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BFIs let-go NRB Security Bills; Liquidity Crisis in Question

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BFIs let-go NRB Security Bills; Liquidity Crisis in Question
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January 18: Nepal Rastra Bank issued Rs 40 billion worth of 'Direct Purchase Auction Bidding' in a bid to address BIFs' complains on liquidity crisis. However, only Rs 9.70 billion worth of auction bidding has been procured by the BFIs so far. Previously, when NRB issued one and two weekly repo, BFIs complained that the short term repo might not solve the liquidity problem. Addressing the complains, NRB issued the auction bidding lasting for nearly five months, but, only 1/4 of the auction bidding has been sold.  

"The less participation of BFIs in the auction bidding of Rs 40 billion issued by the NRB to curve the liquidity crisis has doubted the existence of liquidity crisis in the market," said Chitamani Siwakoti, Deputy Governor of NRB. According to him, BFIs procured only Rs 1.90 billion of Rs 20 billion repo issued by the NRB previously. During the issuance of repo, BFIs viewed that the short term repo might not address the liquidity crisis.

"As repo is for only 2 weeks period, we issued NRB Security Bills with the maturity period till May 26 and July 13 that can be directly purchased through auction bidding. However, it drew minimal participation." Only six BFIs participated in the auction bidding. As per Siwakoti, if there was real crisis of liquidity, BFIs would have procured the required amount for investment. 

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