State-run Nepal Bank Limited (NBL) and Agriculture Development Bank Limited (ADBL) have taken initiatives to raise their paid-up capital to the required level.

The Nepal Rastra Bank (NRB), through the Monetary Policy for this fiscal year, has directed commercial banks to raise their paid-up capital to Rs8 billion from existing Rs2 billion by mid-July 2017.

The NBL board has decided to meet the capital requirement within this fiscal year by issuing 23.74 percent right’s share, while ADBL plans to raise its capital to the prescribed level by the next fiscal year. This year, ADBL will issue 15 percent bonus shares and 2:1 right’s shares as per its board decision.

NBL Chairman Janardan Acharya said the board’s decision to issue right’s shares to increase its capital to Rs8 billion has been sent to the Finance Ministry and Nepal Rastra Bank (NRB) for their approval. “As the government holds a 62 percent stake in the bank and it has to make further investment, its approval has been sought.”

The government initially held around 38 percent stake in the bank, but the stake rose after it converted its more than Rs2 billion loans into equity. Currently, NBL has a paid-up capital of Rs6.46 billion. The oldest bank of the country will raise Rs1.53 billion through the issuance of right’s shares.

As far as ADBL is concerned, it had to go for capital increment after the central bank didn’t allow it to count preference shares as paid-up capital. The bank has preference capital of Rs6.44 billion. And if the amount is deducted, its paid-up capital stands at Rs3.42 billion. Following the issuance of right’s and bonus shares, the bank’s capital will reach Rs5.9 billion.

“We plan to increase the paid-up capital to Rs7 billion from this fiscal year’s profit, and to Rs8.5 billion from next year’s earnings,” said ADBL CEO Lila Prakash Sitaula.

According to the central bank, financial institutions need a total of Rs228 billion in the next two years to meet the new capital requirements. Commercial banks alone will require Rs143.1 billion.