Kathmandu, August 29 - Financial institutions that had been termed ‘problematic’ and have resumed operations after Nepal Rastra Bank (NRB)’s resolution will get two years’ time to meet the paid-up capital requirement set by the central bank.
A recently held board of directors meeting of the central bank has decided to provide two years’ time since the date such financial institutions resume operations, according to NRB Joint Spokesperson Rajendra Pandit. Two financial institutions — General Finance and Arun Finance — recently resumed operations after the central bank’s resolution and will have to meet the paid-up capital requirement by mid-July 2019.
Arun Finance, which came into operation after NRB’s resolution has already initiated the process to increase its paid-up capital from Rs 150 million to Rs 800 million through capital injection from its promoters and rights issue.
According to NRB, out of the 16 problematic financial institutions, seven are in the process of resolution. NRB has facilitated in the ownership transfer of problematic financial institutions to bring them into operation. Financial institutions under the resolution process of NRB namely, Capital Merchant Banking and Finance, Kuber Merchant Finance, World Merchant Banking and Finance, Nepal Finance, Lalitpur Finance, and Corporate Development Bank Ltd have already signed memorandums of understanding to transfer ownership. Financial institutions that had earlier been termed as problematic by NRB were mainly development banks and finance companies.
The Monetary Policy 2017-18 has announced to provide preferential treatment to those financial institutions that resume operations after being termed ‘problematic’ earlier to meet paid-up capital requirement of the central bank.
NRB has set paid-up capital requirement for national level development banks at Rs 2.5 billion. The requirement for development banks working in four to 10 districts has been set at Rs 1.2 billion, and for development banks working in one to three districts it is Rs 500 million. Likewise, paid-up capital requirement for national level finance companies has been set at Rs 800 million and for finance companies working in one to three districts at Rs 400 million. NRB had given deadline of fiscal year-end of 2016-17 for banks and financial institutions to meet the set paid-up capital requirement.