Financial status of merged BFIs ‘improved in third year’
The NRB study states non-performing loans, ratios of net profit against net asset, net profit against equity and loan against dividend have decreased in most of the entities
Oct 3, 2015-Financial status of most of the merged banks and financial institutions (BFIs) has improved in the third year after mixed results in the first two years, according to a report on the effectiveness of BFI mergers.
The study conducted by the Nepal Rastra Bank (NRB) has stated non-performing loans (NPL), ratios of net profit against net asset, net profit against equity and loan against dividend have decreased in most of the merged entities.
The report titled “Study on Status of BFIs After Merger and Effectiveness of Merger” has stated the merged BFIs are expected to reduce the number of staff members and administrative costs, improve capacity utilisation of the staffers and fulfil the integration process, which will improve the net profit in the long-run.
The central bank conducted the study on 25 entities created after the merger of 68 BFIs until mid-January 2015.
According to the report, salaries and facilities to staffers have either risen or remained the same in the merged entity. but most of the BFIS witnessed hike in the facilities.
The merged BFIs hiked salary and benefits to motivate the staffers. Most of the staffs were found to be satisfied with the responsibilities given to them.
“With some merged entities failing extend branches, promotion was limited for staffers,” it said. “In the case of some BFIs which were in losses and went to merger, they could not provide bonuses to the staffers due to increased cost during the merger.”
One drawback of the merger is increased time for executing works. Due to lengthy decision-making process after the rise in the size of the financial institution, execution of works has been affected. In customer service, there has been positive impact in most of services except for the deadline for providing loans to customers.
Service seekers felt some complications emerged in the loan approval process, according to the report.
It said most of the merged BFIs fulfilled their objectives such as hiking capital, expanding business areas, enhancing competitiveness and improving financial situation, while a few did not.
However, in some of the mergers, promoters were found to have not followed the swap ratio of share allocation as per the due diligence audit (DDA).
So the shareholders of the merged entity failing push their agenda were forced to receive less than the actual value of their assets.
Published: 03-10-2015 09:27