Nepal Rastra Bank to Absorb Rs 85 Billion from Banking System Amid Excess Liquidity
5th August 2026, Kathmandu
Nepal Rastra Bank is set to withdraw Rs 85 billion from the Nepalese banking sector on Wednesday through its standard deposit collection instrument.
NRB to Absorb 85B Rupees from Banking System
The central bank initiated the large scale open market operation to manage persistent surplus liquidity accumulating across commercial, development, and finance banking channels.
The competitive bidding process for the deposit collection was scheduled to conclude at 3:00 PM on Shrawan 20, corresponding to August 2026, through the online bidding system software managed by the Monetary Management Department.
Auction Terms and Bidding Eligibility
Under the official guidelines established by the central bank, eligible financial institutions can participate in the liquidity absorption tender by submitting competitive interest rate offers.
Participation is strictly restricted to licensed Class A commercial banks, Class B development banks, and Class C finance companies operating under the supervisory authority of Nepal Rastra Bank.
The central bank specified that participating institutions must place a minimum bid of Rs 100 million.
Any additional bid amounts submitted by financial institutions must be made in incremental multiples of Rs 50 million, up to the total offered amount of Rs 85 billion.
Individual institutions are also permitted to submit multiple application bids at varying interest rate tiers to maximize their placement opportunities.
Details of the 90 Day Deposit Collection Instrument
The current liquidity management exercise is conducted using a ninety day deposit collection instrument designed to absorb short term surplus funds from the market.
The monetary instrument will officially mature on Kartik 19, 2083.
Upon reaching the maturity date, Nepal Rastra Bank will return the full principal deposit amount along with the total interest earned during the ninety day tenure.
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The effective interest rates for the absorbed funds will be determined through a uniform or competitive price auction based on the bids submitted by participating financial institutions.
Persistent Sluggish Credit Demand Keeps Liquidity High
The decision to mop up Rs 85 billion comes as Nepal’s financial system continues to experience a prolonged build up of idle capital.
Surplus liquidity in commercial banks has remained high due to subdued credit disbursement and sluggish private sector loan demand across key economic sectors.
With limited high yield lending avenues in the domestic market, commercial banks have increasingly relied on central bank deposit facilities to earn modest yields on idle reserves.
Weighted average deposit and lending rates across the banking industry have consistently trended downward as a response to the ample liquidity conditions.
Role of Central Bank Intervention in Money Market Stability
Nepal Rastra Bank frequently deploys open market instruments, including deposit collection auctions and the standing deposit facility, to regulate short term interest rates and maintain monetary stability.
Absorbing excess money supply helps prevent interbank interest rates from falling too low, which could otherwise create market distortions and impact broader price stability.
By regularly absorbing liquidity through structured tools, the central bank aims to balance domestic credit growth with inflation control and macroeconomic resilience.
Summary of Liquidity Absorption Tender Key Facts
- Total Liquidity to be Absorbed: Rs 85 billion
- Monetary Instrument: 90 Day Deposit Collection Instrument
- Official Auction Date: Shrawan 20, 2083 or August 2026
- Final Bidding Submission Time: 3:00 PM
- Eligible Bidders: Class A commercial banks, Class B development banks, and Class C finance institutions
- Minimum Bid Requirement: Rs 100 million
- Additional Incremental Bid Size: Multiples of Rs 50 million
- Maturity Date: Kartik 19, 2083
- Primary Strategic Objective: Absorb surplus capital and preserve interbank stability amid weak loan demand
Financial Market Outlook
The massive absorption of Rs 85 billion highlights ongoing challenges in aligning domestic credit growth with available banking capital.
While commercial banks remain highly liquid and well capitalized, central bank interventions will remain necessary until private sector investment and credit demand pick up significantly across Nepal.
