NRB to collect Rs 55B in 21-day deposit auction amid excess liquidity

KATHMANDU: Facing persistently high liquidity in the financial system, Nepal Rastra Bank (NRB) has announced a 21-day deposit collection of Rs 55 billion starting today, Sunday.

The central bank will raise the deposits through an auction-based system. Currently, total deposits in the system exceed Rs 7.2 trillion.

The central bank has been managing excess liquidity and interest rates through deposit collection instruments and standing deposit facilities. Only banks and financial institutions categorized as ‘A’, ‘B’, and ‘C’, and authorized by NRB, are eligible to participate in the auction.

During the allocation of long-term deposits, the bids with the lowest interest rates will be prioritized and distributed sequentially until the total offered amount is met.

The auction will be conducted online, and the interest rates will be determined through the bidding process.

The principal and interest of the deposits collected today will be payable on 5 Ashwin 2082.

Eligible institutions can bid in multiples of Rs 500 million, with a minimum bid of Rs 1 billion.

Any remaining amount will be adjusted to match the total auction amount.

According to the NRB’s open market operations guidelines, when the financial market experiences long-term excess liquidity, the central bank may use long-term deposit collection instruments of up to six months to manage market interest rates.

Following this mechanism, NRB has repeatedly used deposit collection instruments to regulate liquidity in the market.