Kathmandu: Nepal Rastra Bank (NRB) has continued its liquidity absorption operations into the new fiscal year, responding to excess liquidity and subdued credit demand in the market.
On Sunday, the central bank announced a deposit collection auction worth Rs 50 billion for a period of 42 days as part of its ongoing efforts to absorb surplus liquidity from the banking system.
Due to the persistent excess liquidity, the central bank has been actively withdrawing funds from the market for the past two fiscal years. The trend has extended into the current fiscal year as well, with four separate rounds of deposit collection auctions already conducted in the first two weeks alone, soaking up a total of Rs 177 billion.
Sunday’s additional auction aims to withdraw another Rs 50 billion, bringing the cumulative liquidity absorption figure even higher. The interest rate for the auction will be determined through a competitive bidding process.
According to NRB, the imbalance between deposit collection and limited credit disbursement is leading to growing pressure from excess liquidity in banks. With lending opportunities remaining limited, banks have deposited over Rs 652.10 billion in the central bank through Standing Deposit Facility (SDF) and deposit auctions, as per data from 29 July.
In response, NRB has now called for another auction to absorb an additional Rs 80 billion in liquidity on Sunday, reinforcing its commitment to manage monetary stability amid sluggish credit activity.
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