SEBON scraps rule of parking money collected in IPO/FPO at NRB

Published On: January 28, 2017 08:49 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Jan 28 : While bankers are ruing shortage of loan-able funds due to slow growth in deposits, Securities Board of Nepal (Sebon) has scrapped a rule that required the money collected in the initial public offering (IPO) or follow-up public offering (FPO) to be parked at the Nepal Rastra Bank (NRB) for a certain period of time. 

The decision comes in the wake of liquidity shortage in the banking system which has crippled the capacity of the BFIs to float loans to borrowers. 

“The rule has been scrapped because there are complaints of liquidity shortage in the market which was also affecting the secondary market. Also the requirement is soon becoming redundant due to implementation of Applications Supported by Blocked Amount (ASBA) system,” Niranjaya Ghimire, deputy spokesperson of the Sebon, said.

Earlier, issue manager of any IPO or FPO was required to deposit all the money collected in the process at its account in the NRB within six days of closing of the issuance for at least six days. Such requirement had also worsened the bank’s liquidity position as huge fund, like Rs 52 billion of money collected from the FPO of Nepal Life Insurance Company Ltd, gets stuck in the central bank’s vault. 

With FPOs of some other big companies in pipeline, bankers had worried that more funds would end up at central bank’s vault, worsening their liquidity problem. 

Bankers say the scrapping of rule will provide some respite to them.

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