NRB to float foreign employment bonds worth Rs250 millionThe Nepal Rastra Bank, on behalf of the government, is floating foreign employment saving bonds worth Rs250 million on Wednesday, in a bid to pool savings of Nepalis working abroad to finance various development projects in the country.
The Nepal Rastra Bank, on behalf of the government, is floating foreign employment saving bonds worth Rs250 million on Wednesday, in a bid to pool savings of Nepalis working abroad to finance various development projects in the country.
These securities, which will be on sale till April 6 and allotted to investors on April 12, guarantee a return of 10 percent per annum. The yield on the bond, which will mature in five years, is higher than 9 percent fixed in the last fiscal year.
The return on these securities was raised to match upward revisions made by banks and financial institutions on interest of deposits, an NRB official said.
The NRB has appointed nine commercial banks and four remittance companies as agents to sell these bonds abroad. These sales agents have contact persons in most of the countries where large number of Nepalis is working. Some of these countries are Australia, Bahrain, India, Israel, Japan, Korea, Malaysia, Qatar, Saudi Arabia, the UAE, the UK and the US.
The foreign employment bonds are exclusively sold to Nepalis working abroad, non-resident Nepalis or those, who returned to Nepal from foreign employment destinations less than four months ago. The NRB has been selling these bonds for almost seven years to inculcate savings habit among Nepalis working abroad and pool their resources to finance various development projects in the country.
Those who buy the bonds get a fixed return every six months till the time of the maturity of the securities. These securities carry zero risk and can be used as collateral to obtain loans.
NRB has been floating foreign employment savings bonds since July 2010.
When these bonds were first introduced, only 0.40 percent of the securities up for grabs were sold. The result was even worse in the next fiscal year, when only 0.07 percent of securities floated were subscribed.
Since that year demand for these securities has gradually gone up.
In fiscal year 2014-15, for instance, 33.5 percent of foreign employment bonds up for grabs were sold, while subscription rate in 2015-16 hovered around 33 percent.
The progress made over the years is commendable, yet more needs to be done, as two thirds of these bonds remain unsubscribed.
One of the reasons for this lukewarm response, according to NRB officials, is continuous depreciation of Nepali rupee.
Nepali rupee has been weakening by over 3 percent per year vis-a-vis US dollar for the last one decade. Those working abroad see currency depreciation as a disincentive to invest in foreign employment bonds, as they have to exchange currency of the country where they are working into Nepali rupee to buy these bonds.
“So, unless a mechanism is introduced to absorb the foreign exchange variation risk, Nepalis working abroad may not show keen interest to invest in these securities,” NRB officials said, adding, “Also, returns on other assets, such as stocks and real estate are high.”