Machhapuchchhre Bank preference shares approved
17th February 2026, Kathmandu
The financial landscape of Nepal witnessed a significant regulatory development on Falgun 04, 2082, as the Securities Board of Nepal officially granted final approval for the Machhapuchchhre Bank preference share issuance. This landmark decision allows Machhapuchchhre Bank Limited to proceed with the issuance of 8.25 percent perpetual non cumulative preference shares totaling 3 billion rupees. As commercial banks in Nepal increasingly look for innovative ways to strengthen their core capital, this 30 million unit offering marks a strategic shift toward Tier 1 capital optimization. The move positions Machhapuchchhre Bank among an elite group of financial institutions, including Nabil Bank, Sanima Bank, and NMB Bank, that have leveraged preference shares to meet the stringent capital adequacy requirements set by Nepal Rastra Bank.
Machhapuchchhre Bank preference shares
Machhapuchchhre Bank Limited, headquartered in Lazimpat, Kathmandu, has consistently sought to expand its credit capacity and diversify its funding sources. The recent approval for these irredeemable preference shares is a central pillar of its long term financial strategy. Unlike traditional debt instruments like debentures, which have a fixed maturity date, irredeemable or perpetual preference shares have no specific date for principal repayment. This permanence is what allows the instrument to be classified as Tier 1 capital under the Basel III framework adopted by Nepal. For the bank, this means it can increase its risk weighted assets and expand its lending portfolio without diluting the voting power of its existing common shareholders.
The dividend structure for the Machhapuchchhre Bank preference shares is specifically designed as non cumulative at a rate of 8.25 percent per annum. In the context of the Nepalese banking sector, a non cumulative feature means that if the bank does not generate sufficient distributable profit in a given fiscal year, the dividend for that year is not carried forward or accumulated. This provides the bank with significant financial flexibility during lean periods, as it is not legally obligated to pay dividends unless it is profitable and meets the regulatory capital buffers. For investors, predominantly institutional players like insurance companies and pension funds, these shares offer a higher yield than traditional savings accounts while carrying a different risk profile than common equity.
To manage the complexities of this issuance, Machhapuchchhre Bank has appointed Laxmi Sunrise Capital Limited as the official issue and sales manager. Laxmi Sunrise Capital will be responsible for the entire administrative and regulatory lifecycle of the offering, including the preparation of the prospectus, managing the private placement process, and ensuring compliance with the Securities Board of Nepal’s guidelines. The bank intends to raise the 3 billion rupees primarily through private placement, targeting sophisticated investors who understand the hybrid nature of perpetual instruments. This method is often preferred for large scale capital raises as it offers a more streamlined path to funding compared to a traditional public offering.
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Financially, Machhapuchchhre Bank has shown resilience in a fluctuating interest rate environment. In its most recent quarterly reports for the first half of the fiscal year 2082/83, the bank maintained a stable capital adequacy ratio, but the infusion of 3 billion rupees in Tier 1 capital will provide a much needed buffer for future growth. The bank’s current paid up capital stands at approximately 11.62 billion rupees, and the addition of preference shares will significantly enhance its leverage ratio. This is particularly important as the Nepal Rastra Bank continues to emphasize strong core capital to protect the banking system against potential credit shocks.
The broader implications for the Nepalese capital market are also noteworthy. The introduction of varied instruments like irredeemable non cumulative preference shares indicates a maturing market where banks are no longer solely dependent on rights shares or bonus shares for capital expansion. Rights shares often put a strain on retail investors and can lead to market volatility, whereas preference shares provide a stable, long term solution for institutional capital mobilization. As more banks follow the path of Machhapuchchhre, Sanima, and Nabil, the Nepal Stock Exchange is expected to see a more diverse array of listed securities, providing investors with better tools for portfolio diversification.
Investors interested in the Machhapuchchhre Bank preference share issuance should closely monitor the official notices regarding the subscription timeline. While the approval from the Securities Board is the most critical hurdle, the bank must now coordinate with the Nepal Stock Exchange and the CDSC for the listing and dematerialization process. The successful execution of this 3 billion rupee issue will not only stabilize Machhapuchchhre Bank’s balance sheet but also serve as a benchmark for other mid sized commercial banks looking to optimize their capital structures in 2082 and beyond.
In conclusion, the Machhapuchchhre Bank preference share issuance represents a sophisticated step forward in Nepalese banking finance. By securing the approval of the Securities Board of Nepal and partnering with Laxmi Sunrise Capital, the bank has laid the groundwork for a robust capital infusion. As the project moves into the subscription phase, it highlights the increasing integration of global capital standards within the local market, ensuring that Nepal’s financial institutions remain well capitalized, resilient, and ready for the next phase of economic expansion.
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