Two Finance Companies out of Risk Zone; Kuber Merchant & Lalitpur Finance declared non-problematic

The Nepal Rastra Bank (NRB) has removed Kuber Merchant Finance and Lalitpur Finance from its list of problematic financial institutions. The latest decision from the banking regulator came after the two institutions showed improvements in their financial health. Earlier, the NRB has said troubled financial institutions can be removed from the list of problematic institutions if they maintain 25 percent of the new paid-up capital requirement and meet the capital adequacy ratio. The NRB had said troubled institutions can meet 25 percent of the new paid-up capital requirement in form of the money contributed by shareholders for the purpose of injecting fresh capital in the financial institution. According to notice published by NRB, these two class C financial institutions managed to secure fresh capital from new shareholders which also helped them to remove their names from the list of problematic institutions. However, the central bank has given a deadline of two years to these institutions to meet the minimum paid-up capital requirement of Rs 800 million. It has also directed both institutions to submit their recapitalization plan to meet the new minimum regulatory paid-up capital requirement within 35 days. Unless they meet the new minimum regulatory paid-up capital requirement, they will be barred from extending over 10 percent of the core capital as credit to single borrower, the NRB has said. The NRB has also directed these finance companies to reduce the volume of their bad loans, strengthen their governance, internal control and risk management systems. Lalitpur Finance, in the meantime, has been directed to initiate action against people who pushed the company to the verge of collapse. The financial health of both finance companies had deteriorated after they chaotically disbursed loans thereby failing to maintain financial discipline. Following this, the NRB declared Kuber Merchant Finance as ‘problematic’ in January 2013, while Lalitpur Finance was labelled as ‘problematic’ in March 2015.