The two institutions stepped up the procedures for merger after Nepal Rastra Bank (NRB) - the central monetary authority -- issued a letter of intent to this connection last week.[break]
“We will complete the merger by mid-August. In the meantime, we have also left the options of merger open with other institutions,” Ajaya Ghimire CEO of Vibor told a press meeting organized jointly by Vibor and Bhajuratna.
Vibor had decided to merge with Bhajuratna after it faced difficulty to repay the depositors, failing to manage liquidity about a year ago. It had formally committed for merger with other bank and financial institution (BFI) when it took Rs 500 million in ´lender of last resort´ facility from the central bank then.
The merged entity would operate as Vibor Development Bank. Following the merger, the paid-up capital of the development bank would be raised to Rs 1.36 billion, said Ghimire.
Jyoti Group -- the leading promoter of Bhajuratna Finance and Savings -- has agreed to inject additional Rs 148.9 million in the merged institution. Currently, Bhajuratna has capital of only Rs 78.60 million.
“Jyoti Group will show stronger presence in the financial sector once Bhajuranta Finance merges with Vibor,” said Roop Jyoti, director of the finance company. “We had remained on a low profile in the sector due to our own compulsion and government´s policy. But in Vibor we will have a strong back up.”
Presently, Jyoti Group has 70 percent stake in Bhajuratna.
Apart from getting additional capital from Jyoti Group, senior officials of the two institutions said they will also raise additional Rs 208.9 million by inducting new strategic partners and merging with other institutions. They have also targeted to mobilize additional Rs 241.6 million through rights issue of the merged institution.
Likewise, structure of the new board of directors in the merged institution will have 2 directors from Vibor and 1 from Bhajuratna. The top body of the two institutions has also agreed to induct additional one director through other merger or strategic partner, two from general shareholders and one independent director. The bank has 39 percent public shares.
“Last 10 months of liquidity crunch gave us a painful experience,” said Ghimire. “We had two options: either to continue operation with the existing capital structure, functioning as a smaller player in the market, or raise the capital and operate as a strong institution. We chose the latter,” he added.
He said the development bank would strive to undergo merger with other institutions as well to fortify its position in the market.
During the liquidity crunch, when Vibor faced difficulty in repaying borrowers, its clients had withdrawn Rs 1 billion. However, its deposits have improved after mid-October, 2011.
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