Nepal Rastra Bank (NRB) is again collecting Rs 10 billion from the banks and financial institutions (BFIs) through deposit auction instrument for 3 month period. This is the eight time NRB is using this instrument to absorb liquidity.
On January 7, 2015 only NRB collected Rs 10 billion from BFI’s. The weighted average deposit auction stands at 0.1561 percent. This rate clearly signals that BFI’s is flooded with liquidity.
The central regulatory bank had introduced this new instrument through its Monetary Policy for Fiscal Year 2014/15 after its other short-term instruments, including frequent reverse repos, failed to resolve the liquidity surplus problem in the banking system.
Though BFIs can count their deposit in NRB as the statutory liquidity ratio (SLR), the returns to them have remained negligible so far due to the competitive bidding process.
The interest rates of the deposit auction are fixed through the auction.
On January 7, 2015 only NRB collected Rs 10 billion from BFI’s. The weighted average deposit auction stands at 0.1561 percent. This rate clearly signals that BFI’s is flooded with liquidity.
The central regulatory bank had introduced this new instrument through its Monetary Policy for Fiscal Year 2014/15 after its other short-term instruments, including frequent reverse repos, failed to resolve the liquidity surplus problem in the banking system.
Though BFIs can count their deposit in NRB as the statutory liquidity ratio (SLR), the returns to them have remained negligible so far due to the competitive bidding process.
The interest rates of the deposit auction are fixed through the auction.
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