NRB seeks clarification from five financial institutions

Nepal Rastra Bank (NRB) has sought clarification from five financial institutions including a development bank for not following the NRB directives asking them to explain why their licenses should not be annulled, Nagarik daily reported.

NRB wrote to United Development Bank, Hama Finance, Mercantile Finance, Investa Finance and Multipurpose Finance companies asking them to clarify why they had not issued general share within deadline and increased paid up capital as required by law.

We have sought their clarification for not issuing general share within deadline and increasing paid-up capital proportionately, said an NRB official, we can annul their license if their clarification is not satisfactory.

Banks and financial institutions are required to increase their paid-up capital as stipulated by 2070. They were required to increase the deficient paid-up capital every year proportionately from fiscal year 2007/2008.

As per the existing laws and regulations, all commercial banks should increase their paid-up capital to at least Rs 2 billion by 2070. Likewise, the development banks operating throughout the country should have a paid-up capital of Rs 640 million, those operating in four to ten districts should have Rs 200 million, and those operating in one to three districts should have Rs 100 million.

The finance companies are required increase their paid-up capital to Rs 100 to 200 million depending on their area of operation.

Earlier, in January this year, the central bank had sought clarification from ten financial institutions for not issuing share and increasing the paid-up capital.

The other five companies have already increased their paid-up capital and initiated process to issue shares.

The companies under the scanner have been in operation for three to ten years. NRB has already stopped their other transactions including distribution of dividends and bonus, issuing credit and collecting deposit.