Similarly, the failure of a foreign promoter that is a non-banking institution to offload its stake in NMB Bank will make it impossible for that bank also to distribute dividend to the Malaysia-based shareholder.NRB is barring dividend payment by these two commercial banks to their foreign stakeholders due to their failure to comply with a directive of the central bank to divest the shares of foreign promoters that are non-financial entities.
Malaysia-based Young Realtors holds a 12.9 percent stake in NMB Bank while NB International Ltd of Ireland holds 50 percent promoter shares in Nabil Bank. Both these companies are non-financial institutions and were required to divest their shares before July 16 last year, according to a circular issued by NRB on March 11, 2014.
The central bank had warned that it would stop dividend payment as well as rights shares entitlement to non-financial international promoter-shareholders if they do not offload their shares by the given deadline.
Nabil Bank is distributing 30 percent bonus shares and 6.8 percent cash dividend while NMB Bank has announced 8 percent bonus shares to shareholders from the net profit it earned in the last fiscal year, 2014/15.
The annual general meeting of Nabil Bank has already approved the dividend distribution. Similarly, NMB Bank is holding its AGM on Monday and the AGM is likely to endorse it's board proposal to distribute 8 percent bonus shares.
With the dividend distributions by these two commercial banks stayed by NRB, Young Realtors would not be able to receive bonus shares worth Rs 20.64 million from NMB Bank, which has shares worth Rs 257.99 million. Similarly, Ireland-based NB International Ltd is not going to receive Rs 548.64 million worth of bonus shares and Rs 125.13 million in cash dividend due to the central bank's ban on bonus share distribution to the foreign stakeholders.
According to central bank officials, the foreign promoters will, however, be allowed to reap the dividend benefit when they offload their shares to other foreign banking or financial institutions or to Nepali nationals or companies.
"The dividend payment has been held up by the central bank as the directive about foreign investment is still in effect. In the meantime, we are following up on the share divestment plans of foreign promoters that are non-financial institutions," an executive director at NRB told Republica, requesting anonymity as he was not authorized to speak to media.
However, Nabil Bank CEO Sashin Joshi told Republica that their international shareholder was exploring an 'international banking party' to divest its shares. " NRB has stopped the dividend payment. The exploration for a possible buyer to relinquish the holding is ongoing," he added.
The central bank in March 2014 decided to instruct non-banking or non-financial foreign institutions to relinquish their stake in Nepali BFIs in line with the Bank and Financial Institution Act, 2006 (BAFIA) that allows foreign ownership in Nepal's BFIs only for banking and financial institutions. The central bank had given the deadline of July 16 last year for completing the divestments in cases where investment by non-financial entities had taken place before the law came into effect.
The central bank says that the measure was taken to separate banking ownership from the non-banking sectors and ensure corporate discipline. A proposed new act to amend BAFIA has also given continuity to the measure.
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