10th November 2024, Kathmandu
Nepal Rastra Bank (NRB) will withdraw NPR 50 billion from the banking system today to manage excess liquidity. This move comes after commercial banks, development banks, and finance companies reported higher-than-expected cash reserves.
NRB Intensifies Liquidity Control Measures
The central bank will use a deposit collection mechanism called Bolkabol to withdraw the funds. Only banks, development banks, and finance companies can participate. These institutions must specify the amount they want to deposit and the interest rate they expect.
Last week, the NRB withdrew NPR 100 billion. This time, the focus is on institutions with excess liquidity. Banks have been holding onto large amounts of cash, and the central bank wants to absorb this excess to stabilize the market.
The deposit period will be 21 days. Banks from categories A, B, and C can participate, with a minimum deposit of NPR 10 million and a maximum of NPR 500 million. The interest rate will be determined through a bidding process. This mechanism will help manage liquidity and allow banks to earn interest on their excess funds.
The NRB’s actions are aimed at maintaining a balanced liquidity environment and preventing excessive cash from destabilizing the financial system. By using tools like Bolkabol, the central bank aims to ensure the smooth functioning of the banking sector.
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