18 BFIs merged into eight entities last fiscal

KATHMANDU:

A total of 18 banks and financial institutions successfully completed the consolidation process in the last fiscal year and merged into eight entities, the latest statistics of Nepal Rastra Bank show.

Mergers in the country’s banking sector kicked off last fiscal with Global IME Bank expressing interest to consolidate with Commerz and Trust Bank Nepal. The two class ‘A’ financial institutions received final approval for merger on April 3 and started joint operation on April 9. The merged entity was named Global IME Bank.

While these two commercial banks were undergoing the merger process, Reliable Finance, a class ‘C’ financial institution, ShubhaLaxmi Finance, another class ‘C’ financial institution and Nepal Consumer Development Bank, a class ‘B’ financial institution, were also laying the groundwork for consolidation. These three institutions started joint operation on April 16 as Reliable Development Bank.

Since the introduction of the Merger Bylaw in April 2011, financial institutions have been rapidly consolidating with each other. Since then, 64 institutions have successfully consolidated and merged into 25 entities.

With this, the number of class ‘A’, ‘B’ and ‘C’ financial institutions have come down to 167 from 198 when the Merger Bylaw was introduced.

Many BFIs have merged to meet minimum regulatory capital requirement, while others have opted for this measure to enhance their capital adequacy ratio and be able to lend more. Also, multiple financial institutions promoted by the same investor or group have also been asked to merge by central bank.

Officials of Nepal Rastra Bank, the central monetary authority, say mergers eventually boost capital position of banks and financial institutions, which allows them to strengthen their position in the market.

In the last fiscal, two other commercial banks also took their respective merger processes to a logical conclusion.

Civil Bank initiated merger process with Axis Development Bank and Civil Merchant Finance Company and started operating as Civil Bank on April 14. Similarly, Lumbini Bank initiated merger process with Navadurga Finance and started joint operation as Lumbini Bank on June 29.

Now, with introduction of a bylaw on acquisition, many in banking sector are expecting bigger institutions to gradually start purchasing smaller ones.

As of now, Citizens Bank International has formally announced of buying Nepal Housing and Merchant Finance for an undisclosed sum. So far, this is the only financial institution that has initiated acquisition process since Acquisition Bylaw was introduced on April 20.

Source: THT