NIB, Mega start integrated operation as Nepal Investment Mega Bank

Nepal Investment Bank (NIB) and Mega Bank (MEGA) today started the integrated operation as Nepal Investment Mega Bank (NIMB).

Chair of the two banks – Prithvi Bahadur Pandey of NIB and Bhoj Bahadur Shah of Mega – inaugurated the joint operations at an event organised here in Kathmandu.

According to a press note issued by the Nepal Investment Mega Bank, the total paid up capital of the integrated entity is now Rs 34.12 billion, while its total assets worth at Rs. 471 billion. “The total capital is calculated at Rs 580 billion, and the deposit stands at Rs 360 billion with a total of Rs 329 billion as loan.”

The merged entity – Nepal Investment Mega Bank – has 296 branches, 59 extension counters, 279 ATM booths and over three million customers, the press note claims, adding that the NIB and Mega merged at 100: 90 share swap ratio. “The chair of the board of directors and chief executive officer (CEO) of the erstwhile NIB Prithvi Bahadur Pande and Jyoti Prakash Pandey continue as the chair and CEO of Nepal Investment Mega Bank.”

Pande will chair the board, whereas Pandey is leading the management as the CEO of Nepal Investment Mega Bank. Likewise, the board has the representations from both NIB and Mega. Prajanya Rajbhandari and Kabi Kumar Tibrewala represent the NIB, whereas Gopal Khanal, Madan Kumar Acharya and Mukti Ram Pandey represent Mega.

The integrated operations of Nepal Investment Mega Bank marks the fourth big merger of commercial banks within last two weeks. Kumari Bank and NCC Bank started joint operations as Kumari Bank on January 1, whereas Global Bank and Bank of Kathmandu started integrated operations as Global Bank on January 9, and Prabhu Bank completed its acquisition of Century Bank and started the integrated operations as Prabhu Bank on January 10.

According to the central bank, two more mergers of commercial banks – Himalayan Bank and Civil Bank, and Laxmi Bank and Sunrise Bank – are on the cards. The integrated operations of these four banks as two will start within a month, according to Nepal Rastra Bank.

Global IME Bank, BoK start joint operation as Global IME Bank

Global IME Bank and Bank of Kathmandu (BoK) today started the integrated operation as Global IME Bank.

Following the merger, the bank's capital fund totaled Rs57 billion, deposit reached Rs 410 billion and loans Rs 400 billion with assets of Rs 500 billion and a network of 1,100 branches, according to a press note issued by the bank.

With a total of 365 branch offices, 367 ATMs, 286 branchless banking services, 61 extended branch offices, and 3 contact offices located abroad, Global IME Bank has more than 4 million customers, the press note reads, adding that the board of directors of the merged bank will consist of five directors including chair Chandra Prasad Dhakal from erstwhile Global IME Bank and two directors from erstwhile Bank of Kathmandu. The chief executive officer (CEO) of Global IME Bank Ratnaraj Bajracharya will continue as the CEO of merged bank.

Inaugurating the programme, Prime Minister Pushpa Kamal Dahal ‘Prachanda’ reetariated the government main agenda as sustainable economic development and strengthening of the economy. “Understanding the need of the hour, we have decided to implement a balanced financial, industrial and monetary policy to make the economy dynamic and to objectively intensify cooperation and cooperation with the private sector to solve the problems seen in the economy,” he said, claiming that the country’s economy will accelerate, if the opportunities provided by the expansion and improvement of the banking sector can be properly utilised. Emphasising that the banking sector has a great role in making remittance transactions reliable and secure, the premier said that it is necessary for the banking sector to contribute not only to big projects but also in the areas of access to finance, financial literacy and self-employment by using the latest banking and financing products. “It would be easier to invest in big projects, if banks and other financial institutions merged and worked together but such mergers should boost financial efficiency and minimise unhealthy competition.”

On the occasion, chief secretary Shanker Das Bairagi said that the government is serious and will take effective steps in increasing their morale. “There have been positive indications in the country's economy lately,” he said, consoling the private sector not to fear. He also said that mergers will make it easier to raise resources for large projects and increase efficiency.

Likewise, central bank governor Maha Prasad Adhikari said that the merger process was pursued following increasing unhealthy competition and rising operating expenditures of financial institutions.

