NRB to Withdraw Rs. 50 Billion via Deposit Collection Amid Surplus Liquidity

ShareSanskar | Shrawan 18, 2082

In a strategic move to control excessive cash flow in the banking system, Nepal Rastra Bank (NRB) has initiated a liquidity absorption operation worth NPR 50 billion. This step, announced on August 3 at 3 PM, is part of NRB's ongoing effort to maintain monetary discipline and ensure financial stability. By using its Deposit Collection Instrument, the central bank is aiming to pull back surplus funds that have been building up due to slowing credit demand in the economy.

The root cause of this action lies in a visible drop in loan demand, which has left banks with idle funds and limited investment avenues. Financial institutions that once powered economic growth through aggressive lending now find themselves parking money in central bank facilities at returns as low as 3%. This has led to mounting pressure on bank profitability and forced the NRB to act decisively. The auction system, open to Class A, B, and C banks, follows a competitive bidding model, allowing institutions to participate fairly while also ensuring transparency in interest rate determination.

With a maturity period of 42 days ending on September 14, the operation is designed as a short-term, tactical response rather than a permanent tightening measure. This gives the central bank room to reassess and recalibrate based on evolving economic indicators. NRB’s preference for market-driven tools over administrative controls reflects a growing maturity in Nepal’s monetary policy framework. By using auctions instead of fixed rates, NRB is showcasing its commitment to transparency, inflation control, and interest rate stability, all crucial elements for long-term economic resilience.