Expressing dissatisfaction over the recent decision of Nepal Rastra Bank (NRB) to increase their minimum paid-up capital requirement by 25 times, development banks licensed to operate in only one district have urged the central bank to increase their paid-up capital by only four times like other bank and financial institutions (BFIs).
Unveiling the Monetary Policy for Fiscal Year 2015/16, NRB asked BFIs to raise their minimum paid-up capital within two years. It has already directed them to present their capital plan with a clear timetable to its BFIs Regulation Department by mid-September.
While the NRB has asked commercial banks, other development banks and finance companies to raise paid-up capital by four times only, development banks operating in one to three districts have been asked to raise their paid-up capital by 25 times to Rs 500 million.
In a meeting with Meeting NRB Deputy Governor Gopal Prasad Kaphle on Friday, Development Bankers Association Nepal (DBAN) requested the central bank to revisit the decision. Bankers of development banks licensed to operate in only one district told Kaphle that it was almost impossible for them to arrange such a massive paid-up capital within two year.
"The delegation of DBAN, comprising of CEOs of 10 one-district development banks, requested the central bank to lower the paid-up capital requirement as it is difficult for them to increase the capital by 25 times," Krishna Prasad Lamichhane, president of DBAN, told Republica. "Their concern is that the capital is too high for the promoters to put in extra money while they will not be acquired or merged by other capital-starved BFIs as their low-capital will mean nothing for the partner."
According to DBAN President Lamichhane, bankers of the one-district level development banks have sought the option from the central bank to be downgraded to 'D' class micro finance if new paid-up capital requirement cannot be lowered.
According to NRB, there are 12 one-district level development banks across the country.-Republica
Unveiling the Monetary Policy for Fiscal Year 2015/16, NRB asked BFIs to raise their minimum paid-up capital within two years. It has already directed them to present their capital plan with a clear timetable to its BFIs Regulation Department by mid-September.
While the NRB has asked commercial banks, other development banks and finance companies to raise paid-up capital by four times only, development banks operating in one to three districts have been asked to raise their paid-up capital by 25 times to Rs 500 million.
In a meeting with Meeting NRB Deputy Governor Gopal Prasad Kaphle on Friday, Development Bankers Association Nepal (DBAN) requested the central bank to revisit the decision. Bankers of development banks licensed to operate in only one district told Kaphle that it was almost impossible for them to arrange such a massive paid-up capital within two year.
"The delegation of DBAN, comprising of CEOs of 10 one-district development banks, requested the central bank to lower the paid-up capital requirement as it is difficult for them to increase the capital by 25 times," Krishna Prasad Lamichhane, president of DBAN, told Republica. "Their concern is that the capital is too high for the promoters to put in extra money while they will not be acquired or merged by other capital-starved BFIs as their low-capital will mean nothing for the partner."
According to DBAN President Lamichhane, bankers of the one-district level development banks have sought the option from the central bank to be downgraded to 'D' class micro finance if new paid-up capital requirement cannot be lowered.
According to NRB, there are 12 one-district level development banks across the country.-Republica
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