Nepali, Chinese central banks sign MoU
KATHMANDU, JUN 22 -
The Nepal Rastra Bank ( NRB ) and People’s Bank of China on Friday inked a memorandum of understanding (MoU) which has paved the way for the former to invest in Chinese securities.
The agreement allows the NRB to invest up to 1.20 billion yuan ($200 million) in China’s internal inter-bank securities market, according to NRB officials.
NRB Deputy Governor Gopal Prasad Kafle and visiting People’s Bank of China Deputy Governor Hu Xiaolian signed the MoU in the presence of NRB Governor Yubaraj Khatiwada at NRB headquarters, Baluwatar, the NRB said in a statement.
The central bank said the agreement was signed as per its efforts to diversify its foreign exchange investment. “It is expected to facilitate the trade payment system,” stated the NRB , adding the move is also expected be a milestone in strengthening financial relations between the two countries. The NRB will now open a Chinese currency account in People’s Bank of China. The Chinese central bank will be investing the money deposited in that account in Chinese securities, including Treasury bills, bonds and debentures on behalf of Nepal, according to NRB officials.
As the yield of investment in other currencies, including the US dollar, euro, Australian dollar and Canadian dollar, is comparatively low, the NRB sought to invest in Chinese securities which have higher yield. Deputy Governor Kafle told the Post on Thursday that Chinese securities offer average yield of 4-5 percent, whereas the dollar yields less than one percent.
At present, the NRB has heavy investment in the US dollar, but its investment in the Indian is most profitable. Before the signing of the MoU, Governor Khatiwada and Chinese Deputy Governor Hu had held talks in which Khatiwada sought exemption of tax on returns from investment in Chinese securities. Khatiwada also urged for currency swap partnership agreement which enables acceptance of each other’s currency, skill development training for bank staffs and staff exchanges.
The duo also held talks on expanding banking services between the two countries and facilitating the same by the two central banks and setting payment made through banking channel.
Source: The Kathmandu Post
