The finance department has made a draft of Bangladesh Government Treasury Bond Rules 2021, including the provision of nominees to smoothen the ownership handover process of government treasury bonds in the event of an investor's death.
According to the draft, published as a gazette by the department on 11 April, nominees or heirs will be eligible to hold the bonds till maturity or can withdraw the money by selling them.
The department will finalise the draft after one month of getting feedback from concerned authorities.
The draft states that investors can nominate one or more nominees at the time of opening the account. If more than one nominee is nominated, the amount of ownership of each nominee should be mentioned in percentage terms. Nominees and percentages can be changed. If there is no nominee, the legal heirs will be the owners of the bond after an investor's death.
An official of the central bank said, "Although there was a provision for appointing a nominee in case of opening a bank account, it was not applicable for bonds. As a result, when an investor died, heirs had to face the complexity of assuming ownership of the bond."
Heirs could assume ownership of a deceased investor's bonds, only after collecting and submitting a certificate from court to prove their legal right to inheritance. Now that complication will be over, he added.
The official said the rules have been framed to popularise bond investment as an alternative investment sector. As there were no rules before, the activities of the bond market were carried out as per notifications issued by the finance department.
According to the rules, investors living in Bangladesh can invest in bonds, banks, financial institutions, insurance, corporate companies, provident funds, pension funds, mutual funds etc.
Although there is nothing in the rules regarding the investment limit for bonds, people said that there is no upper limit for investment in bonds. Anyone can invest any amount from a minimum of Tk1 lakh and there are no questions asked about the source of the money.
Besides, any foreign person or organization, including non-resident Bangladeshis, can buy government treasury bonds. Foreign or non-resident investors will be able to take their profits or the money from selling their bonds in foreign currency. According to existing income tax law, taxes will be applicable on the profits of government bonds.
Regarding the term of a bond, the draft said government treasury bonds can be valid for 2, 5, 10, 15 or 20 years. Investors can sell their bonds in the primary or secondary market on or before maturity.
There was no approval before to trade bonds on the Dhaka Stock Exchange as part of the secondary market. That approval has been given in the draft rules. Officials of the central bank said they had a meeting with the Dhaka Stock Exchange recently on how to conduct the transaction. A memorandum in this regard has also been submitted to the Bangladesh Securities and Exchange Commission (BSEC).
Besides, the draft rules have highlighted the issues of electronic transactions. People concerned think it will be easy to address any kind of complication, given electronic transactions. If there is any conflict in the bond transaction, it will be settled as per the instructions of the central bank.
Arif Khan, a former commissioner of BSEC, said, "The provision of assigning nominees is a very good initiative. This will reduce complexities and encourage individual investors to invest in government bonds."
He said institutional investors usually invest in government bonds as individual investors know little about this area of safe investing.
"Besides, selling bonds on the DSE as a secondary market will increase the interest of general or individual investors, which will help expand the scope of the bond market and also make corporate bonds popular in the future," he added.