July 20: The deadline given by Nepal Rastra Bank (NRB)  to meet the paid-up capital requirement for banks and financial institutions (BFIs) has expired with the start of the new fiscal year.  However, the central bank has shown some flexibility regarding this issue.

Only five commercial banks have fulfilled the requirement of Rs 8 billion paid-up capital as of now. Four commercial banks made the announcement well ahead of the deadline. Those banks meeting the criteria set by the central bank within mid-June are Rastriya Banijya Bank, Agriculture Development Bank, Nepal Investment Bank and Global IME Bank. Another commercial bank, Nepal Bank Limited, fulfilled the requirement on the eve of the new fiscal year.

Other banks have pledged to fulfill the requirement by issuing rights shares and bonus shares while some banks have said they have been able to meet only half of the paid-up capital requirement.

Records maintained by NRB show that the commercial banks which have so far failed to meet the ceiling set by NRB have paid-up-capital between Rs 4 billion to Rs 6 billion.

Likewise, national level development banks also have not been able to meet the paid-up capital requirement of Rs 2.5 billion set by the central bank. The ceiling for district level development banks has been set at Rs 1.5 billion.

Of late, most of the banks have been busy in merger and acquisition to meet the paid-up capital while some have made commitment to meet the requirement by issuing rights shares and bonus shares.

Garima Bikas Bank, Kailash Bikash Bank and Lumbini Bikas Bank have almost met the paid-up capital requirement.

NRB has said that the banks which have already started the process of meeting the paid-up capital will not be punished until the final audit report is prepared.

NRB had issued a warning a few weeks ago that it would take action against banks and financial institutions (BFIs) if they fail to meet the paid-up capital requirement by mid-July.

NRB’s Spokesperson Narayan Prasad Poudel had said the central bank would put a hold on cash dividends, bonus distribution, deposits, loan ceiling and opening of new branches of those BFIs which do not comply with its directives.

NRB had brought a new monetary policy two years ago under which all commercial banks were asked to increase the minimum paid-up capital from Rs 2 billion to Rs 8 billion by mid-July 2017.

However, Poudel has now softened his stance.

“The BFIs Act 2073 has provision for final audit six months after the end of a fiscal year. We won’t take action against BFIs until we get the final report,” said poudel.