NRB calls auction for T-bill of Rs.1,210 crore

Kathmandu: Nepal Rastra Bank has published auction notice for a treasury bill of Rs. 12.10 billion to raise internal debt for the Government of Nepal.

The auction will take place through online bidding on Monday. BFIs up to category C licensed by NRB, non-banking financial institutions, organization and individuals will be able to participate in the bidding on Monday. 15 percent of the total amount has been allocated for non-competitive participants.

According to the notice published by NRB, bills of Rs. 9.10 billion for a period of 91 days and Rs. 3 billion for a period of 182 days are being issued.

NRB will allocate the bill to the highest bidder among the participants in the bidding.

As per the provisions of Nepal Rastra Bank Act, 2058 BS and National Debt Act, 2059 BS, the Department of National Debt Management under Nepal Rastra Bank, collects internal debt on behalf of the Government of Nepal.

Prior to this, NRB had disbursed Treasury bill of Rs.11.83 billion during last week.

What is a treasury bill?

A treasury bill is a short-term government bond used to raise internal debt for a period of one year or less. At present, treasury bills are issued in Nepal for 91 days, 182 days and 364 days. The treasury bills of different periods are issued by the central bank  on behalf of the government.

The bills are used to mobilize financial resources for a short period of time required by the government.

How to participate in auction?

NRB has made arrangements for auction of treasury bills through its web portal since 2072 BS. Those who wish to purchase treasury bills must declare the amount they want to lend to the government.

For example, NRB has issued a bill with a face value of Rs. 100. If anyone offers to pay the highest amount of Rs. 95 among the participants in the auction, NRB will allocate the bills to the same bank.

Thus, when buying treasury bills, the institution/ or individual has to deposit 2.50 percent of the auctioned amount in the account of NRB as earnest money.

How is the payment made?

At the end of the bills maturity, NRB pays the face value of the treasury bill. But in making such payment, the difference between the pledged amount and the face value will be paid only after deducting the tax as per the income tax rules.

Discount rate is applied on treasury bills instead of interest rate. According to the example mentioned here, the discount rate is 5 percent. The discount rate on treasury bills issued by the Central Bank on September 20,2021 ranged from a minimum of 4 to a maximum of 4.94 percent.

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