Nepal Rastra Bank (NRB) is set to withdraw NPR 20 billion from the banking system on Monday through its deposit collection instrument, a monetary policy tool used to manage excess liquidity in the financial sector. The funds will be absorbed for a period of 86 days, equivalent to nearly three months.

According to the central bank, eligible banks and financial institutions will be able to participate in the bidding process by submitting applications in multiples of NPR 100 million. The minimum bid amount has been set at NPR 100 million, and institutions may apply for larger amounts as long as the total requested does not exceed the announced NPR 20 billion ceiling.

NRB stated that the allocation process will prioritize institutions offering the lowest interest rates. This competitive bidding mechanism is designed to ensure efficient liquidity management while minimizing the central bank’s borrowing costs. The principal amount along with accrued interest will be repaid to participating institutions on Mangsir 9, the maturity date of the instrument.

The facility is open to Class ‘A’, Class ‘B’, and Class ‘C’ financial institutions, which include commercial banks, development banks, and finance companies. These institutions can submit bids based on their available surplus funds and desired interest rates.

The central bank has been regularly conducting such liquidity absorption operations in recent months as excess cash continues to accumulate within the banking system. Strong deposit growth, relatively slower credit expansion, and subdued loan demand have contributed to higher levels of liquidity across financial institutions.

By withdrawing surplus funds from the market, NRB aims to maintain stability in short-term interest rates and support effective monetary policy implementation. Liquidity management tools such as deposit collection instruments are commonly used by central banks to balance money supply and prevent excessive cash from creating distortions in the financial system.

The latest operation reflects NRB’s ongoing efforts to regulate liquidity conditions and ensure that the banking sector remains stable, efficient, and aligned with broader economic and monetary policy objectives.