Nabil Bank Receives Approval to Issue Preferred Shares, Several Other Banks Awaiting Clearance
22nd November 2025, Kathmandu
The Securities Board of Nepal (SEBON) has granted its approval to Nabil Bank Limited to issue preferred shares worth NPR 5 billion.
Nabil Bank Preferred Shares
This major regulatory clearance allows Nabil Bank to proceed with mobilizing capital to support its business expansion and strategically strengthen its core capital position. The bank will issue “Nabil 8 percent Non-redeemable Preferred Shares,” with NIC Asia Capital appointed as the issue manager for the issuance process.
Understanding Preferred Shares in Nepal’s Banking Sector
The ability for Nepali banks to issue preferred shares is a relatively new development, enabled by regulatory amendments introduced earlier this year after receiving the necessary green light from Nepal Rastra Bank (NRB).
Definition: These shares are specified as Perpetual Non-Cumulative Preference Shares (PNCPS), meaning the bank is not obligated to buy them back, making them a permanent part of the capital structure. The 8 percent figure represents the fixed dividend (return) rate that the holders of these shares will receive annually.
Target Investors: Unlike ordinary shares, these preferred shares will be issued at a face value of NPR 100 per share and will be sold exclusively to institutional investors. They are explicitly not available for purchase by the general public, a key requirement for them to qualify as Additional Tier 1 capital.
Regulatory Purpose: The new provision for preferred shares is critical for the banking sector as it is expected to ease capital pressure for banks, particularly those that may be struggling to meet the stringent minimum core capital requirements set by the NRB under the Basel III framework. This mechanism provides a stable, long-term source of capital classified as Additional Tier 1 (AT1) capital, strengthening the bank’s solvency and ensuring financial stability.
Key Requirements for Additional Tier 1 Capital
The preferred shares issued by Nabil Bank must adhere to strict conditions set by the Nepal Rastra Bank for them to be classified as Additional Tier 1 (AT1) capital, ensuring they can absorb losses if needed.
Perpetual and Non-Redeemable: The shares must have no fixed maturity date and cannot be redeemable at the bank’s option.
Discretionary Dividend: Dividend distribution is at the discretion of the issuing institution. Dividends can only be paid from the current fiscal year’s profit, not from retained earnings or other reserves, and the payment is non-cumulative.
Loss Absorption Trigger: A critical feature is the loss absorption mechanism. If the bank’s Common Equity Tier 1 (CET1) capital falls below 5.125 percent of its total risk-weighted assets (the pre-specified trigger point), the preference shares must be converted to common equity (ordinary shares) or written down to absorb the losses, subject to NRB approval.
Advertisement
Liquidation Priority: In the event of liquidation, preference shareholders will be paid after creditors but before ordinary shareholders.
Banks Awaiting Regulatory Clearance for Preferred Shares
Following Nabil Bank’s success, several other commercial and development banks have moved quickly to pass preferred share proposals at their respective AGMs and are now actively awaiting regulatory clearance from SEBON and/or pre-approval from NRB to proceed with their own issuances. This collective action highlights the sector-wide importance of this new capital-raising instrument.
NMB Bank: This bank plans to issue NPR 3 billion in preferred shares, offering an 8.25 percent fixed return. This issuance is aimed at increasing the bank’s authorized capital to NPR 25 billion.
Siddhartha Bank: The bank will issue NPR 3.5 billion in preferred shares after receiving regulatory approval, which will significantly raise both its authorized and paid-up capital.
NIC Asia Bank: This institution has approved the issuance of NPR 5 billion in preferred shares, which is designed to boost its paid-up and authorized capital to nearly NPR 20 billion.
Sanima Bank: This bank is preparing to issue NPR 2 billion in preferred shares, also offering an 8.25 percent annual return to meet its capital targets.
Kumari Bank: This bank has already received NRB pre-approval for NPR 350 million in preferred shares at a 9 percent return. A critical condition for Kumari is that the return is payable only in profitable years.
Muktinath Bikas Bank: A major development bank, it plans to issue NPR 2 billion in preferred shares with an 8.5 percent return, aiming to raise its paid-up capital to over NPR 8 billion.
More banks are actively preparing to enter this process as preferred shares become a vital, viable tool for bank management to strengthen capital positions without diluting the equity of existing ordinary shareholders as severely as rights issues might, while providing a fixed return to institutional investors. T
For More: Nabil Bank Preferred Shares
