Sunday, October 18, 2026

Investment Scams in Nepal: Red Flags and How to Protect Yourself

Scams in Nepal have become much more sophisticated. It's no longer just the obvious "you won a lottery" SMS. Now it's polished Telegram groups with "expert signals," fake trading apps that show huge profits until you try to withdraw, and calls from someone claiming to be your bank.

The tools change. The tricks underneath mostly don't.

Red flags

  • Guaranteed high returns: "3% per month, no risk." Real investments don't work like that.
  • Pressure to hurry: "Only today," "last few seats," "decide now."
  • Pay to a personal account or eSewa/Khalti wallet instead of a company account.
  • Recruit friends to earn more: classic pyramid structure.
  • Screenshots as proof: fake profit screenshots and "approved by SEBON" logos are easy to make.
  • Asking for OTP, PIN or remote access (AnyDesk, TeamViewer). No genuine bank, broker or CDSC staff will ever ask.

Before sending any money

Check the company yourself on the official website of the relevant regulator: SEBON for securities and brokers, NRB for banks and financial institutions, and the Nepal Insurance Authority for insurers. Find the phone number independently. Don't use the one in the message.

Ask simple questions: how exactly is this return generated? What happens if it goes wrong? How do I withdraw? Vague answers are your answer.

If you think you've been hit

  • Call your bank or broker immediately using the number on their official website or your card.
  • Change your passwords from a device you trust.
  • Keep every screenshot, message and transaction slip.
  • Report it to the Nepal Police Cyber Bureau.

And watch out for the second scam: someone who contacts you offering to "recover" your lost money for a fee. That's almost always the same people, or new ones who heard you're an easy target.

Share this with your parents and relatives. They're often the ones these scammers target first.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Investment Scams in Nepal: Red Flags and How to Protect Yourself

Scams in Nepal have become much more sophisticated. It's no longer just the obvious "you won a lottery" SMS. Now it's polished Telegram groups with "expert signals", fake trading apps that show huge profits until you try to withdraw, crypto "opportunities", and calls from someone claiming to be your bank, CDSC or even the police.

The tools change. The tricks underneath mostly don't. Once you learn to spot the patterns, most scams become surprisingly easy to recognise.

Common scams I keep seeing

1. Fake trading and investment apps

You're added to a WhatsApp or Telegram group where "members" share screenshots of big profits. Someone invites you to download an app or visit a website to start trading. You deposit a small amount and see impressive gains on the screen. You deposit more. When you try to withdraw, there's suddenly a "tax", a "processing fee" or a "verification charge". You pay it, and then there's another one. Eventually the app disappears.

The profits on the screen were never real.

2. "Guaranteed" share tips

Paid groups promising "sure-shot" NEPSE tips or "insider information". Some are just guessing. Others are deliberately pumping a thinly traded share so the group admins can sell their own holdings to members at a high price. When they sell, the price collapses.

3. Bank and CDSC impersonation calls

"Your Mero Share account will be blocked." "Your KYC is expired." "There's a suspicious transaction on your account." The caller sounds official and asks you to confirm an OTP or install an app "to fix it". Once they have the OTP or remote access, they empty your account or sell your shares.

4. High-interest cooperatives and Ponzi schemes

Promises of 18%, 24% or more per year, often promoted through community networks. Early investors get paid (with later investors' money), so the scheme looks legitimate, until new money stops coming in.

5. Crypto and "forex" schemes

Crypto trading and many forex platforms aren't authorised in Nepal. Schemes promising daily returns from "crypto mining" or "forex robots" are very common, and many are outright frauds.

6. Remittance and lottery scams

"A transfer is stuck. Pay a fee to release it." "You've won a prize. Pay the tax first." Classic advance-fee fraud.

7. Romance and relationship scams

Someone you meet online builds trust over weeks or months, then introduces an "investment opportunity" or needs money urgently. These can be devastating, emotionally as well as financially.

Red flags

  • Guaranteed high returns: "3% per month, no risk." Real investments don't work like that. Higher returns always come with higher risk.
  • Pressure to hurry: "Only today." "Last few seats." "Decide now or miss out." Legitimate opportunities don't disappear in an hour.
  • Pay to a personal account or eSewa/Khalti wallet instead of a company account in the company's name.
  • Recruit friends to earn more: classic pyramid structure.
  • Screenshots as proof: fake profit screenshots and "approved by SEBON" or "NRB registered" logos are easy to make.
  • Secrecy: "Don't tell your family yet." "This is only for selected people."
  • Asking for OTP, PIN or remote access (AnyDesk, TeamViewer, screen-sharing apps). No genuine bank, broker or CDSC staff will ever ask for these.
  • Unclear business: they can't explain clearly how the returns are generated.
  • Withdrawal problems: easy to put money in, difficult or "temporarily unavailable" to take it out.

Before sending any money

Check the regulator yourself

  • SEBON for securities, brokers, mutual funds and merchant bankers
  • Nepal Rastra Bank for banks, financial institutions, payment service providers and remittance companies
  • Nepal Insurance Authority for insurers and agents
  • The relevant government body for cooperatives

Go to the official website directly by typing the address. Don't use a link someone sent you.

Find the phone number independently

Don't use the one in the message or on the "company" website the scammer sent. Look up the official number yourself.

Ask simple questions

  • How exactly is this return generated?
  • What happens if it goes wrong?
  • How and when can I withdraw?
  • Can I see the registration and audited accounts?

Vague answers are your answer.

Talk to someone you trust

Before putting in a significant amount, talk to a family member or friend who isn't involved. Scammers rely on isolation and urgency. A second opinion breaks both.

Protect your accounts

  • Use strong, unique passwords for Mero Share, TMS, internet banking and email. Not your birthday. Not your phone number.
  • Never share your password, PIN or OTP with anyone, ever.
  • Don't install apps from links in messages. Only use official app stores and official websites.
  • Keep your phone number and email linked to your bank and Mero Share up to date, so you get alerts.
  • Turn on transaction alerts for your bank accounts.
  • Don't use public Wi-Fi or shared computers for financial accounts.
  • Be careful about what you post publicly. Scammers use personal details to sound convincing.

If you think you've been hit

  1. Act fast. Call your bank or broker immediately using the number on their official website or the back of your card. Ask them to block the account or transaction.
  2. Change your passwords from a device you trust.
  3. Keep evidence: every screenshot, message, call log, transaction slip and the scammer's account details.
  4. Report it to the Nepal Police Cyber Bureau, and to the relevant regulator.
  5. Warn others, especially if the scam came through a group or community network.

Watch out for the second scam

After you've been scammed, there's a good chance someone will contact you offering to "recover" your lost money, for a fee. They might claim to be lawyers, hackers, police or a government agency.

That's almost always the same people, or new scammers who bought a list of victims. Real police don't charge a fee to investigate. Don't send more money.

No checklist is perfect

Scammers keep inventing new methods. Smart, educated people get caught every day. It's not about intelligence; it's about catching someone at the right moment with the right story.

The best defence is a simple habit: pause, verify independently, and never rush a money decision because someone else is in a hurry.

Please share this with your parents and older relatives. They're often the ones these scammers target first. And if you're new to investing, start with the legitimate basics: how Demat, Mero Share and brokers work.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

A Simple Money Plan for Families Living on Remittance

Walk through almost any village in Nepal and you'll find houses built with money earned in Malaysia, Qatar, Saudi, Korea or Japan. Remittance keeps millions of families going. But I also hear the same story again and again: years of hard work abroad, and very little saved by the time the worker comes home.

It's rarely because anyone was careless. Usually there was just no plan that everyone agreed on.

Sit down together, even over a video call

The person earning and the people managing the money at home need to agree on a few things:

  • What are the fixed monthly costs? Food, school, medicine, loan repayment.
  • What big expenses are coming? A manpower loan to clear, a wedding, house repairs.
  • How much gets saved each month, and where?
  • Who tracks it, and how often does everyone review it together?

Plan around a conservative amount

Jobs abroad end, salaries get delayed, overtime disappears. Build the household budget on a lower, safer amount. In months when more comes in, send the extra straight to savings or loan repayment, not to new monthly commitments that are hard to undo.

Pay off the manpower loan first

Many workers start abroad with a loan at high interest. Clearing it quickly is often the best "investment" the family can make.

Use legal channels, always

Send money through banks and licensed remittance companies. Hundi might offer a slightly better rate, but it's illegal, your money has no protection, and it can land your family in serious trouble. Compare the full cost (fees plus exchange rate), not just the advertised rate.

Be careful with "schemes"

Remittance families are a favourite target for cooperatives and schemes promising unusually high returns. If it sounds too good, it probably is.

Finally, talk openly about whose name each account and asset is in. It's an awkward conversation, but it prevents much bigger problems later.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

A Simple Money Plan for Families Living on Remittance

Walk through almost any village in Nepal and you'll see houses built with money earned in Malaysia, Qatar, Saudi Arabia, the UAE, Korea or Japan. Remittance makes up around a quarter of the country's economy and keeps millions of families going.

