Nepal asks Bangladesh to let it use Mongla, Chittagong Port

Prime Minister Madhav Kumar Nepal requested Bangladesh Prime Minister Sheikh Hasina to allow Nepal use Mongla and Chittagong Ports during the meeting with Bangladeshi Prime Minister at Bangladesh House in SAARC village, Thimpu.

The Bangladeshi Prime Minister said that she had already talked to Indian Prime Minister Dr Manmohan Singh on the issue during her India visit in January this year. She said that Nepal — with huge potential of producing hydro-power — could benefit from exporting electricity to Bangladesh.

During the meeting,the issue of regional connectivity featured prominently in the discussion. The two prime ministers also discussed various issues of bilateral interests, including expansion of trade and business between the two countries. Bangladeshi Foreign Minister Dr Dipu Moni was also present during the meeting.

Meanwhile, the scheduled meeting of the commerce secretaries of Bangladesh and Nepal in Dhaka next week — to facilitate bilateral trade and establish connectivity between the two countries under a proposed transit deal — is postponed.

The meeting was supposed to focus on further integration in sub-regional perspectives and mutual recognition of each other’s testing and standardisation certificates, according to experts. The commerce secretaries of the two countries are expected to devise a strategy for the implementation of relevant clauses of the joint communiqué, signed by the premiers of India and Bangladesh at New Delhi in January.

A joint communiqué, co-signed by Indian Prime Minister Dr Manmohan Singh and his Bangladeshi counterpart Sheikh Hasina has assured of giving

Nepal and Bhutan access to Mongla and Chittagong ports. The prime ministers — in the joint communiqué — also agreed that Rohanpur-Singabad broad gauge railway link would be available for transit to Nepal.

“The upcoming secretary level meeting between Dhaka and Kathmandu will pave the way for implementation of commitments made by Prime Minister Sheikh Hasina during

her recent visit to New Delhi to boost the sub-regional integration on both trade and connectivity fronts,” the Bangladesh Ministry of Commerce said.

Besides, a Memorandum of Understanding (MoU) between the two countries on mutual recognition of standardisation is likely to be inked at the meeting. The trade talks to be held between the countries will also focus on problems relating to loading and unloading of goods at zero point of the border.

At present, Nepali trucks cannot enter Bangladesh and they need to load/unload at zero point of the border. Most of the traded goods of Nepal

are carried via Banglabandha land port.

Similarly, due to absence of such agreement, Nepali trucks cannot reach the warehouses of the land port and they need to wait on no man’s land for Bangladeshi trucks to come for re-loading, which increases the cost of business.

The volume of bilateral trade between the two countries is very low, less than $60 million a year. Bangladesh exported goods worth $6.70 million to Nepal in 2008-2009, its imports figured $53 million. Major exports from Bangladesh to Nepal include pharmaceuticals, woven garments, plastic goods, furnace oil, zippers, duck down, dry cell battery, ceramic table ware and handicrafts. Pulses, lentils, rice and wheat make up Bangladesh’s import basket from Nepal.

Nepal’s merchandise exports during the first eight months of the current fiscal year declined by eight per cent to Rs 40.41 billion against a growth of 16.2 per cent in the corresponding period of last fiscal year.

On a monthly basis, the merchandise exports, however grew by 8.9 per cent in February-March as against a decline of 0.8 per cent in the corresponding month of the previous year.

Nabil Investment gets approval from Sebon

Securities Board of Nepal (Sebon) permitted Nabil Bank Ltd's subsidiary company Nabil Investment Banking Ltd to work as a merchant banker.

This is the first merchant banker that has been established after the new regulation that has permitted the the financial institutions to establish a separate entity as a merchant banker as subsidiary institutions, said the regulatory authority of the capital market.

Nabil Investment Banking Ltd will work as a market maker and can work as issue and sales manager apart from being a register and underwriter.

At present, there are a total of seventeen merchant bankers listed in Sebon including two commercial banks and three national level development banks.

