Nepal Rastra Bank (NRB) has announced that it will absorb another Rs 25 billion from the banking system to manage excess liquidity.

The central bank will collect the funds through a 61-day Deposit Collection Instrument from banks and financial institutions on Shrawan 15.

According to NRB, the auction will be conducted at 3:00 PM, allowing eligible banks and financial institutions to participate. Participants may submit bids ranging from a minimum of Rs 100 million up to the total amount announced by the central bank.

Bids must be submitted in amounts divisible by Rs 50 million, as specified in the auction guidelines.

NRB stated that the deposits will be accepted based on the auction interest rate, while the Multiple Interest Rate bidding system will also be available.

Only Class 'A', 'B', and 'C' banks and financial institutions are eligible to participate in the auction.

The central bank said that both the principal and interest of the 61-day deposit collection instrument will be repaid on Ashoj 14.

With credit demand remaining weaker than expected, excess liquidity has continued to build up across Nepal's banking sector. To manage this surplus cash, NRB has been regularly using deposit collection instruments as part of its monetary operations.

Currently, banks and financial institutions are placing excess funds with the central bank at an interest rate of around 3%.