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    How To | What IsFinance RelatedWhy are debentures unpopular in Nepal?

    Why are debentures unpopular in Nepal?

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    A debenture is a long-term security provided by a corporation that pays a fixed rate of interest. It is protected against company’s properties. After the monetary policy for this fiscal year raised the question of debenture issuance, banks have been steadily issuing a series of debentures.

    Debenture has same allure as foreign securities. However, based on Nepalese investment activities, it can be concluded that they are not yet well-known. Debentures are also not well-received. People don’t seem to be interested in it, despite the fact that it is risk-free.

    Unpopularity is due to a variety of factors

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    Debentures aren’t glorified to give them a halo effect. Debentures are unpopular in Nepal for following reasons.

    Lack of Knowledge:

    Lack of knowledge is one of main reasons why debentures are under-subscribed in Nepal. Debentures are a term that many people are unfamiliar with. They have no idea how to do it. They still have no idea if it’s tradable. People have yet to know that it is an excellent choice for a regular or fixed deposit. They have no idea what a debenture is, leaving a large group in a of disarray.

    Unscientific Rate of Interest:

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    Fixed Deposits are currently offering a 9.75 percent interest rate on market. This was a drop from a high of 13% only a few months ago. A simple hint – in the coming days, there will be doubt about the agreed price. So, why would anyone want a debenture that is only.25 percent higher? While it appears that the interest rate on debentures is increasing, many people believe that the interest rate on fixed deposits will rise in the coming days. As a consequence, debentures are still a source of consternation. The Macchapuchre Bank Debenture was oversubscribed due to a 0.25 percent rate increase.

    Investors’ nature/options:

    Gambling appeals to many people. As a result, a fixed income is not preferred option for most citizens. People are more inspired by capital gains in addition to dividends. As a result, debentures are not among their preferred investments. Despite the fact that debentures are as good an investment as stocks, they are not well-known to the general public. People’s perceptions vary greatly, and they continue to seek stock with high risks and high returns. Investors in the Nepalese market are more interested in high-risk, high-reward opportunities.

    Problem of Ownership:

    general public understands that debenture holders are merely creditors, not shareholders. As a result, they are deprived of their voting rights as well as all other ownership rights. They are only responsible for a small amount of interest. As a result, many people believe there is nothing wrong with acquiring assets by buying debentures. All of this culminates in an ownership dispute and a lack of appeal for debentures on the Nepalese stock exchange.

    High Cost:

    Debentures, unlike mutual funds or stock exchanges, are not readily accessible. A minimum of 25 units with a par value of Rs 1000 each must be purchased. For average Nepalese investor, that is a huge amount. People don’t even consider doing it. As a result, it seems that they are effectively freezing a large number of money-losing opportunity costs. One significant aspect of this is due to the same – where people are hesitant to spend a large amount of money despite the absence of risk. They’d rather wait for a few IPOs or invest in the secondary market while the stock market is down.

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