Decision-making process longer in merged entity: NRB study report

According to a report entitled 'Study on status of BFIs after merger and effectiveness of merger' conducted by NRB, most of the stakeholders it interviewed during the study told that there was no improvement on the time taken for the work performance of the merged entities as the decision making process becomes longer in the institution that becomes bigger after the merger. "One third of the stakeholders have been found of realizing that the complication in the merged entity was increased," read the study report unveiled by the central bank recently. A total of 68 BFIs have gone into merger to become 25 BFIs within three years of Merger Bylaws 2068 came into implementation, according to the report. Nine commercial banks, 28 development banks, 26 finance companies and five microfinance institutions have pursued merger during the review period. The central bank has collected and analyzed the information of 25 BFIs who have gone for the merger. It has conducted interview with 550 respondents that includes two promoter of the merged entity, two senior level management officials, five staffs, five depositors and five borrowers of all 25 institutions. Likewise, the report has also pointed out to a problem of mismatch on the real status of transactions, assets and liabilities in the pre-merger due diligence audit (DDA) and DDA after the merger. Problem on the bigger board of directors (BoD) and their work performance due to the inclusion of board directors in the merged entity due to the practice of appointing board directors through splitting up the posts is what the study report has found. "It has also been found that meeting of the BoD is some institutions have not held for a long period of time due to the disputes in the board," the report added. The delay of lifting the suspension of share transaction of the merged entity even after the completion of merger, delay in the joint operation of the merged institution due to the complication resulting from the use of different software and rank harmonization, different working culture and inferiority complex among the staff of small institution of the merged entity are other problems laid out by the study report. The study report has also found many positive impacts of the merger in the BFIs. The increase of the 'economies of scale', public confidence, upgradation in the technology and expansion of new services are the positive results of the merger, according to the finding of the central bank's report. The report has also found that the non-performing loans of the institutions pursuing merger has gone up in the first two years but fall of the NPL in the third year of merger. Net profit ratio, return on the equity, credit deposit ratio have been found of increment in the third year of merger while fall on such ratios on first two years after the merger, according to the report. "It can be assumed that the capacity of the institution can be improved in a long term rather than within a short period of time," added the report. The staffs of the BFIs are also enjoying the benefit of the mergers, according to the report. The study report found that the pays and perks of the staffs of most of the merged BFIs have increased. "Salary and facilities of the staff is found to have increased. As the human resource management becomes a issue of big complication in the merger, the pay and perks of staffs is increased for the staff encouragement. Likewise, while the institution that provides more salary to its staff goes for merger with another institution, it also pays higher salary to the staff retained in the merged entity," read the report. "While assessing the opinion of the staffs of the merged BFIs about their new roles, very few staffs were found to be unhappy," it added.