“Although the exact date of the meeting has not been fixed yet, it can take place as early as Tuesday,” said Khum Raj Punjali, joint secretary of the Ministry of Finance (MoF), who is heading the nine-member sub-committee comprising officials of the MoF, Nepal Rastra Bank, the Securities Board of Nepal and ADBL, among others.[break]
The sub-committee has received the mandate to finalize the process of disinvesting 30 percent shares among strategic partners, which includes fixing share prices and prepare documents to initiate the bidding process. The report will have to be presented to the Privatization Committee, a high-level body formed under the finance minister, in the next six months.
“In case of need, the sub-committee can also appoint other experts to facilitate its work,” states the terms of reference given to the sub-committee by the Privatization Committee, which was seen by Republica.
ADBL currently has 51 percent shares of the government. Of the remaining 49 percent stake, 30 percent was issued to the public last year; another 14.14 percent was distributed among its debtors in 2007, and 5.86 percent of the shares have been allocated for the bank´s staff.
Its latest attempt to divest 30 percent shares will help it raise fresh capital and expedite the capital restructuring plan prescribed by the Asian Development Bank (ADB) under the second phase of the Rural Finance Sector Development Cluster launched in 2004.
The Manila-based agency had extended support to the ADBL after the state-controlled bank nearly went bankrupt in 2003 with non-performing loans reaching 47 percent of the total credit portfolio. Since then the ADB has injected Rs 8.7 billion into the bank as preference shares and has extended technical support by upgrading its IT infrastructure and providing IT related training to the staff.
In return ADB had asked ADBL to give a complete overhaul to its governance practices, management structure, business processes and the way it was delivering services. It had also asked for divestment of shares owned by the government.
Since that time, the bank´s financial health has improved. It generated a net profit of Rs 1.6 billion last fiscal year. Over the years, the bank has also converted Rs 2.30 billion of the ADB loans into debentures.
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