Merger : Nepal Bangladesh Bank & Nepal Sri Lanka Merchant Bank

After four years of twists and turns, the merger between Nepal Bangladesh Bank Limited (NBBL) and Nepal Sri Lanka Merchant Bank Limited (NSLMB) is finally taking place. The Nepal Rastra Bank gave the go-ahead for the merger last week. In the event of the merger taking place, it will be the first in 2011 and the fourth in the country's banking history. About three weeks ago, the central bank had disqualified the institutions' merger announcement, saying that they did not follow due procedures as per the as per the Bank and Financial Institution Act (BAFIA) prior to announcing the merger.

"The merger will be effective from Jan. 23," said Prithvi Raj Ligal, chairman of the merger committee formed by the two financial institutions. The central bank will issue a notice of merger after receiving request from the institutions. NRB officials, however, said that they were yet to receive a formal letter from the institutions, requesting the central bank to issue a merger notice. NRB has told the institutions to complete the merger process within next 90 days.

This will be the second merger of the financial institutions promoted by the NB group. NBBL and NB Finance had merged four years ago. Other mergers that took place in the country are between Laxmi Bank and Hisef Finance¿both promoted by Khetan Group¿and Narayani Finance and National Finance. "The NBBL-NSLMB merger will encourage other financial institutions to go for merger," said Ligal, who is also the chairman of Nepal Credit and Commerce Bank. The government and the central bank have given high priority to mergers of bank and financial institutions (BFIs). The government has changed the existing provision of taxing assets and liabilities as disposal after mergers, making it non-taxable. The central bank is also mulling facilities to be provided to encourage mergers.

Following the NBL-NSLMB merger, the paid-up capital of NBB will surpass Rs 2 billion mark, a requirement which banks should meet by fiscal year 2012-13. Currently, NBB has a paid-up capital of Rs 1.86 billion and the paid-up capital of NSLMB is Rs 300 million. However, NBBL has to bear the liabilities of NSLMB as per the BAFIA. NSLMB owes Rs 60 million to Madhyamanchal Grameen Bikas Bank and Rs 149.2 to the Nepal Army.

"We decided to allow the merger to save NSLMB form collapse," said a senior NRB official. "The merger may affect the financial situation of NBBL. However, in the event of NSLMB's collapse, depositors' confidence in the financial system, which is already coping with acute liquidity crisis, would weaken." After the merger, the head office and branches of NSLMB will be converted into NBL branches. NSLMB staff will be assimilated to the NBB staff.

Boards of both the institutions have agreed to appoint NSLMB staff in posts two levels lower than those they currently hold. However, some of the NBBL employees are opposing this provision, saying that the NBBL board had assured them that NSLMB staff would be appointed in posts four levels lower than those they currently hold. "The management has assured us in writing," said Rabin Shakya, president of Employees Union of NBBL. On the other hand, NSLMB employees are saying that the appointments have to be made according the decision taken by the boards of the two institutions. "If not done as per the boards' decision, it will be our humiliation," said a senior NSLMB officer. The NBBL will not be changed even after the merger. "NRB did not allow us to change the board as per the changed shares structure," said Laxmi Bahadur Shrestha, director of NBBL

Source:
ekantipur