KATHMANDU, AUG 06 - After raising the paid-up capital requirements for banks and financial institutions (BFIs) four-fold, the Nepal Rastra Bank (NRB) has directed the BFIs to submit their working plan on capital hike by mid-September.
The Monetary Policy 2015-16 has given two years to the BFIs to meet the capital requirements, but the latter have been demanding more time.
Issuing a directive on Thursday, the central bank also made it clear that strong action would be taken against the BFIs failing to meet the capital requirements within the stipulated time. The NRB said it could bar such BFIs from issuing bonus and right shares, deposit mobilisation, loan disbursement and branch expansion.
With the new directive in place, the central bank looks firm on its plan to raise the capital requirements. “The central bank is firm on its plan,” said a senior NRB official. It means the BFIs will have to raise their capital either on their own or by merging with other BFIs.
The BFIs have to submit the capital-hike plan after getting it endorsed by their respective boards. The central bank, in the monetary policy, had raised the capital requirement for commercial banks to Rs8 billion from Rs2 billion. The requirement for national-level development bank has been raised to Rs2.5 billion from Rs640 million, and for national finance companies, it has been raised to Rs800 million from Rs200 million.
Despite the NRB’s firm stance, the bankers have urged the central bank to rethink the plan.
They have said they should be given at least five years to raise the capital to the required level. “Though the task is not difficult, there are problems in implementation,” said a banker.
Bankers are of the view that if the capital has to be raised within two years as, they have no option but to go for merger.
Having indirectly asked the BFIs to raise their paid-up capital by merging and forcing banks promoted by same groups of promoters to combine previously, the central bank now has aimed at forceful merger. “But forceful merger could invite problems also,” said a CEO of leading commercial bank.
Source: The Kathmandu Post