March 11: The Nepal Rastra Bank has issued a directive asking foreign companies or individuals, other than banks and financial institutions (BFIs), who have investments in Nepal´s ´A´, ´B´ and ´C´ class banks to relinquish their holdings by mid July 2015.
Issuing a circular on Tuesday, the NRB said non-banking foreign institutions or individuals should sell their shares to the foreign BFIs or Nepali people or institutions.
According to the Bank and Financial Institution Act, 2006, any foreign BFIs can only make investment in Nepal´s BFIs. "According to BAFIA, foreign ownership of Nepal´s BFIs is allowed only for banking and financial institutions. There were cases of non-banking foreign institutions and individuals holding the investment in Nepal´s BFIs before BAFIA came into the effect. The regulation is now aimed at separating the BFIs from non-banking institutions in the spirit of existing laws," NRB deputy governor Maha Prasad Adhikari told Republica.
NRB has also warned that it will bar respective BFIs from distributing the bonus shares and cash dividends if such holdings are not regularized by the prescribed deadline. According to NRB, it has also barred non-banking foreign institutions that have the ownership in Nepal´s BFIs to buy the rights shares of BFIs.
Upendra Poudyal, vice-president of the Nepal Bankers´ Association (NBA), who is also the chief executive officer (CEO) of NMB Bank, one of the banks with foreign company´s holding, refused to comment on the issue. Malaysia based Young Leon Real Estate owns 12.67 percent shares of NMB Bank.
Apart from NMB Bank, there is also a 50 percent stake of Ireland based NB International in the NABIL Bank.
Bhuwan Dahal, CEO of the Sanima Bank, said that the central bank´s decision to urge the foreign institutions to sell their shares was necessary particularly to those shareholders who have made investment before the BAFIA came into the effect. "The directive is good for everyone, especially those foreign non-banking investors who had owned the shares before BAFIA was enforced," he said.
Likewise, NRB has also directed BFIs that are yet to issue 30 percent shares to the public as per the law but banks with foreign holdings were not bound by the rule and eventually sold the shares to Nepali shareholders should also issue the primary shares as per the law by mid July 2015.