NRB to Withdraw Rs. 40 Billion Liquidity Amid Excess Deposits in Banks

Nepal Rastra Bank (NRB) has announced that it will withdraw Rs. 40 billion from the banking system on Wednesday through its deposit collection instrument for a period of 21 days. The move comes as liquidity has been accumulating in banks due to rising deposits and sluggish credit disbursement.

According to NRB, the volume of deposits in the banking sector has been increasing steadily, but credit investments have not kept pace, resulting in idle investable funds. To manage this excess liquidity, the central bank has been conducting deposit collection auctions twice a week.

Wednesday’s auction will be based on competitive interest rates. Participating institutions must specify the amount they wish to deposit and the interest rate (up to four decimal places). The lowest quoted interest rates will be prioritized during fund allocation.

Only Class A, B, and C banks and financial institutions licensed by NRB are eligible to participate in the auction. The Open Market Operations Committee reserves the right to accept or reject any or all bids either partially or fully.

Once accepted, the funds will be transferred from the counterparty's account held at NRB and deposited into a separate account created for this instrument. If a participant does not maintain sufficient funds on the issuance day, NRB will blacklist the institution and bar it from participating in future auctions.

This move is seen as a key monetary tool by NRB to stabilize liquidity levels in the banking system and maintain financial discipline.