The listed Merchant bankers

Nepal Finance Ltd

United Finance Ltd

Nepal Share Markets & Finance Ltd

NIDC Capital Markets Ltd

Ace Development Bank Ltd

NMB Bank Ltd

Citizen Investment Trust

Elite Capital Ltd

Nepal Housing & Merchant Finance Ltd

Vibor Bikas Bank Ltd

DCBL Bank Ltd

Nepal Srilanka Merchant Banking & Finance Ltd

Civil Capital Market Ltd

Investment Management Merchant Banker Ltd

Beed Invest Ltd

GROWMORE Merchant Banker Ltd

NABIL Investment Banking Ltd

Kingfisher starts Delhi-Kathmandu flight

Kingfisher Airlines -- India's only Five Star Airline rated by Skytrax -- today announced the launch of daily flights from Kathmandu to New Delhi. The launch of this new route marks the first time that Kingfisher Airlines is commencing operations from Kathmandu.

In addition to this new route, Kingfisher Airlines also launched two other new international routes with the commencement of flights from New Delhi to Dubai and Mumbai to Dubai.

The flights on all these routes are being operated with Kingfisher Airlines' modern fleet of Airbus A320 aircraft. The flights on the Kathmandu - New Delhi route will feature Kingfisher Class, the premium economy service from Kingfisher Airlines.

The award-winning Kingfisher experience includes roomy seats with a wide seat pitch and ample leg room, in-flight entertainment, delectable cuisine, specially trained international cabin crew and a host of on-board comforts.

"I am delighted to announce the launch of Kingfisher Airlines' maiden flight between Kathmandu and New Delhi," said commenting on the launch of these new international routes, Dr Vijay Mallya, chairman and CEO, Kingfisher Airlines Ltd. "Kingfisher Airlines has redefined the whole experience of flying and with the launch of this new service, discerning flyers on this popular route popular will now have the choice of traveling with India's favourite airline."

Kingfisher Airlines has the largest network in India and flies to many cities that are served exclusively by Kingfisher Airlines. Guests flying in from Kathmandu to New Delhi will get easy and convenient connections to Mumbai, Bangalore, Pune, Chennai, Hyderabad and Ahmedabad.

The New Delhi-Kathmandu flight offers excellent connectivity with Ahmedabad, Mumbai, Hyderabad, Bangalore, Kolkata, Chennai, Leh and London amongst other cities. Kingfisher Airlines' guests will now be able to fly in from these cities and easily connect with the New Delhi-Kathmandu flight.

Air India, Jet Airlines, and Jet Lite are already flying on Kathmandu-Delhi-Kathmandu flights. Kingfisher Airlines will be another Indian airlines flying on the route.

At present, there are 42 daily flights from Delhi to Kathmandu while total the number of flights from Mumbai is seven.

Meanwhile, more international airlines are planning to fly to Kathmandu.

Malaysian Airlines has got permission for operation but its schedule has yet to be made public. Similarly, Oman Air has scheduled to fly to Kathmandu from June 17, according to CAAN.

Oman Air has also appointed its General Sales Agents in three of its soon-to-be-launched-destinations -- Kuala Lumpur in Malaysia, Dar Es Salam in Tanzania, and Kathmandu in Nepal. It will be flying to Kathmandu from the June 17. Oman Air has appointed Amravati Travels as its GSA.

Abdulrazaq Alraisi, general manager, Worldwide Sales said that the airlines is very happy with the appointment of these premier and premium organisations as its GSA. The Board and the management of Oman Air are sure that these GSAs will deliver the top-class service to Oman Air and will help in bringing new and more business from these markets. "We are sure that both inbound tourism and outbound tourism between Oman and these countries will prosper greatly," he added.

Third SAFE Conference starts in Port Louis

Nepal has a great potential not only in tourism but also in capital market.

"Though Nepal has less than four per cent growth, it has a huge potential for tourism as it has eight of the ten highest mountains in the world," said Tanka Prasad Paneru, chairman of Nepal Stock Exchange (Nepse) at the third South Asian Federation of Exchanges (SAFE) conference that is being held from April 22 at Maritime Hotel in Balaclava, Mauritius.

"The capital market also has a huge potential, he added.

The event hosted by MCX Stock Exchange (India) and Global Board of Trade (GBOT) Mauritius is being attended by Adnan Afridi, chairman of SAFE and more than 100 prominent experts from the financial markets and from exchanges of the South Asian region. The Mauritian experts and top executives are also taking part in the conference.

The guest of honour for the opening ceremony which was held on Thursday was Madhusudan Ganapathy, high commissioner of India in Mauritius, and chief guest of the evening was Milan Meetarbhan, chief executive officer (CEO) of the Financial Services Commission Mauritius.

