Against the popular assumption, the central bank has made the merger optional rather than forceful, though it has announced a gamut of incentives and facilities for bank and financial institutions (BFIs) pursuing merger to promote consolidation in banking sector.
Releasing 'Monetary Policy for the current fiscal year 2019-20' today, the central bank governor Dr Chiranjivi Nepal said that the central bank will offer various benefits for BFIs going for amalgamation in line with the government's policy of encouraging 'big' merger in the banking sector. The government in the fiscal policy has also said that it will encourage the merger.
Against recent indication from Dr Nepal that the Nepal Rastra Bank could pursue a 'carrot and stick' approach on merger and acquisition (M&A), the monetary policy has taken a softer line of encouraging them rather than forcing them to go for the merger. “Commercial banks that complete their M&A and start joint operation by mid-July 2020 will get a relaxation in the deadline for maintaining priority sector lending requirement and interest rate spread,” the Monetary Policy reads, adding that it means the merged entity will have to maintain directed sector lending requirement and interest rate spread by mid-July 2021. “The commercial banks going for the merger will get waiver on cooling period for board directors, CEOs and deputy CEOs.”
After the merger, board directors, CEO or deputy CEO will not be barred from joining another bank before six months as is the case for other BFIs, against the current directives of six months cooling period, it reads. “The BFIs will not require merged entity to get its approval for expansion of branches.”
Another benefit for banks is that the extension of the deadline on the new requirement to float debentures worth 25 per cent of their paid-up capital will be until mid-July 2021, according to the Monetary Policy.
Likewise, the merged entity will also get up to mid-July 2021 to reach the 4.4 per cent spread rate. “The consolidation of BFIs will be accorded priority to enhance the capacity of banking sector in mobilising resources and increase people's access to finance,” Dr Nepal said, unveiling the Monetary Policy. The Policy has also announced that the central bank will make an arrangement to send BFIs with crossholding of shareholders in more than one institution into M&A.
Bankers are elated by the Nepal Rastra Bank’s policy on not forcing banks to merge, except in the case of cross holding, in which an individual is in the board of directors of two institutions. They said that incentives and facilities offered by the central bank could encourage banking institutions to go for amalgamation.
“The incentives and facilities, particularly on interest spread, seem tempting for banks to go for merger, if they have to maintain profitability,” according to banking expert Anal Raj Bhattarai.
Releasing 'Monetary Policy for the current fiscal year 2019-20' today, the central bank governor Dr Chiranjivi Nepal said that the central bank will offer various benefits for BFIs going for amalgamation in line with the government's policy of encouraging 'big' merger in the banking sector. The government in the fiscal policy has also said that it will encourage the merger.
Against recent indication from Dr Nepal that the Nepal Rastra Bank could pursue a 'carrot and stick' approach on merger and acquisition (M&A), the monetary policy has taken a softer line of encouraging them rather than forcing them to go for the merger. “Commercial banks that complete their M&A and start joint operation by mid-July 2020 will get a relaxation in the deadline for maintaining priority sector lending requirement and interest rate spread,” the Monetary Policy reads, adding that it means the merged entity will have to maintain directed sector lending requirement and interest rate spread by mid-July 2021. “The commercial banks going for the merger will get waiver on cooling period for board directors, CEOs and deputy CEOs.”
After the merger, board directors, CEO or deputy CEO will not be barred from joining another bank before six months as is the case for other BFIs, against the current directives of six months cooling period, it reads. “The BFIs will not require merged entity to get its approval for expansion of branches.”
Another benefit for banks is that the extension of the deadline on the new requirement to float debentures worth 25 per cent of their paid-up capital will be until mid-July 2021, according to the Monetary Policy.
Likewise, the merged entity will also get up to mid-July 2021 to reach the 4.4 per cent spread rate. “The consolidation of BFIs will be accorded priority to enhance the capacity of banking sector in mobilising resources and increase people's access to finance,” Dr Nepal said, unveiling the Monetary Policy. The Policy has also announced that the central bank will make an arrangement to send BFIs with crossholding of shareholders in more than one institution into M&A.
Bankers are elated by the Nepal Rastra Bank’s policy on not forcing banks to merge, except in the case of cross holding, in which an individual is in the board of directors of two institutions. They said that incentives and facilities offered by the central bank could encourage banking institutions to go for amalgamation.
“The incentives and facilities, particularly on interest spread, seem tempting for banks to go for merger, if they have to maintain profitability,” according to banking expert Anal Raj Bhattarai.
No comments:
Post a Comment