NMB, Nabil front-runners both in race to open mutual fund

POST REPORT

KATHMANDU, NOV 18 - NMB Bank and Nabil Bank have intensified preparations to open an asset management company to operate the mutual fund after the recent issuance of mutual fund regulations by the Securities Board of Nepal.

Establishment of a mutual fund is expected to help stabilise the capital market as it is heavily distorted in the absence of institutional investors.

NMB Bank is at the front in making the preparations. “We have experience and expertise in the capital market to open a mutual fund as we have been doing merchant banking for a long time,” said NMB Bank’s CEO Upendra Poudel. “There is also business viability, as the slowdown in the capital market has given some space for improvement.”

According to NMB officials, it has already prepared a feasibility study and documented the minutes of the bank’s annual general meeting that endorsed the proposal to establish a mutual fund.

NMB’s feasibility study has confirmed the viability of a mutual fund if the bank can enter the untapped market at the earliest.

“The study found that the market may head in a positive direction after the political stalemate ends,” said Sameer Chhetry, head of NMB Capital.

As the mutual fund regulations have also made it compulsory that any company going for an initial public offering (IPO) should allocate 5 percent of the shares for mutual funds, it will help in running them because shares are issued at face value during an IPO.

NMB has also finalised the tentative names of the supervisors of the company.

The job of the supervisor is to see that the fund manager and the depository are operating the fund as per the prevailing laws and regulations.

According to the regulations, the promoter of the fund (sponsor) may appoint at least five independent people from different fields, and the supervisor should not have any financial or non-financial interest with the sponsor or the fund manager who is responsible for making investments wisely. NMB Capital will operate the mutual fund.

Similarly, Nabil Bank will be hiring manpower to study the possibility of establishing a mutual fund. “Following the recruitment of personnel, we will carry out a feasibility study and other related tasks to register the company,” said Praveen Raman Parajuli, head of Nabil Investment Banking, the bank’s subsidiary that handles merchant banking.

Nabil’s AGM has endorsed the proposal to establish a mutual fund. “We have to hold Nabil Investment Banking’s AGM too to increase its paid-up capital to Rs 100 million from the current Rs 70 million,” said Parajuli. “We are making preparations with the assumption that there is a market for a mutual fund,” he added.

Everest Bank has also shown interest to operate a mutual fund. But it has not started any preparations so far. “We are studying the market at the moment,” said assistant general manager Humnath Gurung.