What it is
Nepal Rastra Bank (NRB) is the central bank. It regulates all banks and acts as their bank.
Every bank must keep a fixed share of its deposits at NRB. This is the Cash Reserve Ratio, or CRR. The money is safe but earns no interest.
Banks also keep extra balances at NRB to settle payments with other banks. This line adds both together.
How it is calculated
Compulsory reserve (CRR amount) + any surplus balance held at NRB. Reported as one line.
Worked on Nabil Bank Limited, FY 2082/83 Q4
At the end of FY 2082/83 Q4, NABIL had Rs 2,438.05 crore due from Nepal Rastra Bank.
What good looks like
It usually moves with deposits, because the compulsory part is a percentage of deposits. A sudden jump can mean the bank is holding spare liquidity it cannot lend.
Watch out
- This money earns no interest, so it is a cost of doing business, not an investment.
- Do not confuse it with 'Due from BFIs' (balances with other commercial banks).
- The CRR percentage is set by NRB and changes with monetary policy; check the current rate rather than assuming one.
In Nepal
NRB sets the CRR in its monetary policy. The rate changes from year to year, so this page does not quote a number. The cost of holding this idle reserve is one of the components banks add into their base rate.
Questions
So that part of depositors' money is always safe and available, and so NRB can control how much banks lend.
On the compulsory reserve, no. That cost is passed into loan pricing through the base rate.