Fifteen banks yet to raise paid up capital
KATHMANDU, DEC 06:
Almost half the commercial banks have yet to increase their paid up capital to Rs two billion, with less than eight months remaining for the regulatory deadline.
Among the 32 commercial banks operating at present, 15 still have a paid up capital that is less than the central bank prescribed Rs two billion. Commercial banks need to increase their paid up capital to Rs two billion by the end of the current fiscal year, according to Nepal Rastra Bank (NRB)’s regulation.
Among the 15 banks, four new banks –– Mega Bank, Civil Bank, Century Commercial Bank, and Commerz and Trust Bank –– have yet to issue shares to the public to increase their paid up capital, whereas the remaining banks including Nepal Bank Limited (NBL), Rastriya Banijya Bank (RBB), Standard Chartered Bank, Everest Bank, Bank of Kathmandu, NCC Bank, Lumbini Bank, NIC Bank, Kumari Bank, Laxmi Bank and Siddhartha Bank are also either issuing bonus shares or rights shares to meet the deadline.
“Banks still have a few months left to increase the paid up capital and they must be working on it,” said spokesperson for the central bank Bhaskar Mani Gyanwali.
NRB had issued a directive in April 2007 for financial institutions to increase their paid up capital by mid-July 2013. According to the NRB directive, commercial banks have to increase their paid up capital to Rs two billion, national level development banks to Rs 640 million, three to 10 district-based development banks must increase their paid up capital to Rs 200 million, and one to three district-based development banks must increase it to Rs 100 million by the deadline.
Likewise, regional level finance companies must increase their paid up capital to Rs 100 million.
Banks can increase their paid up capital by either opting for mergers with other financial institutions or by issuing rights and bonus shares to existing shareholders. Almost all the banks, except for government owned NBL and RBB, have substantial sum in their reserve funds which can be capitalised.
Citizens Bank International, Sunrise Bank, Bank of Asia, Grand Bank, NMB Bank and Prime Commercial Bank that were awarded a licence before April 2007, had increased their paid up capital to Rs two billion by mid-April 2011.
These banks also had a hard time getting their rights issue subscribed, especially among promoters themselves as share prices were falling pretty fast then.
“Mergers have been propelled by the necessity to increase paid up capital of late –– especially among development banks and finance companies –– and even commercial banks are in talks for mergers for the very reason,” said Gyanwali.
Some 22 financial institutions have acquired the final approval from NRB to merge into 10 financial institutions, and 23 financial institutions have already got Letter of Intent for their merger. In the last fiscal year, three finance companies merged into two commercial banks, and seven development banks and five finance companies completed mergers with each other.
The end of the last fiscal year saw the emergence of Global IME Bank –– merged entity of Global Bank, IME Financial Institution and Lord Buddha Finance, and merged Machhapuchchhre Bank with Standard Finance.
Source: THT
