The government on Wednesday decided to hand over the responsibility of monitoring Employees Provident Fund (EPF) and regulating Citizens' Investment Trust (CIT) to Nepal Rastra Bank (NRB). Wednesday's Cabinet meeting took the decision to this effect. The central bank now onwards will monitor EPF and regulate CIT.The decision came following the central bank's initiative and willingness to regulate both the institutions.
NRB on Dec. 9 had communicated to the Ministry of Finance (MoF) stating it was ready to regulate EPF and CIT in response to the ministry's call some four months ago that NRB regulate both the institutions. Though EPF and CIT both have huge resource mobilisation, both the institutions were self-regulated. EPF has mobilised about Rs. 80 billion and CIT about Rs. 16 billion.
According to EPF, about 50 percent of its money has gone to contributors, 35 percent is in fixed deposits, 8 percent in government bonds and 5 percent in project loans. CIT holds deposits of general public and government employees. It provides certain benefits to the public by investing the money in corporate shares, debentures and government securities.
Since law doesn't allow the central bank with the right to regulate EPF, the government has decided EPF only to be monitored by it. "Our main concern was whether the government's decision would be as per the law," said Ramesh Bhattarai, Administrator of EPF. "Today's cabinet decision shows we need not worry." The government had made a provision in the budget two years ago about letting the central bank regulate these two institutions, but was yet to materialise. An MoF official said that the proposal went to the Cabinet but was cancelled. Meanwhile, the Cabinet also decided to form a committee to recommend the new governor under the convernership of Finance Minister Surendra Pandey. However, consensus could not be forged among the committee members.
According to the Section 15 of Nepal Rastra Bank Act 2002, finance minister will be the convener of the committee. As per the Act, the three-member committee will recommend three names to the Cabinet. Tenure of Bhattarai ends in January.
Source:eKantipur
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Showing posts with label Nepal Rastra Bank. Show all posts
Showing posts with label Nepal Rastra Bank. Show all posts
Saturday, January 16, 2010
NRB bars promoters to buy public shares
Nepal Rastra Bank (NRB) has imposed a restriction for promoters, along with their family members, of banks and financial institutions to buy shares allocated for public issue.
Issuing a circular on Tuesday, the central bank clarified that the new restriction would, however, not prevent the promoters and their family members to buy public shares which are left unsubscribed within specified application deadline.
The financial regulator also stated that the promoters or promoter shareholders have been restricted from filing candidacy for promoter of other company groups than the companies promoted by them.
Source:Republica
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Issuing a circular on Tuesday, the central bank clarified that the new restriction would, however, not prevent the promoters and their family members to buy public shares which are left unsubscribed within specified application deadline.
The financial regulator also stated that the promoters or promoter shareholders have been restricted from filing candidacy for promoter of other company groups than the companies promoted by them.
Source:Republica
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Liquidity Crisis: Higher Import Duty Likely
The government plans to hike the customs duty on major goods to control soaring imports if the monetary measures taken by Nepal Rastra Bank (NRB) fails to solve the liquidity crisis. Rising imports against declining exports have been cited as the major reason behind the persisting cash crunch.
Senior economic advisor at the Finance Ministry Keshav Acharya said that the government would take fiscal measures including hiking the duty on gold at first and other commodities whose volume surged one after another calculating the situation to rescue the economy from a rising trade deficit. "We have not finalised the goods on which we will be imposing extra duty at the moment," he said.
Exports declined by 23.7 percent against a rise in imports by 27.8 percent during the four months of the current fiscal year leading to a trade deficit of 48 percent, as per the latest NRB report on the country's macro-economic situation.
Terming gold imports as the major factor behind the surge in total imports that stood at Rs. 25 billion during the last five months as per the data of the Department of Customs, the central bank took stringent measures including forcing importers to deposit at least 40 percent cash of the amount sought for bank guarantee. Earlier, importers could import gold on the basis of a bank guarantee even if they didn't have cash at hand.
The central bank has also directed banks and financial institutions not to surpass the loans and advances 80 percent of total deposits and primary capital in order to force them to maintain comfortable liquidity. Another major decision taken by the central bank is the capping of loans in the real estate sector forcing them to maintain the loan exposure to real estate under 40 percent by the current fiscal year.
NRB has already injected Rs. 20 billion in the market through repo (central bank injecting money to the banks against their treasury bills) and outright purchase over the last two months. About Rs. 5 billion was injected into banking system through repo on Sunday.
NRB's executive director Lila Prakash Sitaula said that the latest injection of liquidity by the central bank eased the crisis and the interest rates of inter-bank lending and standing liquidity facility (NRB giving money to banks to address short-term liquidity problems) went down to around 10 and 11 percent respectively from above 12 and 14 percent in the past. He said that the various measures taken by the central bank in recent days would not let banks face an acute cash crunch in the coming days.
But chief executive officer of Kumari Bank Radhesh Pant said that the banks which didn't own much treasury bills (TBs) to offer to the central bank for repo were still in a cash crunch, whereas those having TBs and liquidity offered very few interest rates resulting in low liquidity in the banking system. "That's why inter-bank lending has not come down to a comfortable level," he said.
Source:eKantipur
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Senior economic advisor at the Finance Ministry Keshav Acharya said that the government would take fiscal measures including hiking the duty on gold at first and other commodities whose volume surged one after another calculating the situation to rescue the economy from a rising trade deficit. "We have not finalised the goods on which we will be imposing extra duty at the moment," he said.
Exports declined by 23.7 percent against a rise in imports by 27.8 percent during the four months of the current fiscal year leading to a trade deficit of 48 percent, as per the latest NRB report on the country's macro-economic situation.
Terming gold imports as the major factor behind the surge in total imports that stood at Rs. 25 billion during the last five months as per the data of the Department of Customs, the central bank took stringent measures including forcing importers to deposit at least 40 percent cash of the amount sought for bank guarantee. Earlier, importers could import gold on the basis of a bank guarantee even if they didn't have cash at hand.
The central bank has also directed banks and financial institutions not to surpass the loans and advances 80 percent of total deposits and primary capital in order to force them to maintain comfortable liquidity. Another major decision taken by the central bank is the capping of loans in the real estate sector forcing them to maintain the loan exposure to real estate under 40 percent by the current fiscal year.
NRB has already injected Rs. 20 billion in the market through repo (central bank injecting money to the banks against their treasury bills) and outright purchase over the last two months. About Rs. 5 billion was injected into banking system through repo on Sunday.
NRB's executive director Lila Prakash Sitaula said that the latest injection of liquidity by the central bank eased the crisis and the interest rates of inter-bank lending and standing liquidity facility (NRB giving money to banks to address short-term liquidity problems) went down to around 10 and 11 percent respectively from above 12 and 14 percent in the past. He said that the various measures taken by the central bank in recent days would not let banks face an acute cash crunch in the coming days.
