Financial institutions will have to issue bonus shares this fiscal year, if they want to increase their paid up capital to the central bank’s mandated amount, according to the recently amended AGM Clearance & Dividend Approval Working Procedure 2069. According to the amendment, financial institutions can include the proposed bonus shares as capital, only after it gets an approval. The document says that those financial institutions that have yet to increase their paid up capital to the regulatory amount have to submit their capital plan before they get approval on their annual audited report. So far, 16 financial institutions have announced dividends. Nepal Rastra Bank (NRB) has urged financial institutions to issue bonus shares sooner so that all financial institutions can achieve their paid up capital requirement. In the current monetary policy, NRB removed the provision that allowed banks to increase capital in such a manner that 80 per cent of the said capital shall be paid up capital and the remaining 20 per cent may be covered by any source that may be calculated as the core capital. Now, financial institutions have to increase the paid up capital without including the amount in reserve and in retained earnings, before the end of the current fiscal year. Capitalising bonus shares is one of the best options for banks that are in profit, so that amount in their retained earnings is transferred as capital. By the end of the current fiscal year, commercial banks have to increase their paid up capital to Rs two billion, national level development banks have to make their paid up capital Rs 640 million, and national level finance companies have to increase their paid up capital to Rs 200 million. Among the 32 commercial banks, eight have yet to increase their paid up capital to Rs two billion including Standard Chartered Bank Nepal. The same guideline has asked financial institutions that have deposited, lent or provided loans to troubled financial institutions to provision the equivalent amount. Earlier, banks were not required to provision but only stopped from distributing dividends and bonus from such amounts. From now on, financial institutions need to provision 25 per cent of such loans or deposits by the first quarter end and consequently by the end of fiscal year, 100 per cent needs to be provisioned.
Posted on: Fri, 06 Sep 2013 07:06:55 +0000
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