KATHMANDU: The Monetary Management Department of Nepal Rastra Bank (NRB) has officially announced the issuance of NRB bond worth Rs 20 billion through an online competitive bidding system.

Designed as a short-term monetary management tool, this one-year instrument is exclusively open to Class ‘A’, ‘B’, and ‘C’ licensed banking and financial institutions.

Bidders are required to submit their bids through the central bank’s online system, specifying their desired amount and expected interest rate up to four decimal places.

The minimum bidding threshold is set at Rs 50 million, with increments allowed in multiples of the same amount up to the total issue limit.

The final interest rate of the bond will be determined through a single-rate cut-off auction method, sorting bids from the lowest to highest rate until the targeted amount is met.

If the total volume of identical bids at the cut-off point exceeds the remaining supply, allotments will be distributed proportionally on a pro-rata basis.

The central bank has clarified that while successful allocations will become part of the counterparties’ investment portfolios and cannot be counted toward the Cash Reserve Ratio (CRR), they remain fully eligible for meeting Statutory Liquidity Ratio (SLR) and Net Liquid Asset ratio requirements.

Furthermore, these bonds are flexible enough to be used as valid collateral for liquidity facilities across the banking sector.

The central bank has issued a strict warning regarding settlement failures: any institution that defaults on its accepted bid due to insufficient account balance will see its allocation canceled, face a 2.50% financial penalty, and be hit with a six-month suspension from all open market operations and interest rate corridor biddings.