BFIs in Nepal to Receive Discount Facilities for Mergers, Acquisitions If Joint Operation Commences Until Ashad, 2080
Tue, Jun 6, 2023 4:50 PM on Latest,
The Nepal Rastra Bank (NRB) has announced that banks and financial institutions (BFIs) engaging in integrated business through mergers and acquisitions will be eligible for discount facilities until the end of Ashad 2080. The NRB aims to encourage consolidation within the banking sector, particularly targeting the ongoing merger between Laxmi Bank and Sunrise Bank.
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Previously, the central bank's monetary policy for FY 2079/80 had provided certain facilities to BFIs commencing joint operations after a merger until the end of Poush, 2079. However, in a recent circular issued by the NRB, six different facilities will now be available to such BFIs until Ashad, 2080.
There had been concerns about whether Himalayan Bank, which merged with Civil Bank and commenced integrated operations, would continue to receive the benefits granted during the merger.
Now, Sunrise Bank and Laxmi Bank with Himalayan Bank, will also be eligible for concessions.
The circular issued by the NRB states, "Commercial banks participating in the process of amalgamation and unable to conduct integrated business within the end of Poush 2079, if they conduct integrated business within the end of Ashad 2080, facilities and discounts will be provided from the date of conducting integrated business."
The NRB has outlined several provisions for the eligible banks. The loan disbursement period for the agricultural, energy, and SME sectors will be extended by one year. Additionally, directors and high-ranking employees will be restricted from joining other banks or financial institutions for a minimum of six months after leaving their positions.
If the loan-to-deposit ratio exceeds the prescribed limit at the time of integrated operations, a six-month grace period will be granted to regulate it. Furthermore, if interest rates during integrated transactions exceed the limit set by the Inter-State Bank due to differing rates maintained by the merging entities, a one-year period will be provided to reconcile the interest rate difference.
The NRB also announced an increase of 5 percentage points in the deposit collection limit per institution for a one-year period. Moreover, for the duration of integrated operations, banks will not require NRB approval to merge or close branch offices within a one- kilometer radius.
These measures aim to facilitate a smooth transition and encourage consolidation within the banking sector. The NRB's initiatives provide financial incentives and regulatory flexibility to banks engaged in mergers and acquisitions, fostering a more robust and efficient banking system in Nepal.
See NRB's circular here:
