Stock related news & regulations of Nepal Rastra Bank

KATHMANDU, Aug 15: Nepal Rastra Bank (NRB) has barred banks and financial institutions (BFIs), which have failed to maintain the required capital requirement, from distributing cash dividends to their shareholders.

Issuing a circular on Friday, the central regulatory bank announced a host of punitive measures for BFIs that fail to comply with its capital requirement diktat. Other actions are restriction on branch expansion, deposit mobilization and loan extension.

Commercial banks and national-level development banks were required to maintain the minimum paid-up capital of Rs 2 billion and Rs 640 million, respectively, by the end of fiscal year 2013/14. Similarly, development banks having operational license for 4-10 districts were required to maintain minimum paid-up capital of Rs 200 million within 2013/14.
Similarly, minimum paid-up capital requirement for development banks having operation in 1-3 three districts, national-level finance companies and regional-level finance companies have been set at Rs 100 million, Rs 100 million and Rs 100 million, respectively.

Deposit mobilization limit for such BFIs has been set at 5 percent of the total deposits that they hold as at mid-August, while they won't be allowed to issue loans exceeding the total loan amount recorded as at mid-August.

Manmohan Kumar Shrestha, spokesperson of NRB, told Republica that the central bank took the decisions to take action against BFIs for their failure to comply with their directives.

"BFIs have sent us their capital boost plan. Commercial banks are likely to increase paid-up capital through issuance of bonus or rights shares or merger," said Shrestha.

"But some financial companies are finding it hard. Seven finance companies have informed us that they would issue bonus and rights shares, while nine others say they are looking for merger."

According to Shrestha, one finance company has informed NRB that it would maintain the required capital base once it issues initial public offering (IPO).

Around half a dozen commercial banks failed to maintain the minimum paid-up capital of Rs 2 billion by the end of 2013/14. Likewise, three national-level development banks, one development bank with license to operate in 10 districts, 24 development banks having license to operate in one to three districts, and a total of 17 finance companies failed to raise the paid-up capital within the stipulated deadline.

Source: Republica

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