Four banks will compete to issue 1.335 million preference shares.

Preference shares are ready to be issued by four different banks. Preference shares have been scheduled to be issued by three commercial banks and one development bank thus far.

A total of 133.5 million preference shares will be issued by Nabil Bank, NMB Bank, NIC Asia Bank, and Kamana Seva Bikas Bank. The corporations, having been impeded in their efforts to grow, intend to issue preference shares as a result of capital pressure.

Conversely, during its August 17 special general meeting, Nabil Bank approved a proposal to issue 5 billion rupees' worth of priority shares. The company's application for "Nabil 8 percent unredeemable unsecured priority shares" worth 5 billion rupees will be approved by Nepal Rastra Bank.

According to the corporation, preference shares will be issued because raising the capital base through additional primary capital is required to handle risks associated with business expansion.

Conversely, NIC Asia Bank has also made arrangements to issue 50 million preference shares. It has an interest rate of 8.5%.

In a similar vein, NMB Bank intends to issue 30 million non-rights shares. At the board of directors meeting on August 14, the business resolved to issue 30 million preference shares, or 3 billion rupees, at a rate of 100 rupees each. The company's interest rate is 8.25 percent.

In a similar vein, Kamana Seva Bikas Bank is ready to grant Bikas Bank 3.5 million priority shares. The company's interest rate is nine percent. The non-cumulative preference shares will be issued by the four companies.

The shares that are only distributed in the year that a profit is made are known as non-cumulative preference shares. During the previous fiscal year, Nepal Rastra Bank made it possible for banks to receive priority shares through monetary policy, which helped them raise investable money. Preference shares will be issued by Nabil Bank and other businesses in accordance with the same agreement.

According to Nabil Bank Chairman Upendra Paudel, the 8% unredeemable unreserved preference shares will only be issued to institutional investors individually and will not impact the voting rights of current shareholders because they are non-redeemable unreserved preference shares. Following the issuing of these shares, the central bank anticipates some respite for the banks that are facing capital pressure.

Preference shares: what are they?

Preference shares are those that the business issues with the intention of paying dividends at a certain rate from its profits. Because it has preferential rights over common shareholders with regard to dividends paid by the corporation, it is known as a preference share. Preference shareholders are entitled to receive their investment and any accumulated dividends first, even in the event that such a company enters liquidation.

Preference share investments are therefore regarded as comparatively less hazardous. However, preference shareholders will not be able to receive the dividend at the designated rate if the relevant company does not turn a profit in any given year. On the other hand, preference shareholders are limited to receiving the dividend at the stipulated rate, regardless of the company's profits.

Purchasing preference shares carries a low risk and a poor return in this sense. The only times preference shareholders may speak at the company's annual general meeting are when it comes to issues pertaining to their rights and interests. Because preference shares combine features of ordinary shares and debentures, they are regarded as securities of a hybrid nature.

Preference shares can be convertible into ordinary shares after a specific amount of time, or they can be non-convertible. They can also be cumulative (if the company experiences a loss and is unable to pay dividends in a given year) or non-cumulative.