As the deadline for meeting capital requirement passes, microfinance companies under pressure to go for forced merger

Nepal Rastra Bank (NRB) has been planning for financial market consolidation for quite some time now. After commercial banks, now it might be planning to push microfinance companies towards force merger.

Currently, there are 99 microfinance companies in Nepal and 15 more in the pipeline. So, soon there will be 114 microfinance companies in Nepal. Like all other classes of Banks and financial institutions, NRB had also raised the minimum paid-up capital requirement of Microfinance companies (Class D BFIs).

The minimum paid-up capital requirements were fixed as follows:
National level microfinance companies: Rs 10 crore
Regional level microfinance companies: Rs 6 crore
4 to 10 districts microfinance companies: Rs 2 crore
1 to 3 districts microfinance companies: Rs 1 crore
Wholesale microfinance companies: Rs 60 crore

Like the other BFIs, the deadline for microfinance companies was also till FY 2074/75. Thus, the companies who haven't met the capital requirement till now will be forced to undergo merger as the issuance of further bonus and right shares will be halted for now. The snapshot attested below is a part of Directive to Microfinance FIs, 2075 issued by NRB.

Thus, given this regulation, the companies now have to go through merger to meet the capital requirement until and unless directed otherwise by NRB.