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New rules on promoter shares
KATHMANDU, AUG 10 -
Promoters of banks and financial institutions (BFIs) who have taken loans by putting up their shares as collateral will have to bring down the collateral size to 50 percent of their total shareholding within the current fiscal year.
“If the repayment period of the loan is sooner than the end of the current fiscal year, the share collateral should be brought down to below 50 percent during the repayment,” a directive issued by Nepal Rastra Bank (NRB) to BFIs states.
The new monetary policy has provisioned that promoters having more than 1 percent shares in any BFI cannot take loans from another BFI by putting up more than 50 percent of their promoter shares as collateral.
While evaluating the shares to be offered as collateral, the lesser value should be maintained between the 50 percent value of public shares over 180 days of trading and the value maintained during the last trading of promoter shares of the BFI.
“Loans can be given up to 60 percent of the value of the
promoter shares maintained through the above method,” the directive states.
“The provision on how to evaluate the average share price of promoter shares was made to prevent the practice of some promoters hiking share prices by selling a few shares at a higher price so that those shares could be put up as collateral at higher valuation,” a senior NRB official said.
Although the monetary policy has prohibited BFIs from opening accounts in other BFI with the aim of earning interest, it has not prevented the amount of provident fund, the amount collected under the provision of initial public offering and issuance of rights shares and account opened in foreign exchange to get interest.
The BFIs will have to close the account for demand deposits within mid-October and in case of fixed deposits, they have been barred to continue.
The NRB has also brought the national-level development banks under the Basel-II framework. They should make reporting on capital adequacy ratio under the capital adequacy framework 2008 which was prepared to implement the Basel-II framework for commercial banks.
The NRB directive has provisioned that the central bank will also rate the capital and other expenses to open the branch and the BFI should present a basis that the proposed branch will be self-reliant.
BFIS, already having informed the central bank about their expansion plan before July 15 after taking decision in this regard, should not take NRB approval. NRB has also fixed 30 districts where BFIs aiming to expand their presence in Kathmandu Valley must open at least one branch and an additional one wherever they like.
But, they cannot claim their presence in these areas if they have opened a branch by taking approval from NRB before July 15. These provisions will not bar commercial banks from opening central or corporate offices or branches in Kathmandu Valley and branches in Kakkarbhitta, Biratnagar, Birgunj, Bhairahawa, Nepalgunj and Dhangadhi.
C class FIs should not add additional paid-up capital if they expand their presence in municipalities and village development committees (VDCs) outside the Kathmandu Valley where there are just two BFIs or their braches.
The central bank has prohibited BFIs from depositing the amount borrowed for lending to the deprived sector. BFIs providing credit to another BFI for the purpose of lending to the deprived sector should take progress report every six months from the latter if the lent amount went for the targeted sector. If not, such credit will not be counted as deprived sector lending.
The NRB official said the central bank had to be strict on whether loans meant for the deprived sector went to the targeted sector as the BFIs had a tendency of blackmailing micro-finance institutions by saying that they would provide credit to them only if they deposited that amount in certain BFIs. “That is why, money allocated to the deprived sector could not reach it,” he said.
Good credit users can also get loans up to Rs. 200,000 without collateral for the use of loans in sheep rearing for wool production. The marginalised community and small farmers can get loans up to Rs. 150,000 without collateral for cold storage, purchase of fertilizers, small irrigation project, and sallow tube well.
They can get up to Rs. 200,000 for livestock, bee keeping and fishery. But, D class micro-finance companies can provide credit up to the level that has already been fixed.
Posted on: 2010-08-11 07:56
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