Nepal Rastra Bank to Issue NPR 25 Billion in One-Year Bonds

31st December 2025, Kathmandu

In a strategic move to manage market liquidity and regulate the domestic financial environment, Nepal Rastra Bank has announced the issuance of a substantial bond package worth 25 billion rupees. This issuance, specifically titled Nepal Rastra Bank Bond 2083 Kha, features a one year maturity period and is scheduled for Poush 16.

NRB to Issue Bonds

The central bank intends to use this instrument to mop up excess liquidity from the banking system, ensuring that interest rates remain within the desired corridor. The bidding process is conducted entirely through an online system, allowing authorized financial institutions to submit their proposals electronically. This move is a critical component of the central bank open market operations, aimed at maintaining monetary stability during a period of evolving economic conditions in Nepal.

UNDERSTANDING THE BIDDING MECHANISM AND ELIGIBILITY

The participation in this bond issuance is strictly limited to Class A, B, and C licensed banks and financial institutions authorized by Nepal Rastra Bank. These entities act as the primary counterparties in the central bank’s effort to manage the money supply. Eligible bidders are required to submit their bids by 2:00 PM on the day of issuance, specifying both the total investment amount and the interest rate they are willing to accept, calculated up to four decimal places. The minimum bid threshold is set at a significant 50 million rupees, with further bids allowed in multiples of that amount. This high entry barrier ensures that only large scale institutional players participate in these high level monetary interventions.

INTEREST RATE DETERMINATION AND ALLOTMENT PROCESS

The interest rate for the NRB Bond 2083 Kha is not fixed beforehand but is determined through a competitive bidding process. Once all bids are received, the central bank arranges them from the lowest proposed interest rate to the highest. A single cutoff rate is then established based on the total amount the bank intended to call. Bidders who quoted the cutoff rate or lower are successfully allotted the bonds. In scenarios where multiple institutions bid at the same cutoff rate and the demand exceeds the remaining volume, the allocation is made on a pro-rata basis. This transparent auction method ensures that the market itself determines the fair price of capital for the one year duration.

SETTLEMENT PROCEDURES AND PENALTY CLAUSES

Once a bid is approved, the settlement occurs immediately on the issuance date. Nepal Rastra Bank debits the approved amount directly from the counterparty’s account held at the central bank. It is imperative for the participating banks to maintain a sufficient balance to cover their successful bids. Failure to do so leads to severe repercussions, including the immediate cancellation of the bid and a 2.5 percent financial penalty. Furthermore, the defaulting institution faces a six month disqualification from participating in any open market operations and interest rate corridor auctions. These strict measures are in place to ensure the integrity of the bidding process and the reliability of the central bank’s liquidity management tools.

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COLLATERAL ELIGIBILITY AND PORTFOLIO MANAGEMENT

For the participating banks, the NRB Bond 2083 Kha is more than just a savings instrument; it is a highly liquid asset that can be used as eligible collateral for other financial transactions at Nepal Rastra Bank. These bonds are counted as part of the bank’s investment portfolio, helping them meet various regulatory requirements regarding asset quality and liquidity ratios. The principal amount is repaid in a lump sum upon the maturity of the bond in Poush 2083. This dual benefit of earning interest while maintaining a high quality collateral asset makes these central bank bonds a preferred choice for commercial banks looking to park their short term excess funds safely.

DOUBLE ISSUANCE: A MASSIVE LIQUIDITY MOPOUP

In an unprecedented move for the week, Nepal Rastra Bank announced yet another issuance of 25 billion rupees on the same day, Poush 16. This follows a previous 25 billion rupee issuance on Poush 14, bringing the total liquidity absorption target to a massive scale within a few days. While both bonds fall under the 2083 Kha series and share the one year maturity profile, the second issuance features semi-annual interest payments, whereas the first focuses on a lump sum repayment model. This massive scale of intervention suggests that the central bank is currently observing significant excess liquidity in the banking system that could otherwise lead to inflationary pressures if left unaddressed.

IMPLICATIONS FOR THE BROADER ECONOMY

The issuance of 50 billion rupees worth of bonds in a single day has a profound impact on the broader economy. By withdrawing this capital from the commercial banking sector, the central bank effectively tightens the money supply. This often leads to a stabilization or slight increase in short term interest rates, which can help in controlling inflation and maintaining the value of the national currency. For the average consumer, while these institutional bonds are not directly accessible, the resulting stability in the banking sector and the controlled inflation environment contribute to overall economic predictability. It also signals the central bank’s proactive stance in steering the economy toward the targets set in the annual monetary policy.

CONCLUSION AND FINAL WORDS FOR INSTITUTIONAL INVESTORS

In conclusion, the dual issuance of 50 billion rupees in NRB Bond 2083 Kha represents a major milestone in Nepal’s financial management for the fiscal year. The transparent bidding process, combined with strict settlement rules, ensures that the central bank can effectively manage national liquidity. Class A, B, and C institutions are encouraged to carefully evaluate their cash positions and submit their bids before the 2:00 PM deadline. As these bonds mature in Poush 2083, they will provide a reliable return for the banks while serving as a vital tool for the nation’s monetary health.

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