Central bank to recapitalise Nepal Bank but how?

The oldest commercial bank Nepal Bank Ltd (NBL) might finally be able to recapitalise itself, but there is policy complications on it.
"Hopefully, restructuring of the bank that is the core of the NBL's problem can soon be achieved," said central bank governor Dr Yubaraj Khatiwada hinting at the new plan for recapitalising of the bank during the bank's 75th anniversary celebration here today.
The biggest challenge for the bank at present is to raise necessary capital as its core capital is still negative by about Rs 4.5 billion and is nowhere near paid up capital of Rs 2 billion that a commercial banks need to have, according to the central bank's norms.
Nepal Rastra Bank (NRB) has proposed to raise Rs 4 billion for the bank's recapitalisation — Rs 2 billion will be raised through issuing right shares to the existing shareholders and another Rs 2 billion can be raised from selling or revaluation of the bank's fixed assets, according to the central bank's plan.
The governor also pointed out the need of appointing chief executive of the bank in order to guide the management of the bank which at present is being undertaken by three member team designated by the central bank.
"The financial sector has come a long way in last 75 years when NBL started its business but the problems of low accessibility to banking, low formal financing and, moreover, the lending capacity of the financial sector is not yet strong enough to manage finance for larger hydro project," Khatiwada added.
"NBL's contribution in the financial and industrial sector development is undeniable," lauded President Ram Baran Yadav in the diamond jubilee celebration ceremony.
"It is the institution that inculcated saving habits in an average citizen and taught them about deposits, cheques and even still in some places the bank is being the forerunner in introducing modern banking services," the President pointed out, suggesting the bank to exploit the opportunities created by the advancement of information technology to extend modern and service-oriented banking to unbanked regions of the nation.
After going through almost a decade long Financial Sector Restructuring Programme that started in 2002, the bank was able to improve its financial standing as 60 per cent Non Performing Loans (NPL) has been fallen down to six per cent and accumulated loss worth Rs 10 billion has also been brought down to Rs 4.5 billion.


President turns nostalgic
KATHMANDU: Getting nostalgic on Nepal Bank's diamond jubilee anniversary, President Dr Ram Baran Yadav revealed that Nepal Bank's loan had helped him pay for his education expenses some 57 years ago. The President remembered that after getting accepted into MBBS course in Calcutta Medical College, he did not have money to meet the expenses, so he pledged gold jewelleries of his relatives and acquired loans worth Rs 8,000 from the Nepal Bank then.