Nepal Rastra Bank reported that it withdrew 246.51 billion NPR from the financial system in the fiscal year 2081-82. This money was taken because banks and financial institutions were unable to lend it out. The central bank spent around 1 billion NPR last year just to manage liquidity.
According to the central bank, 215.08 billion NPR was withdrawn through the permanent deposit facility, and 31.42 billion NPR through deposit collection auctions, totaling 246.51 billion NPR. During the year, banks also used 270 million NPR through overnight liquidity facilities. As a result, the total liquidity withdrawn reached 246.48 billion NPR.
In the previous fiscal year, 38.68 billion NPR was withdrawn using open market operations and permanent liquidity facilities. The central bank reported a loss of 1 billion NPR while trying to implement an effective interest rate corridor. Excess liquidity in the financial system last year forced the bank to prevent short-term interest rates from falling below the corridor’s lower limit, which caused this cost.
Last year, the central bank provided 3 percent interest on money withdrawn from the system through permanent deposit facilities and deposit collection tools. This year, the interest rate has been reduced by 0.25 percent to 2.75 percent. So far, the central bank has withdrawn 3.5 billion NPR through deposit collection alone.
The central bank manages the system’s liquidity and controls unusual swings in interest rates by injecting or withdrawing money. It earns interest income when it injects money and incurs a cost when it withdraws money.
During the review year, the bank purchased 583 million USD from commercial banks in the foreign exchange market and injected 787 billion NPR into the system. In the previous year, it bought 589 million USD and injected 783.47 billion NPR.
