NRB moves to ease lengthy promoter share transfer rules as banks face months-long delays

KATHMANDU: In a major policy shift aimed at modernizing Nepal’s capital market and improving investment mobility within the banking sector, the Nepal Rastra Bank (NRB) has begun reviewing the long-criticized and time-consuming process for the sale and transfer of promoter (founder) shares in banks and financial institutions. The move follows mounting complaints from investors, banks, and institutional shareholders who say the current rules—requiring multiple approvals, lengthy notices, and strict regulatory vetting—have made promoter share transactions unnecessarily sluggish, discouraging investment fluidity and weakening market competitiveness.

The policy review gained momentum after Pakistan’s Habib Bank Limited (HBL) needed nearly four and a half months to sell its 12.93% stake—28,012,447 promoter shares—in Himalayan Bank, eventually purchased by National Life Insurance Company at Rs 118.88 per share, totaling Rs 3.33 billion. The protracted process has become a textbook example of inefficiencies in Nepal’s regulatory framework governing promoter shares.

Months of Procedure for a Single Transaction

According to Himalayan Bank officials, HBL was required to issue a 35-day public notice inviting interest from existing promoter shareholders, secure approval from the bank’s board of directors, and then seek final consent from Nepal Rastra Bank. Only after all three steps were completed could the transaction move forward—resulting in months of delay.

This is not an isolated case. Across the banking sector, promoter shareholders attempting to exit or rebalance their holdings routinely spend a minimum of three months navigating procedural hurdles.

Global IME Bank’s Company Secretary, Bishnu Baskota, explained that the current system obliges a selling promoter to request the bank to publish a 35-day notice offering first priority to existing promoters.
If no promoter shows interest, another 35-day notice must then be issued for public investors.

“The promoter share sale process is lengthy and far from market-friendly. Unlike public shares, promoter shares cannot be traded on the secondary market. Every transfer requires NRB approval and a board-level decision, which makes the procedure slow and bureaucratic,” Baskota said.

He added that the dual share structure—promoter vs. public shares—itself is outdated and creates unnecessary complications. In developed markets, a single class of shares trades freely, ensuring higher liquidity and transparency.

Regulators’ Stringent Filters Add More Delays

Promoter share buyers must pass NRB’s stringent thresholds, including:

These checks, while intended to safeguard the financial system, significantly slow down genuine transactions.

Baskota argues that with mutual agreement between a buyer and seller, promoter share transfers should be possible within seven days, provided the legal framework is amended accordingly.

“Shares are legally classified as movable property. But unlike gold or land, even one’s own movable asset cannot be sold quickly. The system must allow faster, simpler transactions,” he said.

Sector Leaders Call the Current Dual-Share Structure “Discriminatory”

Rajesh Upadhyaya, Chairperson of Mahalaxmi Bikas Bank and Senior Vice President of the Confederation of Banks and Financial Institutions (CBFIN), called the existing two-tier share structure discriminatory.

“Promoter and public shares should not exist as separate classes. BAfIA says one thing, but NRB continues to restrict. Why are investors held hostage? Bank investors are taxpayers who invest clean money. Despite passing rigorous fit-and-proper tests, they face unnecessary barriers even when they want to exit,” he said.

Upadhyaya emphasized that no other sector in Nepal has such restrictive exit rules, despite the banking industry being the most transparent in terms of compliance and disclosure.

NRB Governor Confirms Policy Overhaul Underway

NRB Governor Dr. Bishwanath Paudel acknowledged the systemic delays and confirmed that the central bank is working to transfer operational responsibilities—such as the processing of share transfers—to banks themselves.

“Retail-level work should not come to the central bank. Share transfer disputes flood NRB. We are preparing guidelines so that company secretaries can handle such matters internally without NRB’s direct intervention,” the Governor said.

He added that the upcoming framework will clarify which transactions require regulatory intervention and which can be processed instantly at the bank level.

For Nepal’s financial market—where confidence, liquidity, and investor protection are central—the easing of promoter share transactions is seen as essential for strengthening the banking sector’s credibility and attractiveness to both domestic and foreign investors.

As NRB prepares its new guidelines, the banking industry hopes that the days of months-long approval delays and procedural complexities will soon be replaced by a faster, market-driven system capable of supporting Nepal’s evolving financial landscape.