NBBL braces for another merger

HIMALAYAN NEWS SERVICE

KATHMANDU: Nepal Bangladesh Bank Ltd (NBBL) is gearing up for the third merger – this time with Nepal Credit and Commerce Bank (NCC Bank). “Nepal Rastra Bank (NRB) has granted ‘theoretical approval’ to the merger of the banks,” informed Basudev Adhikari, director at the NRB’s supervision department.

Even after obtaining the permission from the regulatory bodies, to realise the merger, the banks have to call a joint Annual General Meeting (AGM) to get approval from their respective shareholders.

Likewise, before the merger is accomplished the banks also have to finalise the share structure of the merging entities – like how many shares of NBBL will be equal to how many shares of NCC Bank or vice versa. And there will also be the issue of employee management that has to be resolved by the banks prior to the merger coming into effect.

Both the commercial banks are promoted by NB Group, thus if these banks do get merged together then this will be the third merger of the financial institutions owned by NB Group.

Just a week ago, Nepal Sri Lanka Merchant Banking and Finance Ltd (NSLMB) formally merged into NBBL, following the long process spanning over four years. The merger finally got realised after NRB and Company Registrar’s Office granted the permission on January first week. Likewise, NBBL and NB Finance – both promoted by NB Group had merged four years ago. NBBL would have been able to fulfil its capital requirement of increasing paid up capital to Rs 2 billion as per NRB’s regulation, following the merger with NSLMB.

However, NCC Bank’s paid up capital was short of approximately Rs 600 million.

The merger will not only increase the assets and the capital of the bank but transfer whole load of liabilities as well.

But the merger of full fledged commercial banks will be the first one in the Nepali banking history and might pave the way for more mergers in the future.

The merger of the financial institutions has been encouraged by both fiscal policy and monetary policy for the present fiscal year. The central bank has forwarded the concept as an alternative to opening of new financial institutions and also as the remedy to increase the paid up capital and as a support to the ailing financial health.

Moreover, it creates space in the crowded financial institutions and increases the reach of financial institutions as well. As an incentive, though the annual budget has removed the provision of charging merger with taxes as that of asset transfer. However, the banks and financial institutions are still less inclined to the mergers citing the lack of incentives.