Non-resident Bangladeshis (NRBs) can directly buy bonds from abroad under planned recast rules meant for making the investment tools attractive and boosting remittance into the country.
Officials said the mandatory presence of investors to buy bonds from authorised dealers will be omitted from the rules through the amendment the government contemplates.
This condition practically discourages them from investing in the tools devised for them.
"We have been informed that NRBs are facing some difficulties in obtaining bonds because of some policy barriers.
We are now working on to remove the obstacles and to make the investment tools more attractive," finance secretary Hedayetullah Al Mamoon told the FE.
Years back the government introduced three bond derivatives -Wage Earner Development Bond (WEDB), US Dollar Premium Bond (UDPB), and US Dollar Investment Bond (UDIB)-especially for the NRBs with the aim of enhancing remittance inflow.
However, the tools were found not much attractive to the NRBs, and could not make significant headway so far.
In July this year a foreign bank completed the first online NRB bond transaction (dollar premium bond) with a Brunei-based NRB customer. Some $50,000 was netted in for the sole purpose of investment in the bond.
The bank authority in a recent letter to Finance Minister AMA Muhith also requested bringing some changes in bond rules to make the instruments attractive and improve ease-of-transaction of bonds for the NRBs.
The bank also had discussions with some NRBs who were interested to invest in these securities.
Based on the discussion output, it suggested mitigating liquidity risk of non-resident investors by allowing them to garner liquidity by availing local-currency- and foreign-currency loans against the debt instruments.
It also recommended expanding the coverage of eligible investors for US Dollar Investment Bond (UDIB), and US Dollar Premium Bond (UDPB).
Presently, Bangladeshi nationals staying abroad and Bangladesh-origin foreign nationals residing abroad can invest in UDPB and UDIB. The bonds are issued in equivalent US dollar against the foreign exchange remitted by the wage earners.
On the other hand, the WEDB is issued in Bangladeshi currency (BDT) against wage earners' foreign-exchange remittance.
A wage earner in his/her own name, in the name of a person nominated by the wage earner or in the name of a beneficiary of the wage earner residing in Bangladesh, any employee of the government or of a statutory, autonomous, semi-autonomous body working abroad on lien, government employees working in the Bangladesh High Commissions abroad can invest in the WEDB.
The bank also suggested inclusion of the provision of repatriating funds to nominees residing abroad and facilitating increased bond purchase online through digitizing the instrument.
"The development of the debt capital market, especially the bond market, is an area which has great potential to add vibrancy to the financial sector of the country," the bank said in the letter.
"An active bond market will supplement the banking sector in terms of sourcing debt capital for both public-and private-sector projects," the letter reads.
At present, an investor needs to be present physically if he/she wants to buy any of the bonds from the authorised dealer banks.
A senior finance ministry official, referring to Mr Muhith's instructions, said the bond- issuing process is backdated and it should go. Steps are underway to simplify the process of investment in the bonds by the NRBs, he added.
The government had introduced the WEDB way back in 1981, followed by the UDPB and UDIB in 2002. Now the yield rate on WEDB is 12 per cent, UDIB is 6.50 per cent and UDPB is 7.50 per cent.
According to statistics of the Department of National Savings (DNS), net investments in WEDB amounted to Tk 1.45 billion in the fiscal year (FY) 2010-11, Tk 1.45 billion in FY 2011-12, Tk 760 million in FY 2012-13, Tk 1.29 billion in FY 2013-14, Tk 4.28 billion in FY 2014-15 and Tk 10.25 billion in FY 2015-16.
The net sales of UDPB were worth Tk 170 million in FY 2010-11, Tk 710 million in FY 2011-12, Tk 310 million in FY 2012-13, Tk 260.93 million in FY 2013-14, Tk 80.0 million in FY 2014-15, and Tk 49.40 million in FY 2015-16 .
UDIB fetched Tk 1.18 billion in FY 2010-11, Tk 2.98 billion in FY 2011-12, Tk 2.64 billion in FY 2012-13, Tk 440.68 million in FY 2013-14, Tk 1.25 billion in FY 2014-15, and Tk 1.86 million in FY 2015-16.