Foreign JV banks seek more timeA number of foreign joint-venture banks have requested the Nepal Rastra Bank (NRB) to consider extending the deadline for submitting the capital-hike plan.
A number of foreign joint-venture banks have requested the Nepal Rastra Bank (NRB) to consider extending the deadline for submitting the capital-hike plan.
Nepal SBI Bank, Everest Bank and Standard Chartered Bank Nepal have sought more time citing the requirement of getting approved the plan by their foreign promoters.
The deadline for submitting the plan ended on Thursday.
“The joint-venture banks have reported that they have already forwarded the NRB’s concern on raising the paid-up capital to their parent companies,” said NRB Spokesperson Trilochan Pangeni.
The central bank has directed the commercial banks to hike their paid-up capital to Rs8 billion from the current Rs2 billion, national-level development banks have to hike their capital to Rs2.5 billion from Rs640 million, and national-level finance companies to Rs800 million from Rs200 million in the next two years.
“As the parent company is in the process of fulfil necessary procedures to make further investment here, it may take some time to reach the final decision,” said Diwakar Poudel, head of Brand & Marketing and Corporate Affairs at Standard Chartered Bank Nepal.
The parent company holds a 75 percent stake in Standard Chartered Bank Nepal, while the general public holds the rest.
Declining to disclose the details about the banks’ capital-hike plans, Pangeni said most of them were ready to raise their capital in line with the NRB’s prescribed ceiling and deadline.
“The majority of the old banks like Everest Bank, Nepal Investment Bank, Sanima Bank and Himalayan Bank have said they could increase their paid-up capital by issuing bonus and right shares, while some others said they would issue preferential shares,” he said.
However, many new banks plan to meet the capital requirement through merger. Janata Bank, one of the new banks, has proposed a merger plan to the NRB.
Pangeni said these banks, however, however raised concerns about a possible disruption in the merger process due to disagreements in Due Diligence Audit.
According to the NRB, the increase in the paid-up capital could help strengthen the financial position of the banks.
The central bank also intends to reduce the number of banks operating inside the country by promoting merger.
“Our target is also to make the banks expand their businesses in rural areas,” said Pangeni, adding the central bank would closely monitor the implementation of the banks’ plans.