Urging the banks and financial institutions (BFIs) to focuse on self-regulation and invest in productive sector including small and medium enterprises (SMEs), he claimed that the merger policy will make the financial system more secure. “Due to increasing numbers of BFIs that led to the unhealthy competition, Nepal Rastra Bank (NRB) has adopted the merger and acquisition (M&A) strategy a decade ago.”

Though the NRB has brought merger bylaw in 2011 and revised it in 2012, the Monetary Policy of the fiscal year 2015-16 has encouraged mergers and acquisitions by increasing the paid-up capital of the BFIs. The Monetary Policy has increased the paid up capital of the commercial banks (Class A financial institutions) to Rs 8 billion, development banks (Class B financial institutions) to Rs 2.50 billion, and finance companies (Class C financial institutions) to Rs 800 million. 

Speaking on the occasion, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Shekhar Golchha asked the government and central bank to address three concerns to improve economy. “First, increase government spending; second make monetary policy restrictive but flexible too given the investment risks, and third, create an investment-friendly environment for private sector.”

“The economy will be strong only if the banks are strong,” he said, adding that the bigger banks after merger will also lead to bigger challenges. “To provide reasonable interest to the depositors and subsidised interest to the borrowers is also a huge challenge.”

Stating that BFIs are the backbone of the economy, Golchha said the profit of banks should also be seen, linking it with their investments.

Saying that reducing interest rates will boost the morale of industrialists and businessmen, Confederation of Nepalese Industries (CNI) president Vishnu Kumar Agrawal asked the government and central bank to decrease interest rate and ease liquidity. “Big banks should have bigger responsibility as well,” he said, urging the BFIs to lower the interest rate. “Encouraging to invest in productive sectors will not only contribute to national capital formation but also help government achieve revenue target.”

Informing about the merger, chair of the Global IME Bank Chandra Prasad Dhakal, on the occasion, said that the Global IME has merged and acquired a total of 21 BFIs to become the largest bank in the country. "This institution has been formed with the merger of five commercial banks and 10 development banks, apart from six financial institutions,” he informed, claiming the merged Global IME Bank as the first bank in terms of higest paid up capital. He also pointing out the risk involved as a big bank. “Being a big bank, there are risks and managerial challenges but we will be able to address them with our experience.”

Started his banking business from bringing remittances back home as a remitter, Dhakal said he will still gives high priority to remittance service. “We will give priority to bringing back money earned by the Nepalis in the Gulf and other countries.”

Global IME Bank, Bank of Kathmandu sign final pact to merge

Global IME Bank and Bank of Kathmandu (BoK) today signed a final memorandum of understanding for a merger.

Global IME Bank chairman Chandra Prasad Dhakal and BoK chairman Prakash Shrestha signed the final memorandum of understanding (MoU) for the merger amidst a programme in Kathmandu today.

After signing ceremony, Dhakal said large banks are need of the hour to invest in big infrastructure projects. Likewise, Shrestha said that big and capable banks are needed for economic transformation.

After the merger, the bank will become the largest commercial bank in Nepal with a total capital of Rs 57 billion, according to a press note issued by the banks. “The merged bank’s paid-up capital will reach Rs 35.77 billion with a total deposits of Rs 400 billion and loans of Rs 379 billion.”

Earlier, the board of directors (BoD) of both the banks had approved the share swap ratio of 1:1, based on the evaluation report of movable and immovable assets, liabilities and transactions received from the appraiser for the purpose of merger between the two banks. 

According to the press note, the name of the merged bank will be Global IME BoK, and the bank will consist of seven board of directors – five five from Global IME Bank including its chairman Dhakal. There will be two board of directors on behalf of Bank of Kathmandu. “The incumbent chief executive officer (CEO) of Global IME Bank Ratnaraj Bajracharya will remain as the chief executive officer of the merged bank. 

After the merger, Global IME BoK will have 385 branch offices, 367 ATM counters, 275 branchless banking services, 61 extended branch offices and 3 foreign contact offices, the press note reads, adding that the merged entity will have more than 4 million customers.

Share transactions to be suspended only for 15 days

After the investors’ pressure, the regulatory authority of the capital market has decided to shorten the duration of suspension of share transactions of companies in the process of merger and acquisition (M&A) to only 15 days.

