The Banking Sector Reform Suggestion Task Force has recommended implementing the provision to convert promoter shares of banks and financial institutions (BFIs) into ordinary shares.
Coordinated by economist Dr. Rewat Bahadur Karki and including former banker Bhuvan Dahal, the task force made the recommendation after reviewing the current state of banking and the capital market.
According to the task force, converting founder shares into ordinary shares would increase public ownership in banks and separate the roles of businesspersons and bankers.
“The law governing banks and financial institutions allows for converting founder shares into ordinary shares. Considering legal consultation and the current state of banking and the share market, this conversion should be implemented optionally within ten years. This will increase public ownership and distinguish the roles of businesspersons and bankers,” the task force stated.
The Bank and Financial Institutions Act permits founder shares to be converted into ordinary shares after ten years of operation. However, despite many banks and financial institutions operating for over a decade, the central bank has not yet enforced this provision.
In contrast, for shares outside the banking and financial sector, founder shares are automatically converted into ordinary shares once the three-year lock-in period ends.
