Guv urges banks to up capital base
KATHMANDU, FEB 29 -
The central bank has suggested banks and financial institutions (BFIs) to increase their capital base.
“It is not true that increasing paid-up capital to Rs 2 billion guarantees upgradation into commercial banks,” said Nepal Rastra Bank (NRB) Governor Yubraj Khatiwada, addressing the formal inauguration ceremony of Sanima Bank. “We should not limit the minimum paid-up capital requirement at Rs 2 billion.”
According to the governor, there’s a trend of taking cash dividends rather than bonus shares among BFI promoters. “Capital can be increased either by reinvesting profits or issuing bonds or debentures,” said Khatiwada. “Unless the capital base is strong, financial institutions can’t reward gains in long term.” So far in the country’s financial sector, the nature of liquidity has been short-term, but the credit demand has been long-term. Khatiwada said the central bank is making efforts to manage this problem.
The governor also suggested that BFIs invest in the areas of agriculture and livestock even if farmers do not put up adequate collateral. “Many farmers are now able to scale up their businesses, and BFIs must take calculated risk to finance their needs,” said Khatiwada. “Investment in agriculture is a way to offset trade deficit in the long run.”
With the year 2012-13 being marked as investment year, he said Sanima Bank, being promoted by Non-Residential Nepalis (NRNs), should help bring foreign investments. He also suggested that the bank continue to maintain good corporate governance.
Sanima Bank CEO Kumar Lamsal said the bank’s good corporate governance practice was the main reason behind its upgradation. “Good corporate governance has always been our motto,” said Lamsal. “Investors and promoters contributed a lot to maintain that.”
Lamsal said the bank is aware of the fact that this upgradation will increase their business exposure as well as the risk. In order to mitigate the risk the bank will always consider three things—careful lending, portfolio diversification and maintaining adequate capital adequacy ratio, he said.
The bank has maintained a healthy portfolio of deposits, with 70 percent of the total deposits coming from individual depositors.
Manoj Goyal, president of Development Bankers’ Association of Nepal, said he has mixed feelings regarding Sanima’s upgradation. “I am happy that one of our friends achieved a milestone and I feel equally sad about missing a sound institution in our category,” said Goyal.
Sanima’s CSR worth Rs 5.3m
Sanima Bank has announced several corporate social responsibility (CSR) programmes in eight rural areas where the bank has its presence. During the bank’s formal inauguration ceremony here on Tuesday, Chairman Jiba Lamichhane announced that about Rs 5.3 million will be spent within a year in CSR activities. “We will spend Rs 1.7 million for 10+2 level education of 16 studens form the eight areas where we have our branches,” said Chairman Lamichhane. “Similarly, we will provide self-employment training to 40 individuals—five each form the eight regions. The cost associated will be Rs 1.4 million.” He also announced that the bank will spend Rs 2.2 million for eye surgery of 200 people residing outside the Kathmandu valley. “In coming days, we will continue to expand our CSR activity.”
Source: Kantipur
