Nepal Rastra Bank (NRB), in a bid to facilitate big mergers of commercial banks, has announced to provide a number of benefits to the unified entity if they carry out joint transactions by mid-July.
Amending the Unified Directive 2022 on Tuesday, the central bank has come up with the provisions mainly for the banks that have started the process of merger but have failed to start joint operations as of mid-January.
In a six-point offer, the NRB has announced benefits allowing the merged entities to issue loans in specific sectors by an additional one year. Likewise, the merged banks will be provided with additional six months to fix their credit-deposit ratio if it has crossed the given threshold.
The NRB also says that the cooling period of the high level officers of the unified banks will be reduced. Currently, the NRB rules prohibit the high ranking officers of banks to join other banks and financial institutions (BFIs) before six months after they leave their current job.
Likewise, the NRB will provide a one-year period for the merged entity to adjust interbank interest rate, if that has breached the limit as per the regulation. The central bank will also be providing the unified banks with an additional margin of five percentage points on the limit of their deposit collection. “If they want to merge their branch offices operating in one kilometer of distance, they do not need to receive approval from the central bank,” reads the amended unified directive issued by the NRB.
The NRB introduced Merger Bylaws in 2011, while it started pressing the BFIs into merger since the fiscal year 2016/17. Over the period, 184 BFIs have opted for merger or acquisition.
As of mid-March 2023, the number of commercial banks has dropped to 21 from 33. Likewise, there are 17 development banks and finance companies each, and 64 microfinance companies in operation.
