Sunday, June 30, 2013

NIC Asia Bank comes into operation



The first merged entity between two commercial banks NIC Bank and Bank of Asia Nepal – NIC Asia Bank – came into operation from today.
The merger between two class ‘A’ financial institutions in the history of the banking system has created an entity with a paid up capital of Rs 2.31 billion, though, its capital base – including reserve and retained earnings – is around Rs 5 billion.
“After a merger, NIC Asia Bank has now become a systemically important bank in the financial system due to its size,” central bank governor Dr Yubaraj Khatiwada said during the inauguration, here today.
The bank has also become a trendsetter in terms of merger between big institutions, he said, adding that mergers are meant to make the merged entity more competitive and able to run cost-effectively. “Its better for the banks and financial institutions, and they should not feel like they are merging for the central bank.”
The financial institutions should not keep on demanding more facilities to get merged, as merger itself provides opportunities for their own business expansion, Dr Khatiwada added. “Merger of banks and financial institutions are not like a cement industry in Souther part of Nepal that seek more benefit from the government.”
The governor, on the occasion, also informed that the time has come for the banks to increase their capital further. “Though higher capital does not guarantee better performance, it gives banks cushion and confidence.”
NIC Bank and Bank of Asia, which had started the merger procedure in May 2012, were granted Letter of Intent (LoI) for merger by the central bank on July 23, 2012.
The Office of Company Registrar granted the final approval for the two banks to merge on May 14.
Following the merger, NIC Asia Bank now has more than 270,000 customers with deposits worth Rs 38 billion and loans worth Rs 33 billion with 53 branches.
The central bank has been suggesting the banks and financial institutions to get merged if they have common directors and promoters.
“Though, the centran bank doesnot force them to merge, we suggest them to merge also for the financial stability,” Dr Khatiwada said.
The chief executive of the merged entity NIC Asia Bank Sashin Joshi said that the merger was not an easy process. “However, provided better facilities like tax breaks and clear legal provisions, mergers will be more attractive,” he said, adding that better legal arrangements will also facilitate acquisition. “The financial sector would see more acquisitions, if the central bank would bring Acquisition law," said Joshi, who was the chief executive of NIC Bank.
He also believed that the Nepal Stock Exchange (Nepse) that had halted trading of their shares due to the merger process since the last one year will resume the trading of the new NIC Asia Bank soon.
Shareholders of Bank of Asia Nepal will be issued new share certificates equivalent to one share of NIC Asia Bank for two shares of Bank of Asia Nepal as the due diligence audit of the banks had determined 1:2 share swap ratio between NIC Bank and Bank of Asia Nepal.
Coordinator of the Joint Merger Committee Rajendra Aryal, on the occasion, thanked for the support during the merger process of the two commercial banks.

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