OSA is an open market operation instrument that the central bank issues to collect money from the bank and financial institutions (BFIs) against the Treasury Bills (TB) of the NRB.
Though NRB has been mopping up liquidity from the market through various other instruments, including Reverse Repo, Deposit Collection and other shorter period instrument, the central bank is issuing OSA for the first time in the current fiscal year 2014/15 to absorb excess cash from the banking system for a longer period.
This means that BFIs will park their excess cash in the central bank at an interest rate fixed through the auction for 139 days. By introducing this instrument, the central bank intends to manage liquidity in banking system in a more permanent way.
According to NRB, banking system has liquidity surplus of around Rs 30 billion.
"We have been introducing various short term instruments to mop up liquidity from the market. This instrument is of permanent type. We are hopeful that it will help to resolve liquidity problem," Min Bahadur Shrestha, spokesperson of NRB, told Republica.
NRB had earlier issued the OSA of Rs 8.5 billion on September 20, 2013.
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