Debt Securities: Corporate Debentures and Government Securities

Nepal has two fixed income markets that barely touch each other. One is the sovereign market, run by Nepal Rastra Bank on the government’s behalf and sitting almost entirely outside the securities regulator’s reach. The other is corporate debentures, which SEBON does regulate and which are small enough that a single year’s issuance would not move a mid-sized bank’s balance sheet.

The statutory divide

The Securities Act 2063 (2007) requires securities to be registered with SEBON before they are issued, and requires a prospectus approved by the Board for a public issue.

Section 30(2) then carves out the sovereign. No prospectus approval is required for securities of Nepal Rastra Bank, for securities guaranteed by the Government of Nepal, for an issue to fifty or fewer persons, for securities issued to employees, or for anything the Board permits.

Those first two exemptions mean the government bond market operates under a different constitutional logic from everything else in this section of the site. There is no prospectus for a treasury bill. There is no SEBON registration. The disclosure that exists is whatever the central bank chooses to publish in an auction notice, and the investor protection is the sovereign’s credit.

The fifty-person exemption does the corresponding work in the private market. A corporate debenture placed with fifty or fewer investors escapes the prospectus regime, which is why private placement is the default route for bank debentures sold to institutions.

The corporate market

In FY 2081/82 (2024/25), SEBON approved nine debenture issues raising about NPR 10.62 billion. Set that against the same year’s NPR 15.41 billion of rights issues and NPR 15.88 billion of mutual fund units, and against a market capitalisation of NPR 4.66 trillion at the year end. Corporate debt is a rounding error in Nepali capital formation.

By 26 August 2026, CDS and Clearing Ltd held 81 bonds and debentures in dematerialised form, against 286 companies with equity in demat. There is roughly one debt instrument in the depository for every three and a half listed issuers, and a substantial share of the 81 will be multiple issues by the same handful of banks.

Two structural facts explain the size.

The first is who is allowed to issue and who is motivated to. SEBON’s draft Debenture Registration and Issuance Rules 2083, published for consultation on 20 August 2026, would confine secured debenture issuance to banks, financial institutions, insurance companies and entities established under special legislation, and would bar other entities from issuing debentures at all. A regulator proposing to codify that restriction is describing a market that already looks like that. Banks issue debentures because Nepal Rastra Bank’s capital rules give subordinated debt a regulatory function. Ordinary corporates have no equivalent driver and can borrow from the same banks more cheaply and with less process.

The second is liquidity, or its absence. A corporate debenture in Nepal is bought to be held. Without a functioning secondary market, an institutional buyer prices in illiquidity, which raises the coupon the issuer must pay, which makes the bank loan look better still.

The 2083 draft rules

The draft is a draft. Nothing in it is in force, and SEBON published an explanatory note alongside it inviting comment. Read on those terms, the proposals are informative about what the Board thinks is wrong.

A trustee would become mandatory for both public and private debenture issues. The trustee would have to be authorised by SEBON, independent of the issuer and of the transaction, and would have to meet a capital threshold. Nepal has had debentures without a proper trustee regime for years. Putting one in is the single most consequential change proposed.

Credit rating would be mandatory for both public and private issues, updated annually and on any material change. Rating requirements already gate equity issuance under the Securities Registration and Issue Regulation 2073, and this extends the same logic to debt.

Private placement would be defined and capped, limited to a stated maximum number of qualified investors approached by letter, telephone, message or electronic means, with a minimum commitment per investor. Privately placed debentures could trade over the counter but could not be transferred to a non-qualified investor.

Public issues would have to be listed on the stock exchange and completed within two months of prospectus approval.

Together these would move corporate debt from a lightly specified corner of the securities regulation into a regime of its own. Whether the effect is to grow the market or to raise its cost of entry depends on details that are not settled, and an issuer planning a 2027 debenture should watch the consultation rather than the draft.

Government securities

The sovereign market is the larger of the two by a wide margin, and it is the one we can say least about with confidence.

Nepal Rastra Bank acts as the government’s issuing agent. The instruments are the familiar set: treasury bills at short tenors, development bonds at longer ones, and retail-oriented instruments including citizen savings certificates and savings bonds aimed at Nepalis working abroad. Issuance runs through auction. Banks and financial institutions are the principal bidders, and government securities count towards their statutory liquidity requirements, which is the main reason they hold them.

We were unable to obtain the outstanding stock, the composition by instrument, or the issuance calendar for FY 2083/84 (2026/27) from Nepal Rastra Bank’s own publications. Its public debt pages returned monetary operations notices rather than debt management data, and the Public Debt Management Office’s site could not be reached. Rather than reproduce figures from secondary aggregators, this article states none.

