Nepal Rastra Bank to Withdraw NPR 100 Billion from Market to Manage Excess Liquidity

Kathmandu — Nepal Rastra Bank (NRB) has decided to withdraw NPR 100 billion from the financial system for a six-day period after excess liquidity surged across banks and financial institutions. The central bank announced a deposit collection auction through its liquidity management instrument scheduled for 3:00 PM on Falgun 19, aiming to absorb surplus funds from the market. The principal and interest payments of the instrument will be settled on Falgun 25, and Class ‘A’, ‘B’, and ‘C’ financial institutions are eligible to participate with a minimum bid of NPR 100 million.

According to NRB, nearly NPR 900 billion in excess liquidity has accumulated within the central bank as credit expansion remains sluggish despite ample funds in the banking system. Currently, NPR 884.45 billion has been absorbed through deposit collection auctions, NRB bonds, and standing deposit facilities. During the current fiscal year, the central bank has already mobilized significant amounts through multiple monetary instruments to manage liquidity conditions.

Despite a low interest rate environment and abundant liquidity, private sector credit growth has remained below expectations. While the annual target for credit expansion stands at 12 percent, growth reached only 6.7 percent by mid-fiscal year. Data also shows banks still possess nearly NPR 1.2 trillion in lendable funds. Analysts interpret the latest liquidity withdrawal as a precautionary measure ahead of the election period to prevent speculative activity, exchange rate pressure, and short-term interest rate volatility while maintaining monetary stability.