Nabil Bank has completed the distribution of special shares worth Rs 5 billion. The bank issued these shares under the name “Nabil 8% irredeemable non cumulative preference shares.”
The bank said it distributed 50 million shares at a face value of Rs 100 each. This completed the full allotment of the shares.
The final distribution was done on Poush 1 after approval from the Securities Board of Nepal. These shares were offered only to institutional investors through the circular method. This means the shares were issued privately and not offered to the general public.
This is the first time in Nepal that such irredeemable non cumulative preference shares have been approved by the Securities Board. The approval came after Nepal Rastra Bank and the Securities Board introduced policy rules for this type of share.
These shares do not have a fixed repayment period. Investors receive a fixed dividend only in years when the bank earns profit that can be distributed. If the bank does not make profit, no dividend is paid.
After issuing these shares, Nabil Bank expects its capital base to become stronger. The bank believes this will increase its ability to manage risks and help in expanding its business.
Nabil Bank currently serves more than 2.5 million customers across Nepal. It provides services through 268 branches and 321 ATMs. The bank has been operating for over four decades and is known for introducing new banking services in Nepal.
What is an irredeemable non cumulative preference share?
This is a special type of share that can only be bought and sold by promoter shareholders. Each share has a face value of Rs 100.
Banks and financial institutions can issue these shares only to institutional investors. The number of investors must be fewer than 50. General investors, securities companies, and mutual funds are not allowed to invest in these shares.
The shares will be held in electronic form through the central depository. Listing and trading will follow the rules set by the securities market.
Rules related to refunding the investment or converting these shares into ordinary shares will be decided according to Nepal Rastra Bank guidelines.
Nepal Rastra Bank had earlier allowed banks facing capital pressure to issue this type of share to strengthen their capital position.
Banks are not allowed to set a repayment period for these shares. Only institutional investors can buy them, and dividends cannot be paid from retained earnings.
If the bank is closed or liquidated, investors holding these shares will be paid only after deposits, debentures, and other regulatory capital are settled.
Under the Capital Adequacy Framework 2015, banks can issue such shares up to 1.5% of their risk weighted assets. These shares are counted only as additional tier 1 capital.
