Told to submit capital plan to central bank by mid-September
KATHMANDU, Aug 25: Nepal Rastra Bank (NRB) has directed wholesale microfinance institutions microfinance companies that lend only to other microfinance companies and large groups or institutions to hit their Rs 600 million-paid-up target by mid-July 2018.
Up from the minimum Rs 100 million capital that national-level microfinance institutions are required to maintain.
Issuing a circular on Wednesday, the central bank also instructed the wholesale microfinance lenders to submit their capital plans, with clear time-tables on raising their paid-up capitals according to the new requirement, to NRB's Banks and Financial Institution Regulation Department and Bank Supervision Department by mid-September.
There are currently four microfinance institutions that provide wholesale credit to other microfinance institutions that float loans to deprived sector and small borrowers -- Chhimek Laghubitta Bikas Bank, Sana Kisan Bikas Bank, Rural Microfinance Development Center and First Microfinance Development Bank.
NRB's circular to these 'D' class financial institutions are in line with its monetary policy for Fiscal Year 2016/17 announcements made in mid-July. The central bank, in its circular, said these microfinance institutions would be allowed to calculate their proposed bonus shares for Fiscal Year 2017/18 in their capital plans.
NRB has also set out actions it will take if any of these wholesale microfinance institutions fail to meet the new paid-up capital requirement by its deadline. According to the circular, it will bar institution that do not meet the new paid-up capital requirement by mid-July 2018 from announcing and distributing dividends, mobilizing financial resources, floating loans and expanding branches.
These microfinance institutions will also have to make their capital plans public through their websites, according to the circular.