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.

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 । 

Himalayan Bank's AGM rejects merger plan with Nepal Investment Bank

 The annual general meeting of the Himalayan Bank Ltd (HBL) rejected the planned merger between HBL and Nepal Investment Bank Ltd (NIBL), after 10 months.

"The 29th annual general meeting of the bank today rejected the planned merger with Nepal Investment Bank,” confirmed Himalayan Bank chief executive officer Ashoke Rana. "So the merger plan with Nepal Investment Bank has officially ended as of now."

The failure of the merger proposal will, however, hurt the investors as the bank cannot distribute dividends and also cannot expand their networks to increase business. The proposal of merger failed in the AGM as the Employees Provident Fund (EPF) and a group led by Manoj Bahadur Shrestha refused to endorse it. The EPF and Shrestha’s group totals some 36 per cent share in the bank.

Shrestha is a former chairman of Himalayan Bank, and EPF -- the government body -- is the institutional promoter. The central bank, has however, clarified that the banks will not be able to distribute the dividends as a fine for 'the demerger'. 

The two commercial banks had signed a memorandum of understanding (MoU) for the merger last May, committing to completing the merger within two months. But the group led by Shrestha was not happy with the proposal.

"The EPF conducted a separate due diligence audit (DDA) of both the banks after the new government was formed in July, even though the merger committee had already conducted DDA,” according to an investor. "The EPF also rejected the merger plan in view of losses projected for it on the basis of the DDA it has conducted."

The merger committee had agreed to seek approval from the AGM for the merger with Nepal Investment Bank on the basis of 1:1 share swap ratio.

The AGM of Nepal Investment Bank Ltd is scheduled for January 18. Howeverm it also needs have a second thought after the rejection from the Himalayn Bank's annual general meeting. Nepal Investment Bank Ltd that feels betrayed by the new development has called emergency meeting of the board of the bank for Sunday.

The central bank -- that is encouraging the mergers -- had extended the deadline for the completion of merger after they wrote an official letter of intent for merger last June.

The merger of the two big commercial banks has been expected to set a precedent for big mergers in future as thed central bank wanted to reduce the number of banks and financial institutions (BFIs) through 'big mergers' enabling the single bank to invest in large infrastructure projects.

Currently, there are 27 commercial banks in Nepal. The number came down as some of the BFIs have already merged.

Himalayan Bank had decided to pass the merger proposal through voting following differences over the  merger between its promoters. According to the voting result some 42 per cent of the votes came in against the merger proposal following objections expressed by the EPF, N Trading Company and Chhaya International. In order to pass the merger proposal, some 75 per cent shareholders had to approve it.

Himalayan Bank has 14.87 per cent share investment of the EPF, where N Trading Company has 12.77 per cent and Chhaya International has 8.94 per cent stake in the bank. Likewise, Habib Bank of Pakistan has a 20 per cent stake in the bank. It is the largest shareholder in the bank, followed by the EPF.

The board of directors of Himalayan Bank had been divided since the merger agreement was signed with the NIBL. Founding promoters Habib Bank, Mutual Trading Company, Aabha International and Khetan Group are in favour of the merger where EPF, N Trading Company and Chaaya International were against the merger. 

Following the agreement, both the institutions had formally informed the regulatory authority central bank, Nepal Stock Exchange (Nepse), Office of the Company Registrar and Securities Board of Nepal (Sebon) about the merger agreement. Moreover, shares of both the institutions had been been suspended until the integrated transaction is completed. The two institutions had planned to start joint operation from last October 1, last year.

Himalayan Bank Ltd --- established in 1993 in a joint venture with Habib Bank Ltd of Pakistan -- was established by Prithvi Bahadur Pandey, who is currently the chairman of Nepal Investment Bank Ltd. 

Nepal Investment Bank Ltd, earlier Nepal Indosuez Bank Ltd, was established in 1986 as a joint venture between Nepali and French partners. But in 2002, a group of Nepali companies, comprising bankers, professionals, industrialists and businessmen acquired the 50 per cent stakes of the French partner, Credit Agricole Indosuez in Nepal Indosuez Bank, and accordingly the name of the Bank was changed to Nepal Investment Bank Ltd.

Nabil Bank to acquire Nepal Bangladesh Bank

 Nabil Bank has signed an agreement today to acquire Nepal Bangladesh Bank (NB Bank).

The merger committee’s coordinator from Nabil Bank Udaya Krishna Upadhyay and the coordinator from NB Bank Indra Bahadur Thapa signed the preliminary memorandum of understanding (MoU) for acquisition in a share swap ratio of 100:43.

