India’s Exim Bank proposes stake in infrastructure bank

- Post Report, Kathmandu
Exim Bank is involved in Nepal since 2006, financing projects on hydropower, transmission lines and road

Aug 11, 2018-Exim Bank of India, an undertaking of the government of India, is exploring an investment opportunity in Nepal, potentially setting up its own infrastructure bank or making equity investments in an existing Nepali bank.

Officials of the southern neighbour’s export finance institution had approached the Finance Ministry in June with a proposal, which coincides with the Nepal government’s decision to sign an MoU with China’s Zhongji Richway Holdings Limited that same month, just days before Prime Minister KP Sharma Oli’s visit to China.

Finance Ministry officials told the Post they recommended the Exim Bank enter into an equity partnership with Nepal’s Infrastructure Development Bank (IDB), financed by local businessmen in partnership with the government.

“We suggested that the Indian bank be part of the infrastructure bank which is coming into operation shortly,” said Uttar Kumar Khatri, chief of the financial sector management and corporation coordination division at the ministry.

Following the government’s suggestion, Exim bank officials had held talks with Emerging Nepal, the promoter of IDB, in June to explore the possibility of equity investment.

Emerging Nepal, which was established under public-private partnership, is expected to come into operation by November 22, after it received a letter of intent (LoI) from the Nepal Rastra Bank in May.

Chandra Prasad Dhakal, a board director of Emerging Nepal, confirmed to the Post that they had talks with Exim bank officials. He said they have been exploring the possibility of a joint venture with a number of Indian companies, and the Exim Bank of India is one. “The discussions are still at an early stage, so no concrete decision has been taken yet,” he said.

Dhakal said Emerging Nepal could accommodate the Exim Bank as a promoter by altering the existing capital structure of the proposed bank. According to the IDB licensing policy introduced by NRB last year, foreign investors can invest up to 85 percent in such banks; and a paid-up capital of Rs20 billion is required to establish the bank.

Currently, promoters of the bank can have 60 percent stake while 40 percent will be owned by the public. Among the promoters, the government will have 10 percent stake while the private sector will contribute 90 percent.

The government has been urging investors from both India and China for the last few years to invest in Nepal to open the infrastructure bank. The NRB has also opened the door for the establishment of such banks even though it has put a moratorium on commercial banks and financial institutions for some time.

The Chinese company responded first earlier this year with the proposal to open an infrastructure bank with a capital base of $1 billion—it would hold 80 percent stake and the Nepal government would hold the remaining 20 percent.

Chinta Mani Siwakoti, deputy governor at the NRB, told the Post that they had notified the finance ministry about the licensing policy and that the IDB should give at least 15 percent shares to the general public.

However, he said no Chinese company has yet applied to the NRB formally to open such a bank. Exim Bank of India has been involved in Nepal since 2006, after it financed a number of projects on hydropower, transmission lines, and road development.

Published: 11-08-2018 08:09

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