Kathmandu. Nepal Rastra Bank (NRB) has been continuously issuing one-year debentures to manage excess liquidity in the banking system.
The sluggish flow of new loans and the accumulation of deposits have made it difficult for the NRB to manage the excess liquidity seen in the banking system. Earlier, the central bank had been drawing money from the banking system through deposit collection tools to manage more liquidity. It’s a short-term tool.
At present, the central bank is issuing one-year bonds and withdrawing money from banks. It’s a long-term tool.
Nepal Rastra Bank (NRB) has so far issued 5 debentures. Even today, money is being drawn from the banking system through bonds.
So far, the central bank has borrowed Rs 120 billion from banks through five debentures. The government is issuing debentures worth Rs 10 billion today.
The interest rate of these bonds is through bidding. So far, the interest rate is less than 3 percent. This means that banks and financial institutions are forced to invest in bonds issued by the central bank at low interest rates.
Dilliram Pokharel, chief executive director of the Monetary Management Department, said bonds are one of the instruments used by the central bank for managing excess liquidity. “Earlier, in 2072 BS, the same equipment was used for managing liquidity”, he said, adding, “The same equipment is being used to manage liquidity even now.” It’s a long-term tool. ’
According to Pokharel, the debentures were issued as per the decision of the Board of Directors of Nepal Rastra Bank. “Through this bond, Rs 130 billion will be drawn from the banking system,” he said, adding, “For now, there is a possibility of pulling up to Rs 200 billion.” However, it can increase in size as needed. ’
