BFIs told to furnish capital increment plan by mid-September

KATHMANDU, Aug 7:

Nepal Rastra Bank (NRB) has asked bank and financial institutions (BFIs) to furnish their paid-up capital increment plan by mid-September.

Issuing a circular on Thursday, the central regulatory bank directed BFIs to present their capital plan with a clear timetable to its BFIs Regulation Department by mid-September this year.

Unveiling the Monetary Policy for fiscal year 2015/16, NRB raised the minimum paid-up capital requirement for BFIs by four times. They have been given two years to increase their capital base.

The central bank has also said that BFIs can calculate their proposed bonus shares as per the financial reports of Fiscal Year 2016/17 while counting the paid-up capital. NRB has also made it clear that it will take action against BFIs that fail to abide by the minimum capital requirement within the stipulated deadline. NRB can ban such banks from distribute bonus and dividend, mobilizing deposit and credit, and opening branch offices.

The new provision requires commercial banks to increase their paid-up capital by four times to Rs 8 billion within coming two years.

Similarly, national-level development banks have been asked to raise their paid-up capital to Rs 2.5 billion, while development banks that have working areas of 4-10 districts will have to raise paid-up capital to Rs 1.2 billion. Similarly, development banks having working areas in 1-3 districts will have to increase their capital base to Rs 400 million.

National-level finance companies and other finance companies with working areas of four to 10 districts will have to increase their capital base to Rs 800 million, while finance companies with working areas of one to three districts will have to raise their paid-up capital to Rs 400 million.

Bankers say it will be difficult for BFIs to come up with a realistic plan to raise paid-up capital. "It would not be a problem to present the plan on our strategies and priorities that we will take toward raising capital. However, it's difficult to come up with a realistic plan on how exactly BFIs will increase capital," Upendra Poudyal, president of Nepal Bankers Association (NBA), told Republica.

'ACCEPT LAND SANS MOTORABLE ROAD AS COLLATERAL'

Meanwhile, the central bank has cleared the hurdles for quake-hit borrowers to get loans from BFIs by pledging land not connected by motorable road as collateral.

The central bank has directed BFIs to issue loans of up to Rs 1 million to earthquake survivors on the basis of their capacity to repay loans even if lad pledged by them as collateral do not have road connectivity.

BFIs do not accept land that is not connected by motorable road as collateral for loans. The central bank has instructed BFIs to consider such collateral to promote commercial farming, SMEs and economic activities in the quake-hit areas.

Source: Republica