Four Commercial Banks Line Up Rs 14 Billion in Debenture Issuances, Signaling a Shift in How Nepal's Banks Fund Themselves

Something is changing quietly in how Nepal's commercial banks think about money — not the money they lend, but the money they borrow to lend. Four commercial banks have filed applications with the Securities Board of Nepal seeking approval to issue debentures worth a combined Rs 14 billion, marking one of the more significant pipeline buildups in Nepal's debt capital market in recent memory. The banks are NMB Bank, Everest Bank, Citizens Bank International, and Rastriya Banijya Bank — a mix of private and state-owned institutions that together represent a broad cross-section of the banking sector's appetite for long-term structured funding.

All four proposed debentures carry a face value of Rs 1,000 per unit, and the combined issuance covers 14 million units. Each bank has structured its offering with a split between public and institutional placement — meaning a portion will be available to ordinary retail investors through the public market, while the remainder will be placed directly with institutional buyers through private placement. The regulatory approval process at SEBON is at different stages for each bank, with some applications still under review and one already in the comment-and-revision cycle.

NMB Bank: The Largest Piece of the Pipeline

NMB Bank has the most ambitious issuance proposal of the four. The bank is seeking approval to issue what it has branded the '7-Year 7 Percent NMB Power Bond-1' — a name that signals both the marketing intent and the financial terms. The bank proposes to issue 5 million units, which at Rs 1,000 per unit translates to a Rs 5 billion fundraise — the single largest debenture in this pipeline.

Of the 5 million units, 2 million are earmarked for the general public and 3 million for private placement with institutional investors. Siddhartha Capital Limited is the issue and sales manager. NMB Bank filed its application with SEBON on Baisakh 11, 2082 — making it one of the earlier applicants in this pipeline — and its review process is presumably more advanced than the other three.

The 7 percent interest rate over a 7-year tenor positions this debenture at the higher end of the yield offered in this batch. For an investor comparing fixed-income options in Nepal's current market — where savings deposit rates at commercial banks hover in a lower range — a 7 percent annual return locked in for seven years carries genuine appeal, particularly for risk-averse investors who find equity market volatility uncomfortable.

Everest Bank: Six Years at 6.25 Percent

Everest Bank Limited is proposing to issue 3 million units of the 'Everest Bank Debenture 2088' — a 6-year instrument carrying a 6.25 percent annual interest rate. At Rs 1,000 per unit, this raises Rs 3 billion for the bank. The split is 1.2 million units for the public and 1.8 million units for private placement. Laxmi Sunrise Capital Limited is the sales manager.

Everest Bank's application was filed on Chaitra 24, 2082, and SEBON has already responded with comments — meaning the bank has received the regulator's observations and is now in the process of revising and resubmitting its prospectus. This is a normal part of the SEBON review process and does not indicate any fundamental problem with the issuance, but it means the timeline to final approval and actual issuance is somewhat extended compared to an application that has sailed through without comment.

At 6.25 percent over six years, Everest Bank's offering is the lowest yielding in this group of four. The shorter tenor relative to NMB's 7-year instrument may appeal to investors who want predictable fixed income but are uncomfortable committing capital for very long periods — though six years is still a meaningful lock-in for retail investors who may need liquidity before maturity.

Citizens Bank: A Rate Revision That Tells Its Own Story

Citizens Bank International's proposed debenture — the '7.5 Percent Citizens Bank Debenture 2091' — carries the longest tenor of the four at 10 years, and the second-highest interest rate at 7.5 percent. The bank is proposing 3 million units for a Rs 3 billion raise, split 1.2 million public and 1.8 million private placement. Himalayan Capital Limited is the sales manager.

But there is a detail in Citizens Bank's application history that deserves attention. The bank originally proposed an interest rate of 8.5 percent when it first filed. After SEBON's review and the revision process, the rate has been reduced to 7.5 percent in the amended prospectus. That one percentage point reduction represents a meaningful change in the annual cost of this borrowing for the bank — and it may also reflect SEBON's view that 8.5 percent was above what the market or the regulatory framework would support for an instrument of this type.

For investors, the revision cuts both ways. A 7.5 percent rate over 10 years is still an attractive fixed-income proposition in Nepal's current environment. But the fact that the original proposal was higher, and was subsequently walked back, suggests that the rate-setting process for these instruments involves regulatory judgment alongside market pricing — which is worth understanding before investing. Citizens Bank's application is currently in the review stage at SEBON.

