February 16: Banks and financial institutions deposited about Rs 28 billion in the Standing Deposit Facility announced by Nepal Rastra Bank.

The banks kept their excess liquidity as deposits with the central bank on the first day of the introduction of the new tool by the central bank to mop excess liquidity.

The regulations and procedures related to open market transactions has arrangements for banks to utilize the Standing Deposit Facility only once every Sunday and Wednesday. As per the legal provision, nine banks on Wednesday kept fixed deposits worth Rs 27.85 billion under the Standing Deposit Facility. Banks will get three percent interest rate on this deposit which matures in four days.

In order to effectively implement the interest rate corridor, the central bank had made arrangements through the monetary policy of the current fiscal year to provide permanent deposit facility at the deposit collection rate which is the lower limit of the interest rate corridor.

Accordingly, the central bank announced during the semi-annual review of the monetary policy that the permanent deposit facility will be implemented from February 13.

According to the 'Interest Rate Corridor Procedure 2076', there is an arrangement to set the upper limit of the bank rate and the lower limit of the deposit collection rate and keep the interbank interest rate in between. For this purpose, Nepal Rastra Bank has a provision to use various monetary instruments for releasing liquidity and mopping excess liquidity.