NRB plans to issue Rs 1 billion foreign employment bonds

KATHMANDU, JUN 08 -

Nepal Rastra Bank (NRB) is planning to issue foreign employment bonds (FEBs) worth Rs 1 billion by the third week of June. The bond issue, in its third year, has been targeted at Nepali migrant workers across the globe.

The central bank has reduced the volume of the bond issue considering the poor subscription during the last two editions. Nepali migrant workers bought bonds worth Rs 3.38 million against the target of Rs 5 billion in the last fiscal year 2010-11. Subscriptions amounted to a paltry Rs 4 million against the target of Rs 1 billion in 2009-10.

“We have decreased the volume of the bond issue due to disappointing subscriptions in the last two years,” said a senior NRB official. However, he believed that there were greater chances of sales this year as Nepali migrant workers from all over the world including India have been allowed to buy the bonds. India hosts the largest number of Nepali migrant workers although the income earned by them is relatively low compared to those who go to the Gulf, Malaysia and other destinations.

Last year, only Nepali migrant workers based in South Korea, Malaysia, the United Arab Emirates, Saudi Arabia and Qatar could buy the bonds. Furthermore, the central bank has permitted migrant workers to pay for the bonds in Nepali currency this year unlike in the past when they had to pay in foreign currency.

“They only need to produce evidence that foreign currency equivalent to the amount of the purchase has been transferred to Nepal,” said the NRB official. “They can show the receipt given by their money transfer agency to prove that the funds have been transferred,” he said.

The government is yet to fix the interest rate the bonds will earn this year. However, the central bank official said that they had proposed fixing the interest rate at 10 percent. Last year, the interest rate was fixed at 10.5 percent.

“As interest rates are dropping in the banking sector, we also proposed reducing the rate marginally for the bonds this year,” said the NRB official involved in issuance of the bonds. “It is still higher than the citizen savings bonds which pay an interest of 9.5 percent per annum.”

According to the working procedure made public by the central bank recently, Nepalis working abroad and those who have returned to the country and have been here for less than three months can subscribe to the bond issue. The bonds will be sold in multiples of Rs 5,000.

Similarly, the bonds can be used as collateral to take loans from banks and financial institutions. Buyers will start earning interest from the date they make payment into NRB’s account. According to the working procedure, the bonds can be traded on the secondary market.

Source: The Kathmandu Post