Nepal Rastra Bank to Raise Rs. 20 Billion Through 35-Day Deposit Collection Instrument

Nepal Rastra Bank (NRB) is set to raise Rs. 20 billion through a one-month deposit collection instrument via a competitive bidding process. The central bank’s Monetary Management Department will conduct the auction for the deposit collection instrument with a maturity period of 35 days. According to a notice issued by NRB, banks and financial institutions willing to participate in the auction must submit their bids exclusively through the Online Bidding System (OBSS) by 3:00 PM today. The deposit will be collected at the interest rate determined through the bidding process. Both the principal and interest will be repaid on Ashwin 2. Participating institutions can submit bids starting from a minimum of Rs. 100 million, with subsequent bid amounts required to be in multiples of Rs. 100 million, up to the total amount called for in the auction. The Rs. 20 billion deposit collection amount will be allocated starting with the bids offering the lowest interest rate and proceeding upward until the total called amount is allocated. If demand exceeds the available amount among bids offering the same interest rate, the allocation will be made on a pro-rata basis. Only Class ‘A’, ‘B’ and ‘C’ banks and financial institutions licensed by Nepal Rastra Bank will be eligible to participate in the auction. Participating institutions must specify both the amount they wish to deposit and the interest rate they are willing to accept. NRB stated that the amount corresponding to accepted bids will be debited from the respective counterparty’s account maintained at the central bank. The collected deposits will then be placed in a separate account. Upon maturity of the deposit collection instrument, the collected amount along with the applicable interest will be credited to the respective participating institution’s account maintained at Nepal Rastra Bank. However, the deposit amount collected through the instrument cannot be included in the investment portfolio of the respective bidder. It can, however, be counted toward the Statutory Liquidity Ratio (SLR) and liquidity ratio requirements as prescribed by Nepal Rastra Bank. The participating institutions will not be permitted to withdraw or receive premature payment of the collected deposit before the specified maturity date.