More FIs exploring merger options
KATHMANDU, JUN 19 -
Development banks and finance companies are increasingly exploring merger options.
The latest on the list of financial institutions (FIs) seeking consolidation are Resunga Bikas Bank of Tamghas, Gulmi, and Shine Development Bank of Butwal, Rupandehi. The FIs applied at the Nepal Rastra Bank (NRB) for merger approval on Sunday.
Last week, Arniko Development Bank of Dhulikhel, Kavre, and Surya Development Bank of Charikot, Dolkha, had applied for the central bank approval of their merger.
“Mergers between FIs are inevitable, at least for their own survival, amid increasing competition and slowdown in profits,” said NRB. “Therefore, it is natural to see more FIs announcing merger plans.”
Recently, NRB approved the merger application of Infrastructure Development Bank (IDB), Banepa, and Swastik Merchant Finance Company Limited, Kathmandu. After the merger, the merged entity will be named as Infrastructure Development Bank and will be headquartered in Kathmandu. According to company sources the merger process will end within a month.
Earlier, three finance companies — Alpic Everest, Butwal Finance and CMB Finance — got letter of intent (LoI) from NRB to form a single company.
Global Bank Limited, which has announced to unify with IME Financial Institution — both promoted by the same group — is also in merger talks with Lord Buddha Finance. Lord Buddha’s merger plan with Global Bank comes in the wake of its failed bid to merge with Pashupati Development Bank. Lord Buddha and Pashupati had also received LoI from NRB.
Pashupati Development Bank and Udyam Development Bank are also waiting for NRB’s LoI to initiate merger process. The regional-level development banks plan to transform into a national-level development bank after merger. Earlier, Udyam had been in merger talks with a group of three other FIs, but the dialogue could not yield positive result.
According to the central bank, three mergers have already been carried out so far this fiscal year and around two dozen FIs have acquired LoIs.
FIs’ latest attraction towards merger has encouraged the central bank at a time when it is struggling to effectively monitor such a huge number of FIs. There are a total of 221 BFIs, including 32 commercial banks, 88 development banks, 76 finance companies and 23 micro-FIs and cooperatives in the country. “The current trend will lead to a stronger financial system,” said a NRB official.
This year, Himchuli Development Bank and Birgunj Finance merged to form H&B Development Bank. Other mergers include Business Development Bank-Universal Finance and Kasthmandap Development Bank-Shikhar Finance.
Central bank officials say the merger trend will not stop here as a large number of FIs were unable to increase their paid-up capital to the required level by mid-April 2012.
Source: The Kathmandu Post
