Vibor, Bhajuranta Finance to merge
Fri, Jul 15, 2011 12:00 AM on Others,
KATHMANDU, July 15:
Vibor Bikash Bank, a national level development bank, has signed a memorandum of understanding (MoU) for merger with Bhajuratna Finance Savings -- a category ´C´ financial institution -- commiting to complete merger within six months.
Vibor CEO Ajay Ghimire and Bhajuratna Director Dr Roop Jyoti after signing the MoU said that the merged institution will be named Vibor Bank. They said the new entity will issue rights share immediately after the merger to raise the paid-up capital to Rs 1.36 billion.
Vibor decided on the merger as part of the commitment it made while acquiring last resort loans of Rs 500 million from Nepal Rastra Bank (NRB). Vibor had acquired the loans after it faced severe liquidity crunch, something which made it unable to repay depositors, on June 10.
Speaking at the MoU signing ceremony, Ghimire said the bank would continue to explore possibilities of undergoing merger with other BFIs as well. “We are also planning to invite investment from foreign BFIs to make our capital base stronger,” he added.
Dr Jyoti said the merger will not impact any employees. \"There will be no lay off. Our vision is to grow, which means we will be in need of more employees,” he stated.
The central bank had instructed Vibor to undergo merger aiming to improve its lending portfolio and financial position. However, Bhajuratna is known as one of the weaker finance companies that has consistently failed to comply with NRB´s capital requirement provision and has faced action, going by which it was prohibited from collecting public deposits from November 2010.
Going by the NRB´s directives, Bhajuratna was required to increase its paid-up capital to Rs 200 million by the end of this fiscal year. Its paid-up capital is just Rs 38.50 million, according to unaudited financial report. Its loans and advances stand at Rs 183.76 million and deposit stands at Rs 192.65 million.
Vibor´s deposits, on the other hand, stands at around Rs 3 billion and its loans and advances stand at Rs 2.30 billion. Its exposure on real estate loans, including credit issued to business complex, residential apartment loan and others, makes about 23 percent of the total loans portfolio. It has invested another more than Rs 1 billion in housing projects.
NRB spokesperson Bhaskar Mani Gynwali said that the signing of merger MoU was a positive development.
However, the central bank officials said they were expecting Vibor to merge with stronger institution, particularly a commercial bank. \"Nevertheless, the MoU has created win-win situation for both the entities. Except the weak capital base, Bhajuratna´s condition is sound,” said a central bank official.
Source: Republica
Vibor Bikash Bank, a national level development bank, has signed a memorandum of understanding (MoU) for merger with Bhajuratna Finance Savings -- a category ´C´ financial institution -- commiting to complete merger within six months.
Vibor CEO Ajay Ghimire and Bhajuratna Director Dr Roop Jyoti after signing the MoU said that the merged institution will be named Vibor Bank. They said the new entity will issue rights share immediately after the merger to raise the paid-up capital to Rs 1.36 billion.
Vibor decided on the merger as part of the commitment it made while acquiring last resort loans of Rs 500 million from Nepal Rastra Bank (NRB). Vibor had acquired the loans after it faced severe liquidity crunch, something which made it unable to repay depositors, on June 10.
Speaking at the MoU signing ceremony, Ghimire said the bank would continue to explore possibilities of undergoing merger with other BFIs as well. “We are also planning to invite investment from foreign BFIs to make our capital base stronger,” he added.
Dr Jyoti said the merger will not impact any employees. \"There will be no lay off. Our vision is to grow, which means we will be in need of more employees,” he stated.
The central bank had instructed Vibor to undergo merger aiming to improve its lending portfolio and financial position. However, Bhajuratna is known as one of the weaker finance companies that has consistently failed to comply with NRB´s capital requirement provision and has faced action, going by which it was prohibited from collecting public deposits from November 2010.
Going by the NRB´s directives, Bhajuratna was required to increase its paid-up capital to Rs 200 million by the end of this fiscal year. Its paid-up capital is just Rs 38.50 million, according to unaudited financial report. Its loans and advances stand at Rs 183.76 million and deposit stands at Rs 192.65 million.
Vibor´s deposits, on the other hand, stands at around Rs 3 billion and its loans and advances stand at Rs 2.30 billion. Its exposure on real estate loans, including credit issued to business complex, residential apartment loan and others, makes about 23 percent of the total loans portfolio. It has invested another more than Rs 1 billion in housing projects.
NRB spokesperson Bhaskar Mani Gynwali said that the signing of merger MoU was a positive development.
However, the central bank officials said they were expecting Vibor to merge with stronger institution, particularly a commercial bank. \"Nevertheless, the MoU has created win-win situation for both the entities. Except the weak capital base, Bhajuratna´s condition is sound,” said a central bank official.
Source: Republica
