Kathmandu, May 29: Nepal Rastra Bank has introduced a new rule requiring banks and financial institutions to maintain at least 90% of the mandatory cash reserve on a daily basis.
Recently, Nepal Rastra Bank amended the Unified Directive, revising the provision that previously required maintaining 70% of the mandatory cash reserve on a daily basis.
According to the amended directive of the central bank, banks and financial institutions must now maintain at least 90% of the mandatory cash reserve daily.
The previous provision requiring licensed A, B, and C class institutions to hold 4% of their total deposits as the Cash Reserve Ratio (CRR) at the central bank remains unchanged. However, through this amendment, the central bank has increased the portion that must be held on a daily basis.
Currently, banks and financial institutions hold a total deposit of Rs 69 Kharba 12 Arba. To meet the CRR requirement, around Rs 2 Kharba 76 Arba is supposed to be set aside. However, only Rs 1 Kharba 93 Arba is currently being maintained at the central bank.
With the new directive, they will now have to maintain Rs 2 Kharba 48 Arba at the central bank. This move is expected to slightly reduce the excess liquidity in the market, according to Nepal Rastra Bank.
