Nepal Rastra Bank to Mopping Up NPR 100 Billion Excess Liquidity

Nepal Rastra Bank is set to withdraw NPR 100 billion to manage the excess liquidity currently present in the financial system. The central bank is mopping up this amount through a 56-day deposit collection instrument. 

Having already collected NPR 40 billion on Wednesday, the bank is issuing the same instrument again this Friday. Currently, there is approximately NPR 76 billion in liquidity within the financial system.

The central bank has taken this step to manage the surplus liquidity in banks and financial institutions and to maintain balance in inter-bank interest rates. Through the deposit collection instrument, the bank prioritizes institutions that propose lower interest rates. 

At present, the bank rate is maintained at 6 percent, while the standing deposit facility rate is at 2.75 percent. Depending on the liquidity situation in the market, the central bank attempts to keep the interest rate corridor balanced through repo or deposit collection instruments.