But I also hear the same story again and again. Someone spends ten years working abroad in hard conditions, sends money home every month, and comes back to find very little saved. There's a house, maybe, but no savings, no income source, and sometimes still some debt.

It's rarely because anyone was careless. Usually there was just no plan that everyone agreed on. Money came in, needs came up, and it all went out.

This post is for families on both sides: the person working abroad, and the people managing the money at home.

Sit down together, even over a video call

The single most useful thing a remittance family can do is have one honest conversation about money. Not a fight, not blame. Just a plan.

Agree on:

  • What are the fixed monthly costs? Food, rent if any, school fees, medicine, electricity, loan repayment.
  • What big expenses are coming? A manpower loan to clear, a wedding, a child's admission, house repairs, land.
  • How much gets saved each month, and where?
  • What are the goals? What should the family have in place when the worker comes home for good?
  • Who tracks it, and how often does everyone review it together?

Write it down. A shared Google Sheet or even a photo of a notebook page sent on WhatsApp works.

Plan around a conservative amount

Jobs abroad can end suddenly. Salaries get delayed. Overtime disappears. Companies close. Visas don't get renewed. Health problems force people home early.

Build the household budget on a lower, safer amount, not the best month. Say the worker usually sends Rs 60,000 but sometimes only Rs 40,000. Plan the household's regular spending around Rs 40,000.

In months when more comes in, send the extra straight to savings or loan repayment, not to new monthly commitments that are hard to undo, like a bigger rent, a new vehicle loan or expensive private school fees that can't be sustained.

Pay off the manpower loan first

Many workers start abroad with a loan to cover recruitment fees, tickets and other costs, often at high interest from moneylenders or cooperatives. Clearing it quickly is often the best "investment" the family can make.

Every month that loan sits there, interest eats into the remittance. Make it the top priority after basic household costs.

Build an emergency fund at home

Keep a reserve in a bank savings account at home, ideally enough to cover several months of basic household costs. If the job abroad ends suddenly or someone in the family gets sick, this money means you don't need a rushed loan.

I've written more about building an emergency fund on an irregular income, and remittance definitely counts as irregular.

Plan for the return

This is the part most families miss. Working abroad is usually temporary. What happens when the worker comes home?

  • Will there be an income source? A small business, a job, rental income, farming?
  • Will there be savings to live on while that income gets started?
  • Does the worker have skills or contacts to use back home?

Start thinking about this years before the return, not months. Setting aside part of every remittance into a "return fund" can make the transition much smoother.

Be careful with big spending decisions

Some of the most common regret stories involve:

  • Building a house that's bigger than needed, using up all the savings with nothing left for income
  • Buying land at inflated prices without checking documents properly
  • Very expensive weddings or ceremonies funded by loans
  • Lending large amounts to relatives without clear terms

None of these are always wrong. But big decisions should be made together, with both the worker and family agreeing, and with a clear idea of what's left afterwards.

Use legal channels, always

Send money through banks and licensed remittance companies.

Hundi (informal money transfer) might offer a slightly better rate, but:

  • It's illegal in Nepal
  • Your money has no protection. If the hundi operator disappears, it's gone
  • It can land your family in serious legal trouble
  • It doesn't build a formal financial record, which can matter for loans and other services later

When comparing legal services, look at the full cost: the fee plus the exchange rate. A "zero fee" service with a poor exchange rate can cost more than one with a small fee and a good rate.

Always confirm the money arrived through official records, like the bank statement or the remittance company's app, not just a phone call.

Take advantage of what's available

Nepalis working abroad have access to some specific options. Check current details, as they change:

  • IPO quota: many IPOs reserve a portion for Nepalis working abroad. You'll need a Demat account and to meet the eligibility requirements. (See my post on Demat and Mero Share.)
  • Foreign employment savings bonds, when the government issues them
  • Special savings or deposit products some banks offer for remittance recipients
  • Social Security Fund contribution options for workers abroad
  • Foreign employment insurance through the official scheme. Make sure you understand what it covers.

Be careful with "schemes"

Remittance families are a favourite target for scams and risky schemes, because there's regular money coming in and the earner is far away.

Red flags include cooperatives promising unusually high interest, "investment opportunities" promoted by people from the same village, and anyone asking for money to "speed up" a transfer or "release" a stuck remittance. Never share banking passwords or OTPs with anyone claiming to help with a transfer. More in my scams post.

Talk openly about ownership

Finally, the awkward one. Talk openly about whose name each account, piece of land and asset is in.

It's uncomfortable, especially in joint families. But many painful family disputes start when a worker returns and finds that assets bought with their money are in someone else's name, or when something happens to the worker and nobody knows what accounts exist.

Make sure:

  • Accounts have nominees
  • Important documents (citizenship copies, land papers, insurance policies, account details) are kept safely and someone trusted knows where
  • Big purchases are recorded clearly

It's an awkward conversation, but it prevents much bigger problems later.

Working abroad is a huge sacrifice. A clear plan at home makes sure that sacrifice actually builds something lasting.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Friday, October 16, 2026

Insurance Isn't an Investment (And Mixing the Two Often Costs You)

Almost everyone in Nepal has a relative or friend who sells life insurance. And almost every pitch sounds the same: "You get protection AND your money back with bonus! It's like saving and insurance together!"

It's a tempting idea. Who doesn't want both? But it's also where a lot of confusion, and a lot of disappointed families, starts.

This post isn't against insurance. Insurance is one of the most important parts of a money plan. It's against buying the wrong kind for the wrong reason.

They do two different jobs

Insurance protects your family from a financial shock: death, serious illness, accident, damage to property. You pay a premium so that if something terrible happens, there's money. If nothing happens, you "lose" the premium, and that's a good outcome. It means nothing bad happened.

Investing is about growing money over time, accepting ups and downs along the way.

When you try to make one product do both jobs, it usually does both jobs less well than two separate products would.

The main types of life insurance in Nepal

Term life insurance

Pure protection. You pay a premium for a set term (say 20 or 30 years). If you die during the term, your family gets the sum assured. If you survive, you get nothing back.

Because there's no savings part, premiums are much lower for the same amount of cover. A young, healthy person can often get a large sum assured for a relatively small yearly premium.

Endowment plans

Protection plus savings. If you die during the term, your family gets the sum assured (plus bonuses). If you survive, you get the sum assured plus accumulated bonuses at maturity.

This is the "money back" feeling people like. But premiums are much higher than term insurance for the same sum assured.

Money-back plans

Similar to endowment, but you get portions of the sum assured back at intervals during the term (every 5 years, say).

Whole life plans

Cover lasts until a high age, with savings built in. Premiums are higher still.

The problem with mixing

When a policy tries to do both, you often end up with:

  • Too little protection. Because premiums are high, people buy a smaller sum assured, like Rs 5 or 10 lakh. If the main earner dies, that's often not enough to support a family for more than a few years.
  • Modest returns. When you work out the effective yearly return on endowment plans, it's often similar to or lower than what you'd get from FDs over the same period, and your money is locked up for 15–25 years.
  • Heavy penalties for leaving early. If you stop paying in the first few years, the surrender value can be much less than what you've paid in.

A comparison worth doing

Ask your agent for two quotes, for the same person and the same term:

  1. An endowment plan with a sum assured of, say, Rs 10 lakh
  2. A term plan with the same yearly premium. How much sum assured would that buy?

Then also ask: if I took a term plan for Rs 10 lakh (much cheaper), and invested the difference in premium every year in an FD or mutual fund, roughly what would I have at the end?

The difference can be eye-opening. Do the maths yourself. Don't rely only on the agent's illustration.

That said, some people genuinely prefer endowment plans because they enforce savings discipline, which is fine as long as it's an informed choice.

Health insurance matters just as much

A single serious illness, like cancer, heart surgery or a major accident, can wipe out years of savings in Nepal. Private hospital bills add up very quickly.

Options include:

  • Health insurance from non-life insurance companies
  • The government health insurance programme run by the Health Insurance Board, which gives families a basic level of cover at a low premium. Check current premium and coverage details on the official site.
  • Employer group cover, if you have it. But check what happens if you leave the job.

When buying insurance, read for

  • What's covered, and especially what's excluded. Exclusions are where claims get rejected.
  • Waiting periods: common in health insurance, especially for pre-existing conditions.
  • Claim process and documents needed. How long do claims usually take?
  • What happens if you miss a premium. Is there a grace period? Can the policy be revived?
  • Sub-limits in health insurance, like caps on room rent or specific treatments.
  • Disclosure. Be honest about your health, smoking and other details when applying. Hiding something can get a claim rejected later, exactly when your family needs it most.

When it's sold as an investment, ask

  • What return is actually guaranteed, and what is only "projected" or "illustrated"? Bonuses are not guaranteed unless the policy says so.
  • What do I get back if I surrender in year 3? Year 5?
  • How much of my premium goes to commissions and charges in the first few years?
  • What is the effective yearly return if everything goes as illustrated?