But chief executive officer of Kumari Bank Radhesh Pant said that the banks which didn't own much treasury bills (TBs) to offer to the central bank for repo were still in a cash crunch, whereas those having TBs and liquidity offered very few interest rates resulting in low liquidity in the banking system. "That's why inter-bank lending has not come down to a comfortable level," he said.
Source:eKantipur
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Century gets LoI
Board meeting of Nepal Rastra Bank (NRB) on Monday decided to issue Letter of Intent (LoI) to Century Bank. An NRB source said the NRB board decided to issue LoI, with some conditions required to be fulfilled soon.
The bank must have completed the procedure of receiving the operating license within nine months and must complete all other legalities and manage physical infrastructures, as per the new licensing policy issued by the NRB.
Century's CEO Ganesh Kumar Shrestha said that they were preparing to start operations in June. "We are in negotiations with parties for our corporate office and in the process of choosing the banking software," he said.
Source:eKantipur
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The bank must have completed the procedure of receiving the operating license within nine months and must complete all other legalities and manage physical infrastructures, as per the new licensing policy issued by the NRB.
Century's CEO Ganesh Kumar Shrestha said that they were preparing to start operations in June. "We are in negotiations with parties for our corporate office and in the process of choosing the banking software," he said.
Source:eKantipur
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NRB amends bank licensing policy
New banks and Financial Institutions (FIs) cannot add new promoters after receiving Letter of Intent (LoI) from Nepal Rastra Bank (NRB), as per the new amendment in the licensing policy NRB. But, in the case a promoter dies after the bank has received LoI, the promoter's shares committed by him to own is transferable to the right holders. "If such right holder fails to purchase full or partial shares the existing promoters only can purchase these shares," the policy states.
Likewise, after receiving the LoI, only the existing promoters can make adjustment in promoters' shares if any promoter wants to leave the bank or reduce number of shares he has committed to own. No new bank or FI can change the promoter shareholders without taking a pre-approval from NRB in case any promoter shareholder dies after the bank or FI has been granted LoI.
Likewise, the banks and FIs will have to complete receiving operating license within nine months from the date the bank or FI received LoI and must have completed all legal procedures and managed physical infrastructures. "Otherwise, the given LoI gets automatically cancelled," stated the new amendment in the NRB' licensing policy.
Earlier, the banks and FIs were required to apply for operating license within six months of the establishment of the bank by registering it with the Company Registrar's Office (CRO). The banks and FIs needed to have been registered with CRO within three months from the date the central bank recommended for the same.
The new banks or FIs will have to submit the 45 percent of total share capital that the promoters committed to inject in cash or as bank guarantee within 30 days from the date of the bank receiving LoI. But, the duration of bank guarantee should not cross a year.
Source:eKantipur
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Likewise, after receiving the LoI, only the existing promoters can make adjustment in promoters' shares if any promoter wants to leave the bank or reduce number of shares he has committed to own. No new bank or FI can change the promoter shareholders without taking a pre-approval from NRB in case any promoter shareholder dies after the bank or FI has been granted LoI.
Likewise, the banks and FIs will have to complete receiving operating license within nine months from the date the bank or FI received LoI and must have completed all legal procedures and managed physical infrastructures. "Otherwise, the given LoI gets automatically cancelled," stated the new amendment in the NRB' licensing policy.
Earlier, the banks and FIs were required to apply for operating license within six months of the establishment of the bank by registering it with the Company Registrar's Office (CRO). The banks and FIs needed to have been registered with CRO within three months from the date the central bank recommended for the same.
The new banks or FIs will have to submit the 45 percent of total share capital that the promoters committed to inject in cash or as bank guarantee within 30 days from the date of the bank receiving LoI. But, the duration of bank guarantee should not cross a year.
Source:eKantipur
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Nepse protests NRB directives
Nepal Stock Exchange (Nepse) on Friday protested directives from Nepal Rastra Bank (NRB) on converting 19 percent of promoter shares into general shares, arguing that this could lead to a market crash. "Conversion of 19 percent promoter shares will double the supply of stock. It would force the market to lose another 200 points. This must be avoided," said Tanka Paneru, Nepse chairman.
Briefing lawmakers at the Parliamentary Finance and Labor Relations Committee, Paneru argued that a tight marginal lending policy, the inflation-shrunk savings of small investors, other market dynamics and liquidity crunch have already forced the market to correct. "The market has already corrected to 540 points from some 1,200 points of two years ago. We need not implement another correction measure that we worked out during the overheated era," Paneru stated.
Lawmakers at the committee were divided over the issue. Dr Ram Sharan Mahat, a lawmaker, stood in favor of NRB´s directives, saying these will free the promoters´ locked-up money and foster entrepreneurship.
Dr Tilak Rawal, another lawmaker, opposed it, saying that it will squeeze the market further, spark distress selling and crash Nepse, sending an adverse wave throughout the economy. Because of differences among lawmakers, the committee failed to give its decision over the case.
Source:Republica
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Briefing lawmakers at the Parliamentary Finance and Labor Relations Committee, Paneru argued that a tight marginal lending policy, the inflation-shrunk savings of small investors, other market dynamics and liquidity crunch have already forced the market to correct. "The market has already corrected to 540 points from some 1,200 points of two years ago. We need not implement another correction measure that we worked out during the overheated era," Paneru stated.
Lawmakers at the committee were divided over the issue. Dr Ram Sharan Mahat, a lawmaker, stood in favor of NRB´s directives, saying these will free the promoters´ locked-up money and foster entrepreneurship.
Dr Tilak Rawal, another lawmaker, opposed it, saying that it will squeeze the market further, spark distress selling and crash Nepse, sending an adverse wave throughout the economy. Because of differences among lawmakers, the committee failed to give its decision over the case.
Source:Republica
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Friday, January 8, 2010
Major banks raise retail lending rates
Consumers planning to buy house or automobiles or any other retail products should review their budget and plan now, as most of the commercial banks have revised their retail lending rates. The banks have revised their lending rates upward in the range of 2.5 to 3.5 percentage points amid long-running liquidity crunch and enforcement of new lending policy by Nepal Rastra Bank. The new rates will not only impact the new borrowers, but will also add financial burden to the previous clients as well.
Among the retail products, commercial banks have hiked interest rates for housing loans sharply. Compared to mid-July, when Nabil Bank clients received housing loans at 9.5 percent per annum, the bank is charging the interest rate of as high as 13 percent to its client as of December-end.
Himalayan Bank Limited (HBL) too has increased its housing lending rate to 12.5 percent from 10 percent. Clients of Nepal Investment Bank Limited (NIBL) and Standard Chartered Bank Nepal Limited (SCBNL) can take respite though, as these banks have not yet effected any change in their interest rates.
Apart from higher interest rates, people hoping to buy land or housing with bank loans could also find it difficult to arrange finances, especially as a couple of banks have already stopped and some others have tightened their lending in the sector after the imposition of cap on loans exposed to realty sector.
