RBB submits three-year capital plan to central bank

KATHMANDU, APR 09 -

Rastriya Banijya Bank (RBB) has submitted a three-year capital plan to the Nepal Rastra Bank (NRB).

Under the Rs 12.5-billion plan, the bank seeks to fulfil the core capital requirement (Tier I) of Rs 8.5 billion in the first two years. RBB says the amount can be raised either by issuing rights shares or issuing bonds. The bank plans to issue debenture for raising the supplementary capital (Tier II) of Rs 4 billion in the third year.

RBB Chief Executive Officer Krishna Prasad Sharma said the capital plan has proposed injection of capital by the government on instalment basis, either in the form of cash or bonds. Being the fully government-owned bank, the government will have to inject the required capital for the bank.

Given the bank’s net worth negative by Rs 9 billion, the 12.5-billion plan is not enough to meet its both capital adequacy and paid-up capital requirement that needs Rs 14 billion. The bank plans to raise the remaining amount by selling its assets, including shares in other financial institutions and land, and from the profits in the next three years. RBB has promoters’ shares worth Rs 3.6 million in Nepal Investment Bank.

The government has already directed RBB and NIDC Development Bank to go for merger. With NIDC having fixed assets worth Rs 10 billion, the government expects some resources can also be generated by selling those after the merger. NIDC owns land plots in Kathmandu, Pokhara, Biratnagar, Bharatpur, Mahendra Nagar, Surkhet and Dhangadi.

Sharma, however, expressed doubts that enough resources could be generated after the merger as selling fixed assets is not an easy job.

The central bank and the government should approve the plan to take it to implementation phase. “We hold talks with the NRB and the government in this matter,” said Sharma.

The government has been reluctant to inject billions of rupees to rescue RBB. The government is holding discussions with the World Bank about the possibility of getting soft loans for injecting capital in RBB.

Source: Kantipur