NRB to invest in 91-day Indian T-B

KATHMANDU, NOV 25: 

Nepal Rastra Bank (NRB) can now invest in higher interest yielding 91-day Treasury Bills (T-B) issued by Indian central bank.

Reserve Bank of India (RBI) has given green signal for Nepali central bank to purchase more interest yielding 91-days T-B, said spokesperson for the NRB Bhaskar Mani Gyanwali.

Currently NRB’s investment portfolio contains 14-day Indian T-B only along with T-B of financially stronger countries. “Investing in instruments with longer maturity period means NRB yields more interest income,” he said, adding that central bank had requested Indian central bank to allow investment in the securities with longer maturity period for higher interest income. In the recent official visit of Prime Minister Dr Baburam Bhattarai to India also the matter was discussed as a high priority. For Nepal, investment in Indian securities is more lucrative than in treasuries belonging to foreign countries as Indian T-B is offers returns higher than three per cent. Moreover, the recent global financial scenario has signaled to volatility of government securities issued by developed countries.

“The investment in dollar-denominated treasuries is rather less profitable due to interest rates being lower,” Gyanwali said, adding that NRB can not invest the reserve in single currency or instruments as Nepal needs all types of currencies to make payments for imports.

The central bank’s investment trend of last couple of years demonstrates the rearrangement of its investment portfolio. NRB had invested Rs 46.8 billion in US government T-B in fiscal year 2008-09, which was reduced to Rs 29.7 billion in the next fiscal year.

However, the investment in Indian T-B have been more than doubled in the same period from Rs 18 billion to Rs 38.9 billion.

Along with the investment in treasuries, the major chunk of NRB reserves is kept in liquid instruments like foreign currencies especially — US dollars and in precious metals like gold and silver.

Diversifying investment in more Indian securities has been a prominent issue that NRB had been lobbying for since some time. Along with it, NRB has also been lobbying to RBI for the permission to open branch of Nepali remittance companies in India for channelise remittance formally.

At present, RBI allows the remittance from India through its Indo-Nepal Remittance Facility that allows Nepali migrants to send up to 50,000 Indian Currency (IC) in a single transaction through its National Electronic Fund Transfer member Indian commercial banks to Nepal SBI Bank’s account that then routes the remittance to the receiver through its branches or a designated money transfers.

Source: THT