Kathmandu, September 18

Nepal Rastra Bank (NRB) has said that there are no immediate plans to raise the paid-up capital of banks.

NRB Governor Chiranjibi Nepal, at an interaction programme with the media today, said that revision of paid-up capital of banks is determined by time and context. “Considering the contemporary state of the banking sector, NRB has not thought of reviewing the paid-up capital structure of banks,” said Nepal.

Furthermore, Governor Nepal hinted that capital structure of banks will not be changed further in his tenure, which will end in March next year.

The central bank, through the Monetary Policy 2015-16, had made it mandatory for commercial banks to increase minimum paid-up capital from Rs two billion to Rs eight billion by mid-July 2017. Similarly, such capital of national-level development banks had been raised from Rs 640 million to Rs 2.5 billion, while paid-up capital of national-level finance companies had been increased from Rs 300 million to Rs 800 million.

The NRB’s notion regarding reviewing paid-up capital of banks has come at a time when a study of the World Bank (WB) had recommended the government to raise paid-up capital of banks to increase their lending capacity to infrastructure sector.

The ‘Nepal Infrastructure Sector Assessment’ report of the WB, which was launched recently, had stated that the subscale size and high market fragmentation leads to market destabilising behaviour and low loan volumes relative to lending capacity, especially to the infrastructure sector. It had thus recommended government to raise paid-up capital of banks to over Rs 16 billion to consolidate the banking sector to enable it to become a focused and more efficient deployer of capital.

Furthermore, the WB report had urged the government also to reduce the number of commercial banks from 28 to less than 15. “Doing this will start to reshape the sector and provide banks with scale and efficiency to deliver consistent loan volumes,” read the report.

Meanwhile, Governor Nepal also said that the central bank’s current focus is to address cyber security issues in the banking sector and raise financial literacy awareness in the country. “The greatest challenge in the banking sector today is related to cyber security issues. We have already directed BFIs to adopt measures to cope with possible security threats,” said Nepal.