Nepal Rastra Bank Moves to Absorb Excess Liquidity, Announces NPR 30 Billion Deposit Collection

Kathmandu — With excess liquidity continuing to build up in the banking system, Nepal Rastra Bank has announced plans to absorb NPR 30 billion from the market for a period of 52 days. The central bank will collect the funds through its Deposit Collection Instrument (DCI) using a competitive bidding process, as part of its ongoing liquidity management strategy.

The repeated use of deposit collection tools in recent months indicates that liquidity in the banking system has risen beyond optimal levels. As credit growth has failed to expand in line with deposit accumulation, a significant volume of funds has remained idle within banks. To prevent excess liquidity from distorting interest rates and financial stability, the central bank has opted to temporarily withdraw funds from the market.

According to Nepal Rastra Bank, banks and financial institutions can submit bids through the online system until 2:00 p.m. on Wednesday. The interest rate on the deposits will be determined through the bidding process, while both principal and interest payments will be settled on Chaitra 11, 2082 (March 24, 2026).

Participating institutions may submit bids ranging from a minimum of NPR 100 million up to the total amount called, provided that the bid amount is divisible by NPR 50 million. The central bank has also allowed multiple bids at multiple interest rates, encouraging competitive price discovery in the process.

During allocation, priority will be given to bids offering the lowest interest rates. Funds will be allocated sequentially until the full NPR 30 billion target is met. Once bids are accepted, the corresponding amount will be debited from the counterparty’s account at Nepal Rastra Bank and credited to a separate deposit account.

The central bank has warned that institutions whose accounts lack sufficient balance on the settlement date will be blacklisted and barred from participating in future bidding processes. This provision is aimed at enforcing financial discipline and ensuring the credibility of the liquidity management mechanism.

Nepal Rastra Bank clarified that the collected deposits will be treated as part of the participating institutions’ investment portfolios and will not be counted toward their compulsory cash reserve (CRR) requirements. This distinction ensures that the operation does not artificially inflate regulatory liquidity indicators.

Economists note that excessive liquidity can reduce competition for deposits, push interest rates downward, and place pressure on banks’ profitability. In such circumstances, proactive intervention by the central bank is considered necessary to maintain financial system stability and orderly monetary conditions.

Overall, while the deposit collection initiative is expected to ease liquidity pressure in the short term, analysts emphasize that long-term balance will depend on stronger credit demand, improved investment sentiment, and structural reforms to stimulate economic activity.