BFIs move to open mutual funds after NRB’s okay

KATHMANDU, JUN 09 -

Banks and financial institutions (BFIs) have been moving to establish mutual funds after Nepal Rastra Bank (NRB) gave the go-ahead to open asset management companies to operate them.

Siddhartha Bank on Wednesday filed an application at the Securities Board of Nepal (Sebon) to operate Siddhartha Mutual Fund. It is the first company to apply for a mutual fund license at Sebon after the Mutual Fund Regulation came into effect. The bank will establish Siddhartha Assets Management Company to run the mutual fund.

NRB had allowed BFIs to open asset management companies to operate mutual funds in the last week of March. Earlier, lack of provisions in the Bank and Financial Institution Act (BAFIA) regarding whether BFIs could open mutual fund companies had created confusion.

Even the central bank had been hesitant to allow BFIs to open subsidiary companies to start mutual funds in the absence of clear provisions in BAFIA. It had turned down requests from a number of BFIs that they be allowed to change their articles and memorandum of association to diversify into mutual funds.

The central bank opened the door for establishing such companies through Article 47 of BAFIA that has provisioned that banks can venture into other businesses as determined by the central bank.

Nabil Bank, Kumari Bank, NMB Bank, DCBL Bank and a number of other banks have already applied to the central bank for approval to start mutual funds. Chief executive of NMB Bank Upendra Poudel said the bank had applied to the central bank to change its articles and memorandum of association but hadn’t got its approval yet. “We’ve completed all the ground work,” said Poudel. “We’re waiting for NRB’s approval. Once we get the approval, we’ll apply to Sebon.”

Nabil Investment Banking, a subsidiary of Nabil Bank, has said it is in final preparation stages to apply for the license. “We will apply at SEBON with an aim of getting license with the current fiscal year,” said Prabeen Ram Parajuli, head of Nabil Investment Banking.

According to Parajuli, Nabil has already increased its paid-up capital to Rs 1.05 billion. The Mutual Fund regulation has provisioned that any institution seeking mutual fund licence should have a minimum paid-up capital of Rs 1 billion. Nabil has already appointed an impendent member in its five-member board. It is currently conducting a feasibility study about the business potential. “We will apply after the completion of the study,” said Parajuli

Sebon, the stock market regulator, has been pushing for the last few years for mutual funds in a bid to widen the capital market and create additional investment opportunities for small investors. Establishment of mutual funds is expected to help stabilise the capital market as it is heavily distorted in the absence of institutional investors.

Sebon issued the Mutual Fund Regulation in the last week of September last year. As per the regulation, BFIs can open assets management companies provided they have a paid-up capital of more than Rs 1 billion, completed five years of operation, registered profits for the last three years and have a paid-up capital not less than its net worth.

Posted on: 2011-06-09 09:11
http://www.ekantipur.com/2011/06/09/business/bfis-move-to-open-mutual-funds-after-nrbs-okay/335421.html