Nepal Rastra Bank (NRB) is all set to issue development bonds worth Rs. 8 billion with a maturity period of eight years.

The central bank is going to issue a development loan of Rs. 8 billion to the government to raise the required domestic debt.

The bond named “Development Bond 2088 Jha” will be issued through both competitive and non-competitive bidding, according to a notice issued by the Monetary Management Department (MMD) of the NRB on Thursday.

Banking and financial institutions, non-banking financial institutions, insurance companies, organised groups and the general public can apply for the bond.

The bank said that all the interested parties could submit their bid documents through the Online Bidding System Software of the NRB by 3 pm Tuesday (March 12, 2024).

The bond, which will be allocated on Wednesday (March 13, 2024), will mature on March 15, 2032.

All interested parties can apply for bonds ranging from Rs. 50,000 to the amount not exceeding the size of the total issue and the amount should be divisible by Rs. 50,000.

In total, 85 per cent (Rs. 6.8 billion) of the bond amount is allotted for competitive bidders while the remaining 15 per cent (Rs. 1.2 billion) for non-competitive bidders, read the bank’s notice.

The group of ‘A”, ‘B”, or ‘C’ banks and financial institutions licensed from the NRB are not allowed to participate as non-competitive bidders, according to the notice.

The interest rate of the bond will be determined after reviewing the interest rates proposed by the participants of the competitive bidders.

The applicants must also deposit 2.5 per cent of the bid amount in the central bank’s account as urgent money, in addition to submitting a deposit voucher to PDMD by 3:00 pm on Tuesday next week.

The NRB said that it would refund money to the bidders if they were not selected or the exceeded amount within seven days of their allotments without any interest.

The bondholders can take loans showing the document of bond purchase as collateral.

The secondary trading of the bond will be transacted through the Nepal Stock Exchange (NEPSE).

The development bond is part of the domestic debt, which the government plans to mobilise to make up for the deficit in its budget.

The NRB uses treasury bills, development bonds, citizen saving bonds, national saving bonds and foreign employment bonds to raise internal debt for the government.