NRB to Mop Up Excess Liquidity: Rs 50 Billion Targeted via Deposit Collection Instrument

ShareSanskar | Shrawan 11, 2082

In response to the mounting excess liquidity within the national banking sector, the Nepal Rastra Bank (NRB) has announced a new measure to withdraw Rs 50 billion from the financial system. The central bank is set to conduct a competitive bidding process today, Shrawan 11, under its deposit collection instrument, in a continued effort to maintain monetary discipline and stabilize short-term interest rates.

This strategic operation comes amid a persistent liquidity glut caused by subdued credit demand and a relatively stagnant investment climate. As a result, commercial banks and financial institutions have been compelled to park their excess funds with the central bank at historically low interest rates, often hovering around 3%.

According to NRB’s official notice, the bidding will commence at 3 PM and will be open exclusively to licensed ‘A’, ‘B’, and ‘C’ class banks and financial institutions. Participants may submit bids starting from a minimum of Rs 100 million, with increments divisible by Rs 5 million, ensuring a broad-based participation framework. The instrument allows for multiple bids at varying interest rates, introducing flexibility and market-based rate discovery.

The tenure for this round of deposit collection has been set at 28 days, with the principal and interest scheduled for repayment on Bhadra 8. This short-term mopping operation aligns with NRB’s broader objective of tightening excess money supply while preserving financial system liquidity at an optimal level.

Monetary analysts suggest that unless credit appetite revives significantly, surplus liquidity may persist in the coming quarters, thereby necessitating further central bank interventions. The NRB\