April 25: Banks have reduced the use of overnight repo and Standing Liquidity Facility (SLF) from Nepal Rastra Bank (NRB) as the liquidity has eased in the banking system.

According to the data of the central bank, banks currently have around Rs 250 billion of investable capital. However, due to high interest rates and slowdown in economic activities, loan disbursement has not been enthusiastic.

As of Saturday, banks and financial institutions had a total deposits of Rs 5453 billion.

Although bank deposits have increased, credit flow has remained stable. As of Saturday, the total loan disbursement of banks stood at Rs 4844 billion. As the liquidity has eased to some extent, the credit deposit ratio (CD ratio) of banks have also dropped to 85.38 percent.

Similarly, the interbank interest rate is 7 percent.

As the liquidity situation started to ease, the banks reduced the interest rate on deposits but kept the interest rate on government bond (Treasury Bills) stable.

The banks, which reduced the interest rate on deposits to single digit, also invested in the government's short-term bond – Treasury Bills – by reducing the interest rate in mid-April. In late April, they kept the interest rate constant.

On Monday, Nepal Rastra Bank (NRB) called for auctioning T-Bills worth Rs 28.6 billion including renewal of T-Bills worth Rs 20 billion and new Treasury Bills worth Rs 8.6 billion.

According to NRB, an average interest rate of 8.54 percent has been fixed for 28-day Treasury Bills, 9.61 percent for 91-day Treasury Bills, 9.62 percent for 182-day Treasury Bills and 9.55 percent for 364-day Treasury Bills has been maintained.

Last week, the average interest rate for 28-day Treasury Bills was 8.33 percent, 9.63 percent for 91 days Treasury Bills, 9.65 percent for 182 days Treasury Bills and 9.55 percent for 364 days Treasury Bills.

Treasury bills are short-term bonds used by the government to raise internal debt. Treasury bills are sold to raise short-term funds needed by the government.