The Securities Board of Nepal (Sebon) today issued a directive clearly mentioning that the share transactions will be suspended for a maximum of 15 working days for the completion of the M&A process that include re-registration of securities, dematerialisation and listing of securities.

The directives has formed a unified policy for all companies listed in the secondary market with the new directives, though there was a policy for trading suspension only for banks and financial institutions (BFIs) earlier.

Enforcing the directive from today, Sebon has maintained that the share transaction will be suspended for a maximum of 15 working days after the unified entity starts joint business transaction.

Investors have been suffering as they had to wait for a longer period of time for buying and selling of shares – especially the BFIs shares – that are in M&A process. As the Sebon scrapped the provision to hold share transactions of the companies, which enter the process for M&A, the new rule will give some respite to the investors, who were unable to purchase and sell their stakes for a long time until the unification process completed.

The regulator has given 15 days also for re-registration, reconciliation, dematerialisation and listing of the shares for post unification.

Earlier, the central bank has authorised Sebon to decide on the suspension of share trading of BFIs opting for M&A. Amending the Regulation for Merger and Acquisition of Banks and Financial Institutions 2073 last month – according to the announcement in the Monetary Policy for the current fiscal year – the central bank has given the right to decide on the suspension of share trading to Sebon. 

The central bank has become flexible after increasing complaints that the suspension of share trading in the secondary market for a long time during M&A adversely affected the investors.

घट्दै बिमा कम्पनी

बैंक तथा वित्तीय संस्थाको मर्जरको लहर पच्छयाउँदै बिमा कम्पनीहरु पनि मर्जरमा जान थालेका छन् । हिमालयन जनरल इन्स्योरेन्स कम्पनी र एभरेष्ट इन्स्योरेन्स कम्पनीबीच मर्जर भएर आइतबारबाट औपचारिक रुपमा एकीकृत कारोबार सुरु भएको छ । 

नेपाली बिमाको इतिहासमा पहिलोपटक दुई वटा बिमा कम्पनीहरु मर्जर भएर एकीकृत कारोबार सुरु गरेसँगै नेपाली बजारमा बिमा कम्पनीहरूको संख्या घट्ने भएको छ । हिमालयन जनरल इन्स्योरेन्स र एभरेष्ट इन्स्योरेन्स कम्पनीबीच मर्जर प्रक्रिया पूरा गरेर बिमा समितिले मर्जर स्वीकृति दिएसँगै आइतबारबाट एकीकृत कारोबार शुभारम्भ भएको हो । एकीकृत कारोबारको शुभारम्भ बिमा समितिका अध्यक्ष सूर्यप्रसाद सिलवालले औपचारिक रुपमा गर्दै बिमा कम्पनीहरुमा अस्वस्थ प्रतिष्पर्धा तथा अहिले कायम रहेको बिमा कम्पनीको पुँजीले बढ्दै गएको दायित्व वहन गर्न नसक्ने भएकाले बिमा कम्पनीको मर्जर जरुरी भएको बताए । उनले बिमा कम्पनीले पोलिसी बेच्ने तर पोलिसी अनुसार दायित्व वहन गर्न नसक्दा सिंगो बिमाको बजार बदनाम भएको तथा बिमा कम्पनीप्रतिको विश्वसनियतामा कमी भएकोले बिमा क्षेत्रमा धेरै सुधार गर्नुपर्ने आवश्यकता रहेको जिकिर गरे । नेपालमा कतिवटा बिमा कम्पनीहरु चाहिन्छ भनेर हालसम्म अध्ययन नै नभएको भन्दै उनले अब बिमा समितिले अध्ययन गर्ने बताए । 

अध्यक्ष सिलवालले सरकारले नै बिमा नबुझेको आरोप पनि लगाए । उनले सरकार र सरकारले गरेका अहिलेसम्मको लगानीको बिमा नभएको भन्दै चालू आर्थिक वर्षको बजेटमा बजेटको विषयमा धेरै कुराहरु समावेश भएर आएको र राष्ट्रिय बिमा नीति समेत मन्त्रालयमा ड्राफ्ट बनाएर दिएको बताए । 

