Chapter 12 · Part 12 — Regulatory, Governance and Market Terms
SEBON, NEPSE, ownership and the AGM
The capital-market regulator, the only exchange, the two share classes, and what shareholder approval actually authorises.
Securities Registration and Issuance Regulation, 2073
Definition. The SEBON regulation governing the registration and public issuance of securities in Nepal, and the continuing disclosure obligations of issuers.
What it requires that appears in this report. The entire final section of the published report — headed "Disclosure as per Securities Registration and Issuance Regulation, 2073" — exists because of it:
1. MANAGEMENT ANALYSIS
Performance commentary, deposit and loan figures, PNCPS
issue, capital ratios, NPA level, risk and control functions
2. DETAILS OF LEGAL ACTION
(a) Cases by or against the institution
(b) Cases on disobedience of prevailing law or criminal
offence by promoters or directors
(c) Cases of financial crime against any promoter or director
3. ANALYSIS OF SHARE TRANSACTION
Management's view on share market performance; maximum,
minimum and closing price; trading number; days of trading
4. PROBLEMS AND CHALLENGES
Internal and external, with the bank's Strategy in response
5. CORPORATE GOVERNANCE
Board committees, code of conduct, compliance department
6. DISCLOSURE OF THE CHIEF EXECUTIVE OFFICER
Personal responsibility statementRelated terms. 12.8 · 12.25, 12.26 · Part 10 · Part 11
Securities Businessperson (Merchant Banker) Regulations, 2008
Definition. The SEBON regulation under which merchant bankers are licensed and regulated in Nepal.
The report's reference: NMB Capital "is into Merchant and investment banking licensed by Securities Board of Nepal under the Securities Businessperson (Merchant Banker) Regulations, 2008."
Permitted merchant-banker activities in Nepal typically include: issue management and underwriting; portfolio management; share registrar services; mutual fund management; and corporate advisory. All three of the intra-group service fees NMB pays its subsidiary — share registrar, debenture RTS, asset management — arise under this licence (Part 10.15, 10.17, 10.18).
Companies Act, 2063
Simple definition. Nepal's general company law.
Technical definition. The statute governing incorporation, share capital, directors, general meetings, accounts, audit, reserves, dividends, mergers and winding up of companies in Nepal.
Where it appears in this report.
• All three subsidiaries incorporated under it:
NMB Capital Ltd. — "incorporated on September 17, 2010
as a public limited company as per the Companies Act 2063"
NMB Laghubitta — "incorporated as a public limited company
under Companies Act, 2063"
• The report's compliance statement: financial statements
prepared "in compliance with the requirements of the
Companies Act, 2063 and generally Accepted Accounting
Principles and Directives, Circulars and Guidelines issued
by Nepal Rastra Bank"
• CAPITAL REDEMPTION RESERVE requirements (Part 7.3) [R]
• Restrictions on the use of SHARE PREMIUM (Part 1.31) [R]
• AGM requirements and dividend approval (12.13)
• Director duties and disclosure of interestThe layering. A Nepali commercial bank is subject to the Companies Act as a company, BAFIA as a bank, and SEBON regulations as a listed issuer. Where they conflict, the specific generally prevails over the general — but the practical rule is that the most restrictive applies.
Related terms. 12.3, 12.8 · Part 1.31 · Part 7.3
MARKET AND OWNERSHIP
Nepal Stock Exchange Limited (NEPSE)
Simple definition. Nepal's only stock exchange.
Technical definition. The sole securities exchange in Nepal, providing the trading platform for listed equity, debentures and mutual fund units, regulated by SEBON.
The report's statement: *"The Bank has a primary listing in the Nepal Stock Exchange Limited, the only Stock Exchange in Nepal."*
Why "the only" matters for analysis.
┌──────────────────────────────────────────────────────────────────┐ │ A SINGLE, RELATIVELY SMALL EXCHANGE MEANS: │ │ │ │ • Limited LIQUIDITY — see NMB's own disclosure: │ │ Trading number 8,289 · Days of Trading 64 │ │ → the share traded on only 64 days in the period │ │ │ │ • Prices can be VOLATILE and less informationally efficient │ │ │ │ • BANKS AND FINANCIAL INSTITUTIONS DOMINATE the index — │ │ so bank share prices move together with sector sentiment │ │ more than with individual fundamentals │ │ │ │ • FAIR VALUE consequences: "quoted price in an active market" │ │ (Level 1) is a strong claim for a thinly-traded share. │ │ Many Nepali listed holdings sit at LEVEL 2 or 3 │ │ (Part 8.C.10) │ │ │ │ • The FVOCI election (Part 3.4) is widely used precisely │ │ because NEPSE volatility would otherwise dominate reported │ │ bank earnings │ └──────────────────────────────────────────────────────────────────┘
Related terms. 12.8 · 12.25, 12.26 · Part 3.4 · Part 6.13 · Part 8.C.10
Annual General Meeting (AGM)
Simple definition. The yearly shareholders' meeting where the accounts are adopted and the dividend approved.
