Nepal Rastra Bank Continues Issuance of One-Year Bonds to Manage Excess Liquidity

With excess liquidity persisting in the banking system, Nepal Rastra Bank has continued its liquidity absorption measures to restore balance. In the first three months of the current fiscal year alone, the central bank absorbed approximately NPR 13,075.95 billion through various monetary instruments—NPR 714.65 billion via deposit collection auctions and NPR 12,361.30 billion through the standing deposit facility. While earlier measures focused on short-term tools, the central bank has recently shifted toward longer-term solutions by introducing one-year bonds as a more effective instrument to manage surplus investable funds in the banking system.

Accordingly, the central bank issued its first one-year bond worth NPR 25 billion on Poush 14, followed shortly by another NPR 25 billion issuance. Strong demand reflects ample liquidity in the financial system: applications reached NPR 120 billion against a NPR 25 billion offer for the first bond, and exceeded NPR 51 billion for the second. Only licensed ‘Class A, B, and C’ banks and financial institutions are eligible to participate under a multi-rate auction system. The accepted amount is debited on the issue date, early redemption is not allowed, and penalties apply for insufficient balances. The central bank stated that all bond-related procedures will be governed by prevailing laws, regulations, and operational guidelines.