After the acquisition, NB Bank’s business transactions will be in the name of Nabil Bank, but the chief executive officer and chair of the merged entity's board has not been decided yet.

According to a press note issued by the Nabil Bank, the merged entity will have a core capital of Rs 43 billion, paid-up capital of Rs 22.5 billion, loans of Rs 300 billion, deposits of Rs 314 billion with 235 branches and over 1.6 million customers.

The agreement came a day after the Kathmandu District Court issued a stay order barring NB Bank from selling the promoter shares of its foreign partner IFIC Bank Ltd Bangladesh to Chaudhary Group of Nepal. A single bench of Justice Ram Chandra Poudel of the Kathmandu District Court had issued the order against the NB Bank’s plan to sell the share to Nabil Bank, whose majority shares are owned by Chaudhary Group (CG).

Earlier, the Chairman of Sunrise Bank Motilal Dugad had filed a writ at the Kathmandu District Court, and also Patan High Court, stating that the IFIC Bank had breached the agreement made with him promising to sell the promoter shares.

Last July, NB Bank announced an exit of IFIC Bank that owned 40.09 per cent shares of the bank. Binod Chaudhary led Chaudhary Group then made its way to purchase 36,827,426 unit shares of the foreign partner of the NBB. But the Dugad claimed that he has already strike the deal.

Global IME, Janata Bank start integrated operations

Global IME Bank and Janata Bank began integrated operations from today following the completion of the merger process.
The merger – between Global IME Bank and Janata Bank – is not only making the new entity the largest commercial bank of the country but also decreased the number of commercial banks to 27 from 28. The merged entity has started integrated operations under the name of Global IME Bank. While industrialist Chandra Dhakal is chairman, Parshuram Kunwar is the chief executive officer (CEO) of the merged Global IME Bank.
Addressing the beginning of integrated transactions of the Global IME Bank here today, finance minister Dr Yuba Raj Khatiwada said that banks should give priority to public benefits and interests. “Along with becoming the country’s largest bank, Global IME Bank should now keep public interest at its centre and work for the betterment of the entire banking sector,” he said, praising the merger.
Citing that a bank becoming bigger in size also means enhanced capacity to invest, Khatiwada urged Global IME to raise its investment in mega projects across different sectors.
The central bank had approved the merger plan of the two big commercial banks in the last week of September. The central bank had given them three months to complete the process and launch joint operations. Following the merger, the paid-up capital of Global IME Bank has reached Rs 24 billion making it the largest commercial bank in terms of paid up capital, apart from being the largest in terms of other key financial indicators like deposits and assets (loans). Likewise, Global IME Bank – after the merger – now has more than 300 branches, 295 ATMs and 33 extension counters across the country. 
On the occasion, the central bank governor Dr Chiranjibi Nepal said that the merger between Global IME Bank and Janata Bank will encourage other commercial banks to opt for mergers. “The merged banks, after getting larger in size, should also look at raising capacity of its management team and make ample investment in security issues,” he said, adding that different cases have shown that banks need to work on capacity building of its staffs. “Amid rising banking threats, banks should invest enough in its human resources and security.”
The governor also advised banks to not primarily focus on profits only as it is promoting unhealthy competition them. He also asked the board of directors of banks not to put undue pressure on the chief executive officers to increase profits.
The biggest merger in the banking sector – that began five months ago – is likely to put pressure on other commercial banks to seek merger partners also. Though most of the banks have already submitted written commitments for merger to the central bank, they have not yet made any breakthrough in finding a partner.
The central bank – earlier in June – had sought merger commitments from banks. The monetary policy for the current fiscal year 2019-20 has introduced a gamut of incentives including relaxation of the interest rate spread cap for those pursuing mergers.

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.