Addressing the conference Afridi said that the conference aims at providing a platform for SAFE member exchanges, to enable industry representatives and capital market professionals to come up together to discuss various opportunities and challenges facing the markets.

Joseph Massey, managing director and chief executive officer of MCX Stock Exchange, highlighted on the progress that Indian markets has made.

Similarly, Dorji Phuntsho, chief executive officer at the Royal Securities Exchange in Bhutan, said that Bhutan is still a small economy. "We do not have much to offer," he said adding that it does not have many foreign investors.

The South Asian Capital Market Conferences were conceived a few years ago to promote the spirit of cooperation, enhance interaction and transact the normal business related to SAFE. Over the last few years, participants at SAFE conferences have come from different organisations including regulatory authority, central banks, mutual fund association representatives, brokerage houses and leading investment banks.

A ten member delegation led by Nepse chairman Tanka Prasad Paneru is in Mauritius to participate in a conference. Chairman Paneru also presented a paper on 'Promoting Investment in South Asian Region: Experience of India, Pakistan, Bangladesh, Srilanka, Maldives, Bhutan, Mauritius and Nepal.'

Nepali delegation includes Nepse acting deputy chairman Sambhu Prasad Pant, Civil Capital Ltd's Bhisma Raj Chalise, Narayan Kumar Shrestha and Anil Prasad Pant, Growmore Merchant Banker's Kabindra Dhwoj Joshi, Prudential Finance Ltd's Bijaya Dev Pant, Investment Management Banker Ltd's Mukunda Bahadur Pradhan, Nepal Investment and Securities Trading Pvt Ltd's Umesh Regmi, ABC Securities Pvt Ltd's Nitesh Kumar Agarwal and Primo Securities Pvt Ltd's MD Meghnath Upadhyay.

Commercial banks' profit margin shrinks

The commercial banks have been facing rough weather.

The key indicators -- Profit margin, earning per share (EPS) and Return on Equity (RoE) -- to guage the performance of the listed commercial banks have slowded down.

"With the increasing number, the profit margin of the commercial banks witnesed a slowdown in the last fiscal year," according to a reserch on the sector-wise average by Securities Research Center and Services Pvt Ltd (SRCS).

In the year 2007-08, the average profit margin of the 23 listed commercial banks was 27.09 per cent but in 2007-08, it posted only 27.86 per cent.

"Cut-throat competition among the rising number of commercial banks and lack of market expansion have pulled their profit margin down," said market analyst Rabindra Bhattarai.

Currently there are 27 commercial banks in operation and some four are in pipeline making it hard to increase the profit margin.

The average profit margin was 18.32 per cent in 2004-05 when there were only 17 listed commercial banks.

Similarly, the earning per share (EPS) has also slowed down, as the market is flooded with rights and bonus shares. In 2007-08, an average EPS of the listed 23 commercial banks was Rs 35.36 but it increased to only Rs 36.74 in 2008-09. EPS is generally considered to be the single most important variable in determining a share's price.

One of the most important profitability metrics Return on Equity (RoE) has declined. The average RoE of the listed 23 commercial banks stood at 24.73 per cent in 2008-09 against the 2007-08's average of 25.22 per cent. RoE reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet.

Due to increasing rights and bonus shares Networth Per Share (NWPS) has also slowed down. In the year, 2006-07 an average NWPS -- a measurement of the net worth of the company for each share of stock that has been issued -- of 18 listed commercial banks was Rs 141.56 which went down in the fiscal year 2007-08 to Rs 140.21 as the listed commercial banks increased to 23. In 2008-09, it posted Rs 153.88.

However, the sector can heave a sigh of relief on non-performing assets (NPA), price-earning (P/E) ratio and return on assets (RoA) — the other key indicators. The average NPA was 1.98 per cent in 2008-09 against a year ago's 3.58 per cent. NPA -- an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions relating to asset classification issued by the central bank -- has to go down.

During the fiscal year 2007-08, the overspeculation of the investors in the secondary market have raised the shares of commercial banks' P/E ratio to an average of 65.60 times that came down to an average of 56.28 times in 2008-09.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself.

The average RoA has, however, almost doubled in 2008-09 to 2.21 per cent from 1.76 per cent a year ago. RoA -- an indicator of how profitable a company is relative to its total assets -- gives an idea as to how efficient management is at using its assets to generate earnings.

Government revises revenue target upward

Encouraged by the whopping revenue collection trend, the government has revised its target upwards by Rs 13 billion to Rs 190 billion.