कार्यक्रममा हिमालयन इन्स्योरेन्सका प्रमुख कार्यकारी अधिकृत विजयबहादुर साहले बिमा कम्पनीहरुले पुँजी वृद्धि गरेर मर्जरमा जाँदा बिमालाई सुधार र उचाइ बढाउने दाबी गरे । हिमालयन र एभरेष्ट दुवै कम्पनीको गत असार २ गते सम्पन्न विशेष साधारणसभाबाट मर्जरसम्बन्धी सम्पूर्ण प्रक्रिया पारित भएका थिए । बिमा समितिले यी दुवै कम्पनीको मर्जरलाई गत असार ८ गते अन्तिम स्वीकृति प्रदान गरेको थियो । दुई संस्थाको मर्जर हुने अन्तिम दिनसम्म कायम रहने सम्पूर्ण सम्पत्ति र दायित्वहरु नयाँ बन्ने संस्था हिमालयन एभरेष्ट इन्स्योरेन्सले स्वीकार्ने गरी गत असार २३ गते स्वीकृति प्राप्त भएको थियो । दुवै बिमा कम्पनीबीच गत वैशाख २२ गते मर्जरमा जाने प्रारम्भिक सम्झौतामा हस्ताक्षर भएको थियो । मर्जरपछि कम्पनीको चुक्ता पुँजी २ अर्ब ४२ करोड ८१ लाख रुपैयाँ पुगेको छ । 

बिमा समितिबाट क समयमा भटाभर छुट लगायत विभिन्न सेवा सुविधा पाउने आशले कम्पनीहरुले अन्तिम मर्जरको लागि सम्झौता गरेका छन् । जसका कारण पुनर्बिमा कम्पनी बाहेक ३९ वटा बिमा कम्पनीहरुमध्ये १९ वटा कम्पनी मर्जरमा जाने भएका छन् । असार महिनामा निर्जीवन बिमाका १० वटा र जीवन बिमाका ९ वटा कम्पनीले मर्जरमा जान प्रारम्भिक समझदारीपत्रमा हस्ताक्षर गरिसकेका छन् । 

मर्जरमा जाने तयारी गरेका निर्जीवन बिमा कम्पनीमा एभरेष्ट, प्रिमियर, सगरमाथा, लुम्बिनी जनरल, सिद्धार्थ, जनरल र सानिमा जनरल इन्स्योरेन्स तथा प्रभु र अजोड इन्स्योरेन्समध्ये सिद्धार्थ इन्स्योरेन्स र प्रिमियर इन्स्योरेन्सबीच मर्जरमा जाने सहमति भइसकेको छ । मर्जपछि सिद्धार्थ प्रिमियर इन्स्योरेन्सको नामबाट एकीकृत कारोबार गर्ने गरी दुई कम्पनीबीच सहमति भएको छ । सानिमा जनरल र जनरल इन्स्योरेन्सबीच सानिमा जनरल इन्स्योरेन्सको नाम रहने गरी मर्जर सम्झौता भएको छ । सगरमाथा इन्स्योरेन्स र लुम्बिनी जनरल इन्स्योरेन्स पनि १०० बराबर ८० को स्वाप रेसियोमा मर्जरमा जाने भएका छन् । त्यस्तै, प्रभु र अजोड इन्स्योरेन्सले मर्जरमा जानको लागि सम्झौता गरेका छन् । 

यस्तै, जीवन बिमातर्फ ९ वटा कम्पनीले मर्जरमा जानको प्रारम्भिक समझदारी गरिसकेका छन् । जसमा प्रभु र महालक्ष्मी लाइफ, सूर्या र ज्योति लाइफ, रिलायन्स र सानिमा लाइफसहित प्राइम, गुराँस र यूनियन लाइफले एक आपसमा मर्जरमा जानको लागि पहिलो चरणमा सम्झौता गरेका हुन् । 

