Central bank gives green signal to merger of rural development bank

The central bank approved the merger of five regional rural development banks today. Th board meeting of the central bank decided to give Letter of Intent (LoI) to five regional development banks – Purbanchal Grameen Bikas Bank, Madhyamanchal Grameen Bikas Bank, Pashchimanchal Grameen Bikas Bank, Madhya Pashchimanchal Grameen Bikas Bank, and Sudur Pashchimancal Grameen Bikas Bank – for the merger.

They had signed a Memorandum of Understanding to become a single national level class 'D' microfinance development bank in October. After the merger, it will have a paid up capital of Rs 400 million.

Among the five, only one Pashchimanchal Grameen Bikas Bank, is in sound financial health and has posted profit in the last fiscal year. It has also floated shares, which was oversubscribed. It has also listed the shares at the Nepse before the central bank granted the Letter of Intent, which will force Nepse to halt its share trading.

The financial health of the remaining four development banks deteriorated due to frequent political bickering. Finally, the central bank was forced to pressurise them to merge.