Fixed Deposit in Nepal for 5 years- What is the best interest and where?

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Hi Knowledgeable people,

My plan is as follows.
Fixed Deposit in Nepal for 5 years.
Amount - 20,00,000 (bis lakh)
What is the best interest and where?

Regards,

nepaluk

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Not sure about banks but private finance companies offer upto 10 or 12 percent in Ktm. But as they say everything is risky and the inflation makes the interest rate is high so in 5 years your 20 lakh may not have the same buying power even with the added interest.

mercynova

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Nepal ma life insurance garnu for that amount of money, you'd prolly get a better deal out of it then to invest in a fixed deposit - banks ( like himalayan or nabil) pays anywhere between 3.5- 6 at the most, they are currently running a campaign on which gives about 10% for 6 mos, and a year long fixed deposit- not sure if that is still valid though.. But finance pays about 10 - 13% but as mentioned above, its riskier

Good luck
Mercynova

Last edited: 10-Apr-17 10:31 AM

Last edited: 10-Apr-17 10:32 AM

ProNepali

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Better invest in stocks in Nepal. Average return is 20-30% and relatively less risky. You can double your investment in 5 years.

Racheeta

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Even big banks like Nabil and Himalayan banks are giving 9-10% interest rates in Fixed deposits these days, that's a lot.. i don't know why the interest rate has gone up so much in nepal.

if you deposit 1 karod, that's 10 lakh per year free money !

maxpayne

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Well Nepal's inflation rate is at around 7 percent. So when you average things out the gains is 2-2.5 percent only.

riddle

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10 percent return is way too small considering Nepal's inflation rate. I'd invest 20 lakh rupees to buy a piece of land instead. Your investment will have at least doubled in 5 years as long as you've bought it in decent area (outer ringroad areas like Chapagaun in Lalitpur for instance).

micky_mouse

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@maxpayne
The inflation rate in Nepal is way below than what you mentioned.
FYI
http://www.tradingeconomics.com/nepal/inflation-cpi

maxpayne

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NRB estimated the inflation target to 7.5% for Fiscal year 16/17, that was the optimistic estimate. Unless something changed drastically, I dont see how we will be at 3.5 this year. It would be great if that is the case though.

http://kathmandupost.ekantipur.com/news/2016-07-14/govt-releases-monetary-policy-for-fy-201617.html

Full report from NRB:
https://www.nrb.org.np/ofg/monetary_policy/Monetary_Policy_(in_English)--2016-17_(Full__Text).pdf

Here is the summary for inflation:

"The projected annual average inflation for 2015/16 was 8.5 percent. In eleven months of the current fiscal year, average consumer price inflation rose to 9.9 percent due to supply disruptions and border disturbance. Such inflation was at 7.2 percent in the previous year. On y-o-y basis, CPI inflation surged up to 11.1 percent in June 2016. The prices of food and beverages group increased by 11.9 percent and the non-food and services group by 10.5 percent in the review period. "

Last edited: 11-Apr-17 10:19 AM

c864916

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Hi micky_mouse,

I did some simple math and found out that a 9% interest rate (compounded annually) doesn't beat the general US stock market (S&P 500). This doesn't even consider the fact that a bank will meet the 9% interest rate year over year.

Forgive me for my mathematical errors for I am not a Maths major. :)

TLDR; version:

Just read the text/numbers highlighted either in bold or red.

April 2012

----------------

USD/NPR: $1 = Rs 82.27

Initial Deposit

NPR: Rs 100000

USD: $1215

April 2017 (5 years)

-------------------------------

USD/NPR: $1 = Rs 103.50

1) With a 6% Interest Rate (Compounded annually)

------------------------------------------------------------------------------------

Interest= Rs 33822

Total Amount:

NPR: Rs 133822

USD: $1292

Average Yearly Return:

NPR: [(133822-100000)/100000 * 100%] / 5 = 6.76%

USD: [(1292-1215)/1215 * 100%] / 5 = 1.26%

2) With a 9% Interest Rate (Compounded annually)

------------------------------------------------------------------------------------

Interest= Rs 53862

Total Amount:

NPR: Rs 153862

USD: $1486

Average Yearly Return:

NPR: [(153862-100000)/100000 * 100%] / 5 = 10.76%

USD: [(1486-1215)/1215 * 100%] / 5 = 4.46%

3) S&P 500 (Index based on 500 large companies)

-----------------------------------------------------------------------------------

Let's take Vanguard 500 Index Fund ETF(VOO)

April 2012

---------------

USD/NPR: $1 = Rs 82.27

NPR: Rs 100000

USD: $1215

VOO: $125.48 per stock/ETF

Number of VOO stocks/ETFs: 9.68

April 2017

----------------

USD/NPR: $1 = Rs 103.50

Value of 9.68 VOO Stocks/ETFs

VOO: $215.91 per stock/ETF

USD: $2090

NPR: Rs 216315

Average Yearly Return:

NPR: [(216315-100000)/100000 * 100%] / 5 = 23.2%

USD: [(2090-1215)/1215 * 100%] / 5 = 14.4%

Note:

- Notice the difference between NPR return VS US return. There's where inflation creeps and the purchasing power of currency falls.

- The US also had inflation but at a smaller rate of 1.32% on average during that 5 year period

- There are expenses on trading VOO stock/ETF.

- There are dividends paid on VOO stock/ETF.

Last edited: 12-Apr-17 07:07 AM

Last edited: 12-Apr-17 12:05 PM

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