December 19: While the interest rates of banks and financial institutions are declining, the interest rates of treasury bills have increased. The interest rates of treasury bills have increased after Nepal Rastra Bank continuously mopped excess liquidity from the market to implement the interest rate corridor.

On Monday, Rastra Bank called for bids to renew the 28-day treasury bills worth Rs 8 billion and 182-day treasury bills worth Rs 6.33 billion. The average interest rate of 28-day treasury bills has been fixed at 2.49% and that of182-day Treasury Bills at 3.84%. Earlier, the average interest rate of 28-day treasury bills issued on November 28 was 1.75% and that of 182-day treasury issued on December 12 was 3.76%.

On Monday, the government has returned the principal of 91-day treasury bills worth Rs 9.53 billion and 364-day treasury bills worth Rs 2 billion after the maturity period.

As the central bank has reduced the policy rates through the first quarterly review of the monetary policy of the current fiscal year, the banks have also reduced the interest rates starting from mid-December. However, the interest rate of treasury bills increased on Monday after the central bank continuously mopped liquidity from the market.

Nepal Rastra Bank has been mopping excess liquidity through deposit collection tools since mid-November. As of Sunday, the central bank has raised Rs 137. 25 billion from the market by issuing deposit collection tools 10 times. Of that, Rs 75 billion have matured and returned to the market. The central bank is again issuing a 14-day deposit collection tool worth Rs 10 billion on Tuesday.

Although the central bank has tried to maintain the interbank rate according to the limit of the interest rate corridor by mopping the liquidity of the financial system, it is still below the target limit.

The average interbank interest rate as of mid-December is 2.72 percent. To maintain the interest rate corridor limit, the average interbank interest rate should be at least 3 percent. There is more liquidity in the financial system due to lack of credit flow compared to deposit collection. By mid-December, banks have collected Rs 6010 billion in deposits and disbursed Rs 4995 billion in loans. During this period, the average credit to deposit ratio (CD ratio) of banks is 80.34 percent. According to the provision that banks can provide loans by maintaining a CD ratio of up to 90 percent, the banks are in a position to extend additional loans of up to Rs  600 billion.