If the agent can't or won't answer these clearly, that tells you something.

Who needs what

  • If people depend on your income, like a spouse, children or ageing parents, life cover is important. A common rule of thumb is cover of several times your yearly income, but your actual needs depend on debts, dependants and other savings.
  • Health cover is important for almost everyone.
  • If you have a home loan, make sure there's cover so your family isn't left with the debt.
  • If you're single with no dependants, you may need less life cover, but health and accident cover still matter.
  • If you work abroad, check what your employer and the foreign employment insurance scheme cover, and what they don't.

Check the provider

Make sure the insurer and agent are licensed by the Nepal Insurance Authority. Look at the company's claim settlement record if you can find it.

Don't decide under pressure

Insurance sales often come with pressure, especially from relatives. "The offer ends this month." "Everyone in the family has taken it." "You're being irresponsible."

Don't cancel an old policy or sign a new one just because someone is pressuring you this week. Cancelling an existing policy early often means losing a lot of what you've paid. Take the documents home, read them, compare, and ask an independent person if you can.

Insurance is about protecting your family. Investing is about growing your money. Get each one right on its own, and your overall plan gets much stronger. For the investing side, start with saving vs investing.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Insurance Isn't an Investment (And Mixing the Two Often Costs You)

Almost everyone in Nepal has a relative or friend who sells life insurance. And almost every pitch sounds the same: "You get protection AND your money back with bonus!"

It's a tempting idea. It's also where a lot of confusion starts.

They do two different jobs

Insurance protects your family from a financial shock: death, serious illness, accident. You pay a premium so that if something terrible happens, there's money.

Investing is about growing money over time.

When a policy tries to do both, like endowment plans and money-back policies, you often end up with too little protection and modest returns. Ask the agent for the actual sum assured versus the premium, and compare it with a pure term life plan. The difference can be eye-opening.

When buying insurance, read for

  • What's covered, and especially what's excluded
  • Waiting periods (common in health insurance)
  • Claim process and documents needed
  • What happens if you miss a premium

When it's sold as an investment, ask

  • What return is guaranteed, and what is only "projected"?
  • What do I get back if I surrender in year 3?
  • How much of my premium goes to commissions and charges?

Who needs what

If people depend on your income, life cover is important. Health cover is important for almost everyone. Check that the insurer and agent are licensed by the Nepal Insurance Authority.

And don't cancel an old policy or sign a new one just because someone is pressuring you this week. Take the documents home and read them.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Bonds and Debentures: You're the Lender Now

When you buy a debenture, you're lending money to a company. They promise to pay you interest regularly and return your money at the end. Simple enough.

The question is how sure you are that they'll keep that promise. And whether you'll be able to get your money out if you need it before the end.

Bonds vs debentures: what's the difference?

In everyday Nepali usage:

  • Bonds usually refer to government borrowing, like development bonds, treasury bills and savings bonds issued through NRB. Foreign employment savings bonds and citizen savings bonds have also been offered at times.
  • Debentures usually refer to company borrowing, mostly by commercial banks and some other companies.

The basic idea is the same: you lend money, you get interest (called the coupon), and you get your principal back at maturity.

The risk level is very different. The government of Nepal is generally considered a much safer borrower than any single company.

How bank debentures work in Nepal

Commercial banks in Nepal issue debentures fairly regularly, partly to meet regulatory requirements and partly to fund long-term lending. A typical bank debenture might look like this:

  • Face value: Rs 1,000 per unit
  • Coupon: a fixed annual rate, paid half-yearly or yearly
  • Term: often 7–10 years
  • Offered partly to the public through Mero Share, like an IPO
  • Listed on NEPSE after issue

The coupon is usually somewhat higher than FD rates at the time of issue, because you're locking your money up for much longer and taking more risk.

Debentures aren't fixed deposits

A lot of people treat bank debentures as "basically an FD with a better rate". They're not the same thing:

  • No deposit insurance. FDs at licensed banks are covered up to a limit by the Deposit and Credit Guarantee Fund. Debentures generally aren't.
  • Lower priority if things go wrong. If the issuer gets into trouble, depositors are typically paid before debenture holders. Many bank debentures are "subordinated", meaning they rank even lower.
  • Can't just withdraw. With an FD, you can break it early (with a penalty). With a debenture, you have to find a buyer on NEPSE.
  • Price changes. An FD's value doesn't fluctuate. A debenture's market price can.

What to look at

Who's borrowing?

A large, well-capitalised bank with low bad loans is a different risk from a small company with heavy losses. Read the issuer's financials and check any credit rating mentioned in the offer document.

Coupon rate and payment schedule

How much interest, and how often? Half-yearly payments give you cash flow more often.

Maturity

Many are 7–10 years. That's a long time. Ask yourself whether you're really sure you won't need this money for a decade.

Secured or unsecured

Is anything backing it? Most bank debentures are unsecured and subordinated. Read what that means in the offer document.

Special terms

  • Call option: can the issuer repay early? If interest rates fall, they might, leaving you to reinvest at lower rates.
  • Convertible: can the debenture be converted into shares? Under what conditions?

Can you sell early?

Debentures are listed on NEPSE, but trading is often thin. Some days, a particular debenture might not trade at all.

This means:

  • You might not find a buyer when you want to sell.
  • If you're in a hurry, you might have to accept a lower price.
  • The bid-ask spread (difference between buyers' and sellers' prices) can be wide.

Don't buy debentures with money you might need before maturity, unless you're comfortable with this.

The coupon isn't your total return

Several things affect what you actually earn:

  • Purchase price. If you buy a Rs 1,000 debenture on the secondary market for Rs 1,050, you'll still only get Rs 1,000 back at maturity. Your actual return is lower than the coupon suggests. If you buy at Rs 950, it's higher.
  • Tax. Tax is deducted from interest payments at source.
  • Broker fees if you buy or sell on NEPSE.
  • Reinvestment. What do you do with the interest payments? If you spend them, there's no compounding.
  • Inflation over 7–10 years can eat into the real value of both the interest and the principal.

The more accurate measure is yield to maturity: the total return you'd get if you bought at today's price and held until maturity, counting all interest and the final repayment. Some websites and brokers calculate it for listed debentures.

Interest rates and debenture prices

This is the part that confuses most people.

Say you bought a debenture paying 10% a year. Then interest rates in the economy rise, and new debentures start paying 12%. Nobody wants to pay full price for your 10% debenture when they can get 12% elsewhere. So its market price falls.

The opposite also works. If rates fall to 8%, your 10% debenture becomes more attractive, and its price can rise.

If you hold to maturity, these price changes don't matter. You still get Rs 1,000 back, assuming the issuer pays. But if you need to sell early, they matter a lot.

Government bonds

For ordinary investors, government savings bonds (when offered) are generally considered among the safest options in Nepal, because they're backed by the government. They usually pay less than corporate debentures for that reason. Look out for announcements from NRB, and remember that availability, terms and eligibility change from issue to issue.

Where debentures can fit

Debentures can be a reasonable part of a portfolio, especially for:

  • People who want steady, predictable income
  • Retirees or those close to retirement
  • The "stable layer" in a diversified portfolio (see my diversification post)

They're less suitable for emergency money (too hard to access) or for people who don't understand the issuer's risks.

Bottom line

Read the offer document, understand who you're lending to, think hard about whether you can hold for the full term, and don't put too much with one issuer. And don't let the phrase "fixed income" convince you your principal is guaranteed. It's fixed income only as long as the borrower can pay.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Bonds and Debentures: You're the Lender Now

When you buy a debenture, you're lending money to a company. They promise to pay you interest regularly and return your money at the end. Simple enough. The question is how sure you are that they'll keep that promise.

Debentures aren't fixed deposits

A lot of people treat bank debentures in Nepal as "basically an FD with a better rate." They're not the same thing. A debenture isn't covered like a deposit, and if the issuer gets into trouble, debenture holders have to wait their turn to get paid.

What to look at

  • Who's borrowing? A large, well-capitalised bank is a different risk from a small company with heavy losses.
  • Coupon rate and payment schedule: how much interest, and how often?
  • Maturity: many are 7–10 years. That's a long time to lock money away.
  • Secured or unsecured: is anything backing it?
  • Can you sell early? Debentures are listed on NEPSE, but trading is often thin. You might not find a buyer at a fair price.

The coupon isn't your total return

If you buy a Rs 1,000 debenture on the secondary market for Rs 1,050, your actual return is lower than the coupon suggests. Tax on interest reduces it further. And if interest rates rise after you buy, the market price of your debenture tends to fall.

Bottom line

Debentures can be a reasonable part of a portfolio, especially for steady income. Just read the offer document, understand who you're lending to, and don't let the phrase "fixed income" convince you your principal is guaranteed.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Wednesday, October 14, 2026

Fixed Deposits: Look Past the Headline Interest Rate

Banks love to put the FD rate in big bold numbers on a banner outside the branch. Those numbers matter, but they're not the whole story.