Earlier in the budget for the fiscal year 2009-10, the government had set a revenue target of Rs 176.5 billion for this fiscal year. "However, the revenue growth trend made us revise the target upward by over Rs 13 billion," said revenue secretary Krishnahari Baskota.

By the end of the ninth month (mid-April) this fiscal year, revenue collection surpassed the target by Rs 3.71 billion. "Our target for the ninth month was Rs 122.82 billion," he said, adding that the collection is 28.2 per cent higher than the corresponding period last year. "Last year by the end of ninth month, we had collected Rs 98.67 billion," Baskota said.

The encouraging collection by the end of ninth month is also due to the timing as its the time of paying installment of income tax to the government.

Apart from that, Nepal Telecom paid Rs 3.30 billion cash dividends to the government. The NT has approved 35 per cent cash dividends to its share holders. The cash dividends made government non-tax collection swell to Rs 16 billion, making it the fourth largest contributor to the government coffer.

The largest contributor for the coffer is still the value added tax (VAT) that has contributed Rs 39 billion to the government coffer in the ninth month of the current fiscal year. VAT is followed by the customs that has contributed Rs 25.10 billion and the third largest contributor is the income tax that has contributed Rs 23.25 billion.

By the end of eight month, Falgun (mid-March), the government had collected Rs 105.58 billion. By the end of seventh month of the current fiscal year Magh (mid-February), the collection stood at Rs 94.28 billion, surpassing its own target of Rs 90.41 billion.

Since past few years, the revenue collection has seen an increasing trend.

In the last fiscal year, the government had set a target of Rs 142 billion. However, by the end of the last fiscal year, the government had exceeded the target to collect Rs 145 billion.

The collection trend

First month (Shrawan) -- Rs 11.47 billion

Second month (Bhadra) -- Rs 22.55 billion

Third month (Ashwin) -- Rs 34.32 billion

Fourth month (Kartik) -- Rs 46.67 billion

Fifth month (Mangsir) -- Rs 58.60 billion

Sixth month (Poush) -- Rs 79.68 billion

Seventh month (Magh) -- Rs 94.28 billion

Eighth month (Falgun) -- Rs 105.58 billion

Ninth month (Chaitra) -- Rs 126.53 billion

Urge to provide Tax benefits for Mutual Fund

Stakeholders suggested to provide tax benefits to attract investors to the Mutual Fund that is in the offing.

"Without tax benefits, it would not attract investors," they suggested, recommending some changes like capital structures, clarification in its legality and widening its area of investment in the draft Mutual Fund Regulation during an interaction on Mutual Fund regulation (draft) organised by Securities Board of Nepal (Sebon) here today.

"Their area of investment should be widened," suggested president of Nepal Investors Forum Sunanda Bahadur Shrestha. "They should also be opened for the consortium financing," he said, adding that the concentration of present secondary market on financial institutions could pose a risk.

"The suggestions will be incorporated in the draft," said Securities Board of Nepal (Sebon) chairman Dr Soorbir Poudel.

"There is no doubt that the Mutual Fund will help develop and expand the capital market," he said, adding that the entry of institutional investor in the form of Mutual Fund could give a new lease of life to the present ailing secondary market.

"The Sebon is waiting for the Finance Ministry's final nod to the Mutual Fund Regulation," Poudel added.

Even after more than one-decade-and-a-half years of securities trading in Nepal, the country is yet to bring a regulation to better manage and regulate mutual funds, though there are two -- NCM Mutual Fund and Citizen Inversntment Unit -- are in the market.

"Mutual fund is the most suitable investment option for a common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost," said Sebon director Paristha Nath Poudel.

After the regulation, Mutual fund is expected to fuel the capital market -- that is at present slowing down -- as many financial institutions have shown keen interest in it. "It will also create institutional investors also -- something that the domestic capital market lacks at present," he added.

Despite an absence of the regulation, NIDC Capital Markets Ltd and Citizen Investment Trust (CIT) had issued NCM mutual fund and CIT unit trust. "However, NIDC had a bitter experience in the absence of transparency and any regulation," Shrestha said.

The regulation -- expected to have all the tools that a transparent and professional fund must have -- lacks some clarifications, said the investors and representatives from financial institutions.

