Kathmandu. Nepal Rastra Bank is going to issue 14-day repo of Rs 20 billion. The bank is about to flow into the banking system through repo bidding which will mature on October 10. The central bank has been issuing repo for some time now to allow liquidity to flow in the banking system due to problems in liquidity management. The bank has stated that licensed A, B and C approved banks and financial institutions can participate in the bidding.
Lack of liquidity has put pressure on banks and financial institutions. In the current fiscal year's monetary policy, the central bank has to maintain the loan-to-deposit ratio of 90 percent. According to the NRB, the current average loan-to-deposit ratio of the bank is 89.15. As liquidity in the banking system is uneasy, NRB has been continuously pouring liquidity into the system through repo.
According to the central bank, the interbank lending rate has reached 4.96. As of Wednesday, banks and financial institutions have used the temporary liquidity facility of Rs. 1,091.64 billion. Although banks and financial institutions continue to use such tools, liquidity management has not been easy.
Bankers say that the bank has to increase the interest rate on deposits due to the lack of new deposits in the market and the need to maintain the loan-to-deposit ratio as prescribed by the National Bank. Banks and financial institutions had set double-digit interest rates on deposits at the beginning of the first quarter of the current fiscal year to increase deposits and prevent their deposits from going out.