Speaking at a press meet, Prabhu Bank Chairman Devi Prakash Bhattachan said they had acquired the GBN to further expand their business, adding that they opted for acquisition since merger process would likely be a lengthier process. “The swap ratio will be fixed only after a detailed financial assessment of GBN.”

Prabhu Bank had earlier merged with Kist Bank six months ago,

posting a net profit of Rs 500 million by mid January.

As per GBN officials, they went for the acquisition once the bank fell into financial crisis. The GBN has been under inspection by Nepal Rastra Bank  after the bank’s Capital Adequacy

Ratio (CAR) fell under 10 percent. As per the bank’s last year financial

report, it also incurred a loss of Rs 1.6 billion after it failed to recover a big chunk of loan.

With the bank’s weak financial position, NRB was compelled to take such corrective action. In addition, the central bank a few days ago gave the GBN management a deadline of six months to increase its capital fund to minimum of 10 percent.

A GBN official said that the bank management decided to go for a acquisition process with Prabhu Bank taking it as an easy approach rather than investing in right shares.

“Based on the financial position of the GBN, its swap ratio has been found to fall between 60 and 70,” the official said.

GBN Chairman Swarup Gurung Koney said that the central bank took the prompt action after the bank’s financial report for last year appeared poor. Apart from undergoing negative capital fund and huge loss, the GBN’s capital fund to risk weighted average fell to 4.07 percent last year from 13.2 percent in 2012-13.

With the acquisition, Prabhu Bank’s paid up capital will reach Rs 5.20 billion. The unified organisation will have a deposit of Rs 45.90 billion while its loan sits at Rs 39.05 billion. The ratio of bank’s idle fund will reach 16.17 percent while the capital fund will reach 10.2 percent, said the bank source.

According to an official at Prabhu Bank, they will not consider officials from the GBN for high-ranking position in the new bank. “Neither will Prabhu Bank have a new member in its board,” said the source.