When will Lumbini Bikas Bank meet the minimum capital requirement? What can the investors expect?

With the end of the fiscal year 2074/75, most of the banks and financial institutions have published their fourth quarter report. However, the fourth quarter report of Lumbini Bikas Bank Limited has raised a few question regarding its paid-up capital.

As per the direction of Nepal Rastra Bank, the national level development bank’s minimum paid-up capital should be at Rs 2.50 arba. But the paid-up capital of Lumbini Bikas Bank stands at Rs 2.17 arba.

The bank is yet to meet the minimum capital requirement. Recently, the bank announced its 10^th AGM for the FY 2073/74 but any kind of capital increment has not been included in the agenda.

When contacted with the Assistant CEO, Mr Tilak Raj Pandey, he replied,” Nepal Rastra Bank declined our request for issuing bonus shares for the FY 2073/74. We are already capable of increasing our capital to the minimum requirements but after the denial of Rastra Bank, it will take some time.”

He informed that due to the reason, the bank has called up for an AGM for the fiscal year 2073/74. The company is capable to issue 16% and above bonus shares from the earnings of the fiscal year 2073/74 and 2074/75 which will increase its paid-up capital above the prescribed minimum requirement.

Initially, the bank which was formed after the merge of Vibor Society Development Bank with Rs 181 crore capital and Lumbini Finance and Leasing Company with a capital of Rs 57 crore had Rs 36 crore as reserve from the merge (20% of the capital of Vibor Society Development Bank). The development bank had planned to provide bonus share from the amount settled as reserve but the decision has been put on a halt by the Rastra Bank.

So, the shareholders can expect a huge return i.e. bonus from Rs 36 crore maintained as reserve i.e. 16% and also the return of the FY 2074/75.