Before you lock money away, here's what I'd compare.

The fine print that matters

  • Term: 3 months, 1 year, 5 years? Match it to when you'll actually need the money.
  • How interest is paid: monthly, quarterly or at maturity? Is it added to the deposit or paid to your savings account?
  • Fixed or floating: can the bank change the rate during the term?
  • Breaking it early: what penalty or reduced rate applies if you withdraw before maturity?
  • At maturity: does it auto-renew? At what rate?

Rates move a lot

In the last few years we've seen FD rates in Nepal swing from double digits down to much lower levels as liquidity changed. A rate you see today might be very different in six months. That's a reason to think about the term carefully, not to chase whoever is highest this week.

Don't forget tax and inflation

Tax is deducted on interest before you receive it. And if inflation is close to (or above) your after-tax rate, your money isn't really growing; it's just keeping pace, or falling behind.

Is it protected?

Deposits at licensed banks and financial institutions are covered up to a limit by the Deposit and Credit Guarantee Fund. Check the current limit and which institutions are covered on the official website. Cooperatives are a different system, and that matters.

Last thing: no real bank will call you asking for your OTP to "process your FD." Hang up.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Fixed Deposits: Look Past the Headline Interest Rate

Banks love to put the FD rate in big bold numbers on a banner outside the branch. "Up to 10%!" Those numbers matter, but they're not the whole story. The words "up to" alone should make you ask a few questions.

Fixed deposits are probably the most common way Nepali families save. They're simple, familiar and relatively safe. But there's more to choosing one than picking the highest rate on the banner. Before you lock money away, here's what I'd compare.

How a fixed deposit works

You give a bank or financial institution a sum of money for a fixed period: 3 months, 6 months, 1 year, 2 years, 5 years. In return, they pay you interest at an agreed rate. At the end (maturity), you get your money back plus any interest not already paid out.

In Nepal, you can open FDs at commercial banks ("Class A"), development banks ("Class B") and finance companies ("Class C"), all licensed by Nepal Rastra Bank. Rates usually differ a bit between them.

The fine print that matters

Term

Match it to when you'll actually need the money. If you need it in 8 months, don't lock it up for 2 years just because the rate is a bit higher.

How interest is paid

  • Monthly or quarterly payout to your savings account. Good if you need regular income, like retirees.
  • Compounded and paid at maturity: interest is added to the deposit, and you earn interest on interest. Better for growth. (See my compound growth post.)

The same headline rate gives you different amounts depending on how often it compounds.

Fixed or floating rate

This one catches people. Some deposits are fixed, so the rate stays the same for the whole term. Others can change during the term based on the bank's rate announcements. Ask clearly: "If I open this today, is this rate locked until maturity?"

Breaking it early

What happens if you need the money before maturity? Usually there's a penalty, or the interest is recalculated at a lower rate. Some banks are flexible, some aren't. Ask before, not after.

At maturity

Does it auto-renew? At what rate: the original or the bank's rate on the renewal date? Many people don't notice their FD has rolled over at a much lower rate. Set a reminder for the maturity date.

Minimum amount

Some special high-rate schemes need large minimum deposits.

Rates move a lot

In the last few years we've seen FD rates in Nepal swing a lot as liquidity in the banking system changed. When banks were short of funds, deposit rates went into double digits. When liquidity improved, rates came down significantly.

A rate you see today might be very different in six months. Some ideas for handling this:

  • When rates are high, locking in a longer term can make sense, if the rate is truly fixed and you won't need the money.
  • When rates are low, shorter terms keep you flexible to reinvest at better rates later.
  • FD laddering: instead of one big FD, split your money into several FDs with different maturity dates, say 6 months, 1 year, 18 months and 2 years. Every few months, one matures, giving you access to cash and a chance to reinvest at current rates.

Don't just chase whoever is highest this week. The difference between two banks is often small, and switching has costs in time and paperwork.

Don't forget tax and inflation

Tax is deducted on interest at source before you receive it. For individuals, it's generally treated as a final withholding tax, but check the current rate and rules with the IRD.

Then there's inflation. If the FD pays 7% and 5% tax is deducted from the interest, you get about 6.65%. If inflation is running at 5–6%, your real gain, meaning what you can actually buy with it, is very small.

That doesn't make FDs bad. They're great for short-term goals and emergency backups. But for 15–20 year goals, relying only on FDs might mean your money barely keeps up with prices. That's where the saving vs investing question comes in.

Is it protected?

Deposits at licensed banks and financial institutions are covered up to a limit by the Deposit and Credit Guarantee Fund (DCGF). If the institution fails, depositors can claim up to that limit. Check the current limit and which institutions and deposit types are covered on the official DCGF website.

A few things to remember:

  • The limit is per depositor per institution. If you have more than the limit, spreading it across a couple of strong institutions can make sense.
  • Cooperatives are a different system. Savings and credit cooperatives aren't regulated by NRB in the same way, and deposit protection doesn't work the same. The cooperative crisis showed what can happen when people treat a cooperative "FD" as equal to a bank FD.
  • Debentures aren't deposits and aren't covered. (More in my debentures post.)

Comparing two offers: an example

Say you have Rs 5 lakh for 1 year (made-up rates):

  • Bank A: 8%, paid at maturity, fixed rate, early withdrawal drops it to the savings rate.
  • Finance company B: 8.5%, quarterly payout, rate can change, early withdrawal penalty 1%.

B looks better by 0.5%. But if the rate can drop mid-term, and you might need the money early, A might actually be the better choice. And if the extra Rs 2,500 a year isn't worth the extra uncertainty to you, that's a valid choice too.

Practical tips

  • Read the deposit agreement. Yes, actually read it.
  • Keep FD certificates or digital confirmations safe, and make sure your nominee is listed.
  • Use a licensed institution. You can check NRB's list of licensed banks and financial institutions on its website.
  • Watch out for "special schemes" from unofficial sources promising far above market rates.
  • No real bank will call you asking for your OTP to "process your FD" or "renew your deposit". Hang up and call the bank yourself.

Bottom line

FDs are a solid, boring tool, and boring is good for money you can't afford to lose. Just look past the headline rate: check the term, how interest is paid, whether the rate is fixed, what breaking it costs, and how it's protected. This post doesn't recommend any particular bank or rate. The right one is the one whose terms fit your plan.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Mutual Funds in Nepal: 5 Questions Before You Invest

If you don't have time to research individual companies, read annual reports and follow every NRB directive (which is most of us), mutual funds sound like the perfect answer. A professional picks the shares, you just invest.

Sometimes it really is that simple. Sometimes it isn't. Nepal's mutual fund market has grown a lot in recent years, and the funds vary widely in structure, cost and quality. Here are the questions I'd ask about any fund before putting money in.

First, what is a mutual fund?

A mutual fund pools money from many investors and invests it according to a stated plan, usually in shares, bonds, fixed deposits or a mix. A fund manager makes the day-to-day decisions.

When you invest, you get units of the fund. In Nepal, units usually have a face value of Rs 10. The value of each unit, called the NAV (Net Asset Value), goes up and down with the value of whatever the fund holds.

In Nepal, fund managers are usually the capital or investment arms of commercial banks, and the funds are regulated by SEBON.

Question 1: Is it closed-end or open-end?

This is the single most important distinction in Nepal, and many investors don't understand it.

Closed-end funds

  • Raise money once through an IPO, for a fixed term (often 7–10 years)
  • Are listed on NEPSE and trade like shares
  • You buy and sell units through your broker, from other investors
  • The market price can be very different from the NAV

That last point matters a lot. If a closed-end fund's NAV is Rs 11 but it trades at Rs 14, you're paying Rs 14 for Rs 11 worth of assets. That's a premium. If it trades at Rs 9, you're buying Rs 11 of assets for Rs 9. That's a discount.

Closed-end funds in Nepal have traded at both large premiums and large discounts at different times, often driven by market mood rather than the fund's actual performance.

Fund managers publish NAV regularly (often weekly). Check it before buying.

Open-end funds

  • Have no fixed size. You can buy new units from the fund manager anytime
  • You sell (redeem) units back to the fund manager
  • The price you pay or receive is based on NAV (sometimes with a small load or fee)
  • Many offer SIPs (Systematic Investment Plans), where you invest a fixed amount every month

Open-end funds avoid the premium/discount problem, and SIPs are a great way to build the investing habit. I've written about the power of regular investing in my compound growth post.

Question 2: What does it actually hold?

The fund's name doesn't tell you much. A fund called "Growth Fund" or "Equity Fund" could hold almost anything within its rules.

Look at the latest portfolio disclosure, usually published monthly or quarterly on the fund manager's website. Check:

  • What percentage is in shares vs fixed deposits vs bonds vs cash?
  • Which sectors? Is it heavy in banks? Hydro?
  • What are the top 10 holdings?
  • Overlap with what you already own. Many funds hold the same big commercial banks and hydro companies. If you already own those directly, buying the fund doesn't diversify you as much as you'd think. (See my post on diversification.)

