Nepal Rastra Bank to undertake 15th round of reverse repo

KATHMANDU:

The central bank will be undertaking the 15th round of reverse repo worth Rs 15 billion to mop up surplus funds from the banking sector on Friday.

Nepal Rastra Bank is undertaking a reverse repo worth Rs 15 billion, informed an official at NRB’s Public Debt Management Department. It is for a seven-day period.

Due to prolonged excess liquidity, NRB has already undertaken reverse repos worth Rs 216 billion in the past six months. As the banks are swollen with deposits while the amount of loans financed has remained a bit dull, the central bank is using reverse repo to provide some relief to the banks.

The central bank allows instruments equivalent to 1.6 per cent of total domestic currency deposits to make reverse repo offering. Earlier, in the last seven rounds, NRB’s Open Market Operation had undertaken each reverse repo worth Rs 19.5 billion.

Along with reverse repo auctions, NRB had issued outright sale auction for securities worth Rs 8.5 billion and development bonds worth Rs 10 billion to mop up short- and long-term liquidity problems. The credit to deposit ratio of financial institutions stood at 76 per cent till the end of first half of the current fiscal year. There is excess liquidity worth Rs 45 billion in the financial system.

The total deposit at commercial banks, development banks and finance companies amounted to Rs 1,353 billion as of mid-January 2014, against total lending of Rs 1,039 billion.

Source: THT