Banks won't need approval for new branches any more

In its latest step of loosening its grip over financial institutions, Nepal Rastra Bank has allowed financial institutions to expand branch offices without its prior approval. According a circular issued recently to all financial institutions, the central bank has however fixed a set of conditions that a commercial bank has to fulfill before bringing new branches into operation. The major condition of granting permission to open a branch inside the Kathmandu valley only after opening a similar branch outside the valley will continue, said a high ranking official at the NRB. Explaining about the new policy the official said, "There is no need to acquire approval from the central bank to open a new branch but the interested financial institutions are required to inform the central bank before bringing a new branch into operation by fulfilling the set conditions." As per the circular, financial institutions falling under the category A and B, are need to have the level of non-performing assets less than 5 percent during the last quarter and maintain capital adequacy as set by the central bank. "Aspirant banks are also required to maintain the minimum paid-up capital as directed by the central bank or should convince it that the bank is on track of gradually raising paid-up capital within the stipulated timeframe," stated the circular. Likewise, the board of director of the concerned bank has been entrusted to take the final decision ion the opening of a new branch and the bank is required to inform the central bank within 15 days of the decision. "Banks should bring a branch into operation within six months after informing the central bank," said the circular and added that the interested banks are also required to prepare a filed report, explaining the financial viability of the new branch. The circular also stated the central bank can even issue an order to close down the branch if bank are found presenting false reports to it while informing about the decision of opening a branch. "In addition, such banks can also be barred from opening any new braches for two years," said the official and added that the central bank might even order a special investigation if it finds any bank providing fake information to the central bank.
Source: Ekantipur