In a clear indication of excess liquidity in Nepal’s banking system, commercial banks have deposited a staggering NPR 180.55 billion under the Standing Deposit Facility (SDF) on Sunday, Ashar 15 (June 29, 2025), according to the Nepal Rastra Bank (NRB).
The SDF is a monetary tool introduced by NRB on Falgun 1, 2080 (mid-February 2024) to help banks manage surplus funds by allowing them to deposit at the central bank and earn interest, albeit at the lower bound of the interest corridor. The facility is available three times a week — Sundays, Tuesdays, and Thursdays.
Key Highlights:
- As of now, commercial banks have deposited NPR 197 billion in total under the SDF in the current fiscal year.
- The NPR 180 billion+ deposited on Sunday is the highest single-day amount so far under this facility.
- This follows a deposit of NPR 119 billion on Ashar 12 (June 27), which matured on Sunday, prompting banks to re-deposit funds for another 3-day cycle.
- Banks have been consistently using the SDF due to a lack of adequate lending opportunities and lower credit demand in the market.
Implications:
- The high volume of deposits reflects the liquidity glut in the banking sector.
- It also indicates subdued credit demand and possibly slower investment momentum in the real economy.
- While the SDF helps control inflation and stabilize the financial system by absorbing surplus liquidity, persistent use over time could pressure banks’ profitability due to low returns.
