Four weak banks to merge, to function as dev bank; no immediate plans to upgrade to commercial bank

ShareSansar, June 4:

Manakamana Development Bank, Infrastructure Development Bank, Yeti Finance and Valley Finance are in the process of being merged. The banks are gearing up to complete the merger by mid-August. After the merger, the combined paid up capital of the new entity would be Rs 2.18 bn.

According to a source knowledgeable of the process, the merged company would function as a development bank with no immediate plans to upgrade into a commercial bank. The decision to merge comes as the banks had failed to expand their business, were reeling under rising bad loans and had not been able to provide dividends to their shareholders.

Manakamana, the biggest institution among the four, has called its AGM for June 24 to get approval from its shareholders to formally begin the merger process. The remaining banks have also decided to call their general meeting on the same day. The decision to call a general meeting was reached after the banks reached an agreement on swap ratio and the new management committee.

As per the latest details made public by Manakamana Bank it has an accumulated loss of Rs 124.7 million and its bad loan ratio stands at 18 percent. Infrastructure Development Bank has a paid up capital of Rs 830 million and its bad loan ratio is at 11 percent. It has collected a deposit of 2.50 billion. Valley finance has 140 million in paid up capital and a deposit of 900 million. Yeti Finance’s paid up capital is 200 million and it has amassed deposits of 1.50 billion.

The average bad loan of all companies is said to be at more than 5 percent, which the companies have committed to reduce below 5 percent within mid-July.

A new management committee would be elected from a general meeting to be held after the merger process. Until then, the newly formed entity will be led by a management committee comprising of two representatives each from Infrastructure Development Bank and Manakamana Development Bank and one each from the two finance companies.