Question 3: What does it cost?

Management fees and other expenses come out of the fund every year, whether it performs well or not. You don't see a bill. The costs just reduce the NAV.

Check:

  • Management fee (percentage of assets per year)
  • Depository, trustee and other fees
  • Entry or exit loads (fees for buying or redeeming, especially early redemption in open-end funds)
  • For closed-end funds: broker commission when you buy and sell on NEPSE

A difference of 1% a year in fees doesn't sound like much. Over 15 years of compounding, it adds up to a meaningful chunk of your returns.

Question 4: How easy is it to get out?

  • Open-end: what's the redemption process? How long until you get your money? Is there an exit load if you redeem within a certain period? Are there any lock-in periods (some tax-saving schemes have them)?
  • Closed-end: is there enough trading volume on NEPSE to sell when you want, at a fair price? What happens at maturity? Usually the fund is liquidated or converted, and investors get NAV.

Question 5: Is it properly approved and managed?

  • Check that the fund and its manager are registered with SEBON.
  • Read the scheme documents (offer document and any updates), not just the bank's poster or a WhatsApp forward.
  • Look at who the fund manager is, how long they've been managing funds, and how their other funds have done.
  • Check who the depository and trustee are.

On past returns

A fund that did great last year isn't guaranteed to do great next year. In fact, a fund that topped the charts in a strong market might simply have been taking more risk.

When comparing funds:

  • Look at performance over several years, not one.
  • Compare with similar funds (equity vs equity, debt vs debt).
  • Look at how it did in bad years, not just good ones. How far did NAV fall when the market fell?
  • Compare NAV growth, plus any distributions, against the overall market.

Dividends from mutual funds

Many funds in Nepal pay out dividends (cash or bonus units) from realised gains. Keep in mind:

  • When a fund pays a dividend, its NAV drops by that amount. It's your own money coming back to you, not extra profit.
  • Some open-end funds offer a "growth" option (no dividends; gains stay invested) and a "dividend" option. For long-term investing, growth options let compounding work better.
  • Tax may apply on distributions. Check current rules.

Who are mutual funds good for?

  • People who want market exposure but don't have time to research individual companies
  • People who want to invest small amounts regularly (SIP)
  • Beginners learning how markets work
  • Anyone who wants some professional management and diversification

They're less useful if you'd just be buying the same handful of large companies you already own, through a fund charging you a fee for it.

Bottom line

A mutual fund is still invested in the market. It can fall, and when NEPSE falls, most equity funds fall with it. Don't invest based only on a friend's experience or an advertised return. Pick one you understand, check what it holds and what it costs, and stay with it through a rough patch. That's where the real benefit comes from.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Mutual Funds in Nepal: 5 Questions Before You Invest

If you don't have time to research individual companies, which is most of us, mutual funds sound like the perfect answer. A professional picks the shares, you just invest. Sometimes it really is that simple. Sometimes it isn't.

Here are the five questions I'd ask about any fund.

1. Is it closed-end or open-end?

In Nepal you'll see both. Closed-end funds are listed on NEPSE and trade like shares, often at a price quite different from their actual value (NAV). Open-end funds let you buy and redeem units directly with the fund manager at NAV, and many offer SIPs (monthly investment plans).

Buying a closed-end fund well above its NAV means paying more than the fund's assets are worth.

2. What does it actually hold?

Look at the latest portfolio disclosure. Many funds hold the same big banks and hydro companies you might already own, so check for overlap.

3. What does it cost?

Management fees and other expenses come out of the fund every year, whether it performs well or not.

4. How easy is it to get out?

Open-end: what's the redemption process and is there an exit load? Closed-end: is there enough trading volume to sell when you want?

5. Is it properly approved?

Check that the fund and its manager are registered with SEBON. Read the scheme documents, not just the bank's poster.

On past returns

A fund that did great last year isn't guaranteed to do great next year. Look at performance over several years, compared with similar funds, and through both good and bad markets.

A mutual fund is still invested in the market. It can fall, and when NEPSE falls, most funds fall with it. Pick one you understand and can stay with through a rough patch.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Monday, October 12, 2026

Got a Right Share Offer? Here's What to Check First

You own shares in a company, and suddenly there's a notice: "1:1 right share issue." It sounds like a gift. It isn't. It's the company asking you for more money.

That isn't necessarily bad. Plenty of good companies raise money this way. But it does deserve a proper look, and it's one of those decisions where doing nothing is also a decision with consequences.

How right shares work

A right share issue (or rights issue) lets existing shareholders buy additional shares in proportion to what they already own, usually at a price below the current market price. In Nepal, right shares are often offered at the face value of Rs 100, though not always.

The ratio tells you how many you can buy:

  • 1:1 — one new share for every one you hold. Own 200, apply for up to 200.
  • 10:3 — three new shares for every ten you hold. Own 200, apply for up to 60.
  • 2:1 — one new share for every two you hold. Own 200, apply for up to 100.

The basic process:

  1. The company gets approval and announces the issue, ratio and price.
  2. A book closure date is set. You need the shares in your Demat by then to be eligible.
  3. An application window opens, usually a few weeks long.
  4. You apply through Mero Share (or the channel in the official notice), and the amount is blocked in your bank account.
  5. After the window closes, the right shares are allotted and credited to your Demat.
  6. Shares that existing shareholders don't take up are typically auctioned to the public later.

Why the price adjusts

When a company offers new shares below the market price, the overall value per share gets diluted. After book closure, the market price usually adjusts down.

A rough formula for the theoretical adjusted price:

(Market price + (Right price × ratio)) ÷ (1 + ratio)

Example: market price Rs 400, right price Rs 100, ratio 1:1.

(400 + 100) ÷ 2 = Rs 250

  • Before: 100 shares × Rs 400 = Rs 40,000
  • If you apply: you pay Rs 10,000 for 100 more shares. Now 200 shares × Rs 250 = Rs 50,000. You put in Rs 10,000, so your total is still Rs 50,000. No gain or loss from the issue itself.
  • If you don't apply: you still have 100 shares, now at Rs 250 = Rs 25,000. You've effectively lost Rs 15,000 in value. Your share of the company is smaller too.

That's why ignoring a right issue isn't "free". In practice the market price after adjustment won't match the formula exactly, but the principle holds.

Questions I ask before applying

Why does the company need the money?

This is the most important question. Read the offer document.

  • To expand or build something specific: a new hydro project, more branches, a factory expansion. Could be good, if the plan makes sense.
  • To meet regulatory capital requirements: very common for banks, insurance companies and microfinance in Nepal. Not necessarily bad, but it's not growth either.
  • To cover losses or repay debt: a warning sign. Ask how the company got into that situation and whether more money will fix it.
  • For a hydro project that's delayed or over budget: be careful. Sometimes right shares are needed because the original plan didn't work.

Can I afford it?

200 shares at Rs 100 is Rs 20,000 you need to have ready within the window. If you hold shares in several companies that announce right issues around the same time, this adds up quickly.

Don't borrow to apply for right shares unless you've thought it through very carefully.

Would I buy more of this company anyway?

Imagine the right issue didn't exist. Would you buy more shares of this company at today's price? If yes, applying makes sense. If no, the right issue doesn't change that.

What will the company look like after?

More shares means profit needs to grow for EPS to hold. If the new money doesn't generate returns, EPS and dividends per share will fall. (I explain why in my EPS and P/E post.)

If you decide not to apply

Some options to consider:

  • Sell before book closure if you don't want to put in more money and don't want to hold diluted shares. (Remember capital gains tax and fees.)
  • Apply for part of your entitlement if you can't afford the full amount. You don't have to apply for all of it.
  • Accept the dilution if you're comfortable with a smaller share of the company.

Right share entitlements in Nepal generally aren't tradable separately, unlike in some other countries, so you can't just "sell the right".

Don't miss the practical steps

  • Note the book closure date. Buying a day before isn't enough. Settlement takes time, so the shares need to be in your Demat before book closure.
  • Note the application window. I've seen people lose out simply because they didn't notice the deadline. Set a reminder on your phone.
  • Check your bank balance. The full amount needs to be in your linked bank account when you apply.
  • Check that Mero Share and your Demat are active. An expired account means a missed application.
  • After allotment, check that the right shares appear in your Demat.

Unclaimed rights may be auctioned later, but you won't get anything for them if you missed the window. Don't count on it as a backup plan.

Stay safe

Right issues are a common hook for scams. Use only official channels: Mero Share and the issue manager or company named in the official notice. Ignore "help desk" numbers that pop up in comments or random Facebook pages. Never share your Mero Share password or OTP.

Bottom line

Treat a right offer as a fresh investment decision. Understand why the company needs money, what it will do with it, and whether you'd want more of this company anyway. If you wouldn't buy more at this price, you don't have to just because they asked. Just understand what not applying means for you.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Got a Right Share Offer? Here's What to Check First

You own shares in a company, and suddenly there's a notice: "1:1 right share issue." It sounds like a gift. It isn't. It's the company asking you for more money.