Global IME, Janata Bank ink MoU for merger

Two commercial banks – Global IME Bank and Janata Bank Nepal – today decided to merge supporting the central bank’s move for a ‘big’ merger, and also to become the largest bank in the country in terms of capital size.
Global IME Bank and Janata Bank Nepal signed a memorandum of understanding (MoU) today, informed chairman of Global IME Bank Chandra Prasad Dhakal, after the signing ceremony. “We have decided to enter into a merger looking into central bank’s plan,” he said, adding that the new bank will retain the name ‘Global IME’.
The MoU was signed by Dhakal and chairman of the Janata Bank Keshav Rayamajhi, on behalf of their respective banks. They have agreed to name chief executive of Janata Bank Parshuram Kunwar Chhetry as the chief executive of merged entity and Global IME’s acting chief executive Mahesh Dhakal will be his deputy. “The share swap ratio has been set at 1:0.85,” Dhakal added. It means that investors holding 100 unit shares of Janata Bank Nepal will receive 85 unit shares of Global IME post merger. “However, the final swap ratio will be determined after the due diligence audit (DDA) report is finalized,” he said, adding that the management teams of both the banks will finalise all the necessary procedures within four months. ““We will now seek the letter of intent from the Nepal Rastra Bank for the merger, while a committee will work on the DDA simultaneously.”
According to the third quarter report of the current fiscal year 2018-19, the paid-up capital of Global IME and Janata Bank Nepal stands at Rs 10.31 billion and Rs 8.08 billion, respectively. Likewise, the reserves and surplus of Global IME Bank and Janata Bank Nepal stand at Rs 5.12 billion and Rs 1.75 billion, respectively. The joint entity – post merger – will have Rs 18.39 billion paid-up capital. “Likewise, Global IME’s net profit stands at Rs 1.87 billion and Janata Bank’s net profit stands at Rs 1.02 billion.”
 According to the MoU, the board of the joint entity will comprise of five directors from Global IME Bank and two from Janata Bank Nepal.
This will be the second merger for the Global IME Bank at the commercial bank level. Global IME Bank has already completed merger with the then Commerz and Trust Bank, apart from two development banks and two finance companies, and has acquired two development banks.
After the merger, the merged entity could post around Rs 5 billion net profit in the next fiscal year. However, the EPS wil stand at Rs 25.43, and the shareholders of both the banks shareholders will benefit from the proposed merger. 

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.

Bankers seek tax incentives to go for merger

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).

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.

Cabinet okays RBB, NIDC merger proposal

The cabinet today approved a proposal for merger between Rastriya Banijya Bank (RBB) and NIDC Development Bank.
Deputy Prime Minister and finance minister Krishna Bahadur Mahara had tabled the proposal to merge the two state-owned financial institutions in the cabinet.
While RBB is a commercial bank, the objective of NIDC was to support industrial sector of the country. But with the changed scenario in the banking sector, the government transformed developed NIDC into a development bank.
Both the institutions had huge defaulted loans in the past. The RBB – along with Nepal Bank Ltd (NBL) – recovered under the financial sector reform programme (FSRP). But NIDC failed to work according to its objective and also could not compete with the mushrooming privately owned development banks, and was in loss till 2011.
Like all the other financial institutions, both the state-owned class 'A' and class 'B' financial institutions come under the purview of the central bank. Thus, they have to now follow merger rule like other financial institutions. The merger of both the government-owned financial institutions is expected to create a stronger class 'A' bank which is also planning to float shares like other financial institutions.
According to the chief executive officer of the RBB Kiran Kumar Shrestha, a merger committee comprising representatives from both the institutions will be formed now to finalize the merger process. "The merger committee will then form two teams to look into technical and managerial issues to execute the merger," Shrestha said, adding that the technical team will conduct valuation of assets of the two financial institutions and also appoint an independent auditor to conduct a due diligence audit (DDA). "It might take around six months to complete the merger process."
RBB has a paid-up capital of Rs 8.58 billion, while NIDC has a paid-up capital of Rs 415 million and a reserve and surplus of Rs 3.02 billion.
The merger of the two state-owned financial institutions has been discussed for long. In 2012, the Finance Ministry wanted the two institutions to undergo merger. But NIDC was not happy with the idea. Then again, the government – through the budget in the fiscal year 2013-14 – tried to turn NIDC into an infrastructure development bank. But the plan failed to take off after the central bank advised the government that NIDC does not have financial and managerial capacity to become an infrastructure development bank.
Again, in the budget for the fiscal year 2015-16, the government announced merger of NIDC with Hydroelectricity Investment and Development Company Ltd (HIDCL). However, the plan again failed to materialise.

Global IME Bank, Commerz and Trust Bank Nepal to start operating as one unit after third quarter

Global IME Bank and Commerz and Trust Bank Nepal today signed the final Memorandum of Understanding for merger.

The merged entity in the name of Global IME Bank will start operating as a single unit after the third quarter, said Global IME Chairman Chandra Prasad Dhakal after signing the memorandum of understanding with chairman of Commerz and Trust Bank Nepal Shovakar Neupane, on behalf of their respective institutions here today.

One of the promoters from the Commerz and Trust Bank Nepal will represent in the board, Dhakal, said, adding that the remaining board members and the chief executive of the current Global IME Bank will continue to serve the institute.

Though, it is the second merger among the two commercial banks after NIC Bank and Bank of Asia Nepal (currently NIC Bank of Asia) lat July, the merger will be the first of its kind in terms of different promoters in two institutions.

