Upendra Poudyal
CEO, NMB Bank Ltd.
President, Nepal Bankers Association
The decision regarding the increment of paid up capital by Nepal Rastra Bank is not be objected however, 2 years is a very less time. The Bank’s can raise their paid up capital by having additional investment by issuing right or bonus shares but the investors will need return for their investments and as we won’t have adequate business, we will not be able to provide service to equity. So investors might not be interested to put additional money.
The only option most of the banks are left with is to go for merger and merger is a very difficult process. It would need time to find a partner and sort out various factors from cultural fit to operational integration. To increase our capital base we might try to go for merger and that would be very risky. If a bank with a huge paid up capital of 8 arba fails then it would create problem to other banks too.
Anil K. Shah
CEO, Mega Bank Nepal Ltd.
Vice President, Nepal Bankers Association
10-12 years back we suggested NRB not to issue license to so many banks stating a large number of banks would bring unhealthy competition. The NRB at the time gave us the example of the countries which are doing well with so many of Banks.
Now NRB is saying that Banks need to raise their paid up capital which is a good step toward stability of the banking system but a two year deadline to meet the capital requirement is challenging. The only way to raise the paid up capital by four folds in 2 year is by entering into merger and merger is a very complex process. There are so many factors that need to be considered before merger like from staffs to balance sheets.
It’s a very nice idea to have just 10-12 big Banks with big paid up capital but we need adequate time for this, at least 4-5 years so that in future the bigger banks won’t face any problem.
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