That isn't necessarily bad, but it does deserve a proper look.

How it works

A right share lets existing shareholders buy additional shares, usually at a price below the current market price (often Rs 100 per share). In a 1:1 ratio, if you own 200 shares you can apply for up to 200 more.

Questions I ask

  • Why does the company need the money? To expand? To meet regulatory capital requirements? To cover losses? The answer matters a lot.
  • Can I afford it? 200 shares at Rs 100 is Rs 20,000 you need to have ready within the window.
  • What happens if I don't apply? Your ownership percentage gets diluted, and the market price usually adjusts after book closure. Doing nothing isn't free either.

Don't miss the practical steps

Note the book closure date (you need to hold the shares by then) and the application window. Apply through Mero Share or the channel stated in the official notice. Unclaimed rights may be auctioned later, but don't count on that.

I've seen people lose out simply because they didn't notice the deadline. Set a reminder on your phone.

Stay safe

Use only official channels. Ignore "help desk" numbers that pop up in comments or random Facebook pages, and never share your Mero Share password or OTP.

Treat a right offer as a fresh investment decision. If you wouldn't buy more of this company at this price anyway, you don't have to just because they asked.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Cash Dividend vs Bonus Shares: Why Bonus Isn't Free Money

Every book-closure season, the excitement is the same: "20% bonus announced!" People rush to buy before the book closure date. Then the price adjusts and they wonder where the gain went.

Let's clear this up.

Cash dividend

The company pays you cash from its profits. If you own 100 shares and it declares a 10% cash dividend on a Rs 100 face value, you get Rs 1,000 before tax. Tax is withheld before it reaches your bank account.

Real money leaves the company and comes to you.

Bonus shares

The company gives you extra shares instead. A 20% bonus on 100 shares gives you 20 more, for 120 total.

But no money left the company. The same business is just cut into more pieces. That's why the market price adjusts downward after book closure. If a share was Rs 600 before a 20% bonus, the adjusted price is roughly Rs 500. Your 120 shares at Rs 500 are worth about what your 100 shares at Rs 600 were.

Think of it as cutting a pizza into 10 slices instead of 8. You don't get more pizza.

Also note: tax on bonus shares is typically payable on their face value, so you may need to pay some cash even though you received no cash.

Which is "better"?

Neither, automatically. A company paying big dividends isn't necessarily healthier than one reinvesting profits to grow. Some Nepali banks have issued bonus shares year after year mainly to meet capital requirements, which tells you something different from "the business is booming."

Before you act

Read the company's official announcement for the book closure date, the ratio and whether AGM approval is still pending. For tax, check with the IRD or a tax professional, since rates and rules change.

Don't buy a share only for its dividend or bonus. Buy it because you like the business at that price.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

Cash Dividend vs Bonus Shares: Why Bonus Isn't Free Money

Every book-closure season, the excitement is the same. "20% bonus announced!" The WhatsApp groups go wild. People rush to buy before the book closure date. Then the price adjusts and they wonder where the gain went.

Let's clear this up properly, because the difference between a cash dividend and a bonus share is one of the most misunderstood things in the Nepali share market.

A few terms first

  • Face value (par value): the nominal value of a share, usually Rs 100 in Nepal (some companies, like mutual fund units, use Rs 10). Dividend percentages are calculated on this, not on the market price.
  • Book closure date: the date the company "closes its books" to decide who's eligible. You need to own the shares (settled in your Demat) before this date to get the dividend or bonus.
  • AGM: the Annual General Meeting where shareholders approve the proposed dividend or bonus.

Cash dividend

The company pays you cash from its profits.

If you own 100 shares and the company declares a 10% cash dividend, that's 10% of the Rs 100 face value, so Rs 10 per share. You get Rs 1,000 before tax. Tax is withheld at source before it reaches your bank account.

Real money leaves the company and comes to you. The company now has less cash, and the share price usually adjusts down by roughly the dividend amount after book closure.

Note that a "10% dividend" sounds big, but it's on face value. If the share trades at Rs 800, Rs 10 is only a 1.25% return on the market price. That's called the dividend yield, and it's a more honest way to compare.

Bonus shares

The company gives you extra shares instead of cash. A 20% bonus on 100 shares gives you 20 more, for 120 total.

But no money left the company. The company has simply moved some of its retained earnings into share capital on the balance sheet. The same business is now cut into more pieces.

That's why the market price adjusts downward after book closure.

How the price adjustment works

The adjustment roughly follows this logic:

Adjusted price ≈ price before book closure ÷ (1 + bonus ratio)

So for a 20% bonus on a share at Rs 600: Rs 600 ÷ 1.2 = Rs 500.

  • Before: 100 shares × Rs 600 = Rs 60,000
  • After: 120 shares × Rs 500 = Rs 60,000

Your total value is the same. (If there's also a cash dividend, the price adjusts for that too.)

Think of it as cutting a pizza into 10 slices instead of 8. You don't get more pizza.

After the adjustment, the price can of course move up or down based on the market. But the bonus itself didn't create value.

The tax catch on bonus shares

This surprises a lot of people. Bonus shares are taxed, typically on their face value, even though you didn't receive any cash.

That's why companies announcing a bonus often also announce a small cash dividend at the same time, which is mostly there to cover the tax on the bonus. For example: "20% bonus and 1.05% cash dividend (for tax purpose)". The cash portion is withheld to pay the tax, and you might receive little or nothing in your bank account.

If there's no cash dividend to cover it, you may need to pay the tax yourself before the bonus shares are credited. Check the company's notice and your DP's instructions.

Tax rates and rules change, so check with the IRD or a tax professional for current treatment.

Why do companies issue bonus shares?

Several reasons, not all of them exciting:

  • To meet capital requirements: many Nepali banks and insurance companies have had to increase their paid-up capital to meet regulatory minimums. Bonus shares are one way to do that without asking shareholders for more money.
  • To keep cash in the business: instead of paying out cash, the company keeps it for growth or to build reserves.
  • To make shares more affordable: a lower per-share price after adjustment can increase trading.
  • Because shareholders like them: this is partly psychological. Many investors in Nepal feel happier with "more shares" even when the value is the same.

A company issuing bonus shares year after year mainly to meet capital requirements is telling you something different from "the business is booming".

The downside of bonus shares nobody talks about

When the share count keeps growing, the company needs to keep growing its profit just to maintain the same EPS. If profit doesn't keep pace, EPS falls, and future dividends per share can shrink. I explain this more in my post on EPS and P/E.

Which is "better"?

Neither, automatically.

  • A company paying big cash dividends isn't necessarily healthier than one reinvesting profits to grow. Sometimes high dividends mean the company has nothing better to do with its money.
  • A company issuing bonus shares isn't necessarily doing well. Sometimes it's just meeting a regulatory requirement.
  • A company paying nothing isn't necessarily bad, as long as it's reinvesting wisely.

What matters is the underlying business: cash flow, debt, profit growth, governance. Here's how to read the annual report to judge that.

The "buy before book closure" trap

Every year, people buy shares a few days before book closure to "get the bonus". Then:

  1. The price often rises in the days before book closure, because everyone has the same idea.
  2. They buy at the higher price.
  3. After book closure, the price adjusts down.
  4. They may have to pay tax on the bonus.
  5. They've paid broker commission on the purchase.

Net result: often a loss. There's no free lunch in buying just before book closure.

Before you act

  • Read the company's official announcement for the book closure date, the bonus and cash ratios, and whether the proposal still needs AGM or regulatory approval. Proposed dividends can be changed or rejected.
  • Remember settlement takes a couple of days. If you buy too close to book closure, the shares might not be in your Demat in time.
  • Check tax with the IRD or a tax professional.
  • Bonus shares can take some time to appear in your Demat after the AGM. Check Mero Share.

Bottom line

Don't buy a share only for its dividend or bonus. Buy it because you like the business at that price. Dividends and bonuses are the result of a good business, not the reason it's good.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Saturday, October 10, 2026

EPS and P/E Ratio: Handy Numbers, Not Buy Signals

"P/E is only 12, it's cheap!" I see some version of this every week. Sometimes it's true. Often it isn't. Here's what these two numbers actually mean.

EPS: profit per share

Earnings per share = the company's profit (for ordinary shareholders) ÷ number of shares.

If a company earned Rs 50 crore and has 1 crore shares, EPS is Rs 50.

Watch out for a few things:

  • A one-time gain (selling property, say) can make EPS jump for one year only.
  • Bonus shares and right shares increase the share count, so EPS can fall even if profit didn't.
  • Quarterly EPS is often "annualised" by multiplying it out. That's a guess, not a result.

P/E: how much you're paying for that profit

P/E = share price ÷ EPS.

If that same share trades at Rs 600 and EPS is Rs 50, the P/E is 12. In plain terms, you're paying Rs 12 for every Rs 1 of yearly profit.

