Nepal Rastra Bank Liquidity Withdrawal of Rs 20 Billion

15th March 2026, Kathmandu

Nepal Rastra Bank (NRB) has announced a significant liquidity withdrawal of 20 billion rupees, effective from Chaitra 1, 2082 (March 15, 2026).

Nepal Rastra Bank Liquidity

This move aims to absorb surplus funds from the banking sector through a 28-day deposit collection instrument. The intervention highlights the central bank’s ongoing efforts to stabilize the monetary market amidst a prolonged period of high liquidity and subdued credit demand from the private sector.

Mechanics of the Liquidity Withdrawal

The withdrawal process is executed through a competitive bidding auction, allowing banks and financial institutions (BFIs) to park their idle capital with the central bank for a fixed duration.

Auction Time: 3 PM today, Chaitra 1, 2082.

Tenure: 28 days, with principal and interest repayment scheduled for Chaitra 29, 2082 (April 11, 2026).

Eligible Participants: Class A commercial banks, Class B development banks, and Class C finance companies.

Bidding Rules: Minimum bid of 100 million rupees, with further increments divisible by 50 million rupees.

This short-term instrument allows the NRB to calibrate the money supply without imposing long-term constraints on the banking system’s lending capacity.

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Reasons Behind the Surplus Liquidity

The primary driver for this intervention is the current “liquidity paradox” in Nepal’s financial system. While banks are oversupplied with loanable funds—driven largely by robust remittance inflows—the real economy is struggling to absorb this capital.

Weak Credit Demand: Despite lending rates dropping to near single digits in many sectors, businesses and households remain cautious. Economic uncertainty and political instability have contributed to a “wait and see” approach among potential borrowers.

Low CD Ratio: The average credit-to-deposit (CD) ratio across banks is currently hovering well below the regulatory ceiling of 90 percent, indicating that nearly a quarter of available deposits are sitting idle.

Asset Quality Concerns: Banks have tightened their lending criteria in response to rising non-performing assets (NPAs), further slowing the pace of credit disbursement.

Impact on the Banking Sector

For banks, the withdrawal provides a safe, albeit lower-yielding, avenue to manage their surplus funds. Currently, inter-bank rates and deposit collection rates are trending around 3 percent. While this helps banks cover some of their interest expenses on deposits, it also reflects the lack of higher-yielding investment opportunities in the productive sectors of the economy.

The NRB’s proactive stance is intended to prevent the potential inflationary pressures that could arise if excess money remained unchecked in the system, which could lead to asset price bubbles or unnecessary consumption.

Looking Ahead

As the central bank continues to monitor the Liquidity Monitoring and Forecasting Framework (LMFF), similar mopping-up operations are expected if credit demand does not pick up significantly in the coming months. The success of these measures in the long run will depend on structural reforms that boost private sector confidence and encourage investment in infrastructure, tourism, and manufacturing.

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