Towards this end, Nepal Rastra Bank issued a Letter of Intent (LoI) to the country’s renowned public-private equity platform Emerging Nepal directing the latter to set up the Infrastructure Development Bank (IDB).

IDB, Nepal’s first such bank, with nearly 40 promoters is set to focus on financing mega infrastructure projects of the country and will begin its operations officially in the next six months.

According to NRB spokesperson Narayan Prasad Paudel, the process followed IDB’s deposit of 50 percent of its paid-up capital (45 percent in six commercial banks and 5 percent in the application phase) for setting up the needed infrastructure.

Why IDB?

With the prime objective of offering financial assistance, IDB will support the infrastructure projects by making the required equity investment and opening letters of credit to facilitate the import of equipment required for the projects.

Besides, IDB mobilizes long-term deposits and also issues currency bonds (domestic & foreign) and debentures to facilitate the required financial resources.

Process Ahead

According to NRB spokesperson Narayan Prasad Paudel, the process followed IDB’s deposit of 50 percent of its paid-up capital (45 percent in six commercial banks and 5 percent in the application phase) for setting up the needed infrastructure.

Post LoI from NRB, IDB will be registered as the public limited company within the next six months.

“In addition, the bank needs to manage the logistics besides developing the necessary software and appointing senior officials. NRB will then carry out an inspection of the financial institution before issuing the operating license,” says Paudel.

Background

IDB is part of the Government of Nepal’s plan to set up a mega bank to support and was envisaged to set up as an entity under public-private partnership.

“The establishment of IDB, which was initiated in the current fiscal year with the participation of national and international banks in order to increase private and foreign investment in the infrastructure sector, will be completed in the coming fiscal year,” reads the budget statement for FY 2017-18.

Following the government’s decision, NRB issued the relevant Licensing Policy for IDB in 2017 calling on the interested parties for their participation and Emerging Nepal was finalized for the deal.

Emerging Nepal has a joint investment of 40 Nepali promoters including insurance firms, five commercial banks and corporate bodies.

When it comes to public-private partnership, government and promoters hold 10 percent and 50 percent shares, respectively, and the remaining 40 percent capital will be raised through Initial Public Offering (IPO).

IDB will be operating according to the Banks and Financial Institutions Act (BAFIA) under the chairmanship of the former Chief Secretary Bimal Koirala.

According to Paudel, NRB is open to welcome more such IDBs provided the necessary requirements are met, and these banks also allow foreign investment.

Let’s hope the new initiative will drive Nepal’s infrastructure development to the next level!

The post Nepal Welcomes its First Infra Development Bank! appeared first on Nepali Sansar.

Addressing the 51^st Annual general meeting of Makawanpur Chamber of Commerce and Industry, she opined that the private sector would lead Nepal towards prosperity and development.

In this regard, she called on the entire Nepali business community and entrepreneurs to take charge of the economic prosperity of the country.

“The under-construction fast-track and Nijgadh Airport are major catalysts of development in the District. Makawanpur has a big scope of tourism development,” she added.

Here it is noteworthy that the Nepali private sector had, earlier in November 2017 announced its wish list for the new Nepali Government.

Private Sector Wish List

In its wish list to the next Nepali administration, the Nepali private sector community had sought fight against corruption, cut in bank interest rates, and the promotion of small and medium enterprises and quality tourism.

Top on priority of the wish-list was a clear road map to avoid double taxation for more private sector investment.

“The private sector is expecting a commitment from the political parties that they will urge the government to prioritize the economic agenda. Entrepreneurs seek a clear provision to avoid multiple taxation while paying taxes to the local, provincial and central governments under the new federal system,” Rana said in an economic dialogue organized to release the wish-list.

“There is a need to tap private sector investment by ensuring an investment-friendly environment,” left leader Khadga Prasad Oli said in a statement while promising removal of multiple taxation system if left forms the next Nepali government.

Fund Crunch, A Key Concern

Meanwhile, fund crunch in Nepal’s Rastra Bank (NRB) (over a period) is resulting in high interest rates for the Nepali private sector community.

According to NRB, the central bank has halted issuing loans because of the excessive money lending during the first five months of the current fiscal year that began in mid-July 2017.

Most of the banks have already reached the 80 percent loan-lending limits and are charging high interests for the new loans to manage the resources, particularly to the institutional depositors.

This move by the central bank is creating a concern for the country’s industrialists.

“Due to dramatic rise in interest rate, the production costs of industries is set to rise which will put Nepali products into competitive disadvantage against imported goods,” the Confederation of Nepalese Industries (CNI), an apex body representing medium and large sized industries in Nepal said in a statement.

According to CNI, unpredictability of interest rates will also hurt the private sector investment.

“The excessive lending of banks and the government’s failure to spend its budget well so far are mainly responsible for current liquidity crunch,” says NRB Spokesperson Narayan Prasad Paudel.

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