Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB), the central bank of Nepal, is to issue debentures worth Rs 25 billion to enhance liquidity management of the banking system. The bank is set to issue one-year Nepal Rastra Bank Debenture 2084 (E).

According to a notice issued by the Nepal Rastra Bank, the bidding process for the debentures will take place until 3:00 pm on July 7, 2083. The debentures will be issued on the same day.

The interest rate of the debentures will be determined through a bidding process and the interest will be paid half-yearly. The principal of the debentures will be paid on July 7, 2084.

Bids can be submitted from a minimum of Rs 50 million to a maximum of Rs 25 billion. The application amount should be divided by Rs 5 crore.

Only the ‘A’, ‘B’ and ‘C’ class banks and financial institutions having license from Nepal Rastra Bank can purchase the debentures.

The bidding will be based on the interest rate. If the demand is high at the same interest rate, it will be distributed proportionately. According to the NRB, the Open Market Transaction Operation Committee has the right to approve or reject all or part of the sum called.

The debentures can be used as collateral in Nepal Rastra Bank and other banks and financial institutions. However, the investment made in it cannot be counted in the Compulsory Cash Reserves (CRR). However, the statutory liquidity ratio (SLR) and the net liquid assets ratio can be calculated.

Nepal Rastra Bank (NRB) has also warned that the bid will be cancelled and 2.5 percent penalty will be imposed on the concerned banks if the amount is not deposited in the account of the concerned bank on the date of issuance.

Nepal Rastra Bank (NRB) has been issuing such bonds from time to time to make the excess liquidity management and monetary policy implementation effective.