MICROCAPITAL BRIEF: Nepal Rastra Bank Allows Acquisitions of Financial Institutions

Nepal Rastra Bank (NRB), the country’s central bank, recently announced the approval of an acquisition bylaw that will allow banks and financial institutions to acquire similar institutions in the market. The law establishes four different classes of institutions, with Class A being commercial banks, Class B being development banks, Class C being finance companies and Class D being microfinance institutions. According to the new bylaw, institutions from classes A, B and C may acquire each other but are prohibited from acquiring Class D institutions. Microfinance institutions may only be acquired by other microfinance institutions.

A second provision of the bylaw states that investments by a single player in a microfinance institution cannot exceed 25 percent of the institution’s paid-up capital. Furthermore, institutions that have completed an acquisition will be given a grace period before they must achieve the required 80 percent credit-deposit ratios and “to meet regulatory requirements on deprived sector lending and investment” [1].

By Juan Blanco, Research Associate

About Nepal Rastra Bank (NRB)

Established in 1956, Nepal Rastra Bank (NRB) is Nepal’s central bank. NRB formulates and monitors the nation’s monetary and fiscal policy and regulates the nation’s banking and financial sectors. For the year 2011, NRB reported total assets of NPR 299 billion (USD 3.67 billion).

Sources and Additional Resources

[1] The Himalayan, “NRB brings acquisition bylaw,” April 2014, http://www.thehimalayantimes.com/fullNews.php?headline=NRB+brings+acquisition+bylaw&NewsID=412379

MicroCapital Story, August 6, 2013, “Nepal Rastra Bank (NRB) Announces Regulations on Microfinance Institutions (MFIs) in Nepal to Increase Financial Inclusion of the Unbanked,” https://www.microcapital.org/microcapital-brief-nepal-rastra-bank-nrb-announces-regulations-on-microfinance-institutions-mfis-in-nepal-to-increase-financial-inclusion-of-the-unbanked/

MicroCapital Story, February 28, 2013, “Nepal Rastra Bank, Rural Microfinance Development Center, Center for Microfinance Nepal Urge Microlenders to Lower Interest Rates, Focus on “Deprived” Sectors,” https://www.microcapital.org/microcapital-brief-nepal-rastra-bank-rural-microfinance-development-center-center-for-microfinance-nepal-urge-microlenders-to-lower-interest-rates-focus-on-deprived-sectors/

MicroCapital Story, February 20, 2013, “Governor Yuba Raj Khatiwada of Nepal Rastra Bank Cites Multiple Lending and Low Outreach to Poor People by Microfinance Sector,” https://www.microcapital.org/microcapital-brief-governor-yuba-raj-khatiwada-of-nepal-rastra-bank-governor-cites-multiple-lending-and-low-outreach-to-poor-people-by-microfinance-sector/

MicroCapital Story, January 5, 2013, “Representatives of Nepal’s Rural Microfinance Development Center (RMDC), Nepal Rastra Bank (NRB) Express Cautious Optimism About Microfinance Reducing Poverty While Conceding There Are High Interest Rates, Mission Drift,” https://www.microcapital.org/microcapital-brief-representatives-of-nepals-rural-microfinance-development-center-rmdc-nepal-rastra-bank-nrb-express-cautious-optimism-about-microfinance-reducing-poverty-while-concedi/

MicroCapital Universe Profile: Nepal Rastra Bank (NRB) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Nepal+Rastra+Bank+%28NRB%29

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