Over NPR 324 Billion Idle at Nepal Rastra Bank, Central Bank to Absorb Additional NPR 50 Billion Today

Around NPR 324.60 billion that banks and financial institutions have been unable to invest remains parked at the Nepal Rastra Bank (NRB) through various monetary instruments. In an effort to manage excess liquidity in the financial system, the central bank is set to withdraw an additional NPR 50 billion today via a 21-day Deposit Collection Instrument.

Due to prolonged sluggishness in loan disbursement despite falling interest rates, the banking system has seen continued excess liquidity. As a response, NRB has been using tools such as Deposit Collection Instruments and the Standing Deposit Facility (SDF) to mop up surplus funds.

The NPR 50 billion being absorbed today replaces an equal amount that matured on Baisakh 17 (April 29). Currently:

• NPR 140.50 billion remains in deposit collection instruments,

• NPR 184.10 billion is parked in the SDF, set to mature this Thursday.

Together, this adds up to NPR 324.60 billion lying idle in short-term NRB instruments as of Wednesday, Jestha 7 (May 21).

Earlier, on Sunday, NRB had issued a similar 21-day instrument worth NPR 24 billion. In that round, 12 banks and financial institutions placed NPR 20.60 billion at an average interest rate of 2.99%. The central bank has issued such instruments 8 times in Baisakh alone and this is the second issuance in Jestha.

Eligible banks and financial institutions can submit bids until 3 PM today, with repayment (principal + interest) scheduled for Jestha 25 (June 7, 2025). Interest rates will be determined through competitive bidding. The minimum bid size is NPR 100 million, and the maximum is NPR 5 billion per institution.

As of now, total deposits in the banking system have surged to NPR 6.885 trillion — largely due to improved remittance inflows:

• Commercial banks hold NPR 6.151 trillion,

• Other financial institutions hold NPR 734 billion.

Total lending stands at NPR 5.527 trillion, with:

• Commercial banks disbursing NPR 4.907 trillion,

• Other institutions disbursing NPR 617 billion.

The average Credit-to-Deposit Ratio (CD Ratio) stands at 79.06%, below the regulatory ceiling of 90%, indicating that banks still have approximately NPR 670 billion in investable funds.

Experts suggest that while NRB’s absorption tools are effective in short-term liquidity management, long-term stability requires acceleration in loan disbursement and real economic activity.