Nepal Rastra Bank (NRB) is collecting Rs 5 billion from bank and
financial institutions (BFIs) through its 'deposit collection'
instrument. Publishing a notice on Wednesday, the central regulatory
bank called for bidding from BFIs for the collection of the deposit.
According to the NRB notice, the bidding will open on Thursday.
After its short-term open market instruments -- like reverse repo -- failed to address the liquidity surplus problem in the banking sector, the central bank introduced the 'deposit collection' through its Monetary Policy for Fiscal Year 2014/15. Deposit collection is an instrument whereby the central bank absorbs the liquidity from BFIs for a period of 90 days through the collection of deposits from BFIs where interest rates are fixed through the auction.According to an NRB official, there is a total of Rs 30 billion of liquidity surplus in the banking system.
After its short-term open market instruments -- like reverse repo -- failed to address the liquidity surplus problem in the banking sector, the central bank introduced the 'deposit collection' through its Monetary Policy for Fiscal Year 2014/15. Deposit collection is an instrument whereby the central bank absorbs the liquidity from BFIs for a period of 90 days through the collection of deposits from BFIs where interest rates are fixed through the auction.According to an NRB official, there is a total of Rs 30 billion of liquidity surplus in the banking system.
NRB has already collected Rs 85 billion from the deposit collection
in different occasions. It absorbed Rs 5 billion from BFIs as part of
deposit collection on March 12. Though liquidity surplus is coming under
control, with excess cash in BFIs coming down to Rs 30 billion from Rs
90 billion some eight months ago, central bank officials say that they
will consider whether there is a need to issue the instrument again.
"The liquidity situation in the banking industry is coming under control. However, it is around the tune of Rs 30 billion. We will decide whether another round of deposit collection will be needed or not following the bidding response from BFIs this time," a senior level official at NRB told Republica.
With liquidity surplus coming to a comfortable position, weighted interest rates of the deposit collection is also gradually increasing. While the first weighted interest rate of deposit collection was 0.6911 percent on August 19 last year, it rose to 0.8645 percent on March 12 -- the last time the central bank had issued deposit collection.
source: republica,9 April 2015
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"The liquidity situation in the banking industry is coming under control. However, it is around the tune of Rs 30 billion. We will decide whether another round of deposit collection will be needed or not following the bidding response from BFIs this time," a senior level official at NRB told Republica.
With liquidity surplus coming to a comfortable position, weighted interest rates of the deposit collection is also gradually increasing. While the first weighted interest rate of deposit collection was 0.6911 percent on August 19 last year, it rose to 0.8645 percent on March 12 -- the last time the central bank had issued deposit collection.
source: republica,9 April 2015
LINK
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