NRB to issue bonds worth Rs one billion

KATHMANDU:

The central bank will be offering a batch of securities targeting the public at eight per cent interest rates. Nepal Rastra Bank (NRB) is issuing a five-year National Saving Bonds 2075, worth Rs one billion, at eight per cent coupon rate.

As the interest rate in the financial market is in a downward trend, the interest offered by the current batch of securities is the least in the last three years. The national savings bond issued last fiscal year had offered nine per cent coupon rate and the one issued in fiscal year 2010-11 paid 10 per cent interest to investors.

Of the total bond worth Rs one billion, bonds worth Rs 800 million are kept for the general public, while other institutions can apply for the remaining amount worth Rs 200 million. The public can apply for the bonds from December 10 to 24, while institutional investors can subscribe for the securities on December 23 and 24.

The National Saving Bond is supposed to be an investment instrument for the public — an alternate to fixed deposits at banks. Like bank deposits, such gilt-edged securities are considered secure investments that provide fixed returns. Unfortunately, retail investors are not attracted to government securities so they hardly get fully subscribed — the rest has to be either absorbed by institutional investors or by the central bank itself.

However, at present, with the declining interest rate and mounting inflation, investors are set to lose with a negative interest rate. Inflation is above 8.5 per cent and interest bearing instruments are providing returns of less than eight per cent — so the value of the actual investment gets eroded.

Source: THT