NRB restricts rapid upgrading

KATHMANDU, Feb 22: Nepal Rastra Bank (NRB) has enforced a new provision whereby financial institutions seeking to expand their territory of operation can now do so through gradual upgrading, spending at least three years at each level.



Previously, the central bank was open at allowing financial institutions expand their working districts from as low as one district to the national level. [break]



“But now, financial institutions must first prove their capacity and competence for three years to expand operations in new districts,” said an official at NRB.



According to the directives issued on Monday, development banks of category B operating in one district can upgrade their area of operation to three districts only after three years of operations.



Likewise, development banks will need to wait for three years to upgrade their area of operations from three districts to 10 districts and from 10 districts to national level. “Upgrading can be done only gradually. Development banks operating in one district or three districts can not be a national level development bank just like that,” said the official.



Same provision has been made effective for finance companies of category C operating at different levels. This means, finance companies working in a district will need to wait for three years to expand their working areas to three districts and another three years to further expand their area of operations.



Micro-finance institutions of category D operating at the regional level or covering 15 districts are allowed to convert into national level micro-credit institutions straight away. However, those operating in a district or four to ten districts will have to undergo gradual upgrading, operating for three years at each level.



“Financial institutions aspiring to upgrade their territory of operation must first open at least a branch in each district of operation. Development banks upgrading into national level institution must submit proof of compliance to new capital adequacy framework,” reads the directive.



If two or more financial institutions operating in at least 10 districts merged, the central bank has said it would be directly allowed to function as a national level institution.

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