KATHMANDU: Nepal Rastra Bank (NRB) has decided to issue deposit collection instruments worth Rs 30 billion to manage liquidity in the banking system.

The Monetary Management Department of the Nepal Rastra Bank (NRB) is going to issue the deposit collection equipment for 28 days. According to the notice made public by the central bank, the banks and financial institutions interested in participating in the bidding will have to submit their bids through the Online Bidding System (OBSS) of Nepal Rastra Bank by 3 pm today.

The interest rate for deposit collection will be determined by bidding. The principal and interest collected in this way will be paid on October 30, according to the Rastra Bank.

Bids can be made from a minimum of Rs 100 million to a maximum of Rs 30 billion, divided by Rs 100 million. In the bidding, the banks and financial institutions will have to mention the amount they want to keep as a deposit and the interest rate demanded.

While allocating the amount called for collection of deposits, the lowest interest rate mentioned in the bid will be given first priority. Thereafter, the bidders with higher interest rates will be allotted until the sum called for is completed.

If there is a demand for more than the total amount issued at the same interest rate, the tender will be allocated on the basis of pro-rata. Only ‘A’, ‘B’ and ‘C’ class banks and financial institutions licensed by Nepal Rastra Bank will be allowed to participate in the bidding of deposit collection equipment.

The amount of the approved bid will be spent from the account of the concerned counterparty in the Nepal Rastra Bank. The amount will be deposited by opening a separate account for the collected deposits. The principal amount of the deposit will be deposited in the account of the concerned bank and financial institution with the interest fixed on the payment date.

According to the Rastra Bank, the deposit amount cannot be counted in the investment portfolio of the concerned bidder. However, it can be calculated in the mandatory liquidity ratio and statutory liquidity ratio (SLR) to be maintained as per the directives of the Nepal Rastra Bank.

Similarly, before the expiry of the period of the deposit collection instrument, the bidder is not allowed to pay back the amount or make pre-mature payment. The Rastra Bank has been exploiting liquidity from the market from time to time through deposit collection instruments with the aim of managing excess liquidity available in the banking system.