The government of Nepal has allowed Nepal Bank to sell fixed assets to replenish its capital.
The Ministry of Finance has said the technically bankrupt bank can sell fixed assets that are not in use in a phase wise manner and subsequently raise Rs 2 billion to fix its balance sheet which shows a negative net worth of Rs 4.5 billion.
However, it was asked to take into consideration the cabinet decision of June 2010 which does not allow public enterprises to sell fixed assets to the private sector.
“Because of this provision the entire process of selling fixed assets belonging to the bank has slowed down,” a person privy to the issue told Republica. “The issue has recently been settled as it has been acknowledged that the government is not a majority stakeholder in the bank and it should be exempt from the condition that solely applies to public enterprises, which according to the definition are companies in which the government is a majority shareholder.”
This has paved way for the bank to sell its fixed asset to the private sector as well.
The bank has a negative core capital of over Rs 4.5 billion it needs an injection of at least Rs 9.7 billion to do away with the negative net worth.
To replenish its capital, the bank is planning to raise Rs 4 billion through rights issue of which Rs 1.5 billion will come from the government. It is planning to raise another Rs 2 billion through sales of fixed assets.
Nepal Bank is estimated to have fixed assets worth around Rs 14 billion at current market price throughout the country. “The bank, however, has not finalized plots of land that would be put on sale, although it is looking at areas where real estate prices have not come down yet,” the source said.
Earlier, the bank had also requested the government to waive off capital gains tax on sales of these assets. But the finance ministry rejected the proposal. It has instead said the amount raised as tax would be invested in purchasing rights shares of the bank.
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