NRB mopping up Rs 50 billion liquidity from banking system

KATHMANDU, MARCH 12: Nepal Rastra Bank (NRB) is absorbing Rs 50 billion from the banking system today, as excess liquidity has accumulated due to an increase in deposits without a corresponding rise in loan demand. The central bank will be conducting a deposit collection auction for a period of 21 days to absorb the surplus liquidity.

.Banks and financial institutions (BFIs) wishing to participate in the auction can bid in increments of a minimum of Rs 10 crore and a maximum of Rs 5 crore, with the remaining portion being allocated based on the total bid amount. The deposit collection auction will be conducted at interest rates, and multiple interest rate bids will also be allowed, according to the NRB.

Last February 18, the central bank had requested Rs 40 billion, out of which banks had submitted Rs 10.4 billion, which will mature today. Additionally, Rs 98 billion in the Standing Deposit Facility (SDF) will also mature today, prompting the central bank to withdraw Rs 50 billion in one day.

Three days back, the central bank had mopped up Rs 25 billion from the system for 21 days through a deposit collection instrument, with an average interest rate of 2.99%. Since the start of the current fiscal year, the NRB has mopped up a total of Rs 19.63 trillion across 55 auctions using the deposit collection instrument. The  BFIs still have Rs 7.75 billion pending for maturity.

According to the latest data from the NRB, the total deposits in the financial system have exceeded Rs 6.75 trillion, while loans and investments have reached Rs 5.46 trillion. The average Credit-Deposit (CD) ratio of banks stands at 79.55%. Banks are allowed to maintain a CD ratio of up to 90% for investment purposes. Based on the current CD ratio, the BFIs have approximately Rs 617 billion available for further investment.