28th January 2025, Kathmandu
Nepal Rastra Bank (NRB) has started pulling NPR 30 billion in liquidity from the banking system. This decision comes after an increase in liquidity within the financial sector. The move aims to regulate the money supply and stabilize the economy.
NRB Withdraws NPR 30 Billion
Bidding Process to Collect Liquidity
NRB will use the “Bolkabol” bidding process to withdraw the NPR 30 billion. The process will last for 21 days. The central bank will collect the funds through this deposit collection tool to absorb excess liquidity from the market. The interest rate will be determined by the bidding process.
Repayment Schedule
The principal and interest for the liquidity withdrawn will be paid back on Falgun 6, 2025 (February 18, 2025). The amount of interest will be finalized based on the bids submitted by the participating banks.
Eligible Participants
Only commercial banks and financial institutions in categories ‘A’, ‘B’, and ‘C’ can participate in the bidding. These banks must bid with a minimum of NPR 10 crore (100 million) and a maximum of NPR 50 crore (500 million) to secure a portion of the total amount being withdrawn.
Usage of Withdrawn Liquidity
The withdrawn liquidity can be used as collateral by participating institutions. NRB aims to control inflation and regulate credit expansion by managing the overall liquidity in the banking system. The move will also help in stabilizing the financial markets in Nepal.
Goal of the Liquidity Withdrawal
NRB’s action is designed to ensure a balance between maintaining adequate liquidity for lending and controlling excess money supply that could lead to inflation. By tightening liquidity, NRB seeks to stabilize the economy and strengthen the financial system.
This decision is a key component of NRB’s ongoing strategy to maintain financial stability within the banking system, aiming to manage liquidity levels effectively and prevent potential economic imbalances. By taking such measures, the central bank seeks to balance the money supply and avoid inflationary pressures that could arise from excessive liquidity.
For more: NRB Withdraws NPR 30 Billion
