KATHMANDU — The Nepal Rastra Bank (NRB) has once again stepped in to manage the rising liquidity surplus in the banking system after the Tihar festival. The central bank is preparing to withdraw Rs 90 billion from the market for 42 days, starting Sunday, as part of its short-term monetary operation.
This decision follows the recent return of around Rs 125 billion that commercial banks had previously parked with the central bank. The move aims to stabilize liquidity conditions amid persistently slow credit expansion.
Liquidity Pressure and Credit Slowdown
Over the past year, commercial banks have experienced a steady rise in deposits, while credit growth has remained weak. With few investment opportunities and limited private-sector loan demand, a significant amount of idle funds has accumulated in the banking system.
To address this imbalance, NRB has been using several monetary instruments — including deposit collection facilities and standing deposit facilities — which allow banks to park surplus funds for short-term periods. These measures are intended to absorb excess liquidity and maintain overall financial stability.
Current Monetary Indicators
According to NRB data, as of mid-October (Asoj 30), banks had deposited over Rs 749 billion with the central bank. On November 2 (Kartik 2), about Rs 125 billion of that amount matured and returned to the banks. However, due to slow lending, the NRB is once again withdrawing funds from the system.
At present, total liquidity within the banking sector is estimated at Rs 1.076 trillion. As of October 15 (Asoj 29), total deposits stood at Rs 7.455 trillion, while total credit disbursement reached Rs 5.633 trillion, according to NRB’s website.
Experts Urge Stronger Lending Momentum
Financial analysts say the growing level of idle funds is the direct result of weak loan expansion. “Unless lending improves, the central bank will need to continue absorbing excess liquidity,” one analyst said.
A few months ago, the total amount parked by banks at NRB had dropped to Rs 233 billion, down from about Rs 400 billion earlier. The figure has now again surpassed Rs 700 billion, signaling a high level of surplus liquidity in the system.
Experts believe that NRB’s latest action will help bring both interest rates and liquidity levels back into balance in the weeks ahead.
