18 August 2024, Kathmandu
Nepal Rastra Bank (NRB) is set to withdraw NPR 1 trillion from the banking system on Monday as part of its ongoing liquidity management strategy.
Nepal Rastra Bank to Extract NPR 1 Trillion
This substantial withdrawal, set to mature on September 8th, is intended to curb excess liquidity within the banking sector and maintain financial stability. The central bank has issued a formal notification, urging banks to participate in this liquidity absorption operation.
This move follows a previous liquidity collection effort on August 14th, when NRB aimed to gather NPR 40 billion. However, banks only proposed to deposit NPR 25.80 billion, and NRB successfully raised NPR 23.6 billion at an average interest rate of 2.99%.
As of August 15th, data reveals that NPR 3 trillion 12 billion is still held by banks through various financial instruments, awaiting settlement with NRB. This significant sum highlights the central bank’s ongoing challenge in managing liquidity within the financial system.
NRB employs a balanced approach to liquidity management, utilizing both repo and reverse repo operations. During periods of liquidity shortage, the central bank injects liquidity into the market through repos. Conversely, in times of surplus liquidity, NRB withdraws the excess through reverse repo operations.
The decision to withdraw NPR 1 trillion underscores the central bank’s proactive stance in addressing the liquidity surplus. By carefully managing the money supply, NRB aims to ensure the stability and resilience of Nepal’s banking system, particularly in light of fluctuating market conditions. This action is a testament to NRB’s commitment to maintaining economic equilibrium and safeguarding the financial sector’s health.
Nepal Rastra Bank to Extract NPR 1 Trillion
