The Continuing Liquidity Crunch Pulls The T-Bill Rates To Rise; What Is The Present CD Ratio and Interbank Interest Rate?

Fri, May 20, 2022 1:58 PM on Treasury Bill, Interest Rates, Latest,

We provide a comprehensive empirical analysis of the effects of liquidity and information about the;

  • Treasury Bills
  • CD Ratio
  • Interbank Interest Rates

Treasury bills or T-bills, which are money market instruments, are short-term debt instruments issued by the Nepal Rastra Bank and are presently issued in four tenors, namely, 28 days, 91 days, 182 days, and 364 days.

The weighted Average Treasury Bills of four tenors (Latest)


Nepal Treasury Bills: Yield: 91 Days data was reported at 8.7739 % p.a in May 10, 2022. This records an increase from the previous number of 8.2774 % p.a for May 3, 2022. Whereas, the Treasury Bills: Yield: 182 days data was reported at 8.8712% for May 10, 2022.

Let's take a look at the 91-day Treasury Bills over the last twelve years

Nepal Treasury Bills: Yield: 91 Days

Source – Nepal Rastra Bank

Start Date – June 15, 2010

End Date – May 10, 2022

Frequency – Weekly

As seen in the graph, from the observations of June 2010 to May 2022, the data reached an all-time high of 9.8 % pa in Feb and April 2011 and a record low of 0.2 % pa on April 15, 2014.

On May 10, 2022 the treasury bill rate stood at 8.7739% which has been significantly rising and is expected to rise further. The high rates signal an acute shortage of liquidity in the banking system.

In general, economic inflation also causes interest rates on Treasury notes to climb, and deflation causes interest rates to fall. Nepal’s inflation rate rose to 7.28% in the first nine months of the fiscal year 2078/2079.

CD Ratio

In banking parlance, the CD ratio stands for credit-deposit ratio. It shows how much of the money that banks have raised from deposits that has been used to make loans.

The credit-to-deposit ratio (CD ratio) in Nepal’s banks has shown the optimistic sign and has come to 90.44 percent on May 16, 2022. With the positive gesture in the CD ratio, the deposits in commercial banks have also increased to NRP 4367 Billion as of May 16, 2022. Previously, the deposits in commercial banks were NRP 4362 Billion on May 11, 2022.

Interbank Interest Rate LCY – Weighted Average

The interbank rate is the short-term interest rate at which banks borrow and lend funds in the money market. It's when one bank lends to another overnight. Most significantly, it indicates whether the market is tight or has too much liquidity. The rate provides crucial information for the central bank to understand the state of the money market.

The rate of the interbank interest rate stood at 7.04% as of May 16, 2022. The fluctuations in the interbank rate arises mainly from the supply and demand for liquidity in the money market.