Kathmandu, October 1
In view of the tight liquidity situation, Nepal Rastra Bank (NRB) is issuing a repo of Rs five billion to banks and financial institutions (BFIs) tomorrow.
The repo that is going to be issued on Sunday will have a maturity period of one week.
NRB had issued a repo last week as well, which is going to mature this week. Banks have quoted interest rate of up to 3.09 per cent for the repo issued last week.
Interbank rate has been going up as the liquidity situation has tightened in the banks.
The central bank is going to issue repo to intervene in the interbank rate, which has exceeded three per cent.
BFIs have been facing tight liquidity as the remittance inflow recorded negative growth since the first month of this fiscal and the government’s capital expenditure has also slowed down.
On the other hand, loans have been expanding and increasing investment in real-estate and stock market has fuelled liquidity crunch in the BFIs.
Commercial banks need to maintain 12 per cent of their total deposit as liquid cash. Likewise, such rate for the development banks and the finance companies has been set at nine per cent and eight per cent, respectively.
A version of this article appears in print on October 02, 2016 of The Himalayan Times.