Nepal Rastra Bank (NRB) is actively managing excess liquidity in the banking system by mopping up Rs 50 billion for a period of 21 days. This move, announced on Sunday, is part of the central bank’s broader strategy to maintain stability in the financial system and ensure that interbank interest rates remain above 3%. The NRB has been consistently using deposit collection tools and permanent deposit facilities since the start of the current fiscal year to withdraw liquidity.
The central bank aims to implement its interest rate corridor, preventing the interbank rate from falling too low, which could lead to imbalances in the market. The Rs 50 billion withdrawal will be conducted through an auction process, where the interest rate for the deposit collection tool will be determined. The details of the principal and interest payment for this tool will be made public on December 8, 2024.
Additionally, NRB’s efforts to manage liquidity are ongoing, with reports indicating that the bank plans to mop up an additional Rs 40 billion in the near future. These measures reflect the NRB’s commitment to maintaining a balanced and stable financial environment.
