The announcement, delivered by Finance Minister Dr. Swarnim Wagle during the joint session of the Federal Parliament on May 29, is detailed under Point 16 of the fiscal year 2083/84 budget statement.
"I have made arrangements to increase capital in some and disinvestment of government shares in others to strengthen public enterprises. I have proposed to increase the capital of the Government of Nepal in the Rastriya Banijya Bank," Minister Wagle stated.
While the financial commitment is certain, the exact operational path—navigating between traditional state dominance and a more liberal market approach—remains a subject of internal debate.
The financial intervention comes at a critical time for RBB. Despite holding massive liquidity, with public and government deposits totaling approximately Rs 600 billion, the bank has been legally hamstrung from lending to seeking entrepreneurs and businesses.
According to RBB Chief Executive Officer Devendra Raj Khanal, the bottleneck is not a lack of cash or a weak Credit-to-Deposit (CD) ratio, which sits at a highly conservative 56–57%. Instead, the bank is restricted by its Regulatory Capital Adequacy Ratio (CAR).
Under Nepal Rastra Bank regulations, commercial banks must maintain an 11% internal capital fund against risky assets.
"If the bank has to extend a loan of Rs 1 crore, it can use Rs 89 lakh from public deposits, but the remaining Rs 11 lakh must be covered by its own capital fund," CEO Khanal explained.
With RBB’s primary capital fund capped at just Rs 34 to 35 billion, its maximum credit capacity tops out at Rs 360 billion. This regulatory ceiling has forced a staggering Rs 240 billion to languish as "idle money," preventing deployment into the nation's core infrastructure and industrial sectors. RBB’s five-year strategic plan aims to scale its paid-up capital from the current Rs 15.63 billion up to Rs 28 billion, targeting an immediate infusion of Rs 4.5 billion to meet urgent credit demands.
The Ministry of Finance and RBB management are weighing four distinct structural mechanisms to raise the capital, though a final decision has yet to be finalized.
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Option
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Mechanism
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Strategic Alignment
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1. Direct Equity Injection
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The government directly allocates capital funds in the annual budget, issuing new shares to itself.
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High: Maintains 100% state ownership and total policy control.
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2. Right Shares (1:1)
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RBB issues right shares. Since state entities own 99.97% of the bank, the government would buy out the issue.
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High: Simple execution, though it demands direct cash output from the state treasury.
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3. Bonus Shares & Capitalization
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The government retains RBB’s annual net profits and accumulated funds, converting them into capital rather than taking cash dividends.
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High: Non-disruptive and utilizes internal bank earnings without impacting the federal budget.
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4. Initial Public Offering (IPO)
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Issuing shares to the general public, initiating a process of partial disinvestment.
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Debated: Aligns with Wagle’s market-oriented outlook, but faces pushback due to the bank's public welfare role.
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The choice of modality has revived a long-standing ideological debate on the nature of the bank's ownership.
A previous plan to take RBB public in 2071 BS was halted after the promulgation of the 2072 Constitution. At the time, the government determined that absolute control over RBB was strategically necessary to execute public welfare mandates—such as delivering social security allowances and establishing banking access in remote, underserved areas. This perspective led to amendments in the Bank and Financial Institutions Act (BAFIA), securing the legal framework for exclusive government ownership.
However, Finance Minister Wagle’s market-forward economic philosophy has reintroduced the possibility of a public offering. The 2083/84 budget explicitly mentions the "disinvestment" of state shares across various public institutions to enhance efficiency.
While RBB is poised for expansion, officials note that the exact mechanism will depend on upcoming negotiations.
"The bank has not yet received a final directive from the government on which path to take, as the budget has just been tabled," stated CEO Khanal. High-level consultations between the Ministry of Finance and RBB management are expected to conclude shortly to finalize the capitalization model.
