NRB calls banks and financial institutions to sign up or update Master Repurchase Agreement

Kathmandu January 10- Banks and financial institutions (BFIs) have been extended a deadline of February 12 to sign or update Master Repurchase Agreement (MRA) with Nepal Rastra Bank (NRB), the central monetary authority.

Failure to sign the pact within the stipulated timeframe will bar BFIs from taking part in open market operations — a system through which the central bank absorbs or injects money into the banking system to tame inflation and stimulate growth — says a notice issued by NRB.

Some of the instruments used in open market operations are repo, reverse repo, outright purchase and sale, and term deposit.

The MRA is a one-time pact, which every BFI has to sign at the time of establishment.

“However, some of the merged entities have changed the name of their institutions, and in one case the name of a Class ‘B’ financial institution was retained upon consolidation with a Class ‘A’ financial institution. These institutions have to sign a new agreement,” said Min Bahadur Shrestha, chief of Public Debt Management Department at NRB.

“Also, hard copies of some of the agreements signed in the past were damaged or lost when our buildings collapsed during the earthquakes of April and May. This is the reason why we have asked all BFIs to enter into or update the agreement.”