Under the auto loans, Nabil Bank has increased its lending rate from 10 percent to 12.5 percent during the period. HBL too has increased its auto lending rate from 12 percent of mid-July to 13 percent in December-end. Auto loans clients of NIBL and SCBNL, however, will continue to enjoy lower interest rate as they have not changed their interest rates so far. The cost of finances on sectors like education loans and term loans too has soared in the wake of banks paying higher rates on deposits to beat liquidity crunch.
Source:Republica
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Among the retail products, commercial banks have hiked interest rates for housing loans sharply. Compared to mid-July, when Nabil Bank clients received housing loans at 9.5 percent per annum, the bank is charging the interest rate of as high as 13 percent to its client as of December-end.
Himalayan Bank Limited (HBL) too has increased its housing lending rate to 12.5 percent from 10 percent. Clients of Nepal Investment Bank Limited (NIBL) and Standard Chartered Bank Nepal Limited (SCBNL) can take respite though, as these banks have not yet effected any change in their interest rates.
Apart from higher interest rates, people hoping to buy land or housing with bank loans could also find it difficult to arrange finances, especially as a couple of banks have already stopped and some others have tightened their lending in the sector after the imposition of cap on loans exposed to realty sector.
Under the auto loans, Nabil Bank has increased its lending rate from 10 percent to 12.5 percent during the period. HBL too has increased its auto lending rate from 12 percent of mid-July to 13 percent in December-end. Auto loans clients of NIBL and SCBNL, however, will continue to enjoy lower interest rate as they have not changed their interest rates so far. The cost of finances on sectors like education loans and term loans too has soared in the wake of banks paying higher rates on deposits to beat liquidity crunch.
Source:Republica
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Central bank to inject Rs. 5b in market
Nepal Rastra Bank (NRB) is set to inject additional Rs. 5 billion within this week in the banking system for the Rs. 12 billion pumped through repo (a monetary instrument under which central bank purchases treasury bills) failed to address the liquidity crunch.
The central bank has taken the decision to purchase treasury bills of the banks to inject the additional liquidity in the market."We've decided to purchase treasury bills through outright purchase," said Lila Prasad Sitaula, Executive Director of NRB. "Additional Rs 5 billion will be injected in the market with NRB purchasing treasury bills," said Sitaula. In addition, the central bank is also planning to pump Rs. 3 billion some time later through repo.
NRB has already poured around Rs. 10 billion in the market through repo. The discount rate of the 91 days treasury bills, renewed by the central bank on Monday has reached near 10 percent. The discount rate that remained at 9.68 percent on Monday illustrates the liquidity crunch of the market.
According to the central bank, there were few takers for the 182 days treasury bills. It received the application of only Rs. 430 million for it. As per the monetary policy for the current fiscal year, the banks are required to deposit certain percent of their total deposits in central bank through Statutory Liquidity Facility, according to which, commercial banks, development banks and finance companies have to deposit 4 percent, 2 percent and 1 percent of their deposits respectively.
The banking system is facing liquidity crunch for the last three months. According to the central bank, the market saw liquidity shortage of Rs. 3.75 billion this week. And, inter-bank lending rate has remained at 13 percent over the last one month. This scenario indicates that the liquidity crunch in the economy will remain longer. In the mean time, the central bank is also evaluating the liquidity situation of around one dozen commercial banks.
Source:eKantipur
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The central bank has taken the decision to purchase treasury bills of the banks to inject the additional liquidity in the market."We've decided to purchase treasury bills through outright purchase," said Lila Prasad Sitaula, Executive Director of NRB. "Additional Rs 5 billion will be injected in the market with NRB purchasing treasury bills," said Sitaula. In addition, the central bank is also planning to pump Rs. 3 billion some time later through repo.
NRB has already poured around Rs. 10 billion in the market through repo. The discount rate of the 91 days treasury bills, renewed by the central bank on Monday has reached near 10 percent. The discount rate that remained at 9.68 percent on Monday illustrates the liquidity crunch of the market.
According to the central bank, there were few takers for the 182 days treasury bills. It received the application of only Rs. 430 million for it. As per the monetary policy for the current fiscal year, the banks are required to deposit certain percent of their total deposits in central bank through Statutory Liquidity Facility, according to which, commercial banks, development banks and finance companies have to deposit 4 percent, 2 percent and 1 percent of their deposits respectively.
The banking system is facing liquidity crunch for the last three months. According to the central bank, the market saw liquidity shortage of Rs. 3.75 billion this week. And, inter-bank lending rate has remained at 13 percent over the last one month. This scenario indicates that the liquidity crunch in the economy will remain longer. In the mean time, the central bank is also evaluating the liquidity situation of around one dozen commercial banks.
Source:eKantipur
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Panel to recommend new governor
Ministry of Finance (MOF) has initiated the process of appointing a new governor and forwarded names of experts to be included in the governor recommendation committee for cabinet approval.
A cabinet source informed myrepublica.com that the MOF on Tuesday proposed former NRB governor Ganesh Bahadur Thapa and Professor Rudra Prasad Upadhyaya as two members of the committee. As per the Section 15 of Nepal Rastra Bank Act 2002, finance minister will be the chairperson of the committee.
As per the Act, the three-member committee will recommend names of three persons renowned in the field of economic, monetary, banking, finance, commerce, management, commercial law and from among the deputy governors -- to the cabinet.
The cabinet meeting that is scheduled for Wednesday will appoint one person from among the three recommendations to the post of governor of the NRB for five years. The tenure of present governor Bijaya Nath Bhattarai, who was appointed to the post of governor on 31 January 2005, is ending at the end of this month.
Source:Republica
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A cabinet source informed myrepublica.com that the MOF on Tuesday proposed former NRB governor Ganesh Bahadur Thapa and Professor Rudra Prasad Upadhyaya as two members of the committee. As per the Section 15 of Nepal Rastra Bank Act 2002, finance minister will be the chairperson of the committee.
As per the Act, the three-member committee will recommend names of three persons renowned in the field of economic, monetary, banking, finance, commerce, management, commercial law and from among the deputy governors -- to the cabinet.
The cabinet meeting that is scheduled for Wednesday will appoint one person from among the three recommendations to the post of governor of the NRB for five years. The tenure of present governor Bijaya Nath Bhattarai, who was appointed to the post of governor on 31 January 2005, is ending at the end of this month.
Source:Republica
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High inflation, BOP deficit major challenges: Governor
Nepal Rastra Bank (NRB) Governor Dr Bijay Nath Bhattarai has termed sustained double-digit inflation and lately emerged alarming deficit in the Balance of Payment (BOP) as the two major contemporary challenges that the economy is confronting.
