BFIs continue consolidation drive
KATHMANDU, MAY 03 -
Banks and financial institutions (BFIs) have taken consolidation to overdrive with merger of more than two companies now becoming more common.
After three finance companies—Alpic Everest, Butwal Finance and CMB Finance—got letter of intent (LoI) from Nepal Rastra Bank (NRB) to form a single company, other BFIs have followed the suit.
Global Bank Limited, which has already announced to merge with IME Financial Institution promoted by the same group, now extended hand to merge with Lord Buddha Finance.
Lord Buddha’s merger plan with Global Bank comes in the wake of its failed bid with Pashupati Development Bank despite receiving an LoI from the central bank.
Global Bank chairman Chandra Dhakal confirmed the merger talks. “There has been bilateral talk with Lord Buddha for merger but no concrete progress has been achieved as of Wednesday,” said Dhakal. “Probably, we will reach to certain conclusion by Thursday.”
Similarly, Pashupati Development Bank and Udyam Development Bank have applied to the central bank for merger. “As we both are regional development banks, we want to transform into a national-level development bank with this merger,” said Kamal Subedi, chief executive officer of Udyam.
Earlier, Udyam had held dialogue on possible merger with a group of three other financial institutions, but it moved away from them to start negotiation with Pashupati for a merger.
According to central bank, there have already been three mergers this fiscal year so far, while eight financial institutions have received LoIs. Most of the financial institutions have received approval from their shareholders to initiate merger with like-minded financial institutions.
The central bank is encouraged with the latest trend on merger at the time when it is struggling to supervise high number of BFIs. There are a total of 221 BFIs, including 32 commercial banks, 88 development banks, 76 finance companies and 23 micro-finance institutions and cooperatives licensed by the NRB as of mid-March 2012. “The current trend is more than expectation and it will lead to a stronger financial system,” said a senior NRB official.
The BFIs that received LoIs recently include Machhapuchhre Bank and Standard Finance, Global Bank and IME, Infrastructure Development Bank and Swastika Finance, Annapurna Development Bank and Suryadarsan Finance, Pashupati Development Bank and Lord Buddha Finance that latter initiated process for merger with Global and finally three finance companies—Alpic Everest, Butwal and CMB. Although the merger plan between Annapurna Development Bank and Surya Darsan Finance hit a stumbling block with Surya Darsan’s directors snubbing the AGM, the issue was recently settled following active facilitation from the central bank, according to NRB officials.
This year, Himchuli Development Bank and Birgunj Finance merged to form H&B Development Bank, Business Development Bank and Universal Finance as well as Kasthmandap Development Bank and Shikhar Finance also merged with each other respectively.
The central bank officials say that merger process would not stop here, with a number of financial institutions failing to increase their paid-up capital at required level by mid-April 2012, may have to opt for merger to avoid central bank’s action.
Source: Kantipur
