13th October 2025, Kathmandu
The financial landscape of Nepal witnessed a significant consolidation of domestic institutional power with the recent approval from Nepal Rastra Bank (NRB), the central bank, for National Life Insurance Company Limited (NLIC) to acquire the entire founder shareholding of Pakistan’s Habib Bank Limited (HBL) in Himalayan Bank Limited (HBL).
NRB Approves Sale of HBL Shares
This pivotal transaction, finalized in the last week of Ashwin 2082 (mid-October 2025), is a landmark event that will substantially re-shape the ownership structure of one of Nepal’s leading Class ‘A’ commercial banks.
The Central Bank’s Formal Clearance and Regulatory Compliance
On October 13, the Nepal Rastra Bank formally granted its final approval for the transfer of a massive block of founder shares. This green light from a governor-level meeting of the NRB was the conclusive step that authorized the sale and subsequent transfer of the shares from the outgoing foreign partner, Habib Bank, to the local institutional investor, National Life Insurance.
The entire transaction involved 28,012,447 units of founder shares, representing approximately a 12.93 percent stake in Himalayan Bank. This approval confirms that the deal satisfied all necessary regulatory requirements under the stringent guidelines of the central bank.
Key Regulatory Requirement: According to the Bank and Financial Institutions Act (BAFIA) and NRB’s Unified Directive, the acquisition of a stake exceeding two percent in a bank by any single institutional entity requires prior and mandatory approval from Nepal Rastra Bank. Furthermore, NRB’s guidelines mandate that the sale of founder shares must first be offered to existing promoter shareholders, a protocol that was duly followed by Himalayan Bank.
The Tender Process: The formal sale process began on Jestha 30 (June 13) when Himalayan Bank issued a 35-day public notice inviting proposals from its existing promoter shareholders. Habib Bank had initially set the minimum offer price for its shares at NPR 112.80 per unit. National Life Insurance, already a minor shareholder, placed a more competitive bid of NPR 118.88 per share, which was ultimately accepted by Habib Bank, leading to the signing of a formal share purchase agreement in the last week of Saun (August).
Major Impact: National Life Insurance’s New Strategic Position
The completion of this share transfer fundamentally alters the shareholder distribution within Himalayan Bank and significantly elevates National Life Insurance’s standing in Nepal’s financial sector.
- Consolidated Ownership: Before this acquisition, National Life Insurance held a 1.25 percent stake in Himalayan Bank. By acquiring Habib Bank’s 12.93 percent shareholding, National Life Insurance’s total ownership in Himalayan Bank will surge to approximately 14 percent.
- Gaining a Voice: This substantial increase in stake, which now nears the maximum regulatory limit for insurance companies’ investment in a single public company (15%), is expected to grant National Life Insurance greater influence in Himalayan Bank’s management and strategic decision-making process. The acquisition is likely to result in National Life Insurance gaining representation on the bank’s Board of Directors, which is a common occurrence for a major shareholder, thereby potentially triggering a “fit and proper” assessment by the NRB.
- Strategic Investment Philosophy: The CEO of National Life Insurance had previously indicated that this investment was driven by the potential for higher returns compared to traditional fixed deposits, viewing the acquisition of founder shares as a robust opportunity in the current financial market environment. This move is part of a broader trend of life insurance companies in Nepal expanding their investment portfolio in the domestic capital market.
The Exit Strategy: Why Habib Bank Sold Its Stake
The sale represents the successful third attempt by Pakistan’s Habib Bank Limited to divest its investment in Himalayan Bank and exit the Nepali banking sector, a decision rooted in several financial and regulatory factors.
- A Planned Exit: Habib Bank had initially decided to exit Himalayan Bank over seven years ago. Its previous attempts, including a deal with Himalayan Reinsurance Company in late 2023, were blocked by the central bank. The NRB’s adherence to the rule prioritizing existing promoter shareholders for the sale of founder shares ultimately streamlined the path for National Life Insurance.
- Global Strategic Focus: The decision of foreign institutional investors like Habib Bank to exit the Nepali market is often attributed to a shift in their long-term global strategic focus, the need to recover invested capital for deployment in other markets, and a desire to minimize the administrative burden associated with compliance and regular reporting required by Nepal Rastra Bank for foreign investors.
- Securing Financial Benefit: By accepting National Life Insurance’s bid of NPR 118.88 per share, which was higher than the minimum asking price, Habib Bank was able to secure a profitable exit, recovering its investment at a favorable valuation.
This successful transaction, authorized by the central banking authority, solidifies a significant partnership between a leading insurer and a top commercial bank in Nepal, marking a new chapter in the country’s institutional ownership dynamics. The regulatory rigor demonstrated by Nepal Rastra Bank ensures a structured and compliant transfer, upholding the integrity of the financial system.
For More: NRB Approves Sale of HBL Shares