Besides, the sponsors that issue Mutual Funds, the draft envisions an Asset Management Company (AMC) that will manage the fund, a trustee that will act as a watchdog, a custodian and a depositor, all of whom will have to get separate licences from Sebon. "However, in absence of Act, supervisors are created in the regulation until the Act comes into effect," according to the draft regulation.

Commercial banks and financial institutions can sponsor the mutual fund and sponsors will appoint AMC. According to the draft regulation, mutual funds can also invest 50 per cent of their funds in foreign country. "While investing outside the country, the regulation should make it clear taht the investment be made in rated companies stocks only," suggested Dr Ramesh Bhandari from Growmore Merchant Banker Ltd.

Similarly, Prabin Raman Parajuli from Nabil Bank suggested the board to attract real sector in the capital market. "Why should investors invest in Mutual Fund instead of direct investment in the Financial Institutions that is a common practice at present," he asked.

A Mutual Fund is a trust that pools the savings of many who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit-holders in proportion to the number of units owned by them.

They can even be traded in the secondary market as well. Apart from that, these funds are convertible and have liquidity.

Civil Bank gets provisional LoI

Civil Bank Ltd (proposed) has received a provisional Letter of Intent (LoI) from Nepal Rastra Bank, the central authority. "The proposed commercial bank is planning to deposit 45 per cent cash of the promoters' share in around 10 days to get the LoI," said Kishore Maharjan, chief executive officer (CEO) of the bank.

Earlier, some of the proposed commercial banks could not deposit the required sum at the central bank forcing the central bank to revise its rule of awarding Letter of Intent. Currently, Nepal Rastra Bank (NRB) provides provisional LoI first and gives a month's time to deposit the 45 per cent deposit before awarding the Letter of Intent.

"We are planning to start operations from the first week of the next fiscal year," Maharjan said adding that the proposed commercial bank has 149 promoters -- mostly from the housing business. The proposed bank will have Rs 2 billion authorised capital.

It is the 12th company of Civil Group -- a renowned name in the housing business. The Civil Group also has Civil Merchant Bittiya Sanstha and Civil Savings and Credit Cooperative.

There are total of 27 commercial banks at present and a couple of proposed commercial banks have also acquired Letters of Intent. Megha Bank Nepal, Century Commercial Bank, Business Bank, Commerce and Trust Bank are some of the proposed commercial banks in the pipeline.

NRB had temporarily stopped the registration of new financial institutions -- including commercial banks, development banks and finance companies -- in August 2009 citing that the existing number of banks in a small economy like Nepal was already more than enough.

However, Maharjan thinks that there is still room for new financial institutions "as the outlet of the financial institutions is much less than required, though the number of financial institutions seems to be more."

There are already 27 commercial banks in operation currently.

Since only a quarter of the population has access to banking channels, the central bank also could not decide on the exact number of financial institutions that Nepal needs.

According to the central bank's data, by the end of the first six months of the current fiscal year, there are 255 financial institutions in the country. "By the end of Poush (December-January), there were a total of 845 branches of commercial banks," said the central bank.

NRB paints gloomy economic picture

The Balance of Payment (BoP) registered a deficit of Rs 21.83 billion in the first seven months of the current fiscal year.

According to the central bank, in the first seven months of 2009-10, the overall BoP recorded a deficit of Rs 21.83 billion against a surplus of Rs 25.68 billion in same period last year.

"The current account also registered a deficit of Rs 30.76 billion against a surplus of Rs 20.32 billion in the same period last year," revealed Nepal Rastra Bank (NRB) 'current macroeconomic situation based on the first seven months' data of 2009-10.

The central bank attributed the huge current account deficit to the increase in trade deficit and the slowdown in the growth of remittance inflows in recent months.

FOB-based merchandise trade deficit also grew by 62 per cent to Rs 180.20 billion compared with a growth of 27.8 per cent in the same period last year.

Gross foreign exchange reserves have also been continuously depleting. "Reserves dropped by 13.5 per cent -- Rs 37.77 billion -- to Rs 242.22 billion in mid-February 2010 from a level of Rs 279.99 billion as in mid-July 2009 against a growth of 18.4 per cent -- Rs 39.17 billion -- in the same period last year," said NRB.

"NRB's reserves declined by 14.8 per cent to Rs 190.96 billion from a level of Rs 224.19 billion a year earlier. Gross foreign exchange reserves in dollar terms declined by 8.7 per cent to $3.27 billion in mid- February 2010 against a growth of 4.4 per cent in the same period last year," it said attributing it to widening of the current account deficit.

