NRB Becomes Denials Bank

Banking sector reforms are getting into greater difficulties with one after another rumour regarding the safety of depositor’s money and the controversy around the central bank’s evaluation of ailing Nepal Bank Ltd.

First came the strong demands from some opposition political parties to impose ceiling on holding all forms of property, not just on landed property. Soon, a massive amount of bank deposit was withdrawn - Rs. 40 billion within days according to initial rumours, but only Rs. 1 billion according to what central bank officials reportedly told some public gatherings.

Meanwhile, Nepal Rastra Bank (NRB) is caught in another controversy, which is more directly related with the year-old program of banking sector reforms which targets to hand over management of Nepal Bank Ltd. (NBL) and Rastriya Banijya Bank (RBB) to international consultants any time now. A remark that the NRB Governor Dr. Tilak Rawal was quoted as making in the Public Accounts Committee (PAC) of the Parliament disturbed the hornet’s nest.

Quoting an evaluation report that NRB team has nearly completed, Rawal reportedly told PAC that NBL should be immediately closed down if the international banking norms are to be followed.

In response, the directors in the private sector-dominated board of NBL were furious and started blaming NRB itself for the poor health of the bank as they claimed it was during the period when NRB representatives were influential in NBL board that the bank was mismanaged the most and the repercussions of which are being faced by the bank now.

However, the bank is now in better shape than in previous years, they argued. Employees unions too came out aggressively against the governor’s remark and claimed the bank’s good health stating that the volume of deposits with the bank has now reached Rs. 35 billion and loan investment Rs. 21 billion. The figure actually are for mid-April, 2001 and clearly represent a decline compared to mid-January 2001 when the total deposits were Rs. 36 billion and total loans Rs. 23 billion.

NRB also issued a denial of the report that quoted the governor having made the devastating remark. But soon another rumour has started spreading that NRB is about to suspend the present Board of Director of NBL. And again NRB is issuing denials.

Fam Trip from Japan

A high profile delegation of Japanese journalists completed a seven-day familiarization trip in Nepal under the invitation of Nepal Tourism Board (NTB).

Before leaving Nepal on September 4, the 12-member delegation from Nepali tourism industry’s fourth largest market visited Pokhara, Bhaktapur, Nagarkot and Godavari and other places of Kathmandu.

According to Ministry of Culture, Tourism and Civil Aviation, 41,000 Japanese nationals visited Nepal during the year 2000. But the number is likely to go down in 2001, as NTB has calculated an 8.8% decline in the number of Japanese arrivals by air during the period of January-August this year.

In a series of such marketing campaign in various target markets, NTB has already conducted fam trips this fiscal year for journalists from India, Singapore and Hong Kong. Fam trips from China, The Netherlands, Italy and USA are now in the pipeline according to NTB.

BPC to be Re-auctioned

The Privatization Committee headed by the Finance Minister has decided to call for fresh tenders for the controversial privatization of Butwal Power Company Ltd. (BPC) after cancelling the latest bidding process.

This is the third time that the bidding for BPC has been cancelled, all for procedural and documentary reasons. Intercraft Nepal, a joint venture between Norway’s Intercraft Nepal A/S and Shangrila Energy Ltd. (a consortium of eight Nepali investors) was the sole bidder left for BPC this time after rival Chaudhary Group (which bid for BPC in association with Britain’s Independent Power Company) was declared disqualified on technical and procedural grounds and its financial bid was returned unopened.

The eight Nepali parties that bid for BPC this time together with Intercraft included Jyoti Group, Mercantile Group, Trishakti Cable, Panchakanya Group (of former President of FNCCI Pradeep K. Shrestha), Binod Bahadur Shrestha (the incumbent first vice-president of FNCCI) and Beltronix. In earlier rounds of the bidding, Intercraft had 11 Nepali partners and Intercraft itself had proposed to take 50% stake in the joint venture company. In the latest bid Intercraft had, however, reduced it to 15%.

As reported, the next tender bid for BPC’s 75% shares will be called for the fourth time within a month (by the first week of October, 2001).

More Banks

Within days after the 15th commercial bank of the country was officially inaugurated reports have come out that the central bank has decided to issue letters of intent to set up two more commercial banks and one Exim bank.

Among the two commercial banks to come up, Siddhartha Bank Ltd. is said to be promoted by Kedia Group (a business house) and Damodar Gautam (a former chief secretary who also is a former ambassador to USA). Laxmi Bank Ltd., the other commercial bank to get the letter of intent, has Khetan Group as the promoter.

