Nepal Rastra Bank Directs Banks to Raise Paid-Up Capital to Rs 8 Billion

Strategic Insights -

In a major move aimed at strengthening the banking sector, Nepal Rastra Bank has directed banks and financial institutions to increase their minimum paid-up capital to Rs 8 billion by mid-July 2017. This decision was made as part of the Monetary Policy 2015-16, unveiled by NRB Governor Chiranjibi Nepal. The new provision has triggered a stock market rally, with commercial banks' share prices surging by an average of 6.85 percent. Stock investors are optimistic that the demand for shares will continue to rise in the coming days, as banks and financial institutions will have to float bonus and rights shares to expand their capital base.

Key Takeaways:

  • Nepal Rastra Bank has directed banks and financial institutions to increase their minimum paid-up capital to Rs 8 billion by mid-July 2017.
  • Commercial banks will have to raise their minimum paid-up capital from Rs 2 billion to Rs 8 billion in the next two years.
  • National-level development banks will have to increase their minimum paid-up capital from Rs 640 million to Rs 2.5 billion by mid-July 2017.
  • National-level finance companies will have to raise their minimum paid-up capital from Rs 300 million to Rs 800 million.
  • The benchmark stock index surged 40.11 points, or 4.16 percent, to close at over 11-month high of 1003.38 points.
  • Commercial banks' share prices went up by an average of 6.85 percent today.
  • President of Stockbrokers' Association of Nepal, Priya Raj Regmi, expects demand for shares of commercial banks and most of the development banks and finance companies to continue rising in the coming days.

Statistics:

  • Rs 8 billion: the new minimum paid-up capital required by banks and financial institutions.
  • 40.11 points: the surge in benchmark stock index.
  • 4.16 percent: the percentage increase in benchmark stock index.
  • 6.85 percent: the average increase in commercial banks' share prices today.
  • Rs 100: the face value of most bonus and rights shares.
  • 1003.38 points: the closing benchmark stock index.
  • Rs 2 billion: the current minimum paid-up capital of commercial banks.
  • Rs 8 billion: the increased minimum paid-up capital of commercial banks.

Sources:

  • Himalayan Times, "Nepal Rastra Bank Directs Banks to Raise Paid-Up Capital to Rs 8 Billion"
  • Monetary Policy 2015-16, Nepal Rastra Bank
  • Interview with Priya Raj Regmi, President of Stockbrokers' Association of Nepal