कम्पनीहरु मर्जरमा जानुको कारण समितिले चुक्ता पुँजीमा गरेको वृद्धि नै हो । बिमा समितिले निर्जीवन बिमा कम्पनीको न्यूनतम पुँजी साढे २ अर्ब रुपैयाँ र जीवन बिमा कम्पनीको न्यूनतम चुक्ता पुँजी ५ अर्ब पु¥याउने व्यवस्था गरेको छ । जसको लागि पहिलो प्राथमिकतामा मर्जर नै थियो । यद्यपि पुँजी पु¥याउनकै लागि गरिएको मर्जरपछि बन्ने अधिकांश कम्पनीहरुको चुक्ता पुँजी भने पुगेको छैन । बिमा समितिले तोकिएको पुँजी पु¥याउनको लागि कम्पनीहरुलाई आगामी चैतसम्मको समय दिएको छ । उक्त समयभित्रमा मर्जरमा गएका कम्पनीहरुले हकप्रद तथा बोनस सेयरमार्फत न्यूनतम पुँजी पु¥याउन सक्ने छन् । 

तर, बिमा कम्पनीको मर्जर सम्झौताले उनीहरुको सेयर कारोबार बन्द भएको छ । जसका कारण सेयर लगानीकर्ताको १ खर्ब २४ अर्ब २४ करोड ९१ लाख बन्धक भएको छ । बिमा कम्पनी मर्जरमा गएसँगै लगानीकर्ताको सम्पत्ति बन्धक बनाइनु उचित नहुने नेपाल उद्योग वाणिज्य महासंघको पुँजीबजार फोरमका सभापति अम्बिका प्रसाद पौडेल बताउँछन् । तर, नेपाल धितोपत्र बोर्ड (सेबोन)का अध्यक्ष रमेशकुमार हमाल भने मर्जरमा जाने कम्पनीहरुको दोस्रो बजार कारोबार निश्चित अवधिका लागि रोक्का हुनुपर्ने बताउँछन् ।

आइतबार हिमालयन जनरल र एभरेष्ट इन्स्योरेन्सबीचको मर्जरपछि बनेको हिमालयन एभरेष्ट इन्स्योरेन्सको एकीकृत कारोबार शुभारम्भ समारोहलाई सम्बोधन गर्दै अध्यक्ष हमालले मर्जर प्रयोजनका लागि हुने कारोबार रोक्का गरिने सेयरधनीको हितमै हुने दाबी गरे । कारोबार लामो समय नराकियोस् भनेर धितोपत्र बोर्ड र हालै गठित टास्क फोर्सले काम गरिरहेको उल्लेख गर्दै हमालले यस विषयमा चाँडै केही सहज व्यवस्था आउने पनि बताए । 

Central bank sets age limit for CEOs, directors of BFIs

The central bank has set an age bar for chief executive officers (CEOs) and board of directors (BoD) of banks and financial institutions (BFIs).
Nepal Rastra Bank (NRB) – issuing a circular – has barred BFIs from appointing or reappointing CEOs, who are above 65 years of age. According to the new rule, the chief executive officer will not be allowed to continue to work in any bank or financial institution after crossing the age of 69.
Likewise, the central bank has set 70 years age limit for board of directors, though the banks and financial institutions have reservation over the central bank decision. The board director will not be allowed to continue in the same capacity after crossing the age of 75, the circular reads.
The circular has, however, not made it clear whether the age bar will affect those who have already got the appointment. The central bank will, however, decided about enforcement of age bar for those who have already got appointment later before the new rule came into force.
Likewise, the central bank has also issued a new circular on the basis of Monetary Policy for the fiscal year 2019-20. The new circular has directed commercial banks to lower their average interest rates spread below 4.4 per cent by mid-July next year. The maximum difference between the average interest rates on loans and deposits was capped at 4.5 per cent earlier. However, commercial banks that go for merger and acquisition (M&A) and start joint operation by mid-July next year will get a relaxation on the deadline for meeting the interest rates spread cap.
The central bank has also barred banks from charging more than two percentage points in premium on their base rate as interest rates on loans of up to Rs 1.5 million on agricultural, entrepreneurial and business promotion. As per Monetary Policy, the central bank has also directed commercial banks to issue debentures/corporate bonds amounting to 25 per cent of their paid-up capital by end of the fiscal year. The BFIs failing to abide by the new requirement will face actions like a ban on the expansion of their branches and no refinance facility, according to the central bank.
The circular has also lowered the maximum limit that a BFI can collect deposits from a single institutional investor. A BFI, at present, will not be allowed to mobilise more than 10 per cent of deposits from a firm, company or organised institution, down from earlier ceiling of 15 per cent. While reducing the general refinance rate for bank loans to small and medium enterprises, it has also lowered the maximum interest rates that BFIs can charge from them. Under the new arrangement, the central bank will provide refinance facility for loans up to Rs 1 million to BFIs at 3 per cent. The banks are not allowed to charge more than 7 per cent interest rates for loans floated under refinance facility. Earlier, such refinance rate was 5 per cent while the ceiling on lending rate was 10 per cent.
Likewise, the central bank has also allowed BFIs to float loans against the collateral of arable land even without road access. The central bank has made it mandatory for BFIs to provide decision about such loans within seven days with clear reasons.