Rastriya Banijya Bank: The State-Owned Entrant

The most institutionally significant aspect of this four-bank pipeline may be the participation of Rastriya Banijya Bank — Nepal's largest state-owned commercial bank by asset size. RBB is proposing to issue the '6 Percent RBBL Debenture 2089' — a 7-year instrument at the lowest interest rate in this group. The bank is proposing 3 million units for a Rs 3 billion raise, split 1.2 million public and 1.8 million private placement. Kumari Capital Limited is the sales manager. The application is currently under review at SEBON.

RBB's 6 percent rate — the lowest of the four — reflects the implicit credit quality premium that comes with state ownership. Investors in RBB's debenture are lending to a bank that carries an implicit government guarantee in a way that private banks do not. That reduced perceived risk justifies a lower yield. Whether retail investors in Nepal's market think about it in these terms is another question, but the rate differential between RBB at 6 percent and NMB at 7 percent is the market's way of pricing that distinction.

The entry of a state-owned bank into the debenture market also signals something about how even government-backed institutions are thinking about funding strategy. RBB has historically had access to cheaper funding through government deposits and policy mandates. Its decision to pursue debenture issuance suggests that long-term fixed-rate funding through the capital market is now considered valuable across the banking sector — not just by private banks optimizing their liability structure.

Why Banks Are Turning to Debentures: The Structural Logic

To understand why four banks are simultaneously queuing up for debenture approvals, it helps to understand what debentures solve for a bank that ordinary deposits do not. Deposits — the primary funding source for any commercial bank — are largely short-term in nature. Savings deposits can be withdrawn at relatively short notice. Fixed deposits typically run for one to three years. But banks want to make loans that run for five, seven, or ten years — to fund infrastructure, housing, business expansion, and capital investment.

This maturity mismatch — short-term funding for long-term lending — is one of the fundamental structural tensions in banking. When a bank funds a seven-year loan with three-year deposits, it faces refinancing risk: what if deposit rates rise before the loan is repaid? Debentures solve this by locking in a fixed funding cost for the full tenor of the instrument. A bank that raises Rs 3 billion at 6.25 percent for six years knows exactly what that money costs for the entire period — and can price its long-term lending accordingly without worrying about interest rate movements in the interim.

Nepal Rastra Bank's regulatory framework also creates incentives for banks to maintain certain capital and funding ratios. Debentures, depending on their structure, can count toward regulatory capital or stable funding requirements — giving banks a dual benefit of regulatory compliance and cost-effective long-term funding in a single instrument.

What This Means for Investors

For Nepal's retail investment community — which has historically been concentrated in equity, particularly banking sector shares — this wave of debenture issuances represents a meaningful expansion of fixed-income options. Each of these four instruments offers a predictable annual return, return of principal at maturity, and the ability to trade the debenture on the secondary market if liquidity is needed before maturity.

The yield range across the four instruments — from 6 percent for RBB to 7.5 percent for Citizens Bank — gives investors a spectrum to choose from based on their risk tolerance, required liquidity, and investment horizon. Investors who prioritize absolute safety may prefer RBB's state-backed instrument even at the lower rate. Those comfortable with private bank credit risk may prefer Citizens Bank's 7.5 percent over ten years. The choice between tenor and yield is a genuine investment decision that this pipeline makes available to ordinary Nepali investors in a way that was less accessible before.

The caveat is liquidity. Nepal's secondary market for debentures is thin — meaning that an investor who needs to sell before maturity may find it difficult to do so at a fair price. This is a genuine limitation of fixed-income investing in Nepal's current market structure, and retail investors should factor it into their decision-making rather than treating debentures as equivalent to a fixed deposit that can be broken with a penalty fee.

The Broader Picture: Nepal's Debt Capital Market Coming of Age

Taken together, a Rs 14 billion debenture pipeline from four banks is not merely a funding story. It is a signal that Nepal's capital market is gradually developing the depth and institutional participation needed to support a functioning debt market alongside its more established equity market. When banks can raise long-term fixed-rate funding through public debenture issuances — rather than relying entirely on deposits and interbank borrowing — the financial system becomes more resilient and better matched in its asset-liability structure.

All applications are pending final SEBON approval, and the actual issuance timelines will depend on how quickly the review processes conclude. But the direction is clear. Nepal's banking sector is increasingly viewing the capital market not just as a place to list shares, but as a genuine funding channel — and that evolution, if it continues, will benefit both the banks that issue and the investors who subscribe.