Contraction of area of operation
KATHMANDU, May 26:
The financial institutions can opt for contracting their areas of operation in case of their capital base being insufficient.
The central bank can direct the development banks, finance companies, and micro-finance institutions to shrink the area of operation, if they are unable to maintain the capital base as per the regulators' requirement. Along with commercial banks, development banks, finance companies, and micro-finance institutions, Nepal Rastra Bank has further sub categorised the institutions based on their area of operation.
Development banks, finance companies and micro-finance institutions can operate in national level, regional level, four to 10 districts, one to three districts and can only conduct banking facilities in single district.
Thus, now on, the central bank can narrow down the area of operation of national level financial institutions to regional and regional financial institutions to the limited numbers of districts, if NRB deems that the financial institutions does not have the capacity to provide financial services in the existing area of operation.
According to the directive, if the financial institutions is unable to meet the minimum capital requirement within the stipulated time, facing consecutive losses for the last five years and is unable to maintain enough balance in the risk weighted fund and have also failed to follow the directions of the central bank, then NRB can direct the financial institutions to narrow down its area of operation.
However, they will not be downgraded, the central bank assured.
Source: THT
The financial institutions can opt for contracting their areas of operation in case of their capital base being insufficient.
The central bank can direct the development banks, finance companies, and micro-finance institutions to shrink the area of operation, if they are unable to maintain the capital base as per the regulators' requirement. Along with commercial banks, development banks, finance companies, and micro-finance institutions, Nepal Rastra Bank has further sub categorised the institutions based on their area of operation.
Development banks, finance companies and micro-finance institutions can operate in national level, regional level, four to 10 districts, one to three districts and can only conduct banking facilities in single district.
Thus, now on, the central bank can narrow down the area of operation of national level financial institutions to regional and regional financial institutions to the limited numbers of districts, if NRB deems that the financial institutions does not have the capacity to provide financial services in the existing area of operation.
According to the directive, if the financial institutions is unable to meet the minimum capital requirement within the stipulated time, facing consecutive losses for the last five years and is unable to maintain enough balance in the risk weighted fund and have also failed to follow the directions of the central bank, then NRB can direct the financial institutions to narrow down its area of operation.
However, they will not be downgraded, the central bank assured.
Source: THT