Answering queries raised at the meeting of parliamentary Finance and Labor Committee held on Monday, the chief of Nepal´s monetary authority said it is worrisome that the inflation has again scaled up to cross double-digit. "In the past few months, we were able to limit inflation to a single-digit. But it is again rising back to double-digit," Bhattarai said.
He voiced concern over the huge deficit in BOP -- amounting over Rs 19 billion in the first quarter -- and added that it had hinted that difficult days are ahead if serious attention is not paid immediately. Boosting export and curtailing imports to lower widening trade deficit is the most appropriate tactics to deal with the problem, since raising remittance -- that has witnessed a sharp decline in its growth lately -- is something that government can do little to correct, he said. "The central bank is seriously thinking over a number of measures to boost exports and we expect the government to take non-monetary steps immediately," he said. However, he was quick to stress on the need to improve business doing environment, including addressing power crisis.
Governor Bhattarai also supported the idea of curbing consumption on certain goods like vehicles that can help ease down imports and expressed the hope that recent rise in lending rates will also address the issue to some extent. He also disclosed that the Indian central bank has recently communicated with the NRB to deal with the rising demand of Indian currency in Nepal and added that he was hopeful of finding a solution that will address Nepal´s need of Indian currency.
Earlier participating in the discussion, former finance minister and lawmaker Dr Ram Sharan Mahat said the BOP deficit figure is alarming and added that the figure would be much higher if under-invoicing and illegal imports are also properly calculated. Dr Mahat also said that even the devaluation of domestic currency will not help correct the deficit since Nepal´s demand elasticity on exports is very weak and said curbing non-essential imports like vehicles can be an option to lower the trade deficit.
Another lawmaker Dr Hari Roka expressed concern over the rising circulation of Indian currency in Nepal and suggested that encouraging Nepali banks to open branches in major Indian cities can help control flow of Indian currency into Nepal.
Source:Republica
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Answering queries raised at the meeting of parliamentary Finance and Labor Committee held on Monday, the chief of Nepal´s monetary authority said it is worrisome that the inflation has again scaled up to cross double-digit. "In the past few months, we were able to limit inflation to a single-digit. But it is again rising back to double-digit," Bhattarai said.
He voiced concern over the huge deficit in BOP -- amounting over Rs 19 billion in the first quarter -- and added that it had hinted that difficult days are ahead if serious attention is not paid immediately. Boosting export and curtailing imports to lower widening trade deficit is the most appropriate tactics to deal with the problem, since raising remittance -- that has witnessed a sharp decline in its growth lately -- is something that government can do little to correct, he said. "The central bank is seriously thinking over a number of measures to boost exports and we expect the government to take non-monetary steps immediately," he said. However, he was quick to stress on the need to improve business doing environment, including addressing power crisis.
Governor Bhattarai also supported the idea of curbing consumption on certain goods like vehicles that can help ease down imports and expressed the hope that recent rise in lending rates will also address the issue to some extent. He also disclosed that the Indian central bank has recently communicated with the NRB to deal with the rising demand of Indian currency in Nepal and added that he was hopeful of finding a solution that will address Nepal´s need of Indian currency.
Earlier participating in the discussion, former finance minister and lawmaker Dr Ram Sharan Mahat said the BOP deficit figure is alarming and added that the figure would be much higher if under-invoicing and illegal imports are also properly calculated. Dr Mahat also said that even the devaluation of domestic currency will not help correct the deficit since Nepal´s demand elasticity on exports is very weak and said curbing non-essential imports like vehicles can be an option to lower the trade deficit.
Another lawmaker Dr Hari Roka expressed concern over the rising circulation of Indian currency in Nepal and suggested that encouraging Nepali banks to open branches in major Indian cities can help control flow of Indian currency into Nepal.
Source:Republica
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Sunday, January 3, 2010
NRB for special act on deposit insurance
Following the government's policy announcement of introducing deposit insurance from this year, Nepal Rastra Bank (NRB) has suggested that the institution that insures the deposits be formed under a special act. NRB has also submitted its concept paper to the Finance Ministry. While the government is yet to decide whether to treat this scheme as insurance or a financial scheme, the central bank has said that it should come under the deposit guarantee scheme and not insurance.
It has given two options regarding the institution dealing with deposit insurance --either upgrade the existing Deposit Insurance and Credit Guarantee Corporation (DICGC) or form another institution. Given the huge transactions associated with this scheme, the DICGC is in no position to guarantee deposits with its present financial strength. Its paid-up capital is just Rs. 70 million.
NRB has proposed that the company that runs the deposit insurance scheme have a paid-up capital of at least Rs. 1 billion. For this, all the stakeholders including the government, NRB and other financial institutions should be asked to buy shares in the institution that provides deposit insurance. A senior NRB official said that bankers were also agreeable to injecting money into the institution that insures deposits.
Sashin Joshi, president of the Nepal Bankers Association, said that they were at the final phase of preparing their own report and would be submitting it to NRB within a few days. A DICGC official said that the DICGC could generate capital of Rs. 310 million from the existing shareholders including the government, NRB and a few other banks. "Other stakeholders including banks and financial institutions could inject money to raise its paid-up capital to Rs. 1 billion."
The DICGC source said that it was ready to shoulder the responsibility if it was upgraded. The DICGC has not been getting enough business after NRB phased out priority sector lending from the banks. The government announced through the budget for the current fiscal year that it would ensure the compulsory insurance coverage for individual deposits up to Rs. 200,000 in both fixed and savings accounts this year.
Joint secretary at the Finance Ministry Bimal Wagle said that the ministry was initiating the discussion process on deposit insurance and the ministry had sent a proposal regarding the issue to the NBA. When NRB views that deposit insurance is not an insurance policy, the Insurance Board (IB) is of the view that it should be considered as an insurance scheme. IB chairman Phatta Bahadur K.C. said that it should be operated as per the principles of insurance. "There should be a re-insurance back-up for this scheme," said K.C.
President of the Develop-ment Banks Association Jhapat Bohora said that the responsibility of insuring deposits could be given to insurance companies as they get reinsured. "It is better to give the responsibility of regulating the company that insures deposits to the IB," he said.
Source:eKantipur
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It has given two options regarding the institution dealing with deposit insurance --either upgrade the existing Deposit Insurance and Credit Guarantee Corporation (DICGC) or form another institution. Given the huge transactions associated with this scheme, the DICGC is in no position to guarantee deposits with its present financial strength. Its paid-up capital is just Rs. 70 million.
NRB has proposed that the company that runs the deposit insurance scheme have a paid-up capital of at least Rs. 1 billion. For this, all the stakeholders including the government, NRB and other financial institutions should be asked to buy shares in the institution that provides deposit insurance. A senior NRB official said that bankers were also agreeable to injecting money into the institution that insures deposits.
Sashin Joshi, president of the Nepal Bankers Association, said that they were at the final phase of preparing their own report and would be submitting it to NRB within a few days. A DICGC official said that the DICGC could generate capital of Rs. 310 million from the existing shareholders including the government, NRB and a few other banks. "Other stakeholders including banks and financial institutions could inject money to raise its paid-up capital to Rs. 1 billion."