Central bank makes merger optional not forceful

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.

More than a dozen banks pledge to undergo merger

Some 16 banks have pledged to undergo merger and acquisition (M&A) in the near future as asked by the central bank. However, they seeking tax incentives.
Century Commercial Bank, Citizens Bank International, Civil Bank, Global IME Bank, Himalayan Bank, Kumari Bank, Laxmi Bank, Machhapuchchhre Bank, Mega Bank, NCC Bank, NIC Asia Bank, Nepal Investment Bank, Nepal SBI Bank, NMB Bank, Sanima Bank and Sunrise Bank have informed the central bank that they are ready to either go for merger or acquire other banks, whereas Janata Bank and Global IME Bank have already announced their merger plans.
The central bank has – before the Monetary Policy for the next fiscal year 2019-20 – asked the banks to opt for either merger or the acquisition, on the basis of the government’s fiscal policy. The central bank had also sought commitments from all the 28 commercial banks – primarily intending to bring down the number of banks, raise their capital and increasing their lending capacity – for either merger or acquisition before the Monetary Policy is announced in mid-July.
Earlier, 4 years ago in the fiscal year 2015-16, the central bank had – through the Monetary Policy – compelled banks to raise minimum paid-up capital by four times to Rs 8 billion from Rs 2 billion.
The bankers are though ready to go for merger or acquisition; they have asked the government to reduce income tax levied on banks by at least five percentage points for a period of five years for those banks who choose to merge with others. Currently, the government imposes 30 per cent income tax in the banking sector.

Central bank seeks commitment from commercial banks for mergers

Central bank today asked the commercial banks to work-out for 'big' merger and acquisition, as the Monetary Policy for the next fiscal year is going to encourage banks and financial institutions to go for Merger and Acquisition (M&A).
Summoning chairpersons and chief executive officers of all the 28 commercial banks, the central bank governor Dr Chiranjibi Nepal urged them to contemplate on the possible merger partner and inform the central bank about the potential amalgamation. He told the bankers to submit names of banks that they wanted to partner with or submit a commitment letter for merger to the central bank before the Monetary Policy that is going to be announced in mid-July. A banker – who was in the meeting – informed that the central bank has asked them to inform about their merger plan by July 4.
Presenting the budget speech for the fiscal year 2018-19 on May 29, finance minister Dr Yuba Raj Khatiwada had said that the government will take a policy of encouraging big' merger among BFIs. Thus the Nepal Rastra Bank (NRB) has urged the banks to submit written commitments in line with the budget. The banks that have already found partners for merger or acquisition should submit their confirmation with the partner’s name and those seeking partners can submit their commitment, according to the central bank.
The central bank brings Monetary Policy every year to support the fiscal policy after discussion with the banks and financial institutions. Thus, the central bank also collected recommendations for the Monetary Policy from the bankers.
The government has also announced to grant tax exemption for one year to encourage BFIs to opt for M&A, the central bank – the government’s financial advisor – said. “M&A among BFIs will contribute to safety and soundness in the banking sector,” the central bank said, against the popular myth of ‘too big to fail.’
The commercial banks are though positive towards merger, they complain that the time is too short. “Choosing a partner for business is also a matter of taking risk,” according to a banker, who said that it will difficult to complete the whole process of M&A by the time the Monetary Policy is announced in next fifteen days.
Earlier, the central bank had – couple of years ago – asked banks to raise their paid-up capital to Rs 8 billion from Rs 2 billion to encourage consolidation in the banking sector. But the decision could not help decrease the number of commercial banks as the central bank could not restrict them to float rights and bonus shares to meet the four-times paid up capital.