Merger fever grips BFIs
KATHMANDU, MAY 28 -
With the merger bylaws introduced recently by the Nepal Rastra Bank (NRB) giving regulatory relaxation to merged banks and financial institutions (BFIs), more and more BFIS have initiated merger processes.
On Friday, NMB Bank and Clean Energy Development Bank notified the central bank about their merger initiative.
Though the country has not witnessed a single merger of commercial banks so far, some financial institutions have already merged, while small financial institutions have merged with commercial banks.
NMB and Clean Energy had signed a memorandum of understanding (MoU) on the merger a month ago. “There is a high possibility of merger between the two banks,” said Upendra Poudel, chief executive officer of NMB. With the merger, the paid up capital of the two banks will be more than Rs 3 billion.
Likewise, Everest Bank and Kumari Bank have also signed an expression of interest (EoI) at the CEO level for merger. Their boards are yet to give a nod to the merger plan. Everest’s earlier attempt to merge with Nepal Investment Bank Limited (NIBL) was aborted due to controversy over the plan at the NIBL.
“We have initiated the merger process in a more matured manner this time around, with signing the EoI at the management level first to win the confidence of employees as well,” a senior official of Everest Bank said.
The understanding between the chairmen of Everest and NIBL for the merger had drawn flak from the senior management of the NIBL last year, leading to a complete collapse of the deal.
The banks mentioned above have different promoter groups altogether. The merger process of Nepal Bangladesh Bank (NBB) and Nepal Credit and Commerce Bank (NCC) is also moving ahead. Both of them are promoted by the NB Group. With the merger of these two banks, all the banks and financial institutions promoted by the group will turn into a single entity. A few months ago, Nepal Sri Lanka Merchant Bank merged with the NBB, while four years ago, NB Finance merged with the NBB.
The due diligent audit (DDA) of the NCC has already been carried out for the merger.
“The DDA (finding of the actual financial status) of the NBB will be carried out now,” said NCC chairman Prithvi Raj Ligal.
According to him, they will also carry out an independent study on the possible situation of the merged bank and how the human resources should be managed.
However, the NCC and NBB have encountered problems in the merger process following the introduction of the merger bylaws. The bylaws say that the merger process should be initiated after first getting a proposal on the merger that is endorsed by the annual general meeting (AGM) of the banks and financial institutions concerned.
“The bylaws do not speak of merger initiatives taken without prior approval from the AGM,” said Ligal. “That is why we have asked the NRB to clarify on the matter.”
In some banks, the merger plans are not moving ahead as some promoters fear that they will lose their existing position.
A CEO of a leading joint venture bank said his chairman did not entertain the idea of a merger although all other board members were in favour of it.
Not only commercial banks, the merger fever has gripped development banks and finance companies also. Kasthamandap Development Bank and Shikhar Finance are on a merger course. Their respective boards have decided to go for the merger. Both of them have already informed the NRB of their plans.
Recently, Birgunj Finance and Himchuli Finance received a nod from the NRB to merge. They are in the final stages of starting operations as a single financial institution.
Source: Kantipur
With the merger bylaws introduced recently by the Nepal Rastra Bank (NRB) giving regulatory relaxation to merged banks and financial institutions (BFIs), more and more BFIS have initiated merger processes.
On Friday, NMB Bank and Clean Energy Development Bank notified the central bank about their merger initiative.
Though the country has not witnessed a single merger of commercial banks so far, some financial institutions have already merged, while small financial institutions have merged with commercial banks.
NMB and Clean Energy had signed a memorandum of understanding (MoU) on the merger a month ago. “There is a high possibility of merger between the two banks,” said Upendra Poudel, chief executive officer of NMB. With the merger, the paid up capital of the two banks will be more than Rs 3 billion.
Likewise, Everest Bank and Kumari Bank have also signed an expression of interest (EoI) at the CEO level for merger. Their boards are yet to give a nod to the merger plan. Everest’s earlier attempt to merge with Nepal Investment Bank Limited (NIBL) was aborted due to controversy over the plan at the NIBL.
“We have initiated the merger process in a more matured manner this time around, with signing the EoI at the management level first to win the confidence of employees as well,” a senior official of Everest Bank said.
The understanding between the chairmen of Everest and NIBL for the merger had drawn flak from the senior management of the NIBL last year, leading to a complete collapse of the deal.
The banks mentioned above have different promoter groups altogether. The merger process of Nepal Bangladesh Bank (NBB) and Nepal Credit and Commerce Bank (NCC) is also moving ahead. Both of them are promoted by the NB Group. With the merger of these two banks, all the banks and financial institutions promoted by the group will turn into a single entity. A few months ago, Nepal Sri Lanka Merchant Bank merged with the NBB, while four years ago, NB Finance merged with the NBB.
The due diligent audit (DDA) of the NCC has already been carried out for the merger.
“The DDA (finding of the actual financial status) of the NBB will be carried out now,” said NCC chairman Prithvi Raj Ligal.
According to him, they will also carry out an independent study on the possible situation of the merged bank and how the human resources should be managed.
However, the NCC and NBB have encountered problems in the merger process following the introduction of the merger bylaws. The bylaws say that the merger process should be initiated after first getting a proposal on the merger that is endorsed by the annual general meeting (AGM) of the banks and financial institutions concerned.
“The bylaws do not speak of merger initiatives taken without prior approval from the AGM,” said Ligal. “That is why we have asked the NRB to clarify on the matter.”
In some banks, the merger plans are not moving ahead as some promoters fear that they will lose their existing position.
A CEO of a leading joint venture bank said his chairman did not entertain the idea of a merger although all other board members were in favour of it.
Not only commercial banks, the merger fever has gripped development banks and finance companies also. Kasthamandap Development Bank and Shikhar Finance are on a merger course. Their respective boards have decided to go for the merger. Both of them have already informed the NRB of their plans.
Recently, Birgunj Finance and Himchuli Finance received a nod from the NRB to merge. They are in the final stages of starting operations as a single financial institution.
Source: Kantipur
