Nepal’s big ticket infrastructure bank

Will it be NIDC, HIDCL or will the private sector beat the government entities to it?

  2 min 0 sec to read

Although the government’s annual budget talked about transforming two government-run entities into the country’s first infrastructure, development bank, the central bank is not convinced that this will materialise.

According to this year’s budget speech, two government-owned entities, NIDC (development bank) and Hydroelectricity Investment and Development Company Ltd, are to be transformed into an infrastructure development bank.

“We are going to allow the private sector to obtain a special license to start an infrastructure bank,” says Nepal Rastra Bank’s Deputy Governor Gopal Kaphle. He said that the central bank was not convinced that the government would be able to invest in these two entities anytime soon.

Governor Dr Chiranjibi Nepal says the new BAFIA (Banking and Financial Institutions Act) will have provisions related to the new infrastructure development bank. “BAFIA is going to say that the central bank will regulate and supervise the infrastructure bank,” says Dr Nepal.


During his monetary policy speech for this fiscal year, DR Nepal had said that the central bank, which placed a moratorium on opening of new banks in 2007, will allow an infrastructure bank to come into operation. But such a bank would have to have a minimum paid-up capital of Rs 20 billion.
NRB officials say that the new bank would not be allowed to run retail businesses. “We can consider any proposal that is backed by at least Rs 20 billion and a sound business plan,” says Deputy Governor Kaphle.

The concept of an infrastructure bank has been figuring in the budget speech for the last few years, but the government has not taken any concrete step towards establishing such a bank. However, after the government specifically mentioned that HIDCL and NIDC would be transformed into an infrastructure bank, NIDC has started preparing a draft proposal for a merger with HIDCL. The government is yet to say whether it wants NIDC and HIDCL to be transformed into two separate infrastructure banks or merge to establish a single bank.

“Both the companies are working on a merger plan. If we enter into a merger, our paid-up capital will exceed Rs 20 billion,” says NIDC Deputy Director Rabiraj Pant. He said the draft proposal has already been presented before the board.

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