E-Kantipur

KATHMANDU, AUG 25 -

Some banks have been unable to end their cross-holding in other banks and financial institutions (BFIs) pushing Nepal Rastra Bank (NRB) to give time to them to complete the divestment process.

The central bank had directed BFIs to end their cross-holdings five years ago. Their failure has compelled NRB to provide time year after year. The deadline has now set for July 15, 2011. The central bank took the decision to end cross-holding as such prevalence means BFIs will have cross interest that would discourage competitive environment in the banking system. Rastriya Banijya Bank (RBB), Nepal Bank Limited (NBL) and Nepal Credit and Commerce Bank (NCC) are yet to divest their cross-holding in other BFIs. RBB has cross-holding of 3.61 million promoter shares in Nepal Investment Bank and 149,000 shares in Nepal Housing Development Finance Company (NHDFC).

Likewise, the NBL has crossholding of 3000 promoter shares n Nepal Industrial Development Corporation (NIDC) while NCC has 187,093 ordinary shares in NBL. NCC had sold 95,000 shares of the above shares but ownership is yet to be transferred.

De-listing of NBL shares from Nepal Stock Exchange has also prevented NCC divesting its remaining cross-holdings in NBL. NCC chief executive officer Ratna Raj Bajracharya said his bank is ready to divest its shares anytime from NBL if an appropriate environment is created for selling shares. The central bank de-listed its shares from the secondary market as its financial health went bad with huge non-performing loans and negative capital base. Meanwhile, selling RBB’s shares via NIBL is tough. A year ago, Securities Board of Nepal (SEBON) refused to entertain the price set by RBB to sell its shares of NIBL.

RBB quoted Rs. 1068 per share which SEBON rejected saying it was unjustified. RBB chief executive officer Janardan Acharya said his bank could sell its cross-holdings in NIBL if SEBON had cooperated a year ago. According to him, his bank had negotiated with some purchasers but SEBON’s reluctance to accept RBB’s quoted price created problems. “We will divest the shares within this fiscal year, but our priority is to sell to public limited companies,” he said. A senior NRB official said it would have been better had the government-owned banks sold their shares to government-owned companies such as Employees’ Provident Fund, Citizens Investment Trust and Nepal Telecom. “Even if the share price is low, the government’s stake remains in a government entity,” he said.

Posted on: 2010-08-25 09:47

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