A board meeting of the central bank held on the day gave principle agreement to Annapurna Development Bank to merge with Suryadarshan Finance, Pashupati Development Bank to merge with Lord Buddha Finance and Business Development Bank to merge with Universal Finance.[break]
All these institutions had lodged applications at the central bank, seeking permission to undergo merger and operate as national level development bank. “The board meeting Thursday responded to their calls positively,” said a senior NRB official.
Going by the existing rule, these financial institutions would need to complete all formalities of merger and approach the central bank for starting operations as a new institution within six months. In case they fail to do so, the permission granted on Tuesday would automatically become void.
Records show Annapurna Development Bank operating with a paid up capital of Rs 672 million, while Suryadharshan Finance´s paid up capital stands at Rs 100 million. Likewise, Pashupati Development Bank and Lord Buddha Finance have paid up capital of Rs 663.17 million and Rs 168.20 million respectively.
Likewise, Business Development Bank has been operating with paid up capital of Rs 690 million, while Universal Finance´s paid up capital stood at Rs 152 million on mid-July 2011.
“The merger will not only trim the number of financial institutions but also help them consolidate their financial positions, enabling them to issue more credit and function more competitively in the nationwide market,” said the source.
Senior officials of these institutions said they would soon conduct a Due Diligence Audit to assess the status and decide on their respective shares in the new structure.
Amid persistent liquidity crunch and problems seen in the financial system, the NRB has been strongly pushing the banks and financial institutions (BFIs) to undergo merger to cut costs and sustain. In a bid to encourage mergers, it even introduced merger bylaws in early May 2011 and the government too has announced various tax incentives.
Responding to the call, more than a dozen financial institutions had approached the central bank for its merger approval, following which NRB had given similar approval to Infrastructure Development (ID) Bank and Swastik Merchant Finance in October to merge and function as a national-level development bank
So far, Birgunj Finance and Himchuli Development Bank completed merger formalities few months ago and are operating as H & B Development Bank.
Vibor Bikas Bank has also signed a memorandum of understanding (MoU) with Bhajuratna Finance to undergo merger, while Kasthamandap Development Bank and Shikar Finance too have lodged application at NRB for merger approval.
“The pace with which financial institutions are moving ahead for merger is really encouraging,” said the NRB official, predicting that if things moved ahead smoothly, the number of financial institutions in the country would soon trim down to 100 from existing 165.
Related story
NRB lays out scenario for sending BFIs into forceful merger
-1200x560-1781083488.webp)
