Excess Liquidity Pressure Persists in Financial System; NRB to Absorb Additional Rs. 25 Billion

Excess liquidity pressure remains in Nepal’s financial system, with Nepal Rastra Bank (NRB) having already absorbed Rs. 242.50 billion since the start of the current fiscal year to manage surplus liquidity. The central bank has announced it will absorb an additional Rs. 25 billion today.

With surplus liquidity piling up in banks and financial institutions, NRB has been continuously mopping up funds through deposit collection instruments. This latest operation will involve collecting deposits for 25 days amounting to Rs. 25 billion. It will be the seventh liquidity absorption operation since the beginning of Shrawan.

According to NRB, bidding will take place today at 3 PM via the online bidding system, and the deposits will be purchased the same day. Interested applicants can submit bids for a minimum of Rs. 1 billion, with increments in multiples of Rs. 50 million, up to the total announced amount. The maturity date, including principal and interest payment, is set for September 7 (Bhadra 22).

Since the start of Shrawan, NRB has already conducted six liquidity absorption operations: Rs. 50 billion on Shrawan 4, Rs. 78.25 billion on Shrawan 7, Rs. 41.10 billion on Shrawan 11, Rs. 7.65 billion on Shrawan 14, Rs. 50 billion on Shrawan 18, and Rs. 15.50 billion on Shrawan 21. In total, Rs. 242 billion has been withdrawn from the system through deposit collection instruments this month alone. In addition to deposit collection, NRB has also been regularly managing liquidity through the Standing Deposit Facility (SDF).

The banking system has been experiencing excess liquidity for a prolonged period. Despite continuously declining interest rates, credit growth has remained sluggish, prompting the central bank to repeatedly drain excess funds from the system.