NRB loosens the leash on promoter’s shares

Nepal Rastra Bank (NRB) has also allowed D class financial institutions to reduce their promoter's shares to 51 percent from the existing 70 percent.

According to the latest directive of the central bank, the remaining 19 percent of the promoter's shares can be traded in the secondary market like ordinary shares.

A, B and C class financial institutions already enjoy this privilege.

The central bank has also prohibited financial institutions from diverting the additional 25 percent investment ceiling to other sectors except power generation, transmission lines and cable cars.

"Otherwise, they will have to make cent percent provisioning of the loans exceeding the ceiling," the directive states.

Financial institutions cannot invest more than 25 percent in a single portfolio except the hydropower sector, according to the existing legal provisions.

"We issued the new directives to make it clear to the financial institutions that the additional facilities are not to allow them to divert funds to other sectors except the three particular sectors related to hydropower," said Laxmi Prapanna Niraula, director of NRB.

Likewise, the central bank has also specified how promoters can transfer the rights shares to others. According to the NRB directive, prospective promoter shareholders should possess the qualifications set by NRB, they should not have been blacklisted by the Credit Information Bureau and they should disclose the source of funds.

Financial institutions can transfer the rights shares themselves by making a provision in the memorandum of association and their regulations if promoters desiring to transfer their shares hold 1 percent or less of the company's stock. Those who hold more than 1 percent of the promoter's shares should obtain an OK from NRB.

If the rights shares are being transferred to the existing promoters, financial institutions can do it on their own following the existing NRB directives.
Source: Ekantipur