21st November, Kathmandu
Nepal’s central bank, the Nepal Rastra Bank (NRB), is currently facing a major challenge: excess liquidity in the banking system. This means there is an oversupply of money, which has been building up over time.
NRB Battles Excess Liquidity Nepal
Currently, deposits have reached a massive Rs. 6.64 trillion, while the total amount of loans given out stands at Rs. 5.287 trillion.
To handle this issue and prevent the risk of inflation, the NRB has been using several methods to withdraw excess money from the banking system. One of the main tools they are using is called the deposit collection tool. This involves an online bidding process, where banks and financial institutions can lend their money to the central bank temporarily.
Today, the NRB has launched another round of this deposit collection process to withdraw Rs. 40 billion. Banks and financial institutions in Class ‘A,’ ‘B,’ and ‘C’ can join the bidding until 2:00 PM. They can place bids starting from a minimum of Rs. 100 million up to a maximum of Rs. 5 billion. The central bank will consider multiple bids at different interest rates.
The funds collected through this process will stay with the NRB for 21 days. After this period, the NRB will return the principal amount along with the interest on December 11. This is the 25th time the NRB has used the deposit collection tool this fiscal year to manage the excess liquidity problem.
The NRB’s efforts are crucial for keeping Nepal’s financial system stable. By carefully managing the supply of money, the central bank aims to reduce risks and maintain a healthy banking environment. If the situation requires, the NRB is prepared to take further action to manage this challenge.
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