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.