Himalayan Bank to increase paid up capital

February 23, 2014
The seventh commercial bank of Nepal, Himalayan Bank Limited (HBL) has decided to increase its paid-up capital to Rs 4 billion within the next two year among rising competition. Its current paid-up capital stands at Rs 2.76 billion. Commercial bank of Nepal, Nepal Rastra Bank (NRB) has already issued a regulation to increase the paid of capital of bank and financial institutions of Nepal. According to NRB, Banks and Financial Insitutions have to increase their paid up capital to strength the economy and to increase the investment.

According to Bhaskar Mani Gyawali, the spokesperson of NRB said that, banks and financial institutions need to increase their capital up to 5 percent more than the current capital they have. The current paid of capital for Commercial Bank, Development Bank and Finance Companies are Rs 2 billion, Rs 64 crore and Rs 20 crore respectively. NRB planned to make paid up capital Rs 10 billion, Rs 3.20 billion and Rs 1 billion for commercial banks, development banks and finance companies respectively.
HBL CEO, Ashok Rana said that, “Our board meeting last week decided to increase Rs 1.24 billion to make the paid-up capital to Rs 4 billion by mid-July 2015, The board has also directed the management to find out a proper method for increasing the capital.”
According to Rana, the bank will carry out homework on three possible methods of raising the capital. CEO found following three methods of raising the capital
a) Merger with other financial institutions
b) Rights shares issuance
c) Rights shares issuance and sales of fixed property in Durbar Marg, Kathmandu, and Pokhara.
In previous years NIC Bank and Bank of Asia merged to become NIC Asia likewise, International Money Express (IME) and Global Bank merged IME became bigger through mergers, the HBL board took the decision to put HBL among top three banks in terms of capital base.
Rana said the Nepal Rastra Bank has also been urging HBL to increase its capital, stating it would help the bank grow further amid rising competition.
“A few days ago, we received the central bank’s approval for holding annual general meeting (AGM),” said Rana.
After the HBL board decided to go for raising capital, the bank has written to the Nepal Rastra Bank (NRB) about its plan.
The central bank is particularly focused on ensuring compliance of the existing provision, which requires commercial bank s to increase their paid-up capital to Rs 2 billion, national-level development bank Rs 640 million and national-level finance companies Rs 200 million within  the current fiscal year.

However, the monetary policy for the current fiscal year has indicated that it would put in place a provision asking all types of the bank s and financial institutions (BFIs) to raise their paid-up capital. Besides paid-up capital, the central bank has also provisioned allowing BFIs to use other types of instruments and measures as part of capital.

Following the central bank’s approval to hold AGM, the HBL is planning to issue a notice on the planned Annual General Meeting (AGM) next week. After the HBL deposited the amount equivalent to the counter guarantee they gave to China’s China Railway 15 Bureau Group—former contractor of Melamchi Drinking Water Project—on non-deductable condition, the NRB allowed the bank to hold the AGM.