NRB tells Infrastructure Bank promoters to deposit 45% of paid-up capital

Published On: March 24, 2018 09:49 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, March 24: Nepal Rastra Bank (NRB) has asked promoters of the proposed Nepal Infrastructure Bank to deposit 45 percent of the paid-up capital within 30 days, giving a green signal for the opening of the bank that is expected to finance mega infrastructure projects. 

The board meeting of the NRB held on Thursday decided to ask the promoters to deposit 45 percent of the capital to issue the letter of intent (LoI) for the opening of the bank. 

“After the amount is deposited, the central bank’s board will issue the LoI,” said Rajendra Pandit, deputy spokesperson of the NRB. 

Following the unveiling of the licensing policy for the establishment of infrastructure development banks, a group of 40 Nepali promoters including bank and financial institutions, insurance companies and corporate houses have applied for the license to set up the infrastructure development bank. 

Binod Atreya, the CEO of Emerging Nepal Ltd and a promoter of the proposed Nepal Infrastructure Bank, told Republica that the process of getting the operational license will start once they get the LoI from the central bank. 

“After filing the 45 percent amount of the capital and getting the LoI, we will work toward registering the company with the Office of Company Registrar, setting up the infrastructure, recruiting staff, and other works to apply for the operational license,” said Atreya. “We will be completing these all works within six months.” 

According to Atreya, the government will have 10 percent (Rs 2 billion) stake in the proposed infrastructure bank with Rs 20 billion of paid-up capital while 50 percent ownership will be of 40 institutional and individual promoters. 

NIC Asia Bank, Prabhu Bank Ltd, Nepal Investment Bank Ltd, Global IME Bank Ltd, Siddhartha Bank Ltd as well as 10 other insurance companies along with 40 other promoters will have 50 percent share in the infrastructure bank. The bank will later float 40 percent shares to the public to collect Rs 8 billion in the capital, according to Atreya. 

Among others, the infrastructure development bank can float loans and make equity investment on infrastructure development projects, issue domestic and foreign currency denominated financial instruments to mobilize financial resources on infrastructure projects, mobilize long-term deposits, and issue debentures for arranging resources and leasing trading. 

The government has been mulling investing on such infrastructure development bank since long as existing BFIs lack capacity to finance mega projects due to liquidity mismatch. Liquidity mismatch refers to the position of a bank whereby the deposits that it holds are for a shorter period while the maturity of loans that it floats is for a longer period.

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