Following a Low Liquidity Situation, Rastra Bank Will Send Rs. 30 Arba to the Banking System Via Repo Transaction

To balance liquidity status in the banking system, Nepal Rastra Bank (NRB) will use repo* to transfer Rs. 30 Arba to the banking system. On Thursday, Ashwin 27, the central bank announced that it will send the cash via a repo.

*Repo - In the banking system, when there is a lack of liquidity of a general nature, it sends liquidity, and when it is more, it withdraws liquidity. If there is a situation of low liquidity in the banking system of a general nature, Nepal Rastra Bank uses the tool 'repo' to flow liquidity for a short-term (maximum seven days) period.

If there is a situation of excessive liquidity of a similar nature, the instrument used by Nepal Rastra Bank to calculate liquidity for a short-term (maximum seven days) period is 'Reverse Repo'.

The deadline for submitting an application for the auction for banks and other financial institutions who wish to use the aforementioned liquidity facility is today at 3 pm. A minimum of Rs. 10 crores and a maximum of Rs. 5 crores divided by the Rastra Bank's liquidity flow ceiling are the minimum and maximum amounts for which applications can be made. Likewise, the seven-day repo will mature on Kartik 3.

The Central Bank has already injected liquidity through a repo of Rs. 1 Kharba since the start of the current financial year. In addition, Rs. 43.70 Arba was transferred via Outright Purchase to the banking system.

Similar to this, banks have employed the Standing Liquidity Facility (SLF) for Rs. 20.50 Kharba and the Overnight Repo for Rs. 55.52 Arba.