Excess Liquidity Drives 48-Fold Demand for NRB Bond

Applications for bonds issued by Nepal Rastra Bank (NRB) exceeded the offered amount by more than 48 times, as banks and financial institutions (BFIs) sought to park surplus liquidity amid sluggish credit demand.

NRB on Monday opened subscriptions for Rs 25 billion worth of Nepal Rastra Bank Bond 2082 ‘A’. A total of 32 banks and financial institutions submitted 129 bids seeking bonds worth Rs 1220.55 billion, the central bank said.

The average coupon rate on the bond has been fixed at 2.64 percent, according to NRB.

Banks have been grappling with excess investible funds as deposit growth has continued to outpace credit expansion. Until now, NRB has been mopping up surplus liquidity mainly through deposit collection instruments and the standing deposit facility for periods of up to six months.

However, with excess liquidity expected to persist, the central bank has begun raising funds from the market through one-year bonds.

Although NRB has decided to issue bonds worth up to Rs 200 billion, the Open Market Operations Committee will determine the actual issuance based on an assessment of prevailing liquidity conditions, the central bank said.