KATHMANDU, APR 05, 2012
Interest rates for debentures that had gone up to as high as 12.5 per
cent in the past have started decreasing due to the lowering deposit
rates in the market in recent months. But its still higher than the
savings interest rates.
Siddhartha Bank is coming up with corporate debenture issue worth Rs
400 million that will yield 11 per cent interest rate. In November 2011,
Nepal Investment Bank had issued debentures worth Rs 300 million at 12
per cent coupon rate with a seven-year maturity period. In February,
Nepal SBI Bank had also issued debentures worth Rs 400 million at 12.5
per cent coupon rate.
Siddhartha Bank has been granted approval by Securities Board of
Nepal to issue seven-year redeemable corporate bonds — SBL Debenture
2075 — at a par value of Rs 1,000. The bank will sell Rs 80 million
worth of bonds to the public and remaining bonds of Rs 320 million will
be allotted to financial institutions and other institutional savers
through private placement.
Earlier too in 2008, the bank had issued a different seven-year
redeemable debenture –– Siddhartha Bank Debenture, 2072, at 8.5 per cent
coupon rate. In recent times, banks have taken to issuing bonds as an
instrument to raise liquidity. “Banks largely go for bonds to raise
necessary funds if they find their capital adequacy will be short of the
prescribed limit set by central bank,” pointed out spokesperson for
Nepal Rastra Bank Bhaskar Mani Gyanwali.
Unlike equities, debentures are debt instruments that a company uses
to borrow money from investors without collateral but with a promissory
note that it will be repaid after a certain period and with a certain
interest.
The debenture or bond units can be traded at the secondary market.
However, Nepse has not seen any transaction of any single bond unit
since it began listing bonds.
In order to meet its capital adequacy as prescribed by the central
bank to be able to float more loans, banks are resorting to debenture
issuances. “We allow banks to issue bonds to meet their capital adequacy
if other factors are positive,” said Gyanwali.
In the secondary market, at present, there are 13 debentures
belonging to 10 companies. Of the 10 companies, nine are commercial
banks and the other is Nepal Electricity Authority. Corporate debentures
amount to Rs 4.97 billion. In addition to corporate debentures, there
are government bonds worth Rs 22.4 billion in the secondary market.
Bonds issued by corporates and the government are primarily absorbed by
banks and financial institutions to maintain their Statutory Liquidity
Ratio, and they prefer not to sell the bonds as the profit obtained from
trading these bonds is also much.
It is not only ignorance among general investors but also the higher
return of shares in the earlier phase and higher deposit rates in the
later phase which has overshadowed bonds trading. Likewise, it has also
been neglected due to the absence of specialised market intermediaries
who deal with fixed income brokerage houses.
Interest rates for debentures that had gone up to as high as 12.5 per
cent in the past have started decreasing due to the lowering deposit
rates in the market in recent months. But its still higher than the
savings interest rates.
Siddhartha Bank is coming up with corporate debenture issue worth Rs
400 million that will yield 11 per cent interest rate. In November 2011,
Nepal Investment Bank had issued debentures worth Rs 300 million at 12
per cent coupon rate with a seven-year maturity period. In February,
Nepal SBI Bank had also issued debentures worth Rs 400 million at 12.5
per cent coupon rate.
Siddhartha Bank has been granted approval by Securities Board of
Nepal to issue seven-year redeemable corporate bonds — SBL Debenture
2075 — at a par value of Rs 1,000. The bank will sell Rs 80 million
worth of bonds to the public and remaining bonds of Rs 320 million will
be allotted to financial institutions and other institutional savers
through private placement.
Earlier too in 2008, the bank had issued a different seven-year
redeemable debenture –– Siddhartha Bank Debenture, 2072, at 8.5 per cent
coupon rate. In recent times, banks have taken to issuing bonds as an
instrument to raise liquidity. “Banks largely go for bonds to raise
necessary funds if they find their capital adequacy will be short of the
prescribed limit set by central bank,” pointed out spokesperson for
Nepal Rastra Bank Bhaskar Mani Gyanwali.
Unlike equities, debentures are debt instruments that a company uses
to borrow money from investors without collateral but with a promissory
note that it will be repaid after a certain period and with a certain
interest.
The debenture or bond units can be traded at the secondary market.
However, Nepse has not seen any transaction of any single bond unit
since it began listing bonds.
In order to meet its capital adequacy as prescribed by the central
bank to be able to float more loans, banks are resorting to debenture
issuances. “We allow banks to issue bonds to meet their capital adequacy
if other factors are positive,” said Gyanwali.
In the secondary market, at present, there are 13 debentures
belonging to 10 companies. Of the 10 companies, nine are commercial
banks and the other is Nepal Electricity Authority. Corporate debentures
amount to Rs 4.97 billion. In addition to corporate debentures, there
are government bonds worth Rs 22.4 billion in the secondary market.
Bonds issued by corporates and the government are primarily absorbed by
banks and financial institutions to maintain their Statutory Liquidity
Ratio, and they prefer not to sell the bonds as the profit obtained from
trading these bonds is also much.
It is not only ignorance among general investors but also the higher
return of shares in the earlier phase and higher deposit rates in the
later phase which has overshadowed bonds trading. Likewise, it has also
been neglected due to the absence of specialised market intermediaries
who deal with fixed income brokerage houses.
Source: THT
