Nepal Bank Limited, which is currently implementing its recapitalization plan, will issue rights shares to its shareholders within mid-January, according to the bank´s coordinator Maheshwor Lal Shrestha.

Shrestha made the remark while giving a welcome speech at a program organized to mark the 76th anniversary of the bank in Kathmandu on Friday. 

The country´s oldest bank is currently working on extending rights shares to all its shareholders, except the government, which in July pumped in Rs 1.39 billion in the bank by purchasing the portion of rights allocated to it. Once the process is complete, additional Rs 2.23 billion will be injected into the state-controlled banking institution. 

As per the rights issuance plan, shareholders holding every share in the bank will have to purchase additional 9.5 stocks, meaning rights are being issued in the ratio of 1:9.5. “The entire process of distributing these additional stocks aimed at replenishing the bank´s capital will wrap up within mid-January,” Shrestha said.

The bank is currently in dire need of fresh capital as its negative networth still stands at Rs 2.65 billion despite years of implementing reforms.

Established in November 1937, Nepal Bank, once a successful banking institution, saw its capital erode as it started accumulating bad debts due to inept management and unnecessary government intervention. And by 2002, the bank´s non-performing loan had soared to 59 percent of the total credit portfolio. 

Since then it has undergone a reform program, which has bolstered its financial condition. Yet it is still technically insolvent as its networth is in the negative territory.

Members of the bank´s trade unions, who spoke on the occasion, said they were committed to extend whatever support to make recapitalization plan a success. “Considering this we have not placed any financial demands for the last few years,” Ghanashyam Adhikari, president of Nepal National Employees Organization, told the function.

To take the recapitalization plan to a logical conclusion, the bank has already initiated the process of selling some of its fixed assets. It is also soon relisting the bank on the stock market so that rights shares can be issued.

Nepal Stock Exchange (Nepse), the country´s only bourse, also confirmed receipt of an application from the bank requesting relisting of its shares, which were delisted in March 2004 following the institution´s enrolment in the financial sector reform program launched by the World Bank. Nepse has said it is still looking over the documents and will relist the company soon.

“But once the process (of relisting and issuance of rights shares) is complete, the bank will also have to focus on increasing its market share, which has been captured by other players in the market,” Navaraj Rimal, president of Nepal Bank Employees Association, said. “For this, preparations should begin from now.”

Source: Republica