Why "low P/E = cheap" can trick you

A low P/E might mean the market expects profits to fall, or that last year's profit was a one-off. A high P/E might mean the market expects strong growth, or it might just be hype. In Nepal, you'll see some hydropower and insurance companies trading at P/Es in the hundreds, while some banks trade at much lower levels. The ratio alone can't tell you who's right.

Using them sensibly

Compare companies in the same sector, using numbers from the same period. Then look at growth, debt and cash flow before drawing conclusions. Get the EPS from the company's actual published report, not a screenshot someone forwarded.

These ratios are good for raising questions. They don't answer them for you.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

EPS and P/E Ratio: Handy Numbers, Not Buy Signals

"P/E is only 12, it's cheap!" I see some version of this every week in investor groups. Sometimes it's true. Often it isn't.

EPS and P/E are probably the two most quoted numbers in Nepali share market discussions. They're useful. But they're also easy to misread, and some people use them to make weak shares look like bargains. Here's what they actually mean.

EPS: profit per share

Earnings per share = net profit available to ordinary shareholders ÷ number of ordinary shares

If a company earned Rs 50 crore in profit and has 1 crore shares, EPS is Rs 50.

That's it. EPS tells you how much profit the company made for each share. It lets you compare profit over time even when the number of shares changes.

Things that can distort EPS

One-time gains

If a company sells a building or an investment, that gain can make profit, and EPS, jump for one year only. Next year, EPS "falls" even if the core business is unchanged. Always check the notes for one-off items.

Bonus and right shares

When a company issues bonus or right shares, the number of shares goes up. Even if profit stays the same, EPS goes down because the profit is divided among more shares.

Example: profit Rs 50 crore, 1 crore shares, EPS Rs 50. The company issues a 25% bonus, so now there are 1.25 crore shares. Same profit, but EPS drops to Rs 40. Nothing bad happened to the business.

This is why comparing EPS across years needs care. Look for "adjusted" or "restated" EPS in reports.

Annualised quarterly EPS

In Nepal, you'll often see quarterly EPS "annualised", meaning multiplied to estimate a full year. If Q1 EPS is Rs 12, someone might say annualised EPS is Rs 48.

That's a guess, not a result. Many businesses are seasonal. Hydropower companies generate much more in the monsoon than in winter. Banks may book different amounts in different quarters. Annualising one strong quarter can make a company look far better than it is.

Accounting choices

Provisions, depreciation methods and how certain income is recognised can all shift reported profit. Two companies with similar businesses can report different EPS partly because of accounting choices.

P/E: how much you're paying for that profit

P/E ratio = share price ÷ EPS

If that same share trades at Rs 600 and EPS is Rs 50, the P/E is 12.

In plain terms: you're paying Rs 12 for every Rs 1 of yearly profit. Another way to think about it: if profit stayed exactly the same forever and was all paid to you, it would take 12 years to earn back your purchase price.

A higher P/E means you're paying more for each rupee of current profit. A lower P/E means you're paying less.

Why "low P/E = cheap" can trick you

A low P/E might mean:

  • The company really is undervalued (great, if true)
  • The market expects profits to fall
  • Last year's profit was inflated by a one-off gain
  • The company has problems the numbers don't show yet: bad loans, debt or governance issues
  • It's in a sector the market doesn't like right now, for good reasons

A high P/E might mean:

  • The market expects strong growth
  • Current profits are temporarily low (a project just started generating, say)
  • It's just hype

In Nepal, you'll see some hydropower and insurance companies trading at P/Es in the hundreds, while some commercial banks trade at much lower levels. Neither number, by itself, tells you who's right.

When P/E doesn't work at all

  • Negative EPS: if the company made a loss, P/E is meaningless. Some websites show it as negative or blank.
  • Tiny EPS: if profit is barely above zero, P/E can be 500 or 1,000, which tells you nothing useful.
  • Projects under construction: a hydro company still building its plant may have no meaningful earnings yet.

Other numbers to look at alongside

P/E works better when combined with other measures:

  • Book value per share (net worth ÷ shares): what the company's assets minus liabilities are worth per share, on paper.
  • P/B ratio (price ÷ book value): often used for banks.
  • ROE (return on equity, profit ÷ shareholders' equity): how efficiently the company uses shareholders' money.
  • Debt levels: a low P/E with huge debt is a different story from a low P/E with no debt.
  • Dividend history: does the company actually return cash to shareholders?
  • Growth rate: a P/E of 25 might be reasonable for a company growing profit 30% a year, and expensive for one growing 3%.

Using them sensibly: a quick example

Say you're comparing two commercial banks (made-up numbers):

  • Bank A: price Rs 400, EPS Rs 25, P/E 16. NPL rising, profit flat for 3 years.
  • Bank B: price Rs 500, EPS Rs 25, P/E 20. NPL low and stable, profit growing steadily.

Bank A looks "cheaper" by P/E. But Bank B might be the better business, and the extra price might be justified. The P/E alone would have pointed you the wrong way.

Practical tips

  • Compare companies within the same sector. Comparing a bank's P/E to a hydro company's P/E is mostly meaningless.
  • Use numbers from the same period. Don't compare one company's latest annualised EPS with another's audited annual EPS.
  • Get the EPS from the company's actual published report, not a screenshot someone forwarded. Many share-market websites calculate these differently.
  • Look at trends over several years, not one number.
  • Read the annual report to understand why EPS is what it is.

Bottom line

EPS and P/E are good for raising questions. Why is this P/E so low? Why did EPS jump this quarter? How does this compare with similar companies? But they don't answer those questions for you. Anyone who tells you to buy something "because P/E is low" without any other reasoning isn't doing analysis. They're doing marketing.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

How I Read a Company's Annual Report (Without an Accounting Degree)

Annual reports are long, dense and full of photos of board members cutting ribbons. Most investors never open them. That's a shame, because 30 minutes with one can tell you more than a month of share-market Facebook groups.

Here's how I go through one.

1. Start with what the business actually does

Read the overview or chairman's message. Can you explain in one sentence how this company makes money? If you can't, stop there. You're not ready to own it.

2. Compare at least three years of numbers

One year's profit tells you almost nothing. Look at revenue, net profit and total debt over several years. Is it growing steadily, jumping around, or quietly shrinking?

3. Check the cash flow statement

This is the part most people skip, and it's the one I trust most. A company can show a profit on paper while very little cash comes in. If "cash from operations" is weak year after year while profits look great, ask why.

4. Read the notes (at least skim them)

The notes explain the headline numbers: loans, related-party transactions, lawsuits, one-time gains. A big jump in profit sometimes turns out to be the sale of a piece of land, not better business.

5. Read the auditor's report

Usually it's a short page saying everything is fine. If the auditor adds a "qualified opinion" or an "emphasis of matter," read it carefully. That's the auditor raising a concern.

For banks and financial companies

Look at NPL (non-performing loans), capital adequacy and distributable profit. These matter more than the headline profit figure.

Get reports from the company's official website or NEPSE disclosures, and check the date. Last year's report won't show this year's problems.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

How I Read a Company's Annual Report (Without an Accounting Degree)

Annual reports are long, dense and full of photos of board members cutting ribbons and handing over cheques. Most investors never open them. That's a shame, because 30 minutes with one can tell you more than a month of share-market Facebook groups.

You don't need an accounting degree. You need to know where to look and which questions to ask. Here's how I go through one.

Where to find annual reports

  • The company's official website, usually under "Investor Relations" or "Reports"
  • NEPSE's website, through company disclosures
  • Quarterly reports are also published in newspapers and on company websites

Most Nepali companies follow a fiscal year that ends in mid-July (end of Asar). Annual reports usually come out a few months later, around the AGM.

Always check the date. A report from two years ago won't show this year's problems.

1. Start with what the business actually does

Read the company overview, the chairman's message and the directors' report. Can you explain in one sentence how this company makes money?

  • "It's a bank. It takes deposits and lends them out at higher interest."
  • "It produces electricity from a river project and sells it to NEA under a PPA."
  • "It makes cement and sells it to builders."

If you can't, stop there. You're not ready to own it.

The chairman's message is usually upbeat, so read it with a pinch of salt. But it does tell you what management thinks is important, and sometimes what they're worried about.

2. Compare at least three years of numbers

One year's profit tells you almost nothing. Look at these over several years:

  • Revenue (or total income): is the business growing?
  • Net profit: is it growing along with revenue, or are margins shrinking?
  • Total debt: is it rising faster than the business?
  • Shareholders' equity: is the company building value over time?

Most annual reports include a "five-year summary" or "financial highlights" table. It's a goldmine. Start there.

Ask: is this growing steadily, jumping around, or quietly shrinking?

3. Check the cash flow statement

This is the part most people skip, and it's the one I trust most.

A company can show a profit on paper while very little cash actually comes in. This happens when customers haven't paid yet, when inventory is piling up, or when accounting choices make profits look better than reality.

Look at "cash flow from operating activities". Over several years, it should be roughly in line with net profit. If profits look great year after year but operating cash flow is weak or negative, ask why.

