NRB Removed the Clause of Halting Share Transaction During Merger

The option to halt secondary market transactions for merged banks and financial institutions has been removed by Nepal Rastra Bank. By changing the merger regulation's fifth amendment on Thursday, the Central Bank abolished this clause.

After signing a merger agreement, banks and other financial institutions must apply to the Central Bank for in-principle approval. Prior to applying in this manner, two or more banks or financial institutions in question had to have a letter of in-principle agreement and special resolutions from their respective general meetings authorizing a merger with the Securities Board of Nepal (SEBON) or the target institution's share transaction had to be suspended.

However, Rastra Bank removed the requirement that an application has to be submitted with a letter of suspension of share transactions of the merged companies from SEBON.

As a result, SEBON will still be responsible for stopping any mergers of financial and banking companies. However, without a letter of share transaction suspension, banks and other financial institutions may submit an application to the Rastra Bank for in-principle approval.

The Securities Board has stated for some time that it will not halt the share transaction of companies that are merging; but, due to a condition in the Central Bank's merger laws, they were unable to put the said clause into practice.

The suspension and release of share transactions for merger and acquisition purposes, according to the central bank, would follow the guidelines established by SEBON.

Similar to the one mentioned above, the clause that released share transactions from the required process following the conclusion of a merger or acquisition has also been eliminated.

Likewise, if an institution's loan-to-deposit ratio rises over the required limit as a result of a merger or acquisition, it must be brought down to the required level in accordance with National Bank guidelines within two years of the conclusion of the merger or acquisition.

Below is the link of number of companies which signed MoU for  Merger and Acquisition.

Merger and Acquisition