Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank (NRB), the central monetary authority, has started groundwork to increase the paid-up capital of commercial banks to Rs 25 billion.
Accordingly, NRB is preparing to raise paid-up capital requirement for banks through the forthcoming monetary policy and compel banks to enter merger and acquisition. The central bank’s prime intention behind raising the paid-up capital requirement is to reduce the number of banks and financial institutions.
In 2015, NRB had introduce a monetary provision requiring banks and financial institutions to raise minimum paid-up capital by up to four times to a whopping Rs 8 billion within 2017. Through the 2015-16 Monetary Policy, then NRB Governor Chiranjibi Nepal had increased minimum paid-up capital of commercial banks from existing Rs 2 billion to Rs 8 billion.
As there are no other way to reduce the number of banks, raising paid-up capital will be an important and pressure-driven strategy for a force merger, informed a NRB source. Accordingly, NRB has recently sought suggestions from chairpersons and chief executive officers of banks and financial institutions on the number of banks required and the paid up capital of the banks.
Currently, there are 27 commercial banks in the country. Global IME Bank Ltd. and Janata Bank Nepal Ltd. have already completed a merger to become Nepal’s largest commercial bank in terms of paid-up capital. Similarly, Nepal Investment Bank Limited (NIBL) and Himalayan Bank Limited (HBL) have already inked merger agreement and both these banks are expected to start joint transaction by the end of this fiscal year.
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