The promoters of the oldest bank of the country are ready to pump in capital and increase the paid up capital of Nepal Bank to Rs 4 billion to make it the largest bank of the country.
A meeting on new recapitalisation plan with its majority stakeholders — Pashupati SJB Rana, Rajendra Khetan, Lok Bhakta Rana, Gajendra Bahadur Shrestha, Lok Manya Golchha, Shekhar Golchha, Niranjan Kumar Tibrewal, Niraj Rajbhandary, Ramesh Raj Aryal, Nabin Narsingh Rana, Indira Khatri, Kedar Narayan Manandhar and Bal Krishna Shrestha — held on Friday decided to inject the capital. The bank's paid up capital currently stands at Rs 830 million.
The oldest commercial bank of the country is planning to issue rights shares to existing shareholders at 1:9.5 ratio to raise capital but the World Bank that has spent a huge amount on reform of the bank is not happy with the idea of rights issue.
According to the plan, the bank will raise funds worth Rs 3.62 billion by issuing rights shares to the existing shareholders, apart from selling its passive assets worth Rs 2 billion and capitalise on the profits earned to make its capital fund positive. The bank's net worth is negative by Rs 4.22 billion as of the end of last fiscal year.
The government holds 41 per cent stake in the bank while 50 per cent is owned by public shareholders and the remaining belongs to different financial institutions. The government has already pledged to inject Rs 1.5 billion to buy the rights shares.
The bank's capital fund was negative by Rs 12.58 billion in fiscal year 2001-02, which has reached Rs 4.22 billion by 2011-12. Likewise, non performing assets (NPA) have also gone down to 5.17 per cent from 60 per cent in 2001-02.
The World Bank supported Financial Sector Reform Programme (FSRP) has appointed a foreign management to clean the financial mess and turn it into a healthy financial institution but the programme could not come to an end in happy note after the then chief executive left without completing his tenure.