NRB to issue repo of Rs 15 arba today to ease liquidity crunch

Nepal Rastra Bank (NRB) has decided to issueRs 15 arba through repo in the market in order to ease liquidity crunch. The 14 days repo will be matured on Poush 7, 2074. The central bank has fixed 5% interest rate for the repo while the bank has set 3% interest rate on deposit collection. Repo is an instrument under which the central bank injects liquidity by purchasing treasury bills of banks and financial institutions (BFIs). With the occurrence of liquidity crisis in banking sector, Nepal Rastra Bank has taken repo as a measure to inject money supply in the market. At times of excessive money supply in the market, central bank uses deposit auction as a tool to mop up money from the market whereas during liquidity crisis, the bank supplies money through repo in order to prevent crisis.