According to unconfirmed reports quoting officials, the negotiating teams of both the countries led by joint secretaries of both the governments have reached an understanding in New Delhi in end September to add provisions for defining the controversial terms "surge" and "manufacturing" in the treaty. India has been complaining that there has been a "surge" in the export of some Nepali goods to India and that some of the goods being exported to India from Nepal are not actually manufactured in Nepal (NBA, September, 2001). Both these terms are not defined in the existing treaty, thus leaving room for controversies.

Reports also say that the negotiating teams did not consider the joint-recommendations made to the governments of both countries by the apex chambers of commerce and industry of both the countries. Holding a press conference in Kathmandu on September 30, leaders of FNCCI, the Nepali apex chamber claimed that their recommendation to include a condition for "value added" in the treaty was in the best interest of the country under the given situation.

The joint-economic council of Nepali apex chamber FNCCI and Indian apex chamber CII had recommended renewing the treaty without adversely harming its basic objective - i.e. to increase trade between the two countries.

The current treaty was revised in 1996 with provisions that allowed duty free entry to Indian markets for goods produced in Nepal. Similar recommendations of the two chambers were the basis for the 1996 revision, but their recommendations this time are not being heard, indicating that the present problems have cropped up not because of any real business issue, but because of lack of understanding between the present political leaderships in both the countries.

Keeping that fact in mind, the negotiation teams led by joint-secretaries have recommended for one more round of consultation between the political leaderships of both the countries before further negotiations, it is reported.

With the revisions, that make the directives easier for compliance, the banks are required to have a capital adequacy ratio (CAR) of 4.5% in terms of core capital and 9% in terms of capital fund. That means 4.5% of their risk assets should be covered by core capital and 9% by total capital fund. It is a relaxation as compared to 5% and 10% respectively ordered in the earlier directive, but is a stricter requirement when compared to 4% and 8% required in the rule prevailing earlier.

Still, the new arrangement is as demanded by Nepal Bankers Association (NBA) in June 2001. However, the ratio in core capital has to be increased to 5% and 6% respectively in the next fiscal years (2002-03 and 2003-04). Similarly the capital fund also has to be increased to 10% and 12% respectively. In earlier directive, the central bank had required the banks to have met the target of 12% CAR by 2002-03 itself.

Likewise, the central bank has also eased the definition of loan categories for the purpose of loan loss provisioning. Accordingly, loans overdue by over three years are to be taken as "loss" for this and next fiscal year requiring a 100% provisioning.

NRB says, the directives are already in force, meaning that the banks have to start complying from the very first quarter of this fiscal year. Thus, the banks have to show compliance of the directive in the financial reports that they prepare for the quarter ending in mid-October.

However, reports now quoting central bank officials say that the rules are now to be relaxed in the case of RBS. Accordingly, RBS is also reported to have decided to increase its shareholding in NIBL from present 15% to 65%. But doubts are also voiced about the capability of RBS to effectively manage NIBL as the government-owned RBS is itself in shambles due to weak management.

According to reports, the 849,922 units of shares held by Credit Agricole are offered for a price of Rs. 290 million, which comes to be Rs. 341 per share.