Kathmandu, March 23

Nepal Rastra Bank (NRB) — the central bank — has given a nod to promoters to form the proposed Nepal Infrastructure Development Bank (NIDB), which is expected to finance mega infrastructure projects in the country.

The NRB board meeting, held on Thursday, decided to approve the formation of the proposed NIDB, which will have a paid-up capital of Rs 20 billion, and asked its promoters to deposit 45 per cent of the paid-up capital of the proposed bank within one month.

“The proposal of the promoters of the planned NIDB has been accepted in principle. However, the minutes of Thursday’s meeting and its decision have not been prepared yet,” informed a highly-placed source at NRB.

As soon as promoters of the proposed bank deposit 45 per cent of the bank’s paid-up capital, NRB is expected to issue a letter of intent (LoI) to promoters to open the bank.

By issuing the ‘Licensing Policy for Infrastructure Development Bank 2017’ on August 11 last year, NRB had called the interested parties to apply for opening the mega bank in the country.

Following NRB’s call, a group of 40 Nepali promoters from different banks and financial institutions, corporate houses and insurance companies had applied for the licence of the proposed Nepal Infrastructure Development Bank.

As per the Licensing Policy for Infrastructure Development Bank 2017, if the bank is established under foreign investment, promoters of the planned NIDB will have to invest a minimum of 20 per cent to a maximum of 85 per cent of its total paid-up capital and 15 per cent share would have to be offered to the public.

But, if the bank is established with 50 per cent of total paid-up capital through foreign investment, public will get 30 per cent share.

If the bank is established entirely with domestic investment, promoters should invest 51 per cent of the bank’s total paid-up capital and 30 per cent share should be floated to the public.

Since the bank is going to be established solely with domestic investment, the third clause of the policy will be applicable in NIDB’s case.

The government and the private sector had felt the necessity of such a mega bank in the country to finance mega infrastructure projects, especially in the backdrop of existing banks and financial institutions lacking the capacity to finance large-scale projects.