Nepal Rastra Bank (NRB) absorbed more than Rs. 1.7 trillion in excess liquidity from the banking system during the first 20 days of the current Fiscal Year (FY) 2026/27, reflecting the continued surplus of loanable funds held by banks and financial institutions (BFIs).
According to the NRB’s Monetary Management Department, the central bank mopped up Rs. 306.1 billion through its regular deposit collection instrument, while BFIs placed an additional Rs. 1.406 trillion under the Standing Deposit Facility (SDF).
The NRB conducted six deposit collection auctions during the review period, receiving bids worth Rs. 340.4 billion against an announced target of Rs. 320 billion. After evaluation, it accepted Rs. 306.1 billion. The cut-off interest rate ranged between 2.69 and 2.70 percent, while the weighted average interest rate remained between 2.72 and 2.73 percent.
The central bank noted that BFIs used the SDF extensively for short-term fund placement, completing 460 transactions worth Rs. 1.406 trillion, highlighting persistent excess liquidity in the banking sector.
Currently, the NRB is holding around Rs. 1.3 trillion absorbed through various monetary instruments, including Rs. 819.55 billion through deposit collection, Rs. 400 billion through NRB bonds and Rs. 80.45 billion through the SDF.
Bankers attribute the liquidity surplus to weak credit demand amid the prolonged economic slowdown. As a result, the average interest rate on fixed deposits has declined significantly, while the banking sector’s credit-to-deposit ratio has fallen to 71.22 percent, well below the regulatory ceiling of 90 percent.