The DICGC source said that it was ready to shoulder the responsibility if it was upgraded. The DICGC has not been getting enough business after NRB phased out priority sector lending from the banks. The government announced through the budget for the current fiscal year that it would ensure the compulsory insurance coverage for individual deposits up to Rs. 200,000 in both fixed and savings accounts this year.
Joint secretary at the Finance Ministry Bimal Wagle said that the ministry was initiating the discussion process on deposit insurance and the ministry had sent a proposal regarding the issue to the NBA. When NRB views that deposit insurance is not an insurance policy, the Insurance Board (IB) is of the view that it should be considered as an insurance scheme. IB chairman Phatta Bahadur K.C. said that it should be operated as per the principles of insurance. "There should be a re-insurance back-up for this scheme," said K.C.
President of the Develop-ment Banks Association Jhapat Bohora said that the responsibility of insuring deposits could be given to insurance companies as they get reinsured. "It is better to give the responsibility of regulating the company that insures deposits to the IB," he said.
Source:eKantipur
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Saturday, December 26, 2009
MoF, NRB team up to strengthen DoC
Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) have teamed up to strengthen inspection and supervision capacity of Department of Cooperatives (DoC), which is scheduled to start scrutinizing financial accounts of the cooperatives.
As per the recent tripartite understanding reached among MoF, NRB and DoC, the central bank has agreed to extend technical support to enhance the inspection and supervision capacity of DoC to look into the accounts of cooperatives, which have largely been unregulated by professional agency so far, an official of MOF informed myrepublica.com. "The NRB officials will help the DoC officials to formulate the inspection regulations as well as setting standard of accounts that the cooperatives are required to maintain," said the official.
Formulation of inspection regulations, and compilation of vital statistics related to financial activities and putting them in a standard format is one of the first tasks that the DoC has to do to kick start inspection and supervision activities, the official added. Both site and off-site inspection of selected cooperatives based on major cities will be initiated only after the issuance of inspection regulation, the official informed. "To start with, the government is planning to select some 20 cooperatives based on their activities and size of deposit mobilization and bring them into direct supervision of DoC," said the official.
Similarly, MoF has also agreed to provide additional budget that the DoC may require to implement the agreed activities. "We have assured DoC officials that there will be no short of resources for the proposed activities and asked the DoC to forward estimated budget for the purpose," said the official.
DoC, last week, issued a notice to all cooperatives, imposing first-ever cap on land and housing loans that they have been extending. As per the notice, cooperatives are required to limit their real estate loan exposures to 15 percent of their total loans portfolio by mid-July 2012 and further 10 percent within the next fiscal year. Similarly, the ratio of total loan exposure to real estate and housing will have to be brought to less than 35 percent within the next two years and further to 25 percent by mid-July 2013.
DoC has also asked the cooperatives to maintain 10 percent liquidity of the total deposits and set single borrower limit at 10 percent of the total capital fund. According to an estimate, saving and credit cooperatives operating in urban areas hold as much as Rs 50 billion as deposits of their members and two-thirds of the money have been invested in the housing and real estate business.
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As per the recent tripartite understanding reached among MoF, NRB and DoC, the central bank has agreed to extend technical support to enhance the inspection and supervision capacity of DoC to look into the accounts of cooperatives, which have largely been unregulated by professional agency so far, an official of MOF informed myrepublica.com. "The NRB officials will help the DoC officials to formulate the inspection regulations as well as setting standard of accounts that the cooperatives are required to maintain," said the official.
Formulation of inspection regulations, and compilation of vital statistics related to financial activities and putting them in a standard format is one of the first tasks that the DoC has to do to kick start inspection and supervision activities, the official added. Both site and off-site inspection of selected cooperatives based on major cities will be initiated only after the issuance of inspection regulation, the official informed. "To start with, the government is planning to select some 20 cooperatives based on their activities and size of deposit mobilization and bring them into direct supervision of DoC," said the official.
Similarly, MoF has also agreed to provide additional budget that the DoC may require to implement the agreed activities. "We have assured DoC officials that there will be no short of resources for the proposed activities and asked the DoC to forward estimated budget for the purpose," said the official.
DoC, last week, issued a notice to all cooperatives, imposing first-ever cap on land and housing loans that they have been extending. As per the notice, cooperatives are required to limit their real estate loan exposures to 15 percent of their total loans portfolio by mid-July 2012 and further 10 percent within the next fiscal year. Similarly, the ratio of total loan exposure to real estate and housing will have to be brought to less than 35 percent within the next two years and further to 25 percent by mid-July 2013.
DoC has also asked the cooperatives to maintain 10 percent liquidity of the total deposits and set single borrower limit at 10 percent of the total capital fund. According to an estimate, saving and credit cooperatives operating in urban areas hold as much as Rs 50 billion as deposits of their members and two-thirds of the money have been invested in the housing and real estate business.
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Wednesday, December 23, 2009
Wanted: NRB, NBL top executives
The Nepal Rastra Bank (NRB) has initiated process for appointing new chief executive officers for both the Nepal Bank Limited (NBL) and Rastriya Bajinya Bank (RBB). "We will place advertisements in a day or two," said a source at the NRB. The two banks with majority shares of the government are currently under the Financial Sector Reform Project.
NRB staffs have been handling the management of NBL for the last two years while the term of the current management of the RBB is expiring in mid-January. The management of the two banks was at the hands of a foreign company for five years before it was handed over to Nepali management two years ago.
At present, a team led by Janardan Acharya is handling RBB management and NRB director Binod Atreya is the chief executive of NBL. About a year ago, NRB had sought proposals from the bankers for the top post of the NBL, however it failed to find one.
Although Anil Shah, outgoing CEO of Nabil Bank and Janak Shah, former CEO of Agriculture Development Bank Limited had sent their proposals to the NRB expressing readiness to handle the country's oldest bank, the central bank board recently disapproved them.
NRB is preparing to appoint CEOs for NBL and RBB on the basis of resume without seeking any initial proposal and the World Bank, which has been supporting the financial reform project, also has given a nod. The bankers selected on the basis of their resume then will be asked to produce a financial proposal. "If the cost is higher than what the central bank has fixed for the person selected as first choice, the CEO will be appointed from among those who are in the second or third place in the ranking," said the source.
The financial reform project was initiated seven years ago with a loan support of Rs. 7 billion from the World Bank and United Kingdom's Department for International Development (DfID). NBL has failed to get an independent CEO. However, its bad debt significantly decreased to 5.65 percent from above 50 percent. Likewise, Non-performing loan (NPL) of RBB has also decreased to 15.42 percent from above 50 percent. The capital fund of both banks is negative by 36 percent in case of RBB and 22.83 percent in case of NBL, though they have succeeded in reducing NPL.
