Kathmandu: Nepal Rastra Bank (NRB) is set to withdraw Rs 90 billion worth of liquidity from the banking system in a single day.
On Sunday, the central bank will absorb liquidity for 42 days through a deposit collection instrument (auction process).
After refraining from absorbing liquidity during the Tihar holidays, the central bank has decided to conduct a single operation on Sunday to absorb liquidity worth Rs 90 billion for a 42-day period.
Due to low demand for credit but increasing deposits, banks have been keeping around Rs 800 billion in liquidity with NRB.
Bankers have been urging the central bank to allow limited investment in the derivative market, as credit demand in the Nepali market remains weak.
They have proposed allowing banks to invest a fixed amount in the derivative market for six months to one year to better utilize excess liquidity.
Bankers have also suggested that once credit demand begins to improve, the central bank could gradually phase out such investments within a fixed timeframe.
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