A liquidity-mopping instrument called ‘term deposit’ launched today by Nepal Rastra Bank (NRB) was oversubscribed by almost 200 per cent. This is the second time the central bank has used this instrument to absorb excess liquidity from the banking system. NRB floated term deposit worth Rs 10 billion today.
“The response was pretty good as we drew bid amount of Rs 30 billion through 209 applications filed by banks and financial institutions (BFIs),” a high-ranking NRB official said. “The exact bid amount, however, could not be ascertained today as we couldn’t complete the data analysis till the office hour. We will reveal it tomorrow.”
NRB said it would also reveal the weighted average interest on the securities tomorrow.
Earlier on August 19, the central monetary authority had issued term deposit of Rs 20 billion. At that time, the securities were oversubscribed by 90 per cent.
The weighted average interest on the instrument stood at 0.69 per cent at that time. NRB had called this rate ‘high’ considering the amount of surplus liquidity available in the banking sector.
When NRB had first floated term deposit instrument, the banking sector had excess liquidity of around Rs 100 billion. Now the level has dropped to around Rs 40 billion, NRB sources said.
“Once we issue the securities, the level of surplus liquidity will come down to Rs 30 billion,” the source said.
Term deposit allows commercial banks, development banks and finance companies to park money at NRB for a period of three months at interest rates fixed through auction.
The tool was introduced to provide some relief to BFIs that have been sitting on piles of cash, which does not give any return.
The banking sector has been facing the problem of excess liquidity for more than a year now due to rise in foreign income, especially remittance.
To deal with this problem, the central bank had earlier this fiscal said it would make its open market operations effective and efficient, so that it can mop up liquidity whenever needed.
In this regard, NRB is mulling over conducting regular open market operations, emergency fine tuning operations, and strategic operations as mentioned in the new Open Market Operation Bylaw.
Last fiscal year, NRB had mopped up Rs 611 billion from the banking system using short-term instruments like reverse repo of seven to 14 days and outright sale auction.
source: the himalayan times,16 sept 2014
LINK
“The response was pretty good as we drew bid amount of Rs 30 billion through 209 applications filed by banks and financial institutions (BFIs),” a high-ranking NRB official said. “The exact bid amount, however, could not be ascertained today as we couldn’t complete the data analysis till the office hour. We will reveal it tomorrow.”
NRB said it would also reveal the weighted average interest on the securities tomorrow.
Earlier on August 19, the central monetary authority had issued term deposit of Rs 20 billion. At that time, the securities were oversubscribed by 90 per cent.
The weighted average interest on the instrument stood at 0.69 per cent at that time. NRB had called this rate ‘high’ considering the amount of surplus liquidity available in the banking sector.
When NRB had first floated term deposit instrument, the banking sector had excess liquidity of around Rs 100 billion. Now the level has dropped to around Rs 40 billion, NRB sources said.
“Once we issue the securities, the level of surplus liquidity will come down to Rs 30 billion,” the source said.
Term deposit allows commercial banks, development banks and finance companies to park money at NRB for a period of three months at interest rates fixed through auction.
The tool was introduced to provide some relief to BFIs that have been sitting on piles of cash, which does not give any return.
The banking sector has been facing the problem of excess liquidity for more than a year now due to rise in foreign income, especially remittance.
To deal with this problem, the central bank had earlier this fiscal said it would make its open market operations effective and efficient, so that it can mop up liquidity whenever needed.
In this regard, NRB is mulling over conducting regular open market operations, emergency fine tuning operations, and strategic operations as mentioned in the new Open Market Operation Bylaw.
Last fiscal year, NRB had mopped up Rs 611 billion from the banking system using short-term instruments like reverse repo of seven to 14 days and outright sale auction.
source: the himalayan times,16 sept 2014
LINK
Comments
Post a Comment