NRB board nod to merger regulation
KATHMANDU, May 11:
The new merger regulation will not act as the magic wand, forcing banks and financial institutions to go for mergers. Rather, the central bank believes market forces will compel them to opt for mergers.
“The merger regulation has been passed by the central bank’s governing board on Sunday,” Bhaskar Mani Gyanwali, spokesperson of the central bank, said, adding that the regulation is only supposed to clarify the merger procedures and introduce incentives for banks and financial institutions, which will eventually give momentum to the merger.
Due to increased competition, banks and financial institutions will have no other option but to consolidate their positions if they want to survive in the growing competition, he added.
Moreover, merger will be the answer to managing the capital requirements as per NRB direction. “The banks and financial institutions unable to increase their paid-up capital as per the central bank’s direction in the stipulated time can opt for mergers,” he said.
Bankers have been voicing the need for reduction in corporate tax for a certain period as the greatest motivating factor for merger. They have also been demanding tax benefits and relaxation of other regulations regarding Capital Adequacy Ratio, deprived sector lending, among others for merging banks and financial institutions as an additional incentive.
“The regulation will not provide any differential treatment for the merging entities but the central bank will be lenient for a certain time regarding ownership patterns and other such provisions, branch extension and so on,” he informed.
The biggest incentive for the Class-B and Class-C financial institutions is the viability for the upgradation to national level financial institutions.
The central bank has already made its stance clear that it will not bring regulations that compromise established prudential norms of the financial sector.
Source: THT
The new merger regulation will not act as the magic wand, forcing banks and financial institutions to go for mergers. Rather, the central bank believes market forces will compel them to opt for mergers.
“The merger regulation has been passed by the central bank’s governing board on Sunday,” Bhaskar Mani Gyanwali, spokesperson of the central bank, said, adding that the regulation is only supposed to clarify the merger procedures and introduce incentives for banks and financial institutions, which will eventually give momentum to the merger.
Due to increased competition, banks and financial institutions will have no other option but to consolidate their positions if they want to survive in the growing competition, he added.
Moreover, merger will be the answer to managing the capital requirements as per NRB direction. “The banks and financial institutions unable to increase their paid-up capital as per the central bank’s direction in the stipulated time can opt for mergers,” he said.
Bankers have been voicing the need for reduction in corporate tax for a certain period as the greatest motivating factor for merger. They have also been demanding tax benefits and relaxation of other regulations regarding Capital Adequacy Ratio, deprived sector lending, among others for merging banks and financial institutions as an additional incentive.
“The regulation will not provide any differential treatment for the merging entities but the central bank will be lenient for a certain time regarding ownership patterns and other such provisions, branch extension and so on,” he informed.
The biggest incentive for the Class-B and Class-C financial institutions is the viability for the upgradation to national level financial institutions.
The central bank has already made its stance clear that it will not bring regulations that compromise established prudential norms of the financial sector.
Source: THT