What can be said, and is directly relevant to any fixed income decision in Nepal, is the liquidity backdrop. In the last week of August 2026 Nepal Rastra Bank ran deposit collection auctions of NPR 35 billion at six months on 19 August, NPR 85 billion at six months on 21 August and NPR 90 billion at four months on 26 August. A central bank absorbing more than NPR 200 billion of surplus bank liquidity inside eight days is operating in a system with far more deposits than lending demand.

That condition drives everything downstream. Deposit rates fall. Government paper is bid aggressively by banks with nothing else to do with the money. Corporate borrowers with bank access have no reason to pay a debenture spread. And the equity market receives the overflow, which partly explains a market capitalisation of NPR 4.4 trillion in an economy of Nepal’s size.

The practical choice

For a domestic institution, the fixed income decision in Nepal is mostly a decision between government paper and a bank deposit, with corporate debentures as a small, illiquid, mostly bank-issued third option carrying a modest spread.

For a foreign institution, the prior question is whether it may hold any of this at all. Debt securities are securities, and the access regime described in Who Can Buy Nepali Securities applies to them as much as to equity. There is no separate open channel for foreign purchase of Nepali government bonds.

For an issuer, the honest advice is arithmetic rather than legal. Compare the all-in cost of a debenture, including the rating, the trustee the draft rules would require, the issue management fee capped at two percent under the merchant banker regulation, and the illiquidity premium a buy-and-hold institutional investor will demand, against a term loan from a bank sitting on surplus liquidity. In most of the Nepali market as it stood in August 2026, the loan wins. That is why the market is the size it is.

Sources

1. Securities Act, 2063 (2007) — English text

   Securities Board of Nepal · Authenticated 14 January 2007 · Tier 1 — Primary legal instrument

   Supports: Registration of securities before issue (section 27), prospectus approval and the exemptions for Nepal Rastra Bank securities, government-guaranteed securities and issues to fifty or fewer persons (section 30 and 30(2)), prospectus content (section 32), prospectus liability (section 33), the seven-day allotment notice (section 28) and the definition of a depository holding scheme assets (section 2(d)).

   Accessed 26 August 2026

2. ऋणपत्र दर्ता तथा निष्काशन नियमावली, २०८३ को मस्यौदा (Draft Debenture Registration and Issuance Rules 2083)

   Securities Board of Nepal · Issued for public consultation 20 August 2026; draft, not in force · Tier 1 — Primary legal instrument

   Supports: The proposed restriction of secured debenture issuance to banks, financial institutions, insurers and entities under special legislation; the mandatory SEBON-authorised trustee independent of the issuer; mandatory credit rating for public and private issues with annual updating; a private placement route limited to qualified investors; listing of public issues on the stock exchange; and completion of a public issue within two months of prospectus approval.

   Accessed 26 August 2026

3. ऋणपत्र दर्ता तथा निष्काशन नियमावली, २०८३ को मस्यौदामा राय सुझाव पेश गर्ने सम्बन्धमा (Notice inviting comments on the draft Debenture Rules 2083)

   Securities Board of Nepal · 20 August 2026 · Tier 2 — Official publication

   Supports: That the draft rules were released for public consultation on 20 August 2026, alongside an explanatory note published the same day, and that a draft Margin Loan Trading Rules and a consultation paper on securities financing services were issued in the same period.

   Accessed 26 August 2026

4. वार्षिक प्रतिवेदन आ.व. २०८१/८२ (Annual Report FY 2081/82)

   Securities Board of Nepal · Published 31 December 2025 · Tier 2 — Official publication

   Supports: Nine debenture issues raising about NPR 10.62 billion in FY 2081/82, against 15 IPO and FPO issues raising about NPR 3.93 billion, 17 rights issues raising about NPR 15.41 billion and 10 mutual fund schemes raising about NPR 15.88 billion, out of 144 issue approvals.

   Accessed 26 August 2026

5. CDS and Clearing Ltd — corporate website, live depository counters

   CDS and Clearing Ltd · Figures as displayed on 26 August 2026 · Tier 2 — Official publication

   Supports: 81 bonds and debentures held in dematerialised form, alongside 286 companies and 69 mutual funds, and 8,052,070 beneficial owner accounts.

   Accessed 26 August 2026

6. Public debt and monetary management notices

   Nepal Rastra Bank · Notices dated 19, 21 and 26 August 2026 · Tier 2 — Official publication

   Supports: Deposit collection auctions of NPR 35 billion at six months on 19 August 2026, NPR 85 billion at six months on 21 August 2026 and NPR 90 billion at four months on 26 August 2026, indicating substantial excess banking system liquidity.

   Accessed 26 August 2026

7. दरभाउपत्र स्वीकृत गर्ने आशयको सूचना (Notice of intention to approve a debenture)

   Securities Board of Nepal · 30 March 2026 · Tier 2 — Official publication

   Supports: That debenture approvals continue to be handled by SEBON as individual notices in 2026 rather than under a dedicated set of rules.

   Accessed 26 August 2026