NRB halves deposit collection to Rs 10b

- POST REPORT, Kathmandu

Sep 14, 2014-

Nepal Rastra Bank (NRB) has halved the amount of deposit collection to Rs 10 billion while issuing the instrument for the second time on Sunday after banks and financial institutions (BFIs) quoted “irrational” interest rates.

Deposit collection was launched in the current fiscal year to absorb excess liquidity in the market on a large scale. When it was first issued a month ago, the amount was fixed at Rs 20 billion.

Central bank officials said that the value of deposit collection had also been slashed as surplus cash in the financial system had shrunk sharply from Rs 80 billion a month ago to Rs 32 billion presently.

They said that the central bank had planned to issue the instrument on a regular basis at the rate of Rs 20 billion to mop up excess liquidity, but the second issuance had been put off due to the higher interest rates demanded by BFIs.

“The average interest rate on 91-day treasury bills is just 0.01 percent and the inter-bank lending rate is 0.13 percent, and an interest rate of 0.69 percent for deposit collection is irrational,” said a senior NRB official.

“If BFIs quote a higher than justified interest rate this time too, we will have to conclude that they don’t need their liquidity to be absorbed.”  

Bankers have said that the interest rate they have quoted is still low as they will earn little from the deposit instrument.

They have been demanding that the central bank fix a certain interest rate for the cash they have to keep idle after maintaining an 80 percent credit-to-deposit ratio.

The deposit collection conducted for the second time also matures in three months.

Published: 15-09-2014 09:36

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