Bankers have sought tax incentives for merger and acquisition (M&A).
As the central bank is bringing a forceful merger policy – according to the rumours making round in the banks and financial institutions – the bankers also said that the central bank cannot force them to merge but can encourage merger by announcing certain tax incentive packages. “We, the commercial banks have been operating legally by taking licences from the central bank,” they said, adding that the government cannot pressurise any bank for forced merger. “Though, the number of banks in Nepal is high and central bank plan to reduce the number through merger and acquisition is good, there has been no study on how many banks are needed in the economy.”
The government could, however, encourage banks towards merger by incentivising them in taxes, according to Nepal Bankers’ Association (NBA) that has held a meeting – today – to decide on how to seek incentives from the government before starting the merger process. “The government should reduce income tax levied on banks by at least five percentage points for a period of five years through the budget for those banks who choose to merge with others,” the association decided, adding that the banks should also be given enough time for merger and acquisition, as choosing a partner for business is a matter of taking risk.
The meeting also discussed on how to answer the central bank that had last week summoned chairpersons and chief executive officers of all the 28 commercial banks in operation to discuss possible merger. The central bank had asked bankers to submit the names of banks that they wanted to merge with or submit a commitment letter for merger before the Monetary Policy that is scheduled to be announced in mid-July.
The government – through the budget for fiscal year 2019-20 – had also announced to adopt policies to encourage mergers between banks and financial institutions (BFIs).
As the central bank is bringing a forceful merger policy – according to the rumours making round in the banks and financial institutions – the bankers also said that the central bank cannot force them to merge but can encourage merger by announcing certain tax incentive packages. “We, the commercial banks have been operating legally by taking licences from the central bank,” they said, adding that the government cannot pressurise any bank for forced merger. “Though, the number of banks in Nepal is high and central bank plan to reduce the number through merger and acquisition is good, there has been no study on how many banks are needed in the economy.”
The government could, however, encourage banks towards merger by incentivising them in taxes, according to Nepal Bankers’ Association (NBA) that has held a meeting – today – to decide on how to seek incentives from the government before starting the merger process. “The government should reduce income tax levied on banks by at least five percentage points for a period of five years through the budget for those banks who choose to merge with others,” the association decided, adding that the banks should also be given enough time for merger and acquisition, as choosing a partner for business is a matter of taking risk.
The meeting also discussed on how to answer the central bank that had last week summoned chairpersons and chief executive officers of all the 28 commercial banks in operation to discuss possible merger. The central bank had asked bankers to submit the names of banks that they wanted to merge with or submit a commitment letter for merger before the Monetary Policy that is scheduled to be announced in mid-July.
The government – through the budget for fiscal year 2019-20 – had also announced to adopt policies to encourage mergers between banks and financial institutions (BFIs).
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