Nepal Bank Limited (NBL) has said it will issue rights shares to increase its paid-up capital to Rs8 billion in the next two years.

Commercial banks are required to hike their capital to Rs8 billion in two years from current requirement of Rs2 billion as per Nepal Rastra Bank (NRB)’s directive.

In a notice, the country’s oldest bank said it would issue the rights shares in 10:2.3 ratio. The bank’s current paid-up capital stands 6.46 billion, while 344764 of its shares are facing legal hurdles.

After taking over the bank nearly 14 years ago, the central bank had handed over management of the bank to the board elected by its annual general meeting in December 2014.  Over the period, the bank went through the financial sector reform programme. It raised its paid-up capital to Rs4 billion from Rs380 million first by issuing rights shares in 1:9.5 ratio. Then, the government injected Rs1.39 billion in NBL two years ago. The government has 38.6 percent stake in the bank.

The bank also converted the World Bank’s SDR loan of Rs2.5 billion into capital. It sold its physical assets to hike its capital size. The central bank exited after the bank’s financial situation turned healthy.

Meanwhile, the NRB has told banks and financial institutions (BFIs) that they cannot count preference shares as paid-up capital. With some BFIs preparing to issue preference shares, NRB told them only equity shares would be considered as paid-up capital.

As they have to hike their paid-up capital four-fold in just two years, there is a rush among the BFIs to go for merger or issue rights shares.