Likewise, it also agreed in principle to allow Infrastructure Development (ID) Bank and Swastik Merchant Finance to merge and function as a national-level development bank.[break]
The board meeting of the NRB held on the day finally settled the long pending request of Sanima and Annapurna to upgrade, said a said a highly placed source at NRB, disclosing that they have been granted agreement in principle for upgrading. “Allowing ID Bank and Swastik Merchant to merge too is an important decision,” the source told Republica.
Going by the existing rule, these financial institutions would need to complete all formalities of upgrading and merger and approach the central bank for starting operations as the new institutions within six months. In case they failed, the permission granted on Tuesday would automatically turn void.
Officials of all these institutions have welcomed the decision and said that they would instantly initiate process to gain the central bank´s license to function as the upgraded entities.
Sanima Development Bank, promoted by non-resident Nepalis and based in Kathmandu, had lodged an application to upgrade into category ´A´ commercial bank two years ago. The bank has already met NRB´s capital requirement by raised its paid-up capital to Rs 2.01 billion. Its deposits and loan investment as at mid-July 2011 stood at Rs 6.35 billion and Rs 7.2 billion respectively.
Annapurna Finance, which was established some 17 years ago, has also raised its paid-up capital to Rs 704.28 million, complying with the capital requirement criteria of the central bank to upgrade into category ´B´ national-level development bank.
“Merger of ID Bank, which has paid-up capital of Rs 660 million, and Swastik Merchant having paid-up capital of Rs 100 million is expected to help them consolidate their position, enable them issue more credit and function more competitively in the market,” said the source.
ID Bank and Swastik Merchant Finance had approached the central bank for merger a few months ago. Records show, both the institutions had operated with profit in the last fiscal year. Officials of both the institutions said they would soon conduct a Due Diligence Audit to assess the status and share of the two institutions 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 to undergo merger to cut cost and sustain. It even unveiled merger bylaws in early May 2011 and the government too has provided various tax incentives to encourage them for merger.
“Since then, about a dozen BFIs have approached us for merger approval. This is a good sign,” said the official.
Annapurna Bikash Bank (ABB) and Suryadarshan Finance Company Limited (SFCL), and Kasthamandap Development Bank and Shikar Finance have formally applied for merger approval, while Vibor Bikas Bank has signed a memorandum of understanding (MoU) with Bhajuratna Finance to undergo merger.
Birgunj Finance and Himchuli Development Bank completed merger formalities few months ago, forming H & B Development Bank.
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