Under the new framework stipulated by the county’s monetary regulator, minimum capital requirement of small banks will be in the region of less than Rs 50 billion this year, officials said.
These banks should maintain its capital to absorb unexpected losses and It should be maintained at a level of around 7 percent of the bank’ assets.
Deposits account should be around 70 percent of bank’s assets. These banks have a responsibility towards the depositors and creditors, they said.
This troubled small bank is required to increase minimum regulatory capital further to Rs.10 billion by 1 January 2018.
The bank's earnings retention alone is not likely to be sufficient to achieve the capital standards, despite improved profitability, officials said.
The bank raised Rs.2.1 billion in March 2017 via a rights issue to increase its minimum regulatory capital in order to meet the Rs.7.5 billion target which was due on 1 January 2017
The bank should achieve a sustained and significant improvement in capitalisation, alongside a moderation in risk appetite.
This small bank will face liquidity issues if loss-absorption buffers deteriorate further, either through aggressive loan-book growth or a greater share of un-provided NPLs, they said.