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Monetary Management: NRB Opens Bidding for NPR 40 Arba Deposit Collection

To manage the excess liquidity in the banking system, Nepal Rastra Bank (NRB) is set to withdraw NPR 40 billion through a deposit collection instrument for a period of 160 days. The central bank is utilizing this tool as loan demand remains sluggish despite high deposit levels.

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Monetary Management: NRB Opens Bidding for NPR 40 Arba Deposit Collection

Due to a lack of credit expansion, banks are currently holding significant idle cash. To stabilize interest rates and manage this surplus, the NRB is inviting 'A', 'B', and 'C' class financial institutions to participate in an online bidding process today. The interest rate will be determined through a Dutch auction system, where those bidding at the lowest rates will be prioritized.

The maturity date for this deposit is set for October 7, 2026 (Ashoj 21). Currently, banks are lending their excess funds to the central bank at rates hovering around 3%, reflecting the high liquidity environment. This 160-day instrument is part of the NRB's structural open market operations intended to maintain monetary stability.

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