Nepal Rastra Bank (NRB) can issue its own bonds for up to one year to absorb more liquidity.

Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) has made a provision to issue its own bonds (NRB bonds) for up to one year if there is excess liquidity in the banking system in the long run.

This provision has been made through the sixth amendment of the Nepal Rastra Bank Open Market Transaction Bylaw, 2078 BS. The interest rate of the debentures to be issued with the approval of the Board of Directors will be determined by the bidding process between the bank and the financial institution.

According to the NRB, this arrangement will help to effectively exploit the surplus money accumulated in the banking system for a long time. Earlier, there was a need to use short-term deposit collection tools frequently for more liquidity management.

However, if the bank’s money is tied to the NRB for a long period, the investable resources may decrease and there may be upward pressure on the market interest rate, so the effect of its use will depend on the size, duration and interest rate of the bonds.