Technical definition. The meeting of shareholders required annually under the Companies Act 2063, at which the audited financial statements are adopted, dividends declared, directors elected or re-elected, auditors appointed and their remuneration fixed, and other reserved matters resolved.
Two AGMs referenced in this report — and what each authorised.
23rd AGM · Poush 26, 2075
→ approved the monthly director allowance of NPR 12,000
(Part 10.3) — still the operative authority years later
30th AGM · during the interim period
→ approved the 5% cash dividend and 5% stock dividend
(Part 5.24, Part 11.1)The recognition rule that follows from AGM approval.
┌──────────────────────────────────────────────────────────────────┐ │ BOARD PROPOSES a dividend │ │ → NOT a liability │ │ → a NON-ADJUSTING event under NAS 10 (Part 11.5) │ │ → DISCLOSE only │ ├──────────────────────────────────────────────────────────────────┤ │ AGM APPROVES the dividend │ │ → NOW a liability │ │ → Dr Retained earnings / Cr Dividend payable │ │ → deducted from equity (Part 5.26) │ └──────────────────────────────────────────────────────────────────┘
Related terms. 12.11 · Part 5.24, 5.26 · Part 10.2 · Part 11.5
Promoter Shareholder / Public Shareholder
Simple definition. Nepal's two-class share ownership structure — founders and the public.
Technical definition. A regulatory distinction between promoter shares, held by the founding and controlling shareholders and subject to transfer restrictions and lock-in requirements, and public shares, freely tradable on NEPSE by the general investing public.
The board composition disclosed, showing the structure in action:
i) Mr. Manoj Kumar Goyal Chairman (Represents Group –
PROMOTER Shareholder)
ii) Ms. Sharmila Hardi Prakash Member (Representative from FMO)
iii) Mr. Thakur Jang Thapa Member (Representative from
Employees Provident Fund)
iv) Mr. Harischandra Subedi Member (Represents Group –
PUBLIC Shareholder)
v) Mr. Uttam Bhlon Member (Represents Group –
PUBLIC Shareholder)
vi) Mr. Sirish Kumar Murarka Member (Represents Group –
PUBLIC Shareholder)
vii) Ms. Bandana Pathak INDEPENDENT DIRECTORWhy Nepal maintains the distinction.
┌──────────────────────────────────────────────────────────────────┐ │ PURPOSE 1 — ACCOUNTABILITY │ │ Promoters cannot simply sell and walk away. Transfer │ │ restrictions and lock-ins [R] keep the founders exposed to │ │ the consequences of their own decisions. │ │ │ │ PURPOSE 2 — BOARD REPRESENTATION │ │ Both classes elect directors, so public shareholders have │ │ a voice — three of NMB's seven directors represent the │ │ public shareholder group. │ │ │ │ PURPOSE 3 — CONNECTED-LENDING CONTROL │ │ Identifying promoters is what makes the prohibition on │ │ lending to them enforceable (Part 10.8). │ └──────────────────────────────────────────────────────────────────┘
Analyst relevance. Promoter and public shares can trade at different prices in Nepal, and promoter shares are far less liquid. When reading a market price or a PE ratio, note which class it refers to — the published figures in a bank's report refer to the publicly traded class.
Related terms. 12.15 · Part 10.1, 10.8 · Part 6.13
Independent Director
Simple definition. A board member with no financial or managerial ties to the bank, appointed to provide objective oversight.
Technical definition. A director who is not an employee, promoter, substantial shareholder or related party, appointed to bring independent judgement to board deliberations, particularly on matters where management or controlling shareholders have a conflict of interest.
*(NMB: Ms. Bandana Pathak, 1 of 7 directors.)*
Why the role exists.
Six of seven NMB directors represent someone: the promoter
group, the public shareholder group, FMO, or the Employees
Provident Fund.
│
▼
Every one of them has a CONSTITUENCY whose interests may
diverge from the bank's, or from depositors'.
│
▼
The INDEPENDENT DIRECTOR represents no constituency —
which is the point. On related-party transactions,
executive remuneration, audit disputes and connected
lending, they are the one board member with no interest
to protect.Analyst reading. One independent director out of seven is a modest proportion by international standards. Combined with the requirement that the Audit, Risk and HR committees be chaired by non-executive (not necessarily independent) directors (Part 10.4), the independence layer is present but thin. That is common in Nepal and not a criticism of this bank specifically — it is a structural feature of the market.
Related terms. 12.14, 12.22 · Part 10.4
Merchant and investment banking
Definition. Capital-market services — issue management, underwriting, portfolio management, share registrar services, mutual fund management and corporate advisory.
Conducted through NMB Capital Ltd., a 100% subsidiary licensed by SEBON (12.10).
