BAFIA amendment to allow foreign promoters of Nabil Bank, NMB Bank to retain stakes

Published On: June 14, 2016 03:40 PM NPT By: Sagar Ghimire


KATHMANDU, June 13: A bill at the parliament to amend the Banks and Financial Institutions Act (BAFIA) could pave the way for existing foreign investors who are non-banking and non-financial institutions to retain their stakes in the bank and financial institutions (BFIs) in Nepal. 

While Nepal Rastra Bank (NRB) has held back bonus and cash dividend distribution at BFIs where foreign companies that are not financial institution have stakes in, endorsement of the bill to amend to BAFIA will also allow such institutions to repatriate their dividend from Nepal’s BFIs. 

The central bank stopped dividend payment from Nabil Bank Ltd and NMB Bank Ltd to their foreign promoters citing that they did not adhere to its earlier circular directing non-banking or non-financial international shareholders to offload their shares. 

In March 2014, NRB had issued a circular to instruct non-banking or non-financial foreign institutions to offload their stake in Nepali BFIs by mid-July of 2015.

The central bank had taken the step to separate banking and other businesses in line with the current BAFIA that allows foreign ownership of Nepal’s BFIs only for banking and financial institutions.The new amendment to BAFIA will allow such companies to continue with their stakes. 

Malaysia-based Young Realtors holds a 12.9 percent stake in NMB Bank while NB International Ltd of Ireland holds 50 percent promoters’ shares in Nabil Bank. Since both these companies are non-financial entities, they were required to divest their shares before July 16, 2015. 

NRB barred dividend payment of nearly Rs 20.64 million from NMB Bank. Similarly, the central bank also stayed Rs 548.64 million worth of bonus shares and Rs 125.13 million in cash dividend to Ireland-based NB International Ltd, which holds a controlling stake in Nabil Bank Ltd.

If the amendment goes through, these institutions will be able to get their dividend payments and continue holding stakes in these banks.
The amendment bill will allow only foreign banks and financial institutions will be able to establish a bank as a subsidiary company in Nepal if it shares joint ownership with a Nepali company or citizens. Such foreign banks and financial institutions will also be able to acquire share ownership in any BFI in Nepal. 

“Whatsoever is mentioned anywhere in this law, investment made by a foreign bank or financial institution or any other foreign company in any BFI in Nepal before this law’s coming into effect will be considered as it is,” reads the proposed amendment.

The amendment bill has already been endorsed by the Finance Committee of the parliament. The bill is scheduled to be tabled in the full house of the parliament this month.
 

 


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