"The current level of reserves is sufficient for financing merchandise imports for 7.8 months and merchandise and service imports for 6.7 months."

Commercial banks also are facing liquidity crunch. "The liquid assets of commercial banks declined substantially by 10.4 per cent to Rs 168.5 billion in contrast to a growth of 3.4 per cent in the same period of last year. Of the components of liquid assets, liquid fund declined by 11.6 per cent against an increase of 11.8 per cent in the same period last year," the central bank added. "A decline in commercial banks' balance with NRB and balance held abroad accounted for such a contraction of their liquid funds."

Meanwhile, merchandise exports also declined by 9.8 per cent to Rs 35.80 billion against a growth of 18.3 per cent in the same period last year. "Exports to India dropped by 4.6 per cent against a growth of 2.4 per cent in the same period last year and exports to other countries plummeted by 17.7 per cent against a growth of 54.4 per cent in the same period last year," said the central bank.

However, imports, on the other hand, grew by 42.2 per cent to Rs 222.07 billion compared with a growth of 25.8 per cent in the same period of last year. "Imports from India grew by 36.1 per cent compared with a growth of 11.4 per cent in the same period last year and imports from other countries witnessed a growth of 50 per cent compared with a growth of 50.7 per cent in the same period last year.

Growing imports and decreasing exports has widened the trade deficit as it is expanded by 59.9 per cent to Rs 186.27 billion. Trade deficit had risen by 28.6 per cent in the same period last year. Trade deficit with India rose by 51.3 per cent compared with a growth of 15.2 per cent in the same period last year. Similalrly, trade deficit with other countries expanded by 70.4 per cent compared with a growth of 49.6 per cent in the same period last year. "The ratio of export to import dropped to 16.1 per cent from 25.4 per cent a year earlier," NRB added.

Though, the government budget posted a surplus of Rs.8.42 billion compared with a surplus of Rs 8.79 billion in the same period last year, total spending increased by 31.9 per cent to Rs 103.38 billion compared with an increase of only 15.1 per cent in the same period last year. The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure, according to the NRB.

Revenue mobilisation grew by 30.5 per cent to Rs 94.28 billion compared with an increase of 32.5 per cent in the same period of last year.

ADBL shares oversubscribed

The primary issue of Agricultural Development Bank Ltd (ADBL) has already been oversubscribed by over one-and-a-half times.

"Till today afternoon, we received 55,000 applications worth Rs 1.40 billion," said Siddhanta Raj Pandey, chief executive officer of Ace Development Bank -- the issue manager of the largest public issue in the history of Nepal's capital market.

ADBL has floated 9.6 million units of shares -- worth Rs 960 million -- at a face value of Rs 100 per unit from Sunday. "Due to oversubscription, it will be closed by Wednesday evening," said Shyam Singh Pandey, chief executive officer of ADBL that has floated the primary issue in a volume equal to that of three commercial banks combined.

The overwhelming collection of the money could ease liquidity crunch a little, if it has come out of the banking channel as it is suspected that urban cooperatives and people have huge cash that they invest on shares or on reality sector.

"Urban cooperatives are involved in lending for shares at high interest rates, putting the norms of cooperatives at stake," said an investor, who himself has borrowed Rs 200,000 from a cooperative at high interest rates to apply for the ADBL shares.

Normally, commercial banks have been issuing primary shares worth Rs 300 million as directed by Nepal Rastra Bank (NRB). The rule is that a commercial bank has to issue 30 per cent primary shares of the total paid-up capital.

ADBL -- a development bank turned 18th commercial bank -- will have Rs 3.20 billion paid-up capital after this issue.

"Despite poor performance of the secondary market at present and liquidity crunch, there is enormous demand in the market," Pandey said adding that there has been encouraging participation in the districts but that the collection was more in the valley.

ADBL's strength is its network, which is the largest one among banks. However, it has to introduce new technology and operate efficiently if it wants to compete with them as the other banks are more efficient and tech-savvy.

On the other hand, being a government bank, political intereference and frequent change of CEOs would also have negative impact on ADBL's financial health in the long run.

Janata Bank starts operation

Janata Bank Nepal Ltd started its operation from today as the 27th commercial bank in the country. Nepal Rastra Bank (NRB) had given it an operating licence last week.

