Rastriya Banijya Bank (RBB) preference shares converted into ordinary shares

The special general meeting (SGM) of Rastriya Banijya Bank (RBB) on Sunday approved the conversion of 8,735,700 units of preference shares worth Rs 873.57 million into ordinary shares.
With the c onversion of the preference shares owned by the government, RBB’s paid-up capital has reached Rs 8.58 billion.
The SGM approved the capital restructuring through an amendment to the bank’s memorandum of association and regulation presented by RBB Chairman Narahari Dhakal. “The conversion has been made as per the bank’s capital plan,” said RBB Chief Executive Officer Krishna Prasad Sharma. “This will help maintain the bank’s capital adequacy ratio at 3 percent for the first time as of mid-July,” he said.
Commercial banks are required to maintain the capital adequacy ratio at 10 percent, but RBB has received special favour from the government as it is a fully state-owned bank.
The bank had planned to increase its core capital to Rs 8.5 billion in its capital plan which has now been attained. Sharma said the SGM was called for the same purpose. Preference share is supplementary capital (tier 2), while paid-up capital is part of the core capital (tier 1).
The government had earlier injected Rs 4.32 billion in the bank to increase its paid-up capital.
The bank had received the Nepal Rastra Bank (NRB) approval for its three-year capital plan in mid-April last year. Under its Rs 12.5-billion plan, the RBB sought to fulfil the core capital requirement (Tier I) of Rs 8.5 billion in the first two years. The bank has further planned to issue debenture for raising supplementary capital (Tier II) of Rs 4 billion in the third year.
However, the bank’s proposed Rs 12.5-billion capital plan will not be enough to meet capital adequacy and paid-up capital requirements, which require Rs 14 billion. According to the bank, it has planned to raise the remaining amount by selling its assets, including its shares in other financial institutions and land, and from the profits in the next three years.
Earlier, the government had directed RBB and NIDC Development Bank, which has fixed assets worth Rs 10 billion, to merge in order to manage the necessary capital resources. However, the merger has not taken place particularly due to NIDC’s reluctance.
The SGM was attended by the representatives from the Finance Ministry, Office of Auditor General, Labour and Employment Ministry, Tourism and Civil Aviation Ministry, Physical Infrastructure and Transport Ministry, Energy Ministry, Irrigation Ministry, Industry Ministry and Commerce Ministry.
Established on January 23, 1966, the bank has conducted seven annual general meetings after it got registered under the Company Act seven years ago. RBB has 145 branches, 10 counters, 50 ATMs and nine branchless banking services in 64 districts. It also offers Any Branch Banking Service.
src kathmandu post