Thursday, July 4, 2019

Seven banks submit central bank written commitment for 'big' merger

Seven commercial banks submitted their written commitment to the central bank for ‘big’ merger in line with recent instruction.
Nepal Investment Bank, Citizens Bank International, Sunrise Bank, Mega Bank, Sanima Bank, Laxmi Bank and Civil Bank submitted their written commitment for 'big' merger, according to a source at the central bank that has – a week ago on June 27 – summoned the chairmen and chief executive officers of all commercial banks for discussion on merger.
The central bank governor Dr Chiranjivi Nepal, on the occasion, had directed the commercial banks to come up with merger commitment by July 4 and start looking for partner for amalgamation.
“Responding to the governor's instruction, seven commercial banks have come to the NRB with their written commitment for merger, confirmed the source, who also informed that the remaining commercial banks will also follow the suit before the central bank announces Monetary Policy for next fiscal year. The central bank is scheduled to unveil Monetary Policy for next fiscal year 2019-20 by the second week of July.
The government – in its fiscal policy – announced to encourage merger among the financial institutions.
In his budget speech for the next fiscal year 2019-20, finance minister Dr Yuba Raj Khatiwada, said that the government is bringing a policy to merge banks and financial institutions.
Some of the banks, however, has said that the ‘big’ merger is not possible in a week’s notice, though some of the banks have committed to merge. “It will take at least three or four months to find the appropriate partner,” according to the president Nepal Bankers' Association (NBA) Gyanendra Dhungana.
The central bank should come up with various facilities and policy relaxations to encourage merger of Class 'A' banking institutions, he said.
After the governor's diktat on merger, the NBA – during a meeting on Wednesday – asked Nepal Rastra Bank (NRB) to come up with incentives including relaxations on prudential lending limits, ratios and directed sector lending requirement, flexibility in terms of composition of the board of directors of the merged entity as well as remove the cooling period for the CEOs.
But it will be challenging for the government banks including Rastriya Banijya Bank (RBB), Nepal Bank and Agriculture Development Bank to merge as they will face a huge opposition from their employees. Likewise, the joint venture banks – including Standard Chartered Bank Nepal and Nepal SBI Bank that have with more than 50 per cent foreign investment – will also find it difficult to get a partner to merge.

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