Rastriya Banijya Bank Ltd (RBBL) is lobbying with the government for initial public offering.
The newly appointed board of directors (BoD) of the state-owned bank has submitted a 10-point proposal to the Ministry of Finance (MoF), which, among others, includes issuance of shares to general public.
Out of 30 commercial banks of the country, RBBL is the only bank which is yet to go public.
Though banks and financial institutions (BFIs) are required to float their shares to general public, the state-owned bank has so far being exempted from the provision due to its failure to maintain the capital adequacy ratio (CAR) as required by the Nepal Rastra Bank (NRB). RBBL´s CAR currently stands at 6.52 percent compared to the regulatory requirement of 11 percent.
NRB imposes prompt corrective action (PCA) for those BFIs who fail to maintain CAR which means they are subject to restrictions like deposit and loan mobilization, branch expansion, and selling and purchasing of fixed assets, among others. Though the central bank has given some exemptions to RBBL on some fronts, the negative net-worth, low CAR and high non-performing loan (NPL), among other non-compliances, have become the pretexts for the bank to avoid the requirement of going public.
“We have requested the government to allow us float at least 30 percent shares to the public. Since we have already adhered to almost all the requirements and the bank will comfortably maintain CAR by completing divestment of crossholdings by mid-January, we want to begin the process of floating IPO after getting approval from the government,”
Rewat Bahadur Karki, chairman of the RBBL, told Republica. “Giving ownership to the public means a complete structural change in the bank which will make us more dynamic.”
RBBL has already started divestment process of its crossholding at Nepal Investment Bank Ltd and Nepal Aawas Finance Company Ltd. After the first auction of the shares failed to woo sufficient investors, the bank has now slashed per unit bidding price of NIBL shares to Rs 400 from Rs 530.
The bidding for remaining 5.8 million units of shares in NIBL and 178,927 units of Nepal Aawas Finance opens from Tuesday. The divestment process will fetch around Rs 2 billion to the bank and help the bank meet the CAR requirement.
According to a central bank official, other private banks have long been complaining to the central regulatory bank of biasness while treating with state-owned banks. "They have been saying that there should be ´level playing field´. The only problem is that the RBBL´s BoD and its owner lack willingness to take initiative toward going public,” the official said preferring anonymity.
IPOs have become a center of attraction for investors in recent years. The IPO of Century Commercial Bank Ltd worth Rs 920 million issued in January was over-subscribed by 24.8 times. The IPO of RBBL, which has the highest paid-up capital (Rs 8.6 billion), is expected to draw a large number of investors if the bank´s plan to go public materializes.
Nabaraj Bhandari, joint-secretary at MoF, told Republica that the government was yet to take final call on floating RBBL´s shares to public. “We have received the proposal from the RBBL´s board. The government´s strategy is to involve the private sector in all the institutions that it fully owns. We are positive about the proposal,” Bhandari, who also heads MoF´s Financial Sector Management Division, told Republica
source: SAGAR GHIMIRE ,republica,9 dec 2014
LINK
The newly appointed board of directors (BoD) of the state-owned bank has submitted a 10-point proposal to the Ministry of Finance (MoF), which, among others, includes issuance of shares to general public.
Out of 30 commercial banks of the country, RBBL is the only bank which is yet to go public.
Though banks and financial institutions (BFIs) are required to float their shares to general public, the state-owned bank has so far being exempted from the provision due to its failure to maintain the capital adequacy ratio (CAR) as required by the Nepal Rastra Bank (NRB). RBBL´s CAR currently stands at 6.52 percent compared to the regulatory requirement of 11 percent.
NRB imposes prompt corrective action (PCA) for those BFIs who fail to maintain CAR which means they are subject to restrictions like deposit and loan mobilization, branch expansion, and selling and purchasing of fixed assets, among others. Though the central bank has given some exemptions to RBBL on some fronts, the negative net-worth, low CAR and high non-performing loan (NPL), among other non-compliances, have become the pretexts for the bank to avoid the requirement of going public.
“We have requested the government to allow us float at least 30 percent shares to the public. Since we have already adhered to almost all the requirements and the bank will comfortably maintain CAR by completing divestment of crossholdings by mid-January, we want to begin the process of floating IPO after getting approval from the government,”
Rewat Bahadur Karki, chairman of the RBBL, told Republica. “Giving ownership to the public means a complete structural change in the bank which will make us more dynamic.”
RBBL has already started divestment process of its crossholding at Nepal Investment Bank Ltd and Nepal Aawas Finance Company Ltd. After the first auction of the shares failed to woo sufficient investors, the bank has now slashed per unit bidding price of NIBL shares to Rs 400 from Rs 530.
The bidding for remaining 5.8 million units of shares in NIBL and 178,927 units of Nepal Aawas Finance opens from Tuesday. The divestment process will fetch around Rs 2 billion to the bank and help the bank meet the CAR requirement.
According to a central bank official, other private banks have long been complaining to the central regulatory bank of biasness while treating with state-owned banks. "They have been saying that there should be ´level playing field´. The only problem is that the RBBL´s BoD and its owner lack willingness to take initiative toward going public,” the official said preferring anonymity.
IPOs have become a center of attraction for investors in recent years. The IPO of Century Commercial Bank Ltd worth Rs 920 million issued in January was over-subscribed by 24.8 times. The IPO of RBBL, which has the highest paid-up capital (Rs 8.6 billion), is expected to draw a large number of investors if the bank´s plan to go public materializes.
Nabaraj Bhandari, joint-secretary at MoF, told Republica that the government was yet to take final call on floating RBBL´s shares to public. “We have received the proposal from the RBBL´s board. The government´s strategy is to involve the private sector in all the institutions that it fully owns. We are positive about the proposal,” Bhandari, who also heads MoF´s Financial Sector Management Division, told Republica
source: SAGAR GHIMIRE ,republica,9 dec 2014
LINK
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