July 2: Nepal Rastra Bank (NRB) has warned banks and financial institutions (BFIs) of stern action if they fail to meet the paid-up capital requirement by mid-July. The central bank has said it will put a hold on cash dividends, bonus distribution, deposits, loan ceiling and opening of new branches of those BFIs which do not comply with its directives. Two years ago, the NRB had brought a new monetary policy under which all commercial banks were asked to increase the minimum paid-up capital from Rs 2 billion to Rs 8 billion by mid-July 2017.

NRB’s Spokesperson Narayan Prasad Poudel issued such warning at a function organized by Kumari Bank to mark the beginning of its integrated transaction service on Friday after acquisition of three development banks and one financial institution.

According to Poudel, merger and acquisition has reduced the number of BFIs from 150 to 46 so far.

Speaking at the function, Governor of NRB Dr Chiranjivi Nepal said that the International Monetary Fund and the World Bank had suggested to the central bank eight years ago to increase the paid-up capital and the implementation of the plan has now become successful.  

Governor Nepal said that the new ceiling of paid-up capital set by the central bank will help in improving the overall banking system of Nepal in the coming days. The new measures taken by the NRB has made large-scale investment possible, argued Governor Nepal.

“Now, we don’t have to depend solely upon donor agencies for large-scale investment,” he said, adding, “Banks and financial institutions will now have plenty of capital.”

Governor Nepal also drew the attention of all stakeholders to expand the network of banking sector to various parts of the country since only 240 local units out of the total 744 units in the new federal setup have banking service.

Kumari Bank has started integrated transaction service since Friday after acquiring Kasthamandap Development Bank, Mahakali Bikas Bank, Kakrebhir Bikas Bank and Paschimacnhal Finance. Kumari Bank’s operator Dr Shobhakant Dhakal said that the bank is still short of Rs 590 million to meet the paid-up capital requirement of Rs 8 billion even after acquiring the four new BFIs. Dhakal informed that the bank would meet the requirement by providing only 20 percent share bonus in the current fiscal year.

After the merger, Kumari Bank has appointed Surendra Bhandari as the new Chief Executive Officer. Now, the bank’s deposit is Rs 52 billion while it has loaned out Rs 45 billion.