Also look at "cash flow from investing activities" (spending on new projects, equipment, etc.) and "financing activities" (borrowing, repaying loans, paying dividends). A company that pays dividends by borrowing more is a warning sign.

4. Read the notes (at least skim them)

The notes to the financial statements explain the headline numbers. This is where companies have to disclose the details. Look for:

  • One-time gains: a big jump in profit sometimes turns out to be the sale of a piece of land, not better business.
  • Related-party transactions: deals with companies owned by directors or promoters. Not always bad, but worth understanding.
  • Loans and borrowings: interest rates, repayment schedules, what's pledged as security.
  • Contingent liabilities: lawsuits, guarantees, tax disputes that could become real costs.
  • Accounting policy changes: if the company changed how it counts something, profits can look different without the business changing.

5. Read the auditor's report

Usually it's a short page or two saying the financial statements give a "true and fair view". That's a clean (unqualified) opinion.

If the auditor adds a "qualified opinion", an "adverse opinion", a "disclaimer of opinion" or an "emphasis of matter", read it carefully. That's the auditor raising a concern, and it's one of the most important signals in the whole report.

Also note who the auditor is, and whether the company changes auditors often.

6. Look at governance

  • Who's on the board? Do they have relevant experience?
  • Are there independent directors?
  • How much do directors and top management get paid compared with the company's profit?
  • Who owns the promoter shares, and are any of them pledged?

For banks and financial companies

Banks are a huge part of NEPSE, and their reports need a slightly different lens. Look at:

  • NPL (non-performing loans) ratio: what percentage of loans aren't being repaid. Rising NPL is a serious warning.
  • Capital adequacy ratio: how much buffer the bank has against losses. It must stay above NRB's minimum.
  • CD ratio (credit to deposit): how much of its deposits it has lent out.
  • Net interest spread: the difference between what it earns on loans and pays on deposits.
  • Distributable profit: after regulatory reserves, how much can actually be paid out as dividends. This can be very different from net profit.
  • Loan concentration: is a big portion of lending to one sector?

For hydropower companies

  • Actual generation vs. contracted energy under the PPA
  • Any outages due to floods, landslides or transmission problems
  • Debt levels and interest costs (many hydro projects are heavily loan-funded)
  • Accumulated losses, if any
  • Status of any new projects being built

A quick checklist

  1. Can I explain the business in one sentence?
  2. Is revenue and profit growing over 3–5 years?
  3. Does operating cash flow roughly support profit?
  4. Is debt manageable?
  5. Any one-off gains inflating profit?
  6. Clean auditor's opinion?
  7. Anything worrying in risks, lawsuits or related-party deals?

When you don't understand something

Some terms will be unfamiliar. That's normal. Look them up, or ask someone who knows accounting. Don't guess. A wrong interpretation of a number can lead to a very wrong decision.

Reading annual reports won't remove uncertainty. Good companies have bad years, and reports only tell you about the past. But careful reading helps you ask better questions and avoid companies with obvious problems. Once you're comfortable, the next step is understanding valuation, starting with EPS and the P/E ratio.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.

Thursday, October 8, 2026

"NEPSE Is Up 40 Points!" What the Index Does and Doesn't Tell You

Every evening the news says something like "NEPSE rose 40 points today." Then you open your portfolio and it's red. What's going on?

What the index is

The NEPSE index is a single number that summarises how listed shares moved overall, calculated with a specific method. Bigger companies count for more. A few large banks and hydropower companies moving a lot can push the whole index up or down.

So the index is a rough picture of the market as a whole. It isn't a picture of your shares.

Why your portfolio can disagree with it

  • If you hold mostly small or mid-sized companies, the big names moving the index may not matter much to you.
  • If you're heavy in one sector, say microfinance, a bad day for that sector hits you hard even on an "up" day.
  • A rising index doesn't mean every share rose. Often it's a handful doing the lifting.

There's more than one index

NEPSE also publishes a Sensitive index, a Float index and sector indices (banking, hydro, insurance and so on). When someone quotes a number, check which one they mean. The sector indices are often more useful for comparing against what you actually own.

Don't read tomorrow from today

One big green day doesn't mean a bull market has started, and one red day isn't a crash. The index tells you what happened. It says nothing reliable about what's next, and nothing about whether a particular company is healthy.

Use it as background, then look at your own holdings and goals.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source before you act.

"NEPSE Is Up 40 Points!" What the Index Does and Doesn't Tell You

Every evening the news says something like "NEPSE rose 40 points today." Then you open your portfolio and it's red. Or the opposite: the index fell, and somehow your shares went up.

What's going on? The short answer is that the index and your portfolio are measuring different things. Here's the longer answer.

What the index actually is

The NEPSE index is a single number that summarises how listed shares moved overall. It's calculated using a defined method, and the important thing to know is that it's weighted by market capitalisation, which means bigger companies count for more.

Market capitalisation is just the share price multiplied by the number of shares. A large commercial bank with a huge number of shares has a much bigger effect on the index than a small hotel or manufacturing company.

So when a few large banks or big hydropower companies move a lot, they can push the whole index up or down, even if most smaller companies barely moved.

The index is a rough picture of the market as a whole. It isn't a picture of your shares.

What "40 points" really means

Points by themselves don't tell you much. A 40-point move when the index is at 2,000 is a 2% change. The same 40 points when the index is at 3,000 is about 1.3%.

Always look at the percentage, not just the points. A headline saying "NEPSE crashes 50 points!" might be a fairly normal day of movement.

Why your portfolio can disagree with the index

  • Your mix is different. If you hold mostly small or mid-sized companies, the big names moving the index may not matter much to you.
  • You're heavy in one sector. If you own mostly microfinance or hydro, a bad day for that sector hits you hard even on an "up" day for the index.
  • A few companies did the lifting. A rising index doesn't mean every share rose. Often it's a handful of large companies carrying it while most others are flat or down.
  • Corporate actions. If one of your companies just had book closure for a bonus or right share, its price adjusts down. That isn't a real loss, but it can make your portfolio look red.

It's a good habit to look at the advance-decline numbers: how many companies rose versus fell that day. If the index is up but 150 companies fell and only 60 rose, the "rally" was narrow.

There's more than one index

NEPSE publishes several indices, not just the headline one:

  • NEPSE Index: the main one, covering listed companies
  • Sensitive Index: based on a group of companies that meet certain criteria (often called "Class A")
  • Float Index: calculated using only shares that are actually available for public trading, not promoter shares that are locked in
  • Sector sub-indices: banking, development bank, finance, microfinance, hydropower, life insurance, non-life insurance, hotels, manufacturing, trading, investment and others

When someone quotes a number, check which one they mean. For your own purposes, the sector indices are often more useful. If you hold mostly banks, compare your bank shares against the banking sub-index, not the overall NEPSE.

For exact definitions and current methodology, check NEPSE's official website. Methods and constituents can change over time.

A short history lesson

NEPSE's history shows why you shouldn't treat any single level as "normal":

  • The index has gone through long stretches of rising and falling, often linked to interest rates, liquidity in the banking system, political events and government policy.
  • In 2021, low interest rates and lots of new investors pushed it close to 3,200.
  • When NRB tightened policy and interest rates rose, it fell below 2,000 within about two years.

If you'd joined in mid-2021 and looked at the index two years later, you might have thought the market was broken. If you'd joined in late 2022, it might have looked like a bargain. Same market, different starting points.

What moves the index in Nepal

Our market has some unique drivers. Big movers include:

  • Interest rates and liquidity: when banks have plenty of money to lend and rates are low, share prices tend to rise. When liquidity is tight, they tend to fall. Nepal Rastra Bank's monetary policy is watched closely for this reason.
  • Margin lending rules: limits on loans against shares can affect how much money flows into the market.
  • Political news: government changes, budgets and policy announcements.
  • Bank results: because banks are such a big part of the index, their quarterly results matter a lot.
  • Sentiment: rumours, social media hype and fear can move prices quickly, especially in the short term.

Don't read tomorrow from today

One big green day doesn't mean a bull market has started, and one red day isn't a crash. Even a week of gains doesn't tell you much about the next month.

The index tells you what happened. It says nothing reliable about what's next, and it tells you nothing about whether a particular company is healthy. A strong company can fall on a bad index day; a weak company can rise on a good one.

Technical analysis people will draw lines on the NEPSE chart and make predictions. Some of it might be useful for traders. But if you're a long-term investor, daily index movements are mostly noise.

How I use the index

  • As context: is the overall market mood positive or negative right now?
  • As a rough benchmark: over several years, has my portfolio done roughly as well as the market, or much worse? If much worse, maybe I should look at a mutual fund instead of picking shares myself.
  • Not as a signal to buy or sell anything.

If you want to judge a company, the index won't help. You need to look at the company itself. Here's how I read an annual report without an accounting degree.

General information, not personal financial advice. Rules, rates and fees change, so check with the official source (SEBON, NRB, CDSC, IRD or the Nepal Insurance Authority) before you act. Have a question? Leave it in the comments.