September 22: The September 17 deadline set by the central bank has elapsed, and banks have submitted their plan to raise their paid-up capital to Rs 8 billion.

From the time Governor Chiranjibi Nepal announced Nepal Rastra Bank’s Monetary Policy to make it mandatory for BFIs to raise their capital, the banks have said they need to overcome a multitude of challenges to comply with the new policy.

Many banks, in their plan submitted to the central bank, have said they will enter into merger with other commercial banks to comply with the minimum capital requirement. However, they face yet another problem when going for mergers: the loans that the promoters have taken.

According to the central bank regulations, a promoter cannot take loan from the bank he promotes. So if a bank, backed by say promoter ‘A’, merges with another bank, where promoter ‘A’ has a loan, he has to either clear the loan or shift it to another bank.

The central bank’s Deputy Governor Maha Prasad Adhikary says,  “This could cause problems when banks go for mergers. But the central bank will give time to shift the loans.” He said that as the existing rules regarding mergers give banks three years to remove legal complexities, the bank can give them time.

The central bank maintains that the new policy was not intended to make banks enter into forceful mergers. In a recent interview with New Business Age, Governor Chiranjibi Nepal said banks are free to raise capital in any way want to (by getting JV partners, issuing right shares, FPOs, and so on).