Source:eKantipur
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NRB staffs have been handling the management of NBL for the last two years while the term of the current management of the RBB is expiring in mid-January. The management of the two banks was at the hands of a foreign company for five years before it was handed over to Nepali management two years ago.
At present, a team led by Janardan Acharya is handling RBB management and NRB director Binod Atreya is the chief executive of NBL. About a year ago, NRB had sought proposals from the bankers for the top post of the NBL, however it failed to find one.
Although Anil Shah, outgoing CEO of Nabil Bank and Janak Shah, former CEO of Agriculture Development Bank Limited had sent their proposals to the NRB expressing readiness to handle the country's oldest bank, the central bank board recently disapproved them.
NRB is preparing to appoint CEOs for NBL and RBB on the basis of resume without seeking any initial proposal and the World Bank, which has been supporting the financial reform project, also has given a nod. The bankers selected on the basis of their resume then will be asked to produce a financial proposal. "If the cost is higher than what the central bank has fixed for the person selected as first choice, the CEO will be appointed from among those who are in the second or third place in the ranking," said the source.
The financial reform project was initiated seven years ago with a loan support of Rs. 7 billion from the World Bank and United Kingdom's Department for International Development (DfID). NBL has failed to get an independent CEO. However, its bad debt significantly decreased to 5.65 percent from above 50 percent. Likewise, Non-performing loan (NPL) of RBB has also decreased to 15.42 percent from above 50 percent. The capital fund of both banks is negative by 36 percent in case of RBB and 22.83 percent in case of NBL, though they have succeeded in reducing NPL.
Source:eKantipur
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NRB tightens lending exposure
In a bid to put a check on financial institutions' over exposure on real estate and housing loan, Nepal Rastra Bank (NRB) on Thursday issued new directives, putting ceiling on lending. As per the new directives, financial institutions now can't lend more than 25 percent on real estate sector. And their exposure to real estate and housing loan shouldn't cross over 40 percent.
The central bank's move comes amid growing concern over the loan exposure of financial institutions on real estate sector. The NRB also instructed the financial institutions to lend money for housing and real estate not exceeding 60 percent of the fair market value of the property. It has also set timelines for the financial institutions to reduce their exposure on real estate and housing loan. As per the NRB directives, financial institutions have to reduce real estate loan to 15 percent by mid-July 2011 and to 10 percent by mid-July 2012. Similarly financial institutions have to downsize both real estate and housing loan to 30 percent by mid-July 2011 and to 25 percent by mid-July 2012.
Bankers have termed the directives as practical solution. According to Sashin Joshi, President of Nepal Bankers' Association, the NRB directives have given a clear message to the financial institutions not to overexpose to the real estate. "It was necessary to avoid systemic risk due to over concentration of lending in one sector," said Joshi. The timeline set by the directives to reduce the loan exposure will help avoid panic in the banking sector.
Bankers said the NRB move will also help correct the escalating real estate price. "It would also discourage financial institutions from additional lending to the real estate," said Joshi. On Wednesday, the government had said that one of the reasons of liquidity crunch was commercial banks' ever-increasing lending in unproductive sectors. The ministry had said that capital deposit ratio (CD Ratio) of six banks to have been more than 100 percent.
The central bank has been asking the commercial banks to be stringent in providing real estate loans. As per NRB estimates, the commercial banks have invested 20 percent on average in the real estate sector. "Some of the banks have even higher percentage of exposure in the real estate," said the official. According to NRB, out of 26 commercial banks, seven have invested more than 25 percent of the total loan in real estate sector.
Source:eKantipur
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The central bank's move comes amid growing concern over the loan exposure of financial institutions on real estate sector. The NRB also instructed the financial institutions to lend money for housing and real estate not exceeding 60 percent of the fair market value of the property. It has also set timelines for the financial institutions to reduce their exposure on real estate and housing loan. As per the NRB directives, financial institutions have to reduce real estate loan to 15 percent by mid-July 2011 and to 10 percent by mid-July 2012. Similarly financial institutions have to downsize both real estate and housing loan to 30 percent by mid-July 2011 and to 25 percent by mid-July 2012.
Bankers have termed the directives as practical solution. According to Sashin Joshi, President of Nepal Bankers' Association, the NRB directives have given a clear message to the financial institutions not to overexpose to the real estate. "It was necessary to avoid systemic risk due to over concentration of lending in one sector," said Joshi. The timeline set by the directives to reduce the loan exposure will help avoid panic in the banking sector.
Bankers said the NRB move will also help correct the escalating real estate price. "It would also discourage financial institutions from additional lending to the real estate," said Joshi. On Wednesday, the government had said that one of the reasons of liquidity crunch was commercial banks' ever-increasing lending in unproductive sectors. The ministry had said that capital deposit ratio (CD Ratio) of six banks to have been more than 100 percent.
The central bank has been asking the commercial banks to be stringent in providing real estate loans. As per NRB estimates, the commercial banks have invested 20 percent on average in the real estate sector. "Some of the banks have even higher percentage of exposure in the real estate," said the official. According to NRB, out of 26 commercial banks, seven have invested more than 25 percent of the total loan in real estate sector.
Source:eKantipur
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NRB changes credit policy
In a crucial decision to check rapid expansion of credit flow, the board meeting of Nepal Rastra Bank (NRB) Tuesday changed the long-running credit policy that will increase borrowing rates. A high-ranking NRB official also vowed to take further steps if current credit bubble doesn´t cool down even after the adoption of news measures. As per the decision, the central bank will now follow a new methodology to calculate Standby Credit Facility (SLF) -- a loan extended to financial institutions by the central bank against the government bills owned by them. "The NRB is convinced that there exists a credit bubble in the economy and the main purpose of the new policy change is to contain rapid credit expansion which has fueled imports thereby widening trade deficit to an alarming level," said the official.
The imports increased by 30 percent against the decline of 16.8 percent in exports during the first quarter of the current fiscal year, resulting to increase in trade deficit by 48.6 percent. Earlier, the SLF rate used to be calculated by adding 3 percent panel rate either on latest average Treasury Bills (TBs) discount rate or repo rate -- the rate fixed at NRB called bidding for loans from central bank against collateral of government bills, whichever is high. However, as per the new methodology, the central bank will add 3 percent panel rate either on latest average treasury discount rate or repo or bank rate interest fixed by central bank for loans it extends to financial institutions, whichever is high.
Recent studies have showed that the huge amount of loans that banks took under the SLF facility was the main factor responsible for the unnatural rise in consumption expenditure that resulted in the shocking rise of imports, said the official. "When the average rate of the TBs and repo rate were around 4 percent, financial institutions took heavy loans from the central bank at the rate of 7 percent and extended the loans to borrowers at over 12 percent," the official said, adding that banks were found attracted towards such transactions as they used to produce handsome and easy profits.
