Nepal Rastra Bank (NRB) will collect Rs 85 billion from banks and financial institutions through a deposit auction on Friday as part of its liquidity management operations.

According to a notice issued by the central bank, the deposits will be collected for a period of 175 days through the Online Bidding System. The bidding will take place on Bhadra 5 (August 21) at 3 PM.

The interest rate for the deposits will not be fixed in advance. Instead, it will be determined through the competitive bidding process, with participating banks and financial institutions submitting their bids based on the return they seek.

NRB has set the minimum bidding amount at Rs 10 crore. The maximum bid can be submitted in multiples of Rs 5 crore, up to the total amount announced for the auction. Institutions are also allowed to submit multiple bids within the overall Rs 85 billion limit.

Only Class 'A', 'B' and 'C' banks and financial institutions licensed by NRB and eligible to participate in the central bank's deposit collection process can take part in the auction.

The deposit collection is part of NRB's broader liquidity management framework. By accepting funds from banks and financial institutions, the central bank can absorb excess liquidity from the financial system for a specified period.

The Rs 85 billion collected through the auction will remain with NRB for 175 days. At maturity, the central bank will return the deposited amount to the participating institutions along with the interest determined through the bidding process.

According to the notice, the deposits will mature on Magh 29, 2083. The maturity date corresponds to February 12, 2027.

The auction will therefore temporarily withdraw Rs 85 billion from the banking system, while the participating institutions will earn interest on the funds placed with the central bank.

The interest rate ultimately offered by BFIs through the bidding process will determine the cost of the deposit collection for NRB and the return earned by participating institutions.