Merger tough, but BFIs still exploring possibilities
KATHMANDU, JAN 13 -
Merger has so far been a hard nut to crack for banks and financial institutions (BFIs), but this has not discouraged them from exploring merger and acquisition possibilities. On Thursday, annual general meetings (AGM) of three BFIs either approved merger plans or gave nod to the board to merge with or acquire other FIs.
Clean Energy Development Bank (CEDB)’s AGM approved the bank’s plan to merge with NMB Bank or other financial institutions.
Upon receiving AGM’s approval, CEDB CEO Manoj Goyal said the bank will initiate the unification process with NMB within a week. “A Joint Merger Committee will start the process in week time,” said Goyal.
“The process includes applying at Nepal Rastra Bank (NRB) for approval and appointing a valuator.”
With the Nepal Rastra Bank (NRB) considering introducing a legal mechanism on acquisition to encourage the financial sector’s consolidation, Laxmi Bank’s AGM that took place authorised its board to merge with or acquire an FI that proves a strategic fit to the bank’s future plans and vision.
Some commercial banks are seen more interested in acquisition than merger although there is no related legal provision about acquisition.
One of them is Laxmi Bank, whose Chairman Rajendra Khetan had told the Post a month ago that his bank was seeking to acquire banks having assets worth Rs 20 billion to 25 billion. “We don’t say no to mergers, but it will be comfortable with the acquisition process,” Khetan had said.
Along with commercial banks, development banks are also in the merger race. International Development Bank’s AGM endorsed a special proposal of authorising its board to merge with or go for joint venture with foreign companies.
Given a huge number of BFIs in the country, the central bank has been stretched to its supervisory limit. As it struggles to monitor and supervise the mushrooming BFIs, cases of bad corporate governance and malpractice have emerged in the last one and half years with a few FIs landing in trouble.
As of last fiscal year, the country has 31 commercial banks, 87 development banks, 79 finance companies and 21 microfinance development banks licensed by NRB.
Last year’s liquidity crunch, heavy exposure to real estate and corporate governance issues forced the central bank to come up with merger bylaws. With many FIs expressing interests in mergers, central bank officials expect about 50 BFIs to merge.
The central bank is also mulling forcing BFIs having same promoters (single business group/family) to go for merge. NRB had recently held talks with two commercial banks that have almost same set of promoters.
With the central bank introducing merger bylaws, more BFIs have shown interest to go for amalgamation.
NRB, in November 2011, gave letter of intent for the merger of Annapurna Development Bank and Suryadarshan Finance; Business Development Bank and Universal Finance; and Pashupati Development Bank and Lord Buddha Finance. Recently, Machhapuchhre Bank and Standard Finance also signed a memorandum of understanding for unification.
Source: Kantipur
