The board meeting of NRB held on Monday took the decision. The central bank had earlier said that it would exit the management of the ailing state-owned bank this month.[break]
“We have decided to take management of NBL for one more year as the process of increasing the bank´s capital has not completed yet. We will hand over the management to NBL once the bank increases its capital base,” an NRB board member told Republica.
The bank is planning to issue rights share to increase its capital. The government has already deposited the amount to buy rights shares in proportion to its stake in the bank. The government has issued Rs 1.37 billion to buy rights share of NBL.
The ailing bank has offered 1:9.5 rights shares to its stakeholders. The bank is preparing to issue rights shares to other institutional investors and general investors soon.
The oldest bank of the country is also planning to sell its fixed assets to increase its capital base.
“The bank has already initiated the process to sell its idle assets worth Rs 2 billion,” an NRB source told Republica.
The 76-year old bank is targeting to distribute dividend to its shareholders from the fiscal year 2013/14.
“Management term of NRB at NBL has been extended also due to incompletion of the process to sell some of the NBL´s assets,” added the source.
Maheshwore Lal Shrestha, director of NRB, has been overseeing the management of NBL.
The central bank has been facing criticisms from some quarters stating that it is not proper for the regulatory authority to take over the management of a bank. Due to such criticisms, NRB had initiated the process to appoint chief executive through open competition a few years ago. However, it couldn´t materialize.
NBL is planning to increase its paid-up capital to Rs 4 billion. Under its restructuring plan, the bank targets to raise public shareholding at the bank to 49.94 percent.
The bank´s management was initially taken over by foreign consulting firm immediately after the central bank launched Financial Reform Programs in 2002 with the support of the World Bank.
Though the bank has seen significant improvement in its financial position, it is still in need of an effective management so that it can compete with private sector banks.
The bank´s total negative capital reserve has dropped to Rs 4.22 billion from Rs 12.58 billion recorded before the financial sector reform programs was initiated.
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