Where it shows in the numbers.
• Investment banking fee and asset management fee (Part 8.E.14, 8.E.15) — Group column only • NPR 391 million of the Group-vs-Bank fee income difference (Part 2.4) • Dividends upstreamed: NPR 64,600 thousand from NMB Capital plus NPR 52,194 thousand from the funds it manages (Part 10.19) • Share registrar and debenture RTS fees paid by the bank TO this subsidiary (Part 10.17, 10.18)
Share brokerage business
Definition. Executing securities trades on NEPSE on behalf of clients, for commission.
Conducted through N.M.B. Securities Limited, a 100% subsidiary "with incorporation on 21 June 2021 and has started the share brokerage business."
Nepali context. Broker licences in Nepal have historically been limited in number and highly valuable. SEBON's expansion of broker licensing allowed bank subsidiaries to enter, and NMB's 2021 incorporation reflects that. Brokerage income is transaction-volume driven and therefore correlates with NEPSE turnover — a volatile revenue stream, but capital-light.
Where it shows. Brokerage fee income (Part 8.E.16), Group column only; and the NPR 1,100 thousand rent it pays the parent for premises (Part 10.15).
SUPERVISORY AND GOVERNANCE CONCEPTS
Non-Performing Assets (NPA)
Simple definition. Loans that have gone bad — the same thing as NPL.
Technical definition. Assets, principally loans and advances, classified as Substandard, Doubtful or Loss under NRB's loan classification directive, on which interest or principal is overdue beyond prescribed thresholds [R].
NPA and NPL are used interchangeably in Nepali banking. The report uses both:
Ratio table: "Non performing loan (NPL) to total loan" 4.91%
Management analysis: "NPA level has increased to 4.91% from
4.11% as compared to previous quarter"
← same number, different labelFull treatment at Part 6.2, including the classification ladder, the trio of ratios to read together, and the limitations.
Related terms. Part 6.2, 6.3, 6.4 · Part 1.7 · Part 2.11 · Part 8.D
Capital Adequacy Ratio
Definition. Regulatory capital as a percentage of risk-weighted assets — the family name for the CET1, Tier 1 and total capital fund ratios.
Full treatment at Part 6.1, 6.9, 6.10 and 6.17.
(NMB Bank, Asar 2083: total 12.73%, Tier 1 9.90%, CET1 8.99%.)
The related capital-structure terms, consolidated for reference:
CET 1 (Common Equity Tier 1)
Ordinary share capital + share premium + eligible reserves
+ eligible retained earnings − goodwill − DTA − other
deductions [R]
→ the PUREST loss absorber
AT1 (Additional Tier 1)
Perpetual, non-cumulative, discretionary-distribution
instruments — NMB's PNCPS [R]
→ going-concern capital, but not common equity
TIER 1 = CET1 + AT1
→ GOING-CONCERN capital: absorbs losses while the bank
still operates
TIER 2 (Supplementary)
Qualifying subordinated debt/debentures (amortised in the
final years), general loan-loss provision within a cap,
eligible reserves [R]
→ GONE-CONCERN capital: absorbs losses mainly in liquidation
TOTAL REGULATORY CAPITAL (Capital Fund) = Tier 1 + Tier 2
RWA (Risk Weighted Assets)
= Credit RWA + Operational RWA + Market RWA
Each exposure scaled by a prescribed risk weight [R]Related terms. Part 6.1, 6.9, 6.10, 6.17 · Part 1.30 · Part 8.H.13, 8.H.14
AML/CFT compliance
Simple definition. Anti-Money Laundering and Combating the Financing of Terrorism — the rules requiring banks to know their customers and report suspicious activity.
Technical definition. The framework of obligations requiring financial institutions to conduct customer due diligence, monitor transactions, maintain records, report suspicious and threshold transactions, and maintain a compliance function — arising under Nepal's asset (money) laundering prevention legislation and NRB directives, and shaped by FATF standards.
Core obligations.
• KYC / Customer Due Diligence (CDD) at onboarding • Enhanced Due Diligence (EDD) for higher-risk customers, including Politically Exposed Persons (PEPs) • Ongoing transaction monitoring • Suspicious Transaction Reports (STRs) and Threshold Transaction Reports (TTRs) to the Financial Information Unit • Record retention • A designated compliance officer and independent compliance function • Staff training — note the link to the mandatory Employees Training Fund (Part 7.6)
The governance response at NMB.
Assets Laundering Prevention Committee: 7 MEETINGS ← the MOST frequent of any board committee (Part 10.7) Strategy statement: "Strengthen AML/CFT compliance, enhance risk monitoring, and align with FATF standards." Corporate governance statement: "The Bank has a Corporate Governance Unit under Compliance Department to oversee matters related to corporate governance of the Bank at all levels."
Related terms. 12.21 · Part 10.7 · Part 7.6
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