Business»
More discount rate on treasery bills
KATHMANDU, JAN 13 - Indicating that investment climate in the country is improving, the Commercial bank’s interest on risk-less government securities has recorded a decline in the past six months. This has led to an increase in the Average Weighted Discount Rate of treasury bills in the recent days.
The central bank statistics reveals that the discount rates on treasury bills begun to record continuous upsurge for the past two months and has now reached the maximum height and has offered a discount of Rs 3.9681 on the investment of every Rs 100.
Experts say, the increase in discount rate also indicates a decrease in liquidity position of the financial system. "When liquidity of the financial system decreases, the financial system will have less amount to invest in government securities, which increases the discount rate," they argue.
The statement is justified, because the latest statistics unveiled by the central bank reveals that the growth rate of investment of commercial banks is higher than the growth rate deposits. This has shrunk the net liquid assets, states the first quarter economic report of the central bank.
The increase in the demand for funds can be attributed to the increased demand for short-term loans including trading. This, despite a decrease in the demand for the long-term investment, has increased the net demand for investment.
Rita Panta, Executive Director at Public Debt Department adds, "Due to an increase in demand for loans, the competition among bankers to buy the treasury bills is lower, and thus the discount rates is high," she added.
Along with the increased discount rates, the increase in the intra-bank interest rates also indicates the increase in the demand for funds. According to the central bank statistics, the intra bank rates increased to 5.5 percent this January, from 3.83 percent of January 2002.
TBs are sold to those who offer lowest discount rate for the purchase. However, the Open Market Operation Committee (OMOC) can reject the bid if it suspects of interest manipulation and rates offered is either too low or too high as compared to normal market rates.
TBs are considered as the most secure investment, in which the default risk is considered to be practically non-existent. They are one of the most important government monetary instruments, widely used to cover irregular short-term deficits.
Out of the total floated TBs, competitive forces can purchase a maximum of only 85 per cent. The remaining 15 per cent is reserved for non-competitors. Only individuals and non-banking institutions are entertained to procure the TBs under the non-competitor facility.Posted on: 2004-01-14 04:03
Headlines
Advertisements
