NRB’s Deposit Auction Facility Doubles to Rs. 656 Billion in August 2025

Nepal Rastra Bank’s (NRB) latest Central Bank Survey reveals that the Deposit Auction and Standing Deposit Facility (SDF) surged dramatically to Rs. 656.1 billion in August 2025, marking a 110 percent year-on-year increase from Rs. 312 billion recorded in August 2024. This sharp expansion reflects NRB’s growing use of deposit instruments to manage excess liquidity within the banking system.

The SDF is a key monetary policy tool that allows commercial banks to deposit surplus funds at the central bank and earn interest, helping NRB control liquidity and stabilize short-term interest rates. The doubling of this facility signals that commercial banks are holding substantial idle liquidity, likely due to weak private sector credit demand and restrained government capital expenditure.

Economists note that the increase demonstrates ample liquidity in the financial system, fueled by high remittance inflows, foreign reserve accumulation, and slow investment momentum. However, this also implies that banks are preferring to park funds safely at NRB instead of lending to the productive sector, indicating limited business confidence and tepid economic activity.

From a policy standpoint, the rising volume in NRB’s deposit auction facility underscores the central bank’s challenge: maintaining liquidity balance without fueling inflation. The trend highlights a paradox—liquidity is abundant, but economic circulation remains slow, reflecting subdued private investment and consumption.

In essence, while the surge in deposit auction volumes reinforces Nepal’s financial stability, it also points to a deeper structural concern: money is staying inside the banking system rather than flowing into the real economy.