July 3: Nepal Rastra Bank had issued development bonds worth Rs 6 billion for a period of 15 years on June 21. Six days later, the central bank sold five-year development bonds worth Rs 7 billion. The government had issued the bonds through the Nepal Rastra Bank to collect internal loan. The demand of the applicants seeking to purchase the five-year bond was three times more than the bond amount. Despite such a great interest to procure the bonds, the participation of people in the process has surprisingly nil.  

Similarly, the demand for the bond issued on June 21 was double than the amount announced by the NRB. But the participation of the public in procuring the bonds was almost zero in this case as well, according to data maintained by the Public Loan Management Department of the NRB.

The department’s acting chief Neelam Timsina informed that there applications worth Rs 15.86 billion for the Rs 6 billion bonds.

Although the general public is eligible to purchase bonds, their participation has significantly been reduced as the bond market has been limited only to banks and financial institutions.

Although the interest rate of bonds issued by the government is less, there is zero percent risk in such bonds and therefore the BFIs are more interested in them, according to Timsina.

The interest of people to buy the bonds allocated for the general public is also not so encouraging.

“This means either the people do not have enough purchasing power or they are unaware about the topic,” says one economist.

“Since the banks agree for low interest rate in the bidding process, the people might have not shown their willingness to buy such bonds,” says Timsina, adding, “Maybe, the people are not interested in buying long-term bonds.”

The government has issued development bonds for eight times in the current fiscal year 2016/17. NRB data shows that such bonds were issued only five times in the last fiscal year.