Nepal Rastra Bank moves to absorb liquidity as banking sector sees loan growth
The Nepal Rastra Bank is withdrawing Rs 150 billion to manage excess liquidity, even as commercial banks report a rise in loan disbursements.
The Nepal Rastra Bank (NRB) moved on Thursday, October 29, to withdraw Rs 150 billion from the financial system for eight days, according to a report by Onlinekhabar. The central bank is taking this step as excess liquidity in the banking sector has reached Rs 1.386 trillion. The report attributes the surplus to rising deposits and remittance inflows alongside weak demand for credit; the central bank's policy is to keep the interbank interest rate from falling below 2.75 percent.
Banking sector activity
While the central bank manages this surplus, commercial banks have reported a notable rise in lending during the first quarter of the current fiscal year. Data from the Nepal Bankers’ Association, as cited by My Republica, show that commercial banks disbursed about Rs 141 billion in new loans between mid-July and mid-October. This brought the total loan portfolio of the country’s 20 commercial banks to Rs 5.430 trillion, up from Rs 5.289 trillion at the end of the previous fiscal year.
Global IME Bank led the sector in loan disbursement, with its portfolio growing by Rs 30.97 billion to reach Rs 507.81 billion. Nabil Bank followed with an increase of Rs 16.44 billion. Despite the overall growth, the report noted that three institutions—Prabhu Bank, NIC Asia Bank and Sanima Bank—recorded a decline in their loan portfolios over the same three months.
Technical hurdles in debt management
In related news, a technical fault held up a government debt auction earlier in the week. Artha Sansar reported that the Public Debt Management Office (PDMO) postponed a Rs 10 billion Treasury bill auction scheduled for Monday, October 26, after problems in its Debt Management and Operation System (DOMS).
The PDMO had planned to raise Rs 5 billion through new 91-day Treasury bills and another Rs 5 billion by renewing 182-day bills. According to the report, the office said at the time that maintenance and upgrades to the system, including its PHP-based software, were under way, and that its IT team was working to fix the fault.