Banks allowed to operate as DPs

KATHMANDU, AUG 23 -

The central bank has allowed commercial banks to operate as depository participants (DP) of the Central Depositary System and Clearing Limited (CDSL).

The Nepal Rastra Bank (NRB) issued a directive on Wednesday in this regard.

DPs are the most integral element of CDSL which operate as intermediaries between CDSCL and investors and provide services like dematerialisation, re-materialisation and transfer of securities and settlement of trading, among others. Although the Securities Board of Nepal (Sebon) has allowed CDSCL to provide DP licence to banks and financial institutions (BFIs), they had been unable to acquire the licence without the NRB approval.

According to a senior NRB official, Everest Bank recently applied for the approval to operate as DP. “Instead of giving approval to a single bank, we thought of bringing a directive so that it would be easier for all banks,” the official said.

Meanwhile, NRB has awarded BFIs a 15-day extension for the collection of interest income after the fiscal year-end. “If interest income is collected within 15 days after the end of the fiscal year, such a collection can be adjusted to the profit and loss account of the previous fiscal year,” read the NRB circular on Wednesday. The central bank official said such a circular was issued in order to provide relief to BFIs.

Also on Wednesday, NRB allowed foreign joint-venture BFIs to have more than one representatives of the foreign joint-venture partner in the board of directors. “In case of domestic promoters, we have not allowed more than one representative in the board in order to prevent ownership control by a single entity which could invite bad corporate governance,” said NRB Director Basudev Adhikari. “But in case of foreign joint ventures, we have relaxed this measure as a gesture that we honour foreign direct investment and promote technology transfer.”

The central bank also increased the ceiling on promoter shares of government-owned enterprise in BFIs to 25 percent from the existing 15 percent. Public enterprises like Employee Provident Fund, Citizens Investment Trust and Rastriya Beema Sasthan, in which the government holds more than 50 percent stake, can now hold up to 25 percent promoter shares in one or more BFIs. The ceiling for other companies or individuals is at 15 percent in a single BFI.

Adhikari said this directive was aimed at making the exit of the existing ‘toxic investors’ easier.

Source: The Kathmandu Post