World Bank frets about Nepal Bank plans

KATHMANDU, MAR 07 -

The World Bank (WB) has shown concern over Nepal Bank Limited (NBL)’s recapitalisation plan to issue right shares and sell off its assets. The WB has doubts whether NBL assets sales will be possible when realty transactions in the country have been disappointing.

The NBL management is gearing up to issue 1:9.5 ratios to raise its paid-up capital to Rs 4 billion. The first bank of the country is also working on generating an additional Rs 2 billion by selling its assets in different locations to improve on its net worth that could help it meet its capital adequacy ratio. NBL has a negative net worth amounting to Rs 4.5 billion.

The World Bank officials were recently in Kathmandu to discuss on financial sector reform in Nepal with earlier programme failing to yield desired result. “They were content with rights shares issuance but were skeptic about whether the asset sales would generate substantial resources to meet the target,” said a senior official of Ministry of Finance (MoF).

The NBL has vast fixed assets at several locations in the country that could generated a huge amount through their sales. “We assured them that resources could be generated as the prices of the assets in all areas have not come down in all the places of the country,” said the MoF official.

NBL officials remain confident that its assets could still return a good price. “As we are rich in fixed assets, withassets at several key locations of the country, stagnation in realty trading in Kathmandu and Pokhara will not affect the sales and generation of resources,” said Maheshwor Lal Shrestha, coordinator of NBL management team.

The government, currently holding 41 percent stake in the oldest bank, has promised to invest additional Rs 1.5 billion during a recent meeting of shareholders.  Khetan Group, which has 9.5 percent stake in NBL has also shown interest to purchase all the stake of the  government. But with the group,  although concern is that whether his group would be allowed to purchase with it is also leading promoter of Laxmi Bank.

The NBL plans to start selling its fixed assets from April. Likewise, it has also initiated process for issuing rights shares and wants to complete share allotment by December. “We feel all shareholders are enthusiastic to invest in our rights shares,” said Shrestha. The NBL will issue rights shares at par value of Rs 100 per share.

Due diligence audit is also being carried out to reflect the real financial status of the NBL and a report is expected shortly, according to Shrestha. Although World Bank has been pressing the government to privatise NBL-one of the conditions of recently concluded financial sector reform programme.

Source: Kantipur