But, as per the new policy, the SLF rate will be 9.5 percent at minimum, given the fact that the central bank has maintained bank rate at 6.5 percent for the current fiscal year. "The central bank will see whether the new policy will be able to curb the current credit rate growth and if it doesn´t, the NRB will take further steps that might even include increasing the bank rate itself," the official said.
The SLF amount during the first three months of the current fiscal year has squeezed to just Rs 4.5 billion as the repo rate has gone up to over 9 percent due to ´short-term´ crunch of liquidity. The SLF loan extension to financial institutions went up to Rs 107.82 billion by the end of last fiscal year and the amount was 130 percent higher than the figure recorded in fiscal year 2006/07.
Source:Republica
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The imports increased by 30 percent against the decline of 16.8 percent in exports during the first quarter of the current fiscal year, resulting to increase in trade deficit by 48.6 percent. Earlier, the SLF rate used to be calculated by adding 3 percent panel rate either on latest average Treasury Bills (TBs) discount rate or repo rate -- the rate fixed at NRB called bidding for loans from central bank against collateral of government bills, whichever is high. However, as per the new methodology, the central bank will add 3 percent panel rate either on latest average treasury discount rate or repo or bank rate interest fixed by central bank for loans it extends to financial institutions, whichever is high.
Recent studies have showed that the huge amount of loans that banks took under the SLF facility was the main factor responsible for the unnatural rise in consumption expenditure that resulted in the shocking rise of imports, said the official. "When the average rate of the TBs and repo rate were around 4 percent, financial institutions took heavy loans from the central bank at the rate of 7 percent and extended the loans to borrowers at over 12 percent," the official said, adding that banks were found attracted towards such transactions as they used to produce handsome and easy profits.
But, as per the new policy, the SLF rate will be 9.5 percent at minimum, given the fact that the central bank has maintained bank rate at 6.5 percent for the current fiscal year. "The central bank will see whether the new policy will be able to curb the current credit rate growth and if it doesn´t, the NRB will take further steps that might even include increasing the bank rate itself," the official said.
The SLF amount during the first three months of the current fiscal year has squeezed to just Rs 4.5 billion as the repo rate has gone up to over 9 percent due to ´short-term´ crunch of liquidity. The SLF loan extension to financial institutions went up to Rs 107.82 billion by the end of last fiscal year and the amount was 130 percent higher than the figure recorded in fiscal year 2006/07.
Source:Republica
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Tuesday, December 15, 2009
Deck clear for intl banks to open Nepal branch
Nepal Rastra Bank, the central bank, has introduced a policy to allow foreign bank and financial institutions to open their branches in Nepal. The NRB came up with the policy in line with the commitment made by Nepal while signing General Agreement on Trade in Services as the 147th member country of the World Trade Organization (WTO) on April 23, 2004.
Under the policy, the NRB has specified different provisions to facilitate foreign banks and financial institutions to open their branches here. The international banks must produce no objection letter issued by central bank of their home country and produce credit rating certified by international standard Credit Rating Agency while applying to NRB to open their branch office here.
Only the banks receiving at least BBB/Baa rating for the last three years will be allowed to open their branch, as per the policy. The international banks should show a minimum assigned capital of US$30 million to open a branch plus $5 million for each additional branch.
The branch of international banks can mobilize deposits, invest on loans and other services and provide wholesale banking services. But each deposit should not be lower than Rs 100 million and loans on investment should not exceed Rs 300 million.
As per the policy, NRB and the central bank of the home country holds the authority to regulate branches of international banks. The branches of international banks have to abide by all policies, rules and regulations followed by local banks unless otherwise stated. The branches can take back the earning after paying existing taxes subject to NRB´s approval. NRB can annul the permission to operate branch in Nepal, if the central office of the bank faces liquidation.
Source: Republica
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Under the policy, the NRB has specified different provisions to facilitate foreign banks and financial institutions to open their branches here. The international banks must produce no objection letter issued by central bank of their home country and produce credit rating certified by international standard Credit Rating Agency while applying to NRB to open their branch office here.
Only the banks receiving at least BBB/Baa rating for the last three years will be allowed to open their branch, as per the policy. The international banks should show a minimum assigned capital of US$30 million to open a branch plus $5 million for each additional branch.
The branch of international banks can mobilize deposits, invest on loans and other services and provide wholesale banking services. But each deposit should not be lower than Rs 100 million and loans on investment should not exceed Rs 300 million.
As per the policy, NRB and the central bank of the home country holds the authority to regulate branches of international banks. The branches of international banks have to abide by all policies, rules and regulations followed by local banks unless otherwise stated. The branches can take back the earning after paying existing taxes subject to NRB´s approval. NRB can annul the permission to operate branch in Nepal, if the central office of the bank faces liquidation.
Source: Republica
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Monday, December 14, 2009
NRB ready to regulate EPF, CIT
Nepal Rastra Bank (NRB) on Wednesday communicated to the Finance Ministry that it could regulate the Employees Provident Fund (EPF) and the Citizens Investment Trust (CIT) in response to the ministry's request for its opinion. An NRB source said that the Finance Ministry had asked it about three months ago to regulate the two institutions which have remained unregulated despite huge resource mobilization.
According to Ramesh Bhattarai, administrator of EPF, it has mobilized about Rs. 80 billion. Similarly, the CIT has mobilized Rs. 16 billion. Both have remained self-regulated so far. According to the EPF, about 50 percent of its money has gone to contributors, 35 percent is in fixed deposits, 8 percent in government bonds and 5 percent in project loans. The CIT holds deposits of the general public and government employees. It provides certain benefits to the public by investing the money in corporate shares, debentures and government securities. An official at the ministry however said that there had been informal talks about regulating these institutions by the NRB.
The NRB official said that regulating the two institutions was simple given their simple form of transactions. "We can regulate them with separate directives, and we should not invest much effort for regulating them," he said. He, however, added that that the government should make the EPF and CIT boards decide to be regulated by the central bank to avoid any legal complications in the future. However, the EPF is not happy about having NRB as regulator. Bhattarai said that NRB was not the appropriate institution to regulate a social security institution like the EPF as the nature of financial institutions and EPF was completely different.
"Financial institutions invest for a short period, but we invest in long-term projects," he said. "NRB has prevented cross-holding for financial institutions, and preventing us from cross-holding may be problematic for us." He, however, added that the EPF would welcome the formation of a separate body to regulate the social security institution while admitting that they needed prudent regulation despite being self-regulated well.
He also said that without a change in the NRB Act or EPF Act, the central bank could not regulate the EPF as both acts lack a provision regarding the central bank's regulating them. "The EPF's board decision is not sufficient for NRB to regulate us," he added. However, CIT manager Sushil Aryal was supportive of the idea of the central bank regulating the CIT, but NRB should give different treatment to financial institutions and the CIT as their nature of work differed. Although the Citizen Investment Trust Act 1990 has provisioned that the CIT would have to comply NRB directions, there are no detailed provisions regarding how NRB should regulate it. The government had made a provision in the budget two years ago about letting the central bank regulate these two institutions, but it did not materialize. The ministry official said that the proposal went to the cabinet where it was cancelled.