"We got the operating licence last week and today we started our operation informally," said Bijay Pant, CEO of the youngest Class-A bank in the country. "We are yet to formally start our operation."

"With a paid up capital of Rs 1.40 billion and 835 promoters, we have the largest paid-up capital and number of promoters," he said.

Guru Prasad Neupane is the chairman of the Bank with journalists, academicians and professionals as promoters.

Despite the overcrowding of banks, there are more commercial banks in the pipeline, some of them already got the Letter of Intent (LoI) from the central bank. Megha Bank Ltd, Century Commercial Bank and Civil Bank are the banks in pipeline.

On one hand, only two-third of the population have access to banking system, and on the other, the number of banks are mushrooming in urban areas fuelling unhealthy competition.

The already operating Class-B and C financial institutions are also planning to upgrade. Not long ago, Kist and NMB underwent an upgradation to become commercial banks.

Development Credit Bank Ltd -- the 24th commercial bank-- was upgraded from Class-B development bank. Nepal Merchant Banking and Finance Company is the 25th commercial bank to be upgraded as NMB Bank from class-C category.

Similarly, Kist Bank became the 26th commercial bank after it upgraded itself from Class-C financial institution.

According to the central bank's six months' data, a total number of companies listed at the Nepse increased to 165 in mid January 2010 compared with 149 last year.

Among them, 133 are banks and financial institutions (including insurance companies).

List of Commercial Banks

1. Nepal Bank Ltd

2. Rastriya Banijya Bank

3. Nabil Bank Ltd

4. Nepal Investment Bank Ltd

5. Standard Chartered Bank Nepal Ltd

6. Himalayan Bank Ltd

7. Nepal SBI Bank Ltd

8. Nepal Bangladesh Bank Ltd

9. Everest Bank Ltd

10. Bank of Kathmandu Ltd

11. NCC Bank Ltd

12. Lumbini Bank Ltd

13. NIC Bank Ltd

14. Machhapuchhre Bank Ltd

15. Kumari Bank Ltd

16. Laxmi Bank Ltd

17. Siddhartha Bank Ltd

18. Agriculture Development Bank Ltd

19. Global Bank Ltd

20. Citizens Bank International Ltd

21. Prime Commercial Bank Ltd

22. Bank of Asia Nepal Ltd

23. Sunrise Bank Ltd

24. Development Credit Bank Ltd

25. NMB Bank Ltd

26. Kist Bank Ltd

27. Janata Bank Nepal Ltd

Japan gives $4.55m aid to Nepal

Japan has pledged a grant aid totaling US$ 4.55 million to protect women, children and the poor in Nepal under the Japan Fund for Poverty Reduction (JFPR) that supports high-impact projects to reduce poverty in developing countries in Asia and the Pacific.

The fund supports activities in Nepal that include provision of small-scale basic economic and social services to the poor.

Masakazu Sakaguchi, executive director of the Asian Development Bank (ADB), -- while launching the programme here today -- said that in line with the poverty reduction goals of JFPR, all three projects are targeted at benefiting and empowering the most vulnerable and often excluded groups in Nepali society- women, children and the extreme poor.

JFPR projects also build capacities, and promote partnerships among various stakeholders for tangible and sustainable results through innovative approaches, he added.

ADB's country director for Nepal, Barry J Hitchcock, said that the women and children service centers will support the Nepal police in establishing effective measures for protecting women and children who are victims of abuse, whilst the legal documentation effort will enable people in some of the poorest districts to gain access to essential services.

The fortified flour in Chakki mills will help reduce anemia and other illnesses linked to vitamin and mineral deficiencies in children, he added.

Rameshore Khanal, secretary at the Ministry of Finance said that this fund will help the rural Nepali women, children and poor by raising awareness among them and also help them generate income.

The government of Nepal is helping by setting up women and children service centers for victims of abuse, facilitating legal identity documentation for poor people and production of fortified flour in Chakki mills, the press release issued on the occasion stated.

Second edition of economic indicator

Securities Research Center and Services Pvt Ltd (SRCS) has published the second edition of 'Financial Indicator' that includes financial data of companies listed and unlisted at the Nepal Stock Exchange (Nepse).

The book has the financial statistics of twenty-five companies belonging to different sectors like commercial banks, development banks, finance companies, insurance companies and hydro power and so on.

The publisher believes that the book will facilitate share investors, students, researchers, market analysts, journalists and the regulatory board. Investors can analyze these statistics and select safe companies to invest in. "This is the only book published in Nepal that includes such financial information," said Rabindra Bhattarai, a renowned share market analyst, who has edited the book.

