KATHMANDU, Aug 21: The banks and financial institutions (BFIs) have been cushioned to expand their investment due to upsurge in their profits at a time when they have been struggling to maintain their capital adequacy funds.
After the BFIs succeeded to increase their profits via write-back of their provision for doubtful debts, they have improved their position of the capital adequacy funds. According to the bankers, the regulatory provision of the commercial banks alone increased by 0.55 percentage points to 13.05 percent over the past one year.
Lending slows as banks focus on recovery of loans at fiscal yea...
Capital adequacy is the statutory minimum reserve of capital that the BFIs must have to maintain. As per the rule of Nepal Rastra Bank, commercial banks need to maintain 11 percent in capital adequacy funds.
Out of the ratio, 8.5 percent has to be maintained in Tier I capital including the core capital, while remaining 2.5 percent must be maintained in various types of reserves under Tier 2 capital. The BFIs can provide more amount as loans if they have sufficient amounts in the capital adequacy fund.