Source:eKantipur
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According to Ramesh Bhattarai, administrator of EPF, it has mobilized about Rs. 80 billion. Similarly, the CIT has mobilized Rs. 16 billion. Both have remained self-regulated so far. According to the EPF, about 50 percent of its money has gone to contributors, 35 percent is in fixed deposits, 8 percent in government bonds and 5 percent in project loans. The CIT holds deposits of the general public and government employees. It provides certain benefits to the public by investing the money in corporate shares, debentures and government securities. An official at the ministry however said that there had been informal talks about regulating these institutions by the NRB.
The NRB official said that regulating the two institutions was simple given their simple form of transactions. "We can regulate them with separate directives, and we should not invest much effort for regulating them," he said. He, however, added that that the government should make the EPF and CIT boards decide to be regulated by the central bank to avoid any legal complications in the future. However, the EPF is not happy about having NRB as regulator. Bhattarai said that NRB was not the appropriate institution to regulate a social security institution like the EPF as the nature of financial institutions and EPF was completely different.
"Financial institutions invest for a short period, but we invest in long-term projects," he said. "NRB has prevented cross-holding for financial institutions, and preventing us from cross-holding may be problematic for us." He, however, added that the EPF would welcome the formation of a separate body to regulate the social security institution while admitting that they needed prudent regulation despite being self-regulated well.
He also said that without a change in the NRB Act or EPF Act, the central bank could not regulate the EPF as both acts lack a provision regarding the central bank's regulating them. "The EPF's board decision is not sufficient for NRB to regulate us," he added. However, CIT manager Sushil Aryal was supportive of the idea of the central bank regulating the CIT, but NRB should give different treatment to financial institutions and the CIT as their nature of work differed. Although the Citizen Investment Trust Act 1990 has provisioned that the CIT would have to comply NRB directions, there are no detailed provisions regarding how NRB should regulate it. The government had made a provision in the budget two years ago about letting the central bank regulate these two institutions, but it did not materialize. The ministry official said that the proposal went to the cabinet where it was cancelled.
Source:eKantipur
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Tuesday, November 3, 2009
NRB cracks the whip on margin lending
Nepal Rastra Bank (NRB) has directed banks and financial institutions to reduce the limit of renewal of margin lending -- lending against collateral of shares -- by 50 per cent.NRB has taken the move to control margin lending in response to reducing share prices. According to NRB directives, banks and financial institutions can renew loan of those borrowers who have repaid 50 per cent loan.
They should have paid total interest of their loan, said NRB. This directive will further affect the Nepali capital market. Nepal Stock Exchange (Nepse) is in a bearish trend since September. Furthermore, NRB has fixed limits for investment in shares and debentures for class `B' and `C' banks and financial institutions. Class `B' companies can invest 20 per cent of paid up capital per company whereas the limit is 10 per cent for class `C' companies.
Meanwhile, NRB has prohibited financial institutions' boards of directors from using the official letterpads of the institutions. Chairpersons and directors cannot use official letterpads for correspondence, NRB said. It has also prohibited non-executive chairpersons from working as chief executive officers.
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NRB urged to probe treasury position
Finance Ministry has expressed dissatisfaction over huge variation seen in the important statistics related to treasury position of the country and has urged the central bank to look into the matter.
A press release issued by Ministry of Finance on Sunday stated that the overall treasury position of the country was in surplus of Rs 3.25 billion in a weekly statement issued by the central bank at the end of last fiscal year.
As a result of surplus treasury position, the government mobilized Rs 6.60 billion less internal loans than planned for last year. However, all of sudden, the central bank, in its third amendment of the treasury position issued on September 20 this year, stated that the overall treasury position was in deficit by Rs 7.99 billion. Though there used to be minor adjustments in the past, the variation of such an extent is worrisome, stated the release.
Source:Republica
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A press release issued by Ministry of Finance on Sunday stated that the overall treasury position of the country was in surplus of Rs 3.25 billion in a weekly statement issued by the central bank at the end of last fiscal year.
As a result of surplus treasury position, the government mobilized Rs 6.60 billion less internal loans than planned for last year. However, all of sudden, the central bank, in its third amendment of the treasury position issued on September 20 this year, stated that the overall treasury position was in deficit by Rs 7.99 billion. Though there used to be minor adjustments in the past, the variation of such an extent is worrisome, stated the release.
Source:Republica
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Friday, October 9, 2009
RBB like to get huge capital injection from govt
Rastriya Banijya Bank (RBB), the largest bank of the country in terms of deposits and coverage, has floated a plan to make its net-worth positive and lower Non-Performing Assets (NPA) to less than 5 percent within the next two years. According to the plan forwarded to the central bank for final approval, the RBB has set a target to recover around 50 percent of the outstanding Rs 4.82 billion, which was categorized as bad loan, within the next two years. "If the plan of recapitalizing and recovering the bad loans gets implemented, RBB will emerge as the strongest bank in the country," said Janardan Acharya, the chief executive officer of the bank.The NPA ratio of the second oldest bank in the country with largest branch network came down to 15.68 percent by the end of last fiscal year ending mid July from 21.63 percent a year earlier. The total value of negative net-worth of the bank currently stands at Rs 14.66 billion. Along with extra efforts made on recovery of bad loans, the bank has no NPA on the loans that were extended after the management of the bank was handed over to private management, he said. Acharya also informed myrepublica.com that the government is seriously looking into all options to make the net-worth of the RBB, which at the moment is negative by over 14 billion, positive. "Issuing special bond and divesting 15 percent share of Nepal Investment Bank that the RBB holds are two major options that are on the table to raise the capital base of the bank," said Acharya.
According to concerned government official, a recent meeting of High Level Committee on Financial Sector Reform, chaired by the Finance Minister Surendra Pandey, agreed in principle to issue such bonds and the Nepal Rastra Bank (NRB) has been asked to detail procedures of bond issuance. Though the amount is yet to be decided, the total value of the special bonds is likely be to around Rs 10 billion, said the official. "Along with the special bond, the total negative net-worth of the bank can be made positive if we become successful in divesting 15 percent share of Nepal Investment Bank that is valued at around Rs 4 billion at the current market price," said Acharya. He further said that the bank has a plan to offer 30 percent of its paid-up capital to general public.
The bank that was able to manage a record net profit of Rs 2.04 billion during the last fiscal year is also planning to set up offices in major Indian cities to tap remittance business opportunities. "First we are planning to open an office in Indian capital New Delhi soon and if things go as plan, we will open our offices in Chennai and Mumbai within a year," Acharya elaborated.
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