July 05, Kathmandu.
Stakeholders' interest in raising capital of banks and financial institutions has also increased as the monetary policy for the coming fiscal year is approaching. NRB has also started homework for this, especially after the banks and financial institutions themselves said that the capital should be increased.
The paid-up capital of development banks and finance companies was increased five years ago. The paid-up capital of Class D microfinance institutions has not increased for a long time. NRB has made arrangements for the national level microfinance institutions to have a paid-up capital of only Rs. 100 million. Although the NRB did not amend this provision made many years ago, the paid-up capital of most national level microfinance institutions is more than Rs 100 million. The paid-up capital of some institutions is more than a billion rupees.
Due to this situation, NRB is preparing to increase its paid-up capital through monetary policy for the coming fiscal year. "There have been suggestions from many quarters to increase the capital and open the issuance of rights. We are also discussing the issue with stakeholders," said an official of the National Bank of Nepal. It has happened. ' The officials say that the capital of all the three categories of banks and financial institutions will increase if there is no major change.
Chairman of the Microfinance Bankers' Association Basanta Lamsal says that the NRB should pay for the issuance of rights. He has been saying that they will not have any objection even if the capital is increased up to five times by allowing the issuance of rights.
Meanwhile, Saroj Kaji Tuladhar, president of the Finance Companies Association, an organization of CEOs of finance companies, also said that class C financial institutions should be empowered by increasing their capital. He demanded that not only increase or decrease the share price of a company but also issue rights for increasing the capital of the institutions.
Pradyuman Pokharel, president of the Development Bankers' Association, says that capital increase is needed for development banks now. The association has also suggested monetary policy, saying that there should be a capital increase and that the NRB should now allow development banks to issue rights.
NRB has now stopped issuing rights so that banks and financial institutions can focus on mergers and acquisitions. NRB has stopped giving permission to other organizations except those that have been released from trouble.
We have clearly written that 'D' class microfinance institutions will not get it. In the case of other banks and financial institutions, it is said that they will not be entitled under normal circumstances except those who are free from problems, 'said NRB spokesperson Dev Kumar Dhakal.
He said that the decision was taken to increase the capital of banks and financial institutions through mergers and acquisitions and not by issuing rights. However, he said that even though the debate on the capital increase was going on now, the discussion did not enter the NRB.
Capital increase to save the existence of development bank
The way the development banks have been merging in recent times, it seems that the very existence of the development banks seems to be in crisis. Krishna Raj Lamichhane, former chairman of the Development Bankers' Association, says that the NRB has also understood the need of development banks and should be given the right to increase its capital to save its existence.
A total of 220 banks and financial institutions have joined the merger/acquisition process by mid-April 2078 BS after the NRB started the process of merging and acquiring banks and financial institutions. Of these, licenses of 166 organizations have been revoked and 54 organizations have been established. This has also hit the development banks hard.
Before the start of the merger process and the current state of the development bank, more than 80 percent of the existence has ended. Some institutions are still in the process of extinction. Former Chairman Lamichhane says that the current growth of the business of development banks is not enough.
Therefore, it is necessary to increase the capital for development banks through the forthcoming monetary policy, he said. "The number of development banks is very low now. In such a situation, it is not enough to increase mergers or acquisitions," he said.
NRB did not stop giving the right shares when it came up with a capital increase plan in 2072 BS. At that time, the NRB had asked to increase the working capital from 4 to 25 times by mid-July 2074 BS.
At that time, the paid-up capital of 32 Class A commercial banks was only Rs 2 billion. As per the NRB directive, they had to quadruple their paid-up capital to Rs 8 billion.
Development banks also disbursed Rs. 2.5 billion, Rs. 1.20 billion to development banks spread across 4 to 10 districts, Rs. 500 million to 1 to 3 district development banks, Rs. The companies had to raise Rs 400 million in paid-up capital. All the banks and financial institutions have already reached the required capital. Therefore, there is a need to increase capital now, experts say.
