KATHMANDU, August 2: The government is gearing up to acquire domestic loans worth Rs 10 billion through market borrowing with the onset of the new fiscal year, FY 2023/24.
According to Nepal Rastra Bank (NRB), the treasurer of the government, it is issuing development bonds worth Rs 10 billion after it finalizes the interest rate through an auction to be held on Thursday. After the fixation of the interest rates, the central bank will issue the bond for the general public on the following day.
For the fixation of the interest rate of the Development Bond 2086 'Chha' with six-year maturity period, the NRB will be arranging the list of interest rates agreed by the bidders in ascending order. The 'cut-off' interest rate will be fixed in a single digit while all the bidders agreeing on the rates below the cut-off amount will be issued the development bonds at the particular single rate of interest.
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Banks and financial institutions, non-banking financial institutions, insurance companies, organizations and Nepali citizens can apply for the auctioned development bonds. The bond holders will have the benefit of using it as a collateral when they take loans.
The interest rate of the bond will be paid semi-annually and interest tax will be charged on the accrued interest.
NRB is allocating 85 percent of the total credit amount of Rs 10 billion to competitive bidders and the remaining 15 percent will be provided to incompatible bidders of the bonds. NRB has stated that if the bonds allocated for the non-competitive bidders are not sold out completely, the unsold segment will be provided to the competitive bidders on a proportional basis.
To apply for the bonds, the interested ones can bid at a minimum amount of Rs 50,000 and a maximum of the multiple of Rs 50,000, not exceeding the released amount. For the purchase of development bonds, individuals and organizations can only participate as competitive or non-competitive bidders under the auction process. Commercial banks, development banks and financial companies licensed by NRB are not allowed to participate as non-competitive bidders.
This year, the government is under extreme pressure to manage the financial resources necessary to meet its liabilities. The government has set a target of acquiring internal loans worth Rs 240 billion in the current fiscal year, while a total of Rs 55 billion will be collected by the first quarter end in mid-October.