SRCS has already published ten books on Nepal's capital market, derivatives and banking.

ADBL floates largest ever primary issue

Agricultural Development Bank Ltd (ADBL) is floating 9.6 million units of shares -- worth Rs 960 million -- at a face value of Rs 100 per unit from Sunday. This is the largest primary issue in the history of the banking history in Nepal. Ace Development Bank has been appointed issue manager of ADBL that has its strength in its network, which is the largest one among the Nepali banks. If it introdues new technology and operate efficiently, ADBL can lead the market. Else, being a government bank, political intereference and frequent change of CEOs would have negative impact on its financial health.

Investors should be aware of the fact that the bank, being a government undertaking, took long to distribute rights shares' certificates. The bank distributed the rights shares' certificates after great hue and cry. "It might do the same in the case of distribution of share certificates and not list these shares at the secondary market on time, keeping investors ion tenterhooks," said Rabindra Bhattarai, stock market analyst. "The success of the largest issue also depends on how investors react as the bank has Rs 450 million negative reserve and the secondary market is performing badly since the last couple of months." The secondary market also could not perform well due to the liquidity cruch in recent months.

"Since it is the largest issue and the market is witnessing poor performance, investors might not get value also," Bhattarai added.

If the shares are oversubscribed, the issuance will close on Wednesday -- the fourth day -- according to rule.

Meanwhile, the NMB Bank Ltd's 7,15,000-unit of further public issue has closed from Friday, according to DCBL Bank Ltd, the issue manager of the first further public issue in the Nepali capital market. NMB Bank Ltd has floated further public issue for the public at Rs 285 per unit -- adding Rs 185 premium to the face value of Rs 100.

IFC trains bankers

The South Asia Enterprise Development Facility, managed by IFC, in partnership with United Kingdom's Department for International Development, Norwegian Agency for Development and Nepal Bankers' Association, organised a three-day training programme on 'Hydropower and Renewable Energy Financing' for bankers.

IFC -- a member of the World Bank Group -- is working with the Nepal Bankers' Association (NBA) to bring about awareness on financial risks and opportunities associated with hydropower and renewable energy projects. Given Nepal's current energy crisis, hydropower holds great potentials for the country as a clean alternative source of energy.

The bankers lack the experience of financing small hydropower projects. Such investments usually involve high risk with long repayment periods and complex technical aspects, said the IFC. The training programme helped bankers understand these projects better by exploring topics ranging from market potential in Nepal, credit assessment, financing structures, laws, licenses and policies, risk and mitigation, insurance to legal issues related to hydropower. Other renewable energy financing options were discussed and participants visited a hydropower plant to gain real on-site understanding of these projects.

"Nepal is strategically located to tap this resource, so this programme represents a great investment opportunity for bankers and businesses alike," said NBA president Sashin Joshi.

Ian Crosby, Head of SEDF, said, "This training was a critical step toward creating opportunities for financial institutions to build a sustainable energy finance portfolio that will address climate change issues, improve energy security and reduce pollution in Nepal, while increasing bank profits."

SEDF is working with financial institutions to develop strategies, products, services and marketing plans in order to enhance their sustainable energy finance portfolios. SEDF also is developing the capacity of energy auditors and providing the latest market information to assist banks in financing energy-efficient projects.

IFC is the only international financial institution focused exclusively on private sector, the engine of sustainable development in emerging markets. Along with IBRD, it is currently seeking to increase capital to strengthen its ability to create opportunity for the poor in developing countries. It plans to increase financing for renewable energy and other energy efficient projects.

Capital market to have institutional investors

The Nepali capital market might see institutional investors soon.
Citizens' Investment Trust (CIT), Employees' Provident Fund (EPF) and Rastriya Beema Sansthan (Insurance Board) have agreed -- in principal -- to invest in the market.
During a discussion held here today between these institutions and Securities Board of Nepal (Sebon) and Nepal Stock Exchange Ltd, they agreed to invest in the capital market. Sebon has shown confidence that the entry of the institutional investor in the market will boost the confidence of general investors as it will help balance the market.
Currently, there are around 1.4 million investors involved in the market and there is no institutional investor. "If institutional institutions get involved in the capital market, the supply and demand mechanism will be balanced and the market can be developed," said the board.