Nepal Rastra Bank To Withdraw 100 Billion Nepalese Rupees From Banking System To Manage Excess Liquidity
22nd July 2026, Kathmandu
Nepal Rastra Bank has announced a fresh liquidity absorption drive, moving to mop up 100 billion Nepalese rupees from the domestic financial system using its standard deposit collection instrument.
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The central bank introduced this intervention as part of its open market operations to absorb surplus funds circulating across commercial and development banking networks. By pulling this substantial volume of money out of circulation, the regulatory authority seeks to stabilize short term interbank rates and prevent potential monetary imbalances.
The central bank has been forced to absorb liquidity repeatedly in recent months due to sluggish credit demand across the market. With lending activities remaining low relative to high deposit inflows, local financial institutions have been sitting on substantial excess reserves. As a result, banks have been regularly depositing their idle surplus funds with Nepal Rastra Bank at modest interest rates hovering around 3 percent.
Auction Mechanics And Participant Bidding Criteria
Nepal Rastra Bank established a precise bidding structure to allow licensed financial entities to deploy their surplus capital into the interest bearing government instrument smoothly.
The key operational parameters and bidding conditions for participating institutions include the following directives.
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- The competitive bidding session was scheduled to take place at exactly 3:00 PM on Shrawan 6.
- Participation is strictly open to eligible Class A commercial banks, Class B development banks, and Class C finance companies licensed by the central bank.
- The minimum bidding threshold for any interested financial institution is set at 100 million Nepalese rupees.
- Additional bid amounts must be submitted in exact multiples of 50 million Nepalese rupees up to the total 100 billion Nepalese rupees ceiling.
- The allotment will be managed through a multi-rate auction system, allowing institutions to submit multiple bid blocks at varying interest rate levels based on their internal yield expectations.
By offering a flexible multi-rate auction framework, the central bank enables financial entities to balance their asset liability management needs while securing predictable returns on their idle liquidity.
Maturity Schedule And Repayment Framework
The monetary intervention operates as a temporary liquidity absorption mechanism designed to lock away excess cash for a defined medium-term period.
The exact maturity timeline and repayment structure for this central bank instrument include the following details.
- The deposit collection tool carries an overall duration of exactly 83 days.
- The instrument will reach its formal maturity date on Ashoj 27.
- Upon reaching maturity, Nepal Rastra Bank will return the full principal amount directly to the participating banks.
Accrued interest calculated based on the successful multi-rate auction results will be fully settled alongside the principal repayment on the maturity date.
This structured withdrawal ensures that liquidity levels remain balanced through the upcoming operational period, providing central bank oversight over domestic interest rate dynamics while safeguarding overall monetary stability in the country.
