Financial institutions need to hold back on demanding more facilities to get merged as merger itself provides opportunities for business expansion, according to the central bank governor.
During the inauguration of NIC Asia Bank Ltd ¿ the merged entity of Bank of Asia Nepal and NIC Bank ¿ Nepal Rastra Bank (NRB) governor Dr Yubaraj Khatiwada said, "Mergers are meant to make the merged entity competitive and able to run the business cost-effectively, and banks should not feel like they are doing it for the central bank."
NIC Asia Bank ¿ that became fully operational today ¿ is the first commercial bank that has been formed through a merger between two class `A' financial institutions in the history of the Nepali banking system. "Not only has the bank become a trendsetter in terms of merger between big institutions, it has also become a systemically important bank in the financial system due to its size," the governor said.
Following the merger, NIC Asia Bank now serves more than 270,000 customers with deposits worth Rs 38 billion and loans worth Rs 33 billion.
It will from now on provide banking services through its 53 branches. It has paid up capital of Rs 2.31 billion, however, its capital base is around Rs five billion, including reserve and retained earnings. Dr Khatiwada also informed that the time had come for banks to increase their capital further. "Though higher capital does not guarantee better performance, it makes banks more sturdy and infuses confidence in them," he said.
NIC Bank and Bank of Asia, which had started the merger procedure in May 2012, were granted Letter of Intent for merger by the central bank on July 23, 2012. The Office of Company Registrar granted the final approval for the two banks to merge on May 14, this year. NRB had specifically suggested the banks that had numerous common directors and common promoters to get merged.
"We, at first, had sought a strategic partnership from foreign banks but could not find one due to the policy volatility of Nepal," said CEO of NIC Asia Bank Sashin Joshi, adding that the merger was not an easy process. He also pointed out the need for better facilities and clear legal provisions that will make mergers more attractive for other banks.
"There is a merger guideline to guide the financial institutions to opt for mergers, but if there were legal provisions that facilitated acquisition then the Nepali financial sector would see more financial institutions that are smaller or in trouble being acquired by larger and able ones," said Joshi.
Nepal Stock Exchange that had halted trading of the banks due to the merger procedure since the last one year, will resume the trading of the new NIC Asia Bank soon. Shareholders of Bank of Asia Nepal will be issued new share certificates equivalent to one share of NIC Asia Bank for two shares of Bank of Asia Nepal. The due diligence audit of the banks had determined 1:2 share swap ratio between NIC Bank and Bank of Asia Nepal.
Source: nepalsharemarket
During the inauguration of NIC Asia Bank Ltd ¿ the merged entity of Bank of Asia Nepal and NIC Bank ¿ Nepal Rastra Bank (NRB) governor Dr Yubaraj Khatiwada said, "Mergers are meant to make the merged entity competitive and able to run the business cost-effectively, and banks should not feel like they are doing it for the central bank."
NIC Asia Bank ¿ that became fully operational today ¿ is the first commercial bank that has been formed through a merger between two class `A' financial institutions in the history of the Nepali banking system. "Not only has the bank become a trendsetter in terms of merger between big institutions, it has also become a systemically important bank in the financial system due to its size," the governor said.
Following the merger, NIC Asia Bank now serves more than 270,000 customers with deposits worth Rs 38 billion and loans worth Rs 33 billion.
It will from now on provide banking services through its 53 branches. It has paid up capital of Rs 2.31 billion, however, its capital base is around Rs five billion, including reserve and retained earnings. Dr Khatiwada also informed that the time had come for banks to increase their capital further. "Though higher capital does not guarantee better performance, it makes banks more sturdy and infuses confidence in them," he said.
NIC Bank and Bank of Asia, which had started the merger procedure in May 2012, were granted Letter of Intent for merger by the central bank on July 23, 2012. The Office of Company Registrar granted the final approval for the two banks to merge on May 14, this year. NRB had specifically suggested the banks that had numerous common directors and common promoters to get merged.
"We, at first, had sought a strategic partnership from foreign banks but could not find one due to the policy volatility of Nepal," said CEO of NIC Asia Bank Sashin Joshi, adding that the merger was not an easy process. He also pointed out the need for better facilities and clear legal provisions that will make mergers more attractive for other banks.
"There is a merger guideline to guide the financial institutions to opt for mergers, but if there were legal provisions that facilitated acquisition then the Nepali financial sector would see more financial institutions that are smaller or in trouble being acquired by larger and able ones," said Joshi.
Nepal Stock Exchange that had halted trading of the banks due to the merger procedure since the last one year, will resume the trading of the new NIC Asia Bank soon. Shareholders of Bank of Asia Nepal will be issued new share certificates equivalent to one share of NIC Asia Bank for two shares of Bank of Asia Nepal. The due diligence audit of the banks had determined 1:2 share swap ratio between NIC Bank and Bank of Asia Nepal.
Source: nepalsharemarket
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