By mid-April, the two Class 'A' banks will be completely merged, he added.

Both the commercial banks have scheduled their annual general meetings next month to get their merger proposals endorsed by the shareholders.

Commerz and Trust is holding its AGM on March 3, whereas Global IME has scheduled its AGM for March 5.

The merged entity is planning to publish a single merged third quarterly financial report,” Dhakal added.

The merger will help increase paid up capital that will give us more room for investment in productive sectors and large-scale projects,” Dhakal said.

The merged Global IME Bank will have Rs 4.10 billion paid-up capital.

Global IME Bank had earlier merged with two Class 'C' financial institutions –IME Finance and Lord Buddha Finance – to form Global IME Bank. Later, it merged with Social Development Bank and Gulmi Development Bank too.

After the central bank's initiation, the banks and financial institutions have been taking merger as a safe landing due to shrinking market size and and also to reduce operating cost.

The central bank had issued Merger Bylaws in May 2011 to facilitate the mergers, though it is planning to bring Acquisition Bylaw soon.

Currently, some 43 banks and financial institutions are planning mergers to become 18 institutions. Likewise, some 23 banks and financial institutions have taken Letter of Intent (LoI) from the central bank to merge.

Nepse directs listed companies to maintain secrecy of price sensitive information during trading hours

Nepal Stock Exchange (Nepse) cautioned the listed companies not to publicise any price sensitive information and maintain secrecy during the trading hours.

As the rumuors of listed companies being merged or distributing bonus shares and rights shares during the trading hours from 12 am to 3 pm on Sundays to Thursdays have impact on price of the stocks, the front line regulator has directed the listed companies to lie low during trading hours.

The Nepse has defined decisions regarding issuance of bonus shares, cash dividends and rights shares and purchase and sale of properties worth more than Rs 100 million as the price sensitive information.

Recently, most of the stock prices has seen a roller coaster ride due to price sensitive information leaked to selected investors or rumours in the market.

 Earlier, Nepse had asked the listed companies to inform it about such decisions an hour before share trading begins. But the latest notice has asked to restrain from publicising information during the trading hours.

Failure to abide the new directives will be taken as insider trading, the Nepse said, asking to be more careful when conveying information about discussions and decisions regarding mergers and takeovers by the regulator as rumours about mergers affect share prices.

In recent months, the listed companies have been leaking the price sensitive information on various news channels including the online media, it added.

The stock prices of listed companies have appreciated due to the rumours of mergers and cash and stock dividends.

Likewise, Nepse has also directed the listed companies to transfer the share ownership within 15 days of the application. Although share trading settlement and clearing is undertaken within three days of the transaction, physical certificate transfer still takes more than three weeks.

Central bank restricts distribution of surplus fund after merger

The central bank has restricted to distribute the excess fund due to share swap during the merger of two financial institutions.

"The surplus fund has to be added in the capital reserve and cannot be distributed among them," the central bank said, adding that such amount in the capital reserve also cannot be distributed as cash dividends.

Global IME‚ Commerz and Trust Bank Nepal plan merger

Global IME Bank and Commerz and Trust Bank Nepal today signed a Memorandum of Understanding (MoU) to consolidate the two financial institutions.
Chairman of Global IME Bank Chandra Dhakal and chairman of Commerz and Trust Bank Shovakar Neupane signed the MoU that could lead to the biggest merger between the two commercial banks in the country.

"The paid up capital of the merged entity will stand at Rs 4.41 billion," Dhakal said after the signing ceremony here today. " Global IME Bank currently has a paid up capital of Rs 2.42 billion, whereas Commerz and Trust Bank has a paid up capital of Rs 2 billion," he said, adding that the total deposit – after the merger – will stand at Rs 48 billion.

They will conduct a due diligence audit after filing an application to the central bank. "We will fix share swap ratio, after the results of the audits," added Dhakal, who will remain chairman of the merged Global IME Bank that is also the merged entity with five other financial institutions.

Likewise, the current chief executive of Global IME Bank Ratna Raj Bajracharya will also retain his position in the consolidated unit. "The board of the merged entity will include one representative from Commerz and Trust Bank Nepal," according to the bank that has booked a net profit of Rs 271.43 million in the first quarter of the current fiscal year.

Similarly, Commerz and Trust had posted a net profit of Rs 58.62 million in the last fiscal year.

Global IME Bank's has been trading its shares at Rs 430 per unit, whereas Commerz and Trust Bank Nepal has traded its shares at around Rs 200 per unit today.

The merged bank – that will have 451,000 customers after the merger – will be the second merger, if it completes its merger successfully, after the merger of NIC Bank and Bank of Asia Nepal.