5 Types of Government Securities in Nepal (with examples)

If you are doing banking preparation for competitive exam, then government securities is one of the topic that you need to know. Government securities can be asked in ADBL, NRB, NBL and RBB competitive exams.

Government Securities in Nepal

Government securities are various instruments that is used to collect the necessary internal fund by Nepal Rastra Bank on behalf of Government of Nepal. Various instruments are used to raise the necessary fund from other bank and financial institutions, organized financial firms, and individuals. Buying Government securities is one of the safest investment for investors. There are various government securities in Nepal that are in practice. Government have to return the principle amount with interest amount after the pre-defined maturity period.

NOTE: Government securities can be taken as the example of Instrument of Public Debt Management.

Types if Government Securities

Treasury Bills – ट्रेजरी बिल
Development Bond – विकास ऋणपत्र
National Saving Bond- राष्ट्रिय बचतपत्र
Citizen Saving Bond – नागरिक बचतपत्र
Foreign Employee Saving Fund – वैदेशिक रोजगार बचतपत्र

Treasury Bills – ट्रेजरी बिल

A treasury bill also known as T-bill is widely used short term money market instrument in Nepal. It is a short term security issued by the Public Debt Department of Nepal Rastra Bank on behalf of Government of Nepal. Treasury bill is issued to fulfill the short term financial requirement. The maturity period of treasury bill are 28 days, 91 days, 182 days and 364 days. Treasury bill is one of the safest security since it is issued by the government.

Features of Treasury Bill

Online bidding system is used.
Issued for short term financing.
Discount rate is used instead of interest
A,B,C class BFIs, Non-financial organized firms, and individual can participate in bidding system.

Development Bond – विकास ऋणपत्र

The development bond issued to raise the fund from individual and institution for development purpose of nation for long-term is known as development bonds. It is started to rise in Nepal since fiscal year 1963. It can be used as collateral when taking loans.

Features

Mid terms as well as long term. Generally maturity period will be of more than 2 years.
In practice, Nepal Rastra Bank has been issuing development bods for 3 – 15 years of maturity period.
Development bond can be traded in Nepal Stock Exchange (NEPSE).
Development bond of 5,7,8,9,10,11,12,13,15 years maturity period are in practice in Nepal.
Dutch Auction System (DAS) is used while issuing development bond.
Online bidding is used.
A,B,C class BFIs, Non-financial organized firms, and individual can participate in bidding system.
Bond holders can get interest in every 6 months.
Loan can be taken by keeping the National Saving Bond as collateral.

National Saving Bond – राष्ट्रिय बचतपत्र

National saving bond is issued for collecting the small small amount from the individuals for the development of finance sector.

Feartures

Maturity period is generally be of 4 or 5 years.
Used for mid term financing.
Issued through Over The Counter (OTC).
Bond holders get return based on the coupon rate defined by the NRB.
Individual citizen and organized firms defined by the committee can buy national saving bond.
Bond holders can get interest in every 6 months.
Loan can be taken by keeping the National Saving Bond as collateral.

Citizen Saving Bond – नागरिक बचतपत्र

This bond is issued in order to collect the small fund from among the citizen and provide the opportunity in the financial development of nation. Nepali citizens can buy this bond.

Features:

Used for mid term financing.
Issued through Over The Counter (OTC).
5, 10, 12 years of maturity period are in practice in Nepal.
Nepali citizen can apply for the issue.
Can be traded in the secondary market makers, abd NRB branch office across the nation.

Foreign Employment Saving Bond – वैदेशिक रोजगार बचतपत्र

This is mid term financing instrument issued for all the Nepalese who are living outside the country. The major focus of foreign employment saving bond is to bring the money back to country in legit way. The interest rate is slightly higher in foreign employment saving bond compare to other bonds.