Nepse halts share trading of five financial institutions

Kathmandu, May 8:

Nepal Stock Exchange (Nepse) has halted share trading of five financial institutions; Mahalaxami Finance, Birgunj Finance, Siddhartha Finance, Butwal Finance and Himchuli

Development Bank until further notice.

“The four finance companies and a development bank jointly announced to merge and become a commercial bank with a paid up capital of Rs 2 billion,” states a press release issued here by the Nepse today, adding that there is a huge difference in the size of their paid up capital at present and its not clear on what to do on the liability and the ratio between share and capital reserve.

The news of their merger and upgradation to a commercial bank has fuelled share prices of these financial institutions forcing the Nepse to act immediately.

“They also have not got any approval from the Nepal Rastra Bank (NRB),” states the press release. As per regulation, they must get NRB’s prior approval.

Mahalaxmi Finance, Birgunj Finance, Siddhartha Finance, Butawal Finance and Himchuli Development Bank have signed an accord a couple of week’s ago to merge and upgrade to a commercial bank.

However, Mahalaxmi Finance, National Finance and Narayani Finance have also earlier declared a merger for upgradation to a development bank. But neither did they merge nor did they upgrade.

“This rumour of upgradation to commercial bank, like the earlier one, could be a ploy to hike share prices ‘unnaturally’ for their personal benefit,” said one senior official at the Nepse, without wanting to be named.

All of them are planning to increase their paid up capital to Rs 400 million each to make Rs 2 billion in total required for the upgradation for the commercial banks.

They have also proposed it to be called ‘United Bank of Nepal’ after the merger. However, the companies that have currently Rs 50 million to 100 million paid up capital have to increase to Rs 400 million each to make a total of Rs 2 billion required for a commercial bank. Some of them have to raise paid up capital to almost four to eight times.