The central bank will be managing Nepal Bank Ltd (NBL) till the end of the fiscal year.
Nepal Rastra Bank (NRB) has decided to stick with the bank till it gets its capital adequacy ratio (CAR) to the regulatory requirement of 10 per cent. NBL — with CAR of 0.04 per cent till mid-October — will need to sell the assets worth Rs two billion to reach competitive level.
“We will look after the bank for six more months,” informed coordinator of NRB deployed management team, Maheshwor Lal Shrestha.
Earlier, NRB had decided to exit from the bank by mid-January. Though NBL has been successful in recording positive net worth for the first time in more than a decade, the presence of risky assets in comparison to its capital is still a matter of concern.
“Once the bank sells the fixed non-banking assets as planned earlier, there won’t be a problem regarding the capital,” added Shrestha.
Since 2002, NBL and another government-owned Rastriya Banijya Bank have improved their performance through almost a decade-long Financial Sector Restructuring Programme, but its core capital remained negative.
A comprehensive audit on the bank discovered that it was on the brink of insolvency due to large number of willful defaulters in 1999, thus bringing about the restructuring programme.
Both the banks have been able to record positive net worth following around Rs five billion injection from the government. Likewise, NBL also issued right shares to the existing share holders that increased its paid up capital to Rs 3.9 billion by the first quarter of the current fiscal year. At present, the bank’s bad loan has come down to below five per cent.
source: the himalayan times,20 jan 2014
LINK
Nepal Rastra Bank (NRB) has decided to stick with the bank till it gets its capital adequacy ratio (CAR) to the regulatory requirement of 10 per cent. NBL — with CAR of 0.04 per cent till mid-October — will need to sell the assets worth Rs two billion to reach competitive level.
“We will look after the bank for six more months,” informed coordinator of NRB deployed management team, Maheshwor Lal Shrestha.
Earlier, NRB had decided to exit from the bank by mid-January. Though NBL has been successful in recording positive net worth for the first time in more than a decade, the presence of risky assets in comparison to its capital is still a matter of concern.
“Once the bank sells the fixed non-banking assets as planned earlier, there won’t be a problem regarding the capital,” added Shrestha.
Since 2002, NBL and another government-owned Rastriya Banijya Bank have improved their performance through almost a decade-long Financial Sector Restructuring Programme, but its core capital remained negative.
A comprehensive audit on the bank discovered that it was on the brink of insolvency due to large number of willful defaulters in 1999, thus bringing about the restructuring programme.
Both the banks have been able to record positive net worth following around Rs five billion injection from the government. Likewise, NBL also issued right shares to the existing share holders that increased its paid up capital to Rs 3.9 billion by the first quarter of the current fiscal year. At present, the bank’s bad loan has come down to below five per cent.
source: the himalayan times,20 jan 2014
LINK
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