Government Securities of Nepal: T-Bills, Bonds & Savings Bonds

Government securities are formal IOUs: certificates through which the Government of Nepal borrows money from the public and from institutions, promising to repay the principal on a fixed date and, in most cases, to pay interest along the way. Because they carry the full backing of the state, they are treated as the safest rupee-denominated investments available in the country and form the backbone of Nepal's domestic public debt.

The government raises money this way to finance its budget deficit, to fund development and infrastructure spending, and to manage short-term gaps between when tax revenue arrives and when the treasury must pay its bills. Short-dated Treasury bills mainly cover temporary cash-flow needs, while long-dated development and savings bonds fund longer-term commitments and help build a market yield curve.

Nepal Rastra Bank (NRB), the central bank, acts as the government's fiscal agent for these securities under the Nepal Rastra Bank Act, 2058 (2002). NRB markets, issues, and services the securities, including paying interest and redeeming principal on maturity. Alongside NRB, the Public Debt Management Office (PDMO) under the Ministry of Finance leads overall debt strategy and record-keeping.

For ordinary Nepalis, these securities matter because a few of them, notably the Citizen Savings Bond and the Foreign Employment Saving Bond, are sold directly to retail investors and often pay interest that is competitive with, or better than, ordinary bank fixed deposits.

Two institutions sit at the centre of Nepal's government-securities market. Nepal Rastra Bank runs the day-to-day issuance, auctions, settlement and interest payments as the government's banker and fiscal agent. The Public Debt Management Office (PDMO) is the specialised Ministry of Finance office responsible for the strategy, negotiation and record-keeping of both domestic and external public debt.

The PDMO was established as a separate office on 20 Ashad 2075 BS (June 2018) and formally began operations later that year. Its legal foundation was strengthened by the Public Debt Management Act, 2079 BS (2022), which consolidated debt-management functions that had previously been scattered across different agencies into a single office.

Issuance and bidding have moved online. The government uses the Debt Operation and Management System (DOMS), with a public-facing Investor Portal, so that individuals and institutions can register and bid electronically rather than through paper counters. Retail instruments such as the Citizen Savings Bond and the Foreign Employment Saving Bond can be applied for through this portal, in addition to licensed banks and market makers.

Treasury bills are the government's short-term borrowing tool. In Nepal they are issued in four standard maturities: 28 days, 91 days, 182 days and 364 days. They are the most frequently issued government security and are used mainly to manage the treasury's short-term liquidity.

T-bills pay no separate coupon. Instead they are sold at a discount to their face (par) value and redeemed at full face value on maturity, so the investor's return is the gap between the lower purchase price and the higher redemption amount. For example, a bill with a face value of Rs 100 might be bought for around Rs 98, with the Rs 2 difference representing the yield.

Bills are sold by competitive auction. Nepal Rastra Bank has generally used a multiple-price (American) auction method for Treasury bills, in which successful bidders pay the individual prices they bid rather than a single common price. Bidding is conducted online, typically with same-day submission and issuance the following business day.

The main buyers are 'A', 'B' and 'C' class banks and financial institutions, plus other institutional investors and organised firms; individuals can also participate through the bidding system. Because T-bills are short and heavily held by banks, secondary-market trading between investors is limited compared with active bond markets abroad.

Development bonds (Bikas Rin Patra) are the government's principal long-term borrowing instrument, used to fund development and infrastructure. Their maturities are considerably longer than T-bills, with issues in Nepal ranging across roughly 5 to 15 years; commonly seen tenors include 5, 7, 8, 9, 10, 12 and 15 years.

Unlike Treasury bills, development bonds pay a periodic coupon (interest), so investors receive regular interest through the life of the bond and the principal back at maturity. The coupon is market-determined through the auction rather than fixed by decree, which lets it reflect prevailing interest-rate conditions.

