Govt bond witnesses encouraging subscription

KATHMANDU, Jan 1: 

After a long time, the latest bunch of government securities targeting the general public witnessed encouraging subscription.

“The public subscribed for securities worth Rs 700 million of National Saving Bond 2075 that had offered securities worth Rs 800 million,” informed a high official at Nepal Rastra Bank’s Public Debt Management Department. This is the highest rate of subscription for bonds meant for the public in recent history. 

Of the total bond worth Rs one billion, bonds worth Rs 800 million were meant for the general public, while other institutions can apply for the remaining amount worth Rs 200 million. Issue was

Deloitte suggests primary dealers for securities

Deloitte suggests primary dealers for securities

KATHMANDU: Aug 12, 2013

A renowned international consulting agency has suggested that Nepal Rastra Bank (NRB), central monetary authority, allow financial intermediaries like commercial banks to sell government securities so as to build a stable source of demand for bonds and treasury bills, among others.

The recommendation was laid in a report titled ‘As Is Assessment and Recommendation Report on Public Debt Management, Capital Market and Infrastructure Capacity Support Project’ prepared for the Finance Ministry by Deloitte Touche Tohmatsu India and its associate Total Management Services.

“NRB should introduce primary dealership system to build a stable dependable source of demand for government securities and to develop the secondary market for government securities,” says the report prepared with grant assistance extended by the Asian Development Bank, which has been supporting Nepal to develop its capital market.

Under the primary dealership system, NRB will have to appoint financial intermediaries like banks to sell securities like treasury bills and bonds by giving them certain incentives. Once the responsibility is transferred, primary dealers of government securities should also shoulder the responsibility of developing new products in consultation with the central bank and marketing them.

NRB issues securities like treasury bills and bonds to raise money for the government which in turn is used for short- or long-term financing. Securities like treasury bills are sold through auctions, while bonds are auctioned at pre-determined rates of interest.

The report prepared by Deloitte has also suggested that NRB introduce online bidding system for issue of government securities and do away with existing manual bidding. Further, NRB should introduce dematerialised form of government securities, the report says. This means the central bank should ditch the practice of issuing government securities in paper and introduce electronic certificates or promissory notes.

The report also recommends that the present price-based auction system be replaced by yield-based auction system. “The interest on various types of certificates may be benchmarked to the cut-off yield on development bonds, while the government should lengthen the maturity of securities to develop the sovereign yield curve,” says the report.

These reform strategies have been laid to upgrade the existing debt management policies and processes in line with international best practices to promote government bond market and reduce the debt service costs of the government, as per the report, which, among others, has stressed on the need to establish a separate Public Debt Management Office to address an array of issues related to public debt management.

The Finance Ministry has already begun consultation with NRB, the Financial Comptroller General Office and other concerned authorities in this regard. Deloitte started conducting the survey in April.

Source: THT

NRB looking at bond sales to BFIs out of Kathmandu

KATHMANDU, Dec 8:

Nepal Rastra Bank (NRB) is mulling over putting in place a new arrangement that will facilitate development banks and finance companies based out of Kathmandu to invest in government securities including treasury bills and bonds.

So far, treasury bills, development bonds and other government securities are issued in Kathmandu only. "But the new arrangement will be of temporary nature," said a source.

According to the source, the new arrangement is being worked out mainly to relieve the category ´B´ and ´C´ financial institutions based outside the Kathmandu valley from possible adverse impact of new NRB policy decision, which restricts them from holding interest-earning accounts in any bank and financial institution (BFI).

NRB had asked development banks and finance companies a few months ago to close all their interest-fetching accounts at other BFIs in a bid to force them to focus on core banking operations, rather than re-depositing the deposits mobilized to earn profits. NRB has asked them to comply with the directive by mid-January 2012.

Clearly, compliance will prevent financial institutions from reaping interest earnings that they have enjoyed so far. "But we think institutions based in urban centers will not face its adverse impact because they have multiple investment avenues and opportunities," said the source.

"There are limited investment opportunities in rural areas," said the source, adding that the new arrangement would enable them overcome adverse impacts that might surface immediately.

Apart from enabling them to invest in government securities, a top NRB official said the central bank could also extend the compliance deadline for such institutions for six months, i.e. till mid-July 2012.

Source: Republica