The average interbank-lending rate of the banks has gone up 1 percent for the first time in last 18 months. According to the data of Nepal Rastra Bank (NRB), the weighted average interbank rate (daily) reached 1.11438 percent on September 26.
Inter-bank interest rate refers to the interest charged on short-term loans between banks. Banks borrow and lend money in the interbank market in order to manage liquidity and meet the requirements placed on them.
The interbank interest rate was 1.1527 percent earlier on May 24 last year. However, the rate was on the downward trend since as the banks and financial system were flushed with excessive liquidity. The liquidity surplus which gripped the bank has also brought down the inter-bank lending rate to as low as 0.05 percent. The interest rate had remained below 1 percent throughout the last 18 months.
“The problem of excessive liquidity surplus has come under control now. The interbank rate is the reflection of the problem,” NRB spokesperson Manmohan Kumar Shrestha told Republica. “NRB has mopped up liquidity surplus from banks and financial institutions through instruments like reverse repo and deposit auction which has helped resolve the problem,” he added.
According to NRB, the current liquidity in the banking system stands at Rs 13 billion. NRB has already absorbed Rs 40 billion through newly introduced open market operation instrument ´deposit auction´ in last one-and-half months. The central regulatory bank collects deposits directly from the BFIs in this instrument which has a maturity period of 90 days and interest rates are fixed through auction.
Likewise, NRB has also soaked Rs 5 billion on September 24 through the reverse repo-the instrument which has a maturity period of seven days.
Bhupendra Pandey, treasury department chief of Rastriya Banijya Bank Ltd (RBBL), told Republica that the interest rate observed a surge due to the ´tight position´ of the liquidity in the banking system. “NRB absorbed liquidity to the tune of Rs 60 billion including the deposit collection and reverse repo as well as the huge amount of the money was withdrawn by the public on the eve of the Dashain festival,” Pandey said. “The position of banks seemed to become tight which required them to borrow money from other banks on relatively higher rate for maintaining their cash reserve ratio (CRR) as prescribed by the central regulatory bank.”
source: republica,8 oct 2014
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Inter-bank interest rate refers to the interest charged on short-term loans between banks. Banks borrow and lend money in the interbank market in order to manage liquidity and meet the requirements placed on them.
The interbank interest rate was 1.1527 percent earlier on May 24 last year. However, the rate was on the downward trend since as the banks and financial system were flushed with excessive liquidity. The liquidity surplus which gripped the bank has also brought down the inter-bank lending rate to as low as 0.05 percent. The interest rate had remained below 1 percent throughout the last 18 months.
“The problem of excessive liquidity surplus has come under control now. The interbank rate is the reflection of the problem,” NRB spokesperson Manmohan Kumar Shrestha told Republica. “NRB has mopped up liquidity surplus from banks and financial institutions through instruments like reverse repo and deposit auction which has helped resolve the problem,” he added.
According to NRB, the current liquidity in the banking system stands at Rs 13 billion. NRB has already absorbed Rs 40 billion through newly introduced open market operation instrument ´deposit auction´ in last one-and-half months. The central regulatory bank collects deposits directly from the BFIs in this instrument which has a maturity period of 90 days and interest rates are fixed through auction.
Likewise, NRB has also soaked Rs 5 billion on September 24 through the reverse repo-the instrument which has a maturity period of seven days.
Bhupendra Pandey, treasury department chief of Rastriya Banijya Bank Ltd (RBBL), told Republica that the interest rate observed a surge due to the ´tight position´ of the liquidity in the banking system. “NRB absorbed liquidity to the tune of Rs 60 billion including the deposit collection and reverse repo as well as the huge amount of the money was withdrawn by the public on the eve of the Dashain festival,” Pandey said. “The position of banks seemed to become tight which required them to borrow money from other banks on relatively higher rate for maintaining their cash reserve ratio (CRR) as prescribed by the central regulatory bank.”
source: republica,8 oct 2014
LINK
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