Nepal Grameen Bikas Bank close to settling differences; AGM likely in Asar

By Amendra Pokhrel and Priyanka Jha
ShareSansar, April 2:

Nepal Grameen Bikas Bank was formed on August 18, 2014 after the merger between five regional development banks.

The five development banks--Sudur Pashchimanchal, Pashchimanchal, Madhya Pashchimanchal, Madhyamanchal and Purbanchal--were established about two decades ago under the joint initiative of the government, Nepal Rastra Bank and a number of commercial banks.

Besides the central bank, various commercial banks including Standard Chartered Bank Nepal, Nabil Bank, Himalayan Bank, Bank of Kathmandu, Nepal Bangladesh Bank and Agricultural Development Bank have invested in the five banks.

The grameen bikas banks were created with the objective of providing micro-credit to micro-industries, agro businesses and traders in rural areas of the country’s five development regions.

But in view of their mounting losses and operational mismanagement, the major stakeholders of the bank had decided to merge the five banks and proposed that they operate as a single entity under the name Nepal Grameen Bikas Bank. There were also reports that some of these banks that were in loss had been urging the government to help settle their losses amounting to over Rs 250 million.

But the merger process did not take place smoothly and disputes and differences over various aspects of the process has been hampering the banks functioning since the process was started. A major hurdle since the five banks merged to become Nepal Grameen Bikas Bank has been the differences over the swap ratio and shareholding structure.

“The due diligence audit, which assesses the value of the shares of each merging entities, has been difficult because of various factors such as weak regulations, varied loan portfolio of the banks and the difference in interest rates on loans,” said Dharma Raj Pandey, the Chief Operating Officer of Nepal Grameen Bikas Bank. “After the merger, the bank has 45,000 shareholders but the share structure proposed by the merger committee after the DDA has not been satisfactory to all stakeholders.”

After the DDA, some shares were worth Rs 100, others Rs 275 and some fell to as low as Rs 1, said Mr Pandey.

On the basis of the swap ratio proposed by the DDA, the share prices of the five development banks were fixed as follows: Sudur Paschimancahl Rs 1.2, Paschimanchal Rs 275, Madhya Paschimanchal Rs 125, Madhyamanchal has reached Rs 1.8, and Purbanchal Rs 1.4.

CEO Pandey said that the confusion and differences over share structure would be sorted out before the bank will hold its AGM. He informed that the bank is planning to hold its AGM in the month of Asar, 2072.

“We are still working to establish uniformity on various issues. After we reach some sort of agreement on those issues, we will hold the AGM in Asar,” Mr Pandey said.

As per Mr Pandey, the bank is expected to propose issuing Further Public Offering (FPO) during the AGM.   

Of the five banks, only Madhyamanchal and Paschimanchal Grameen Bikas Bank have floated their shares to the general public.

The bank had made a profit of Rs 13 crore till Poush end. As per the information available on the bank’s website, its paid up capital has reached Rs 55.74 crore and its loans and advances stand at Rs 3 arba 93 crore. The bank has 152 branches and 912 employees.