Bars financial institutions defying to raise capital from collecting deposit‚ extending loan
Finance companies that have not met the minimum regulatory capital requirement will soon be barred from collecting fresh deposits and issuing new loans, as Nepal Rastra Bank (NRB) prepares to tighten the noose around financial institutions that have defied calls to raise paid-up capital to the level fixed by the central bank.
The move is expected to affect at least 18, or a third of, class ‘C’ financial institutions operating in the country.
“We will soon prevent finance companies that have not met NRB’s capital requirement from collecting deposits from the public and issuing new credit. This ban will be effective until mid-January, 2015,” a high-ranking NRB official told The Himalayan Times. “If they do not heed our call till then, we will take further action.”
The measure, according to the official, is being taken to ensure all finance companies comply with the central bank’s capital requirement measure so that depositors’ interests are not compromised.
“We hope the move will expedite the pace of injecting fresh capital or compel finance companies to look for alternatives, such as mergers, to meet minimum regulatory capital requirement,” the official said.
Finance companies, operating at the national level, were earlier asked to maintain paid-up capital of at least Rs 200 million by mid-July. Those wishing to expand their network have previously been told to add Rs 20 million to the minimum paid-up capital for every branch they open in Kathmandu Valley and Rs five million for every branch they open outside the Valley.
Similarly, national-level finance companies engaged in leasing business were directed to maintain a minimum paid-up capital of Rs 300 million by mid-July. And finance companies operating in one to three districts were asked to raise paid-up capital to at least Rs 100 million till the deadline.
“We’ve already given finance companies more than a year to comply with the new requirement. Yet, many have disregarded our call. We won’t tolerate this behaviour anymore,” the NRB official said.
Currently, 53 finance companies are operating throughout the country. Of these, 18 are yet to meet the paid-up capital fixed by the NRB.
Among those that are yet to meet minimum capital requirement, only two — Multipurpose Finance of Rajbiraj and Shrijana Finance of Morang — are district-level finance companies, while the rest are national-level finance companies. Of national-level finance companies, Bhaktapur Finance, established in February 2011, has neither met minimum regulatory capital requirement nor heeded NRB’s call to launch initial public offering. As per NRB rule, all banks and finance companies must go public within two years of starting operation.
Finance companies yet to meet capital requirement
• Nepal Aawas Finance
• Nepal Finance
• Kathmandu Finance
• Union Finance
• Nepal Housing & Merchant Finance
• Shree Investment & Finance
• Lalitpur Finance
• Progressive Finance
• Central Finance
• Premier Finance
• Arun Finance
• Multipurpose Finance
• Shrijana Finance
• Guheshwori Merchant Banking & Finance
• Patan Finance
• Sagarmatha Merchant Banking & Finance
• Nepal Express Finance
• Bhaktapur Finance
source: RUPAK D SHARMA,the himalayan times,5 august 2014
LINK
Finance companies that have not met the minimum regulatory capital requirement will soon be barred from collecting fresh deposits and issuing new loans, as Nepal Rastra Bank (NRB) prepares to tighten the noose around financial institutions that have defied calls to raise paid-up capital to the level fixed by the central bank.
The move is expected to affect at least 18, or a third of, class ‘C’ financial institutions operating in the country.
“We will soon prevent finance companies that have not met NRB’s capital requirement from collecting deposits from the public and issuing new credit. This ban will be effective until mid-January, 2015,” a high-ranking NRB official told The Himalayan Times. “If they do not heed our call till then, we will take further action.”
The measure, according to the official, is being taken to ensure all finance companies comply with the central bank’s capital requirement measure so that depositors’ interests are not compromised.
“We hope the move will expedite the pace of injecting fresh capital or compel finance companies to look for alternatives, such as mergers, to meet minimum regulatory capital requirement,” the official said.
Finance companies, operating at the national level, were earlier asked to maintain paid-up capital of at least Rs 200 million by mid-July. Those wishing to expand their network have previously been told to add Rs 20 million to the minimum paid-up capital for every branch they open in Kathmandu Valley and Rs five million for every branch they open outside the Valley.
Similarly, national-level finance companies engaged in leasing business were directed to maintain a minimum paid-up capital of Rs 300 million by mid-July. And finance companies operating in one to three districts were asked to raise paid-up capital to at least Rs 100 million till the deadline.
“We’ve already given finance companies more than a year to comply with the new requirement. Yet, many have disregarded our call. We won’t tolerate this behaviour anymore,” the NRB official said.
Currently, 53 finance companies are operating throughout the country. Of these, 18 are yet to meet the paid-up capital fixed by the NRB.
Among those that are yet to meet minimum capital requirement, only two — Multipurpose Finance of Rajbiraj and Shrijana Finance of Morang — are district-level finance companies, while the rest are national-level finance companies. Of national-level finance companies, Bhaktapur Finance, established in February 2011, has neither met minimum regulatory capital requirement nor heeded NRB’s call to launch initial public offering. As per NRB rule, all banks and finance companies must go public within two years of starting operation.
Finance companies yet to meet capital requirement
• Nepal Aawas Finance
• Nepal Finance
• Kathmandu Finance
• Union Finance
• Nepal Housing & Merchant Finance
• Shree Investment & Finance
• Lalitpur Finance
• Progressive Finance
• Central Finance
• Premier Finance
• Arun Finance
• Multipurpose Finance
• Shrijana Finance
• Guheshwori Merchant Banking & Finance
• Patan Finance
• Sagarmatha Merchant Banking & Finance
• Nepal Express Finance
• Bhaktapur Finance
source: RUPAK D SHARMA,the himalayan times,5 august 2014
LINK
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