Among the most prominent upheavals under this rule, the Chaudhary Group, which has a stake in Nabil Bank through its Irish offshore company NB International, and Malaysian company Yong Lian Realty, which has a stake in NMB Bank, will have to sell their shareholdings.

NB International owns 50 percent of Nabil Bank while Yog Lean Realty has a 12.9 percent stake in NMB Bank. The central bank said that those failing to sell their shares by the deadline will not be allowed to receive cash dividends and bonus shares or buy rights shares.

“Before the deadline passes, the door is open to these two foreign companies to receive dividends,” said a senior NRB official of the regulation department. Before issuing the latest circular, NRB had told Nabil not to distribute dividends to NB International for the time being. “Our supervision department will decide on what basis the distribution of dividends will be allowed,” said the central bank official.

Nabil’s annual general meeting (AGM) has approved issuing 60 percent dividends (40 percent cash and 25 percent bonus shares) from the profits of the last fiscal which amounted to Rs 2.23 billion. NB International will be receiving Rs 669 million in dividends.

Earlier, a complaint had been registered at the central bank against the repatriation of profits to NB International claiming that it violated the Bank and Financial Institution Act (Bafia). The central bank subsequently stopped Nabil from distributing dividends to NB International until further notice.

Clause 4 (3) of Bafia allows only foreign BFIs to invest in Nepali BFIs. “The new circular was issued to bring the entire shareholding pattern as per Bafia,” said another NRB official.

“As foreign companies like NB International and Yong Lian Realty held stakes in two banks before the introduction of the NRB Act and Bafia, they were given time to come within the parameters of Bafia.”

A Nabil Bank board member representing NB International said that they would abide by the central bank’s directive. The NRB Act has authorized the central bank to issue licences to BFIs, a privilege previously held by the government.

Meanwhile, the new circular has also directed BFIs which had foreign ownership in the past but failed to increase the shareholdings of the public to at least 30 percent to do so within a year.  “If any BFI has failed to increase the public’s shareholdings to 30 percent, they have to do so by mid-July 2015,” states the circular.

An NRB official said that the move had been taken to address the small shareholdings of the general public in Nepal Investment Bank Limited (NIBL). The public owns only 20 percent of the shares in NIBL as its promoters had bought all the shares of French promoter Credit Agricole Indosuez before it left Nepal.

Bafia includes a provision saying that all the BFIs should issue at least 30 percent of their shares to the public.