In a clear indication that excess liquidity is easing, banks and
financial institutions (BFIs) oversubscribed treasury bills (T-bills) by
1.3 times.
Under the mechanism, the Nepal Rastra Bank (NRB) had called for the BFIs to subscribe the treasury bills worth Rs 10 billion on Wednesday, but they subscribed T-bills worth Rs 13 billion.
Reverse repo is the mechanism under which the BFIs purchase treasury bills from the central bank for certain period so that idle fund of them is settled at the central bank.
Earlier, such T-bills oversubscribed up to six times of the reverse repo’s worth. At a time when people withdraw money from the BFIs for the Dashain festival, the BFIs have oversubscribed the T-bills marginally in compensation.
The latest reverse repo signals the fourth in the last month, and the fifth intervention the NRB made, including the outright sale to reduce unwanted liquidity from the market.
In the third reverse repo of Rs 10 billion, the BFIs oversubscribed Rs 23 billion. Subscriptions worth Rs 43 billion were recorded in the second reverse repo. Likewise, the BFIs had oversubscribed the first reverse repo, worth Rs 5 billion, with Rs 30 billion. “This relatively low subscription level of T-bills under the mechanism, suggests that the situation of excess
liquidity has eased in the banking system,” said a senior official of the NRB.
The central bank official said that with people withdrawing money for the Dashain festival, and the expenditure for election preparations by political parties and candidates, the central bank’s move for reducing liquidity in the market contributed to an ease in excess liquidity. In the last month, the central bank managed liquidity worth Rs 43.5 billion, through five interventions to ease the situation. According to the NRB, there has been excess liquidity of 20-22 billion in the banking system, much lower than recent figures of around Rs 50 billion.
Despite a relatively low subscription of T-bills under the latest reverse repo, the interest rate remained very low, at 0.05 percent. Which is a slight improvement on the previous rate of 0.04 percent, said the NRB. “This shows that banks are predicting excess liquidity in the upcoming two to three months,” said the NRB official.
When remittance piled up in the BFIs and there is difficulties finding borrowers, the country’s banking system observed a huge excess in liquidity. On the other hand, the government has not been able spend capital budget, despite a timely budget presentation this fiscal. According to the NRB, the government’s treasury currently holds Rs 51 billion. “As a result, even the private sector, particularly the contractors who start work after the release of budget from the government, are not spending adequately,” said the NRB official.
source: the kathmandu post,3 Oct 2013
LINK
Under the mechanism, the Nepal Rastra Bank (NRB) had called for the BFIs to subscribe the treasury bills worth Rs 10 billion on Wednesday, but they subscribed T-bills worth Rs 13 billion.
Reverse repo is the mechanism under which the BFIs purchase treasury bills from the central bank for certain period so that idle fund of them is settled at the central bank.
Earlier, such T-bills oversubscribed up to six times of the reverse repo’s worth. At a time when people withdraw money from the BFIs for the Dashain festival, the BFIs have oversubscribed the T-bills marginally in compensation.
The latest reverse repo signals the fourth in the last month, and the fifth intervention the NRB made, including the outright sale to reduce unwanted liquidity from the market.
In the third reverse repo of Rs 10 billion, the BFIs oversubscribed Rs 23 billion. Subscriptions worth Rs 43 billion were recorded in the second reverse repo. Likewise, the BFIs had oversubscribed the first reverse repo, worth Rs 5 billion, with Rs 30 billion. “This relatively low subscription level of T-bills under the mechanism, suggests that the situation of excess
liquidity has eased in the banking system,” said a senior official of the NRB.
The central bank official said that with people withdrawing money for the Dashain festival, and the expenditure for election preparations by political parties and candidates, the central bank’s move for reducing liquidity in the market contributed to an ease in excess liquidity. In the last month, the central bank managed liquidity worth Rs 43.5 billion, through five interventions to ease the situation. According to the NRB, there has been excess liquidity of 20-22 billion in the banking system, much lower than recent figures of around Rs 50 billion.
Despite a relatively low subscription of T-bills under the latest reverse repo, the interest rate remained very low, at 0.05 percent. Which is a slight improvement on the previous rate of 0.04 percent, said the NRB. “This shows that banks are predicting excess liquidity in the upcoming two to three months,” said the NRB official.
When remittance piled up in the BFIs and there is difficulties finding borrowers, the country’s banking system observed a huge excess in liquidity. On the other hand, the government has not been able spend capital budget, despite a timely budget presentation this fiscal. According to the NRB, the government’s treasury currently holds Rs 51 billion. “As a result, even the private sector, particularly the contractors who start work after the release of budget from the government, are not spending adequately,” said the NRB official.
source: the kathmandu post,3 Oct 2013
LINK
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