Development bonds are typically issued through a single-price (Dutch) auction and are dominated by institutional investors such as commercial banks, insurance companies, provident and pension funds and other organised entities that need long-dated, safe rupee assets. These bonds can, in principle, be listed and traded on the Nepal Stock Exchange (NEPSE), giving them a secondary market, although actual trading volumes have historically been thin.

For institutions, development bonds are attractive because they help meet regulatory and liquidity requirements and provide a dependable long-term yield; for the government, they lock in funding for extended periods and help establish a longer-dated benchmark yield curve.

The Citizen Savings Bond, popularly known as Nagarik Bachat Patra, is the flagship retail government security aimed at ordinary Nepali citizens. It is designed to widen participation in government debt beyond banks by letting individuals invest relatively small amounts directly. It is typically issued with medium- to long-term maturities such as five years, and pays interest semi-annually rather than only at maturity.

Eligibility is restricted to Nepali citizens (and, in practice, non-resident Nepalis in some issues), and minors may invest through a guardian. Investment sizes start small, historically from around Rs 10,000, rising in multiples up to the size of the issue, which keeps the instrument accessible to household savers. Recent issues have carried headline coupon rates that are competitive with bank deposits; the exact rate is fixed for each specific issue and announced in the issuance notice.

The National Savings Bond (Rastriya Bachat Patra) is a closely related instrument historically used to collect small savings from individuals and organisations, typically for medium terms such as four to five years. It served a similar mobilisation purpose to the Citizen Savings Bond; investors should treat the two names as belonging to the same family of retail savings instruments and rely on each issue's official notice for current terms.

Both instruments can usually be pledged as loan collateral at banks and financial institutions if the holder needs cash before maturity, giving some liquidity even though active secondary trading among retail holders is limited.

The Foreign Employment Saving Bond (Baideshik Rojgar Bachat Patra) is a special retail security created for Nepal's large migrant workforce. Its purpose is twofold: to channel remittance earnings into government debt and to encourage workers to send money home through formal banking channels rather than informal ones.

Eligibility is targeted at Nepali citizens working abroad, non-resident Nepalis, and workers who have returned from foreign employment (within a defined recent period). It is generally a medium-term instrument, and recent issues have carried a five-year maturity with an interest rate deliberately set above typical bank deposit rates to attract migrant savers.

A key attraction is tax treatment: the government has waived income tax on the interest earned from the Foreign Employment Saving Bond in its recent issues, making the effective return more competitive. Applications are made online, including through the DOMS Investor Portal and participating banks, which suits investors who are physically outside Nepal.

Despite generous terms, uptake has historically been modest relative to the amounts offered, with actual sales in many years falling well short of the target issue size. Prospective investors should always confirm the coupon, maturity, tax status and application window from the specific NRB issuance notice, as these are set fresh for each series.

For wholesale instruments, Treasury bills and development bonds, Nepal Rastra Bank runs competitive auctions announced in advance through issuance notices. Bidders submit competitive bids online through NRB's systems; T-bills have generally used a multiple-price (American) format and development bonds a single-price (Dutch) format. Settlement and interest or discount payments are handled by NRB as fiscal agent.

For retail instruments, the process is simpler and more accessible. Citizen Savings Bonds and Foreign Employment Saving Bonds are sold to the public during a defined application window at a pre-announced fixed interest rate, so individuals do not need to bid a price. Applications can be made through the DOMS Investor Portal, licensed banks and appointed market makers, with basic documents such as citizenship and photographs.

Tax treatment varies by instrument and by issue, so it should be checked against the specific notice. As a general pattern, interest on ordinary savings bonds has historically been subject to tax on the interest income, while the Foreign Employment Saving Bond has been given a tax waiver on its interest in recent issues as a deliberate incentive for migrant workers. Because concessions can change from series to series, the official issuance notice is the authoritative source.

In short, institutions dominate the auctioned Treasury bill and development bond markets, while households and migrant workers are the intended audience for the Citizen Savings and Foreign Employment Saving Bonds. Anyone considering an investment should read the relevant NRB or PDMO notice for the exact rate, maturity, eligibility, tax status and application dates before committing funds.