Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank (NRB) has announced the issuance of a one-year bond worth Rs 25 billion as part of its ongoing liquidity management operations in the domestic financial system.
According to a public notice issued by the central bank, the instrument titled “Nepal Rastra Bank Bond, 2083 (Series 6)” will be issued today, with applications accepted through an online system. The bond will have a maturity period of one year.
Participation in the bond issuance is restricted to NRB-licensed Class A, B, and C banks and financial institutions, which will act as counterparties. The central bank clarified that individuals and non-licensed entities are not eligible to apply for this instrument.
Eligible banks and financial institutions may submit bids for a minimum amount of Rs 50 million. Applications can be made up to the total announced amount of Rs 25 billion, provided that the bid amount is divisible by Rs 50 million without any remainder.
NRB has also imposed strict compliance requirements for participating institutions. If a counterparty fails to maintain sufficient funds in its account on the bond issuance date, the approved bid amount will be automatically cancelled. In such cases, the concerned institution will be penalized at a rate of 2.5 percent of the cancelled amount and will be barred for six months from participating in open market operations as well as any bidding processes under the interest rate corridor framework.
The bond will be issued through a competitive bidding process, with the interest rate determined by auction. Interest payments will be made on a semi-annual basis, while the principal amount will be repaid at maturity on Poush 28, 2083.
This is not the first time the central bank has resorted to such instruments in the current fiscal cycle. NRB has already issued three separate one-year bonds earlier, signaling an active use of monetary tools to absorb excess liquidity from the banking system.
Market participants view the continued issuance of NRB bonds as an indication of surplus liquidity in the financial sector, despite relatively sluggish private-sector credit growth. While lending rates have declined in recent months, credit expansion has remained subdued, prompting the central bank to mop up excess funds to maintain stability in short-term interest rates.
The bond issuance also aligns with NRB’s broader objective of ensuring effective transmission of monetary policy, stabilizing money market rates, and preventing volatility in the interbank market.
With banks holding high levels of investible funds and limited lending opportunities, NRB bonds remain an attractive low-risk instrument for financial institutions seeking stable returns while meeting regulatory and liquidity management requirements.
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