Promoted by Vishal Group and Triveni Group, the business houses that are separately involved in two recently opened insurance companies, and jointly in one existing commercial bank (Nepal industrial and Commercial Bank Ltd.), the Exim Bank is the first of the kind in the country and will have Rs. 1000 million as its capital.

Meanwhile, Kumari Bank Ltd. that has been in operation for the last several months, has now been formally inaugurated. The bank initially suffered a dispute among the promoters, but that has now been resolved, according to the bank sources.

1500 IT Jobs

While IT companies elsewhere are slashing jobs, the opposite is happening in Nepal.

Unlimited Numedia (P) Ltd. is to increase the number of its employees from present 200 to over 1500 within a year from now under an agreement with the Employment Promotion Commission (EPC).

For this, the company is to train selected 1500 SLC graduates from all over the country and provide them jobs in Medical Transcription for at least two years, according to EPC. The nine months training including an internship period of three months is to commence soon in training outfits of Unlimited Numedia in Itahari, Pokhara and Kathmandu. According to Allen Tuladhar, CEO of Unlimited Numedia, the graduates will be provided Rs. 10,000 a month as salary upon employment.

The training is to cost Rs. 25,000 per person and EPC is to provide the amount as interest-free loan to the trainees who are to repay it in instalment over 12 months after they start working with Unlimited.

Transavia to Makeup the Void

Transavia Airlines is likely to make up for the short fall in airseats available for tourists from Northern Europe to Nepal following the withdrawal of RNAC from that sector, as revealed by Subodh Rana, managing director of Marcopolo Travels, the GSA of Transavia in Nepal.

Speaking at a special Travel Agents Award Night during which the airline awarded three top sales agents in Nepal that sold Transavia air tickets for the season 2000-01, Rana also revealed that Transavia has entered into a codeshare agreement with US carrier Northwest Airlines for entire routes in Europe and Asia.

As Nepal has no air service agreement with USA, the US government has requested Nepali government to grant codeshare permission for flight to Kathmandu. "If HMG agrees to the US request, Nepal will have extensive exposure in the US market with 52000 computers of NW Airlines showing Kathmandu in their reservation system", said Rana.

Transavia is also in alliance with KLM.

The travel agencies awarded on that occasion were Darbar Travels, Gandaki Travels and Jolly Gorkha Travels and Tours.

Capital Gain Tax

After the finance bill presented to the parliament on July 9 imposed 10% capital gain tax (CGT) on securities trading beginning July 16, every comment on this topic can be found complaining that the detailed provisions about it are not clarified as yet. However, some such details were brought out way back in July itself.

A six-point circular dated July 30 issued by the Internal Revenue Department and printed in the 26th AGM supplement of Nepal Foreign Trade Association (July-August, 2001) clarifies that:

1. The CGT will be on the excess of sales price over the purchase price in case of the securities so sold are purchased on July 16 or later.

2. In arriving at the sales or purchase price, the broker’s commission also will be considered.

3. In case the particular security was not traded on July 16, the price recorded in the latest transaction on that security earlier to July 16 will be taken as the purchase price.

4. In case of right shares and primary issue shares issued after July 16, the paid up value will be the reference price. In case such issue is with a premium, the reference price will be the face value. Similarly, the face value will be the reference price also in case of bonus share issued after July 16.

5. In case the actual price for which the stock is sold is less than the market price, the average price recorded that day for that stock in the stock exchange will be taken as the sales price for tax purpose.

6. In case a security is sold at a price lower than its purchase price, and thus a capital loss is sustained, such a loss will be allowed to be adjusted against the gain from other stocks transacted during the same fiscal year.

Had the authorities circulated these provisions more widely, a lot of the misinterpretations and complaints would have been avoided.

Send your feedback to the editor: bizline@mos.com.np 1999 © Mercantile Communications Pvt. Ltd. P.O. Box 876, Durbar Marg, Kathmandu, NEPAL. Tel : 977 1 220 773, 243 566 . Fax: 977 1 225 407. Reproduction in any form is prohibited without prior permission. No part of the articles which appear in the internet version on NEW BUSINESSAGE may be reproduced without the permission of Mercantile Communications Pvt. Ltd. For reprinting rights, please write to us. Send us your feedback:contact us . This site is best viewed at : 800 X 600 resolution

Back to the top