Nepal Rastra Bank (NRB) Governor Dr Yuba Raj Khatiwada inaugurated NIC Asia Bank amid a function on Sunday, six months after the two Class ´A´ banks signed merger agreement. [break]
This is the first merger of Class ´A´ bank in Nepal´s banking history.
With the merger, the newly formed entity has 53 branch offices and 57 ATMs. The bank plans to increase the number of branches to 66 with the relocation of 13 branches. It boasts of capital base close to Rs 5 billion with deposit base worth Rs 38 billion and loan and advance amounting to Rs 33 billion.
As per the agreement, two shares of Bank of Asia have been converted into one share of NIC Asia Bank. Shareholders of NIC Bank, however, will receive one share of NIC Asia Bank for every one share they held in NIC Bank.
Speaking on the occasion, Khatiwada urged banks and financial institutions (BFIs) to go for mergers to strengthen their capital base.
Amid rising incidence banks facing financial problems, NRB has been urging BFIs to go for mergers.
“Merger is not the agenda of only the central bank. It is the common agenda of both the central bank and BFIs to strengthen financial position of banks and financial institutions,” added Khatiwada.
Responding to demand for incentives by BFIs interested to undergo merger, Khatiwada asked them to take merger as an opportunity to increase their capital base. Expressing dissatisfaction over widening spread rates -- difference between interest on deposits and interest on loan, Khatiwada urged BFIs to revisit their interest policy.
“It is high time the bankers revisited their interest policy so that industries will not have to suffer crisis due to exorbitant interests on loans,” said Khatiwada.
Speaking on the occasion, Sashin Joshi, CEO of NIC Asia Bank, asked the the central bank to offer more incentives to BFIs which are ready to undergo mergers. “NRB should announce incentives, including tax rebates, to BFIs so that they can come forward for merger spontaneously,” said Joshi.
The merger process was initiated with the signing of the Memorandum of Understanding (MoU) between the two banks on June 28, 2012. The two banks had received final approval for merger from NRB on April 26.
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