Surplus liquidity fell sharply from Rs 91.6 billion to Rs 1 billion in less than a month.
According to the data of Nepal Rastra Bank (NRB), the Central Bank, the surplus liquidity was recorded at Rs 91.6 billion on December 16, and it fell to Rs 1.5 billion on December 29.
Dr. Gunakar Bhatta, NRB spokesperson, said that the main reason for the falling amount of surplus liquidity is the moping of liquidity using deposit collection from NRB. He said the main motive of moping liquidity is to hook the interbank interest rate above 4 per cent in line with the NRB monetary policy to maintain an interbank interest rate between 4 per cent to 7 per cent.
Dr. Bhatta stated that if the interbank rate goes further down, the risk of dis-saving might arise in the future.
Despite a fall in liquidity and moping by NRB, the inter-bank interest rate also fell from 2.95 to 2.45 per cent from 17-29 December.
Meanwhile, NRB has been continuously moping liquidity through deposit collection of 7- and 14-days duration.
In the second half of December 2023, the NRB has moped liquidity from the banking system 6 times in the range of amount of Rs 10 billion to Rs 34 billion in a single auction. The main intention of the moping was to trigger the interbank interest rate to swing up.
The sucking of the excess liquidity slightly swung the inter-bank interest rate up from 1.14 per cent recorded on December 2 to 2.95 per cent on December 17, 2023.
However, the inter-bank interest rate was noted to be falling last week from 2.95 on December 17 to 2.45 per cent on December 29, 2023, despite a sharp fall in liquidity.
This has caused the deposit collection rate to move up again. In the last week of December, the weighted average deposit collection rate rose to 2.99 per cent on December 28 from 2.33 per cent recorded on December 19.
Despite the absorption of the excess liquidity through deposit collection, the interbank interest rate has declined, which indicates NRB has to suck more liquidity from the market.
