Planned merger of grameen bikas banks nears fruition

- RAJESH KHANAL, Kathmandu

Jun 22, 2014-

Drawn-out amalgamation talks between the five grameen bikas banks in the country have finally borne fruit, and these financial institutions, which specialize in providing small loans to rural borrowers, are on track to merge, said Nepal Rastra Bank (NRB).

The central bank and the merger committee said that the unification could happen within this fiscal year.

“The merger process of these financial institutions is at the final stages, and they will be operating as a single organisation soon,” said NRB Spokesperson Bhaskarmani Gnawali.

“We are currently discussing the final merger proposal of the merger committee.”

Moves to combine the five grameen bikas banks, which began about two years ago, have been progressing at a snail’s pace. The central bank has been pushing them to merge as most of them have been operating in the red.

About two decades ago, the government, NRB and a number of commercial banks had joined forces and established five grameen bikas banks, namely Purbanchal, Sudur Pashchimanchal, Pashchimanchal, Madhya Pashchimanchal and Madhyamanchal to provide micro-credit to micro-industries, agro businesses and traders in rural areas of the country’s five development regions.

Besides the central bank, various commercial banks including Standard Chartered Bank Nepal, Nabil Bank, Himalayan Bank, Bank of Kathmandu, Nepal Bangladesh Bank and Agricultural Development Bank have invested in the five banks, and they will all retain their stakes in the merged entity.

Jagat Bahadur Pokharel, chief of the merger committee and chairman of Pashchimanchal Bikas Bank, said they had sent their final merger proposal to NRB and were waiting for its go-ahead.

“We submitted the proposal about a month ago after reaching a consensus,” he said. After getting the central bank’s okay, the five banks formed a merger committee two years ago comprising two board members from each bank.

The merger committee has proposed the name Grameen Bikas Bank, Nepal for the new entity. After the amalgamation, its paid-up capital will be Rs 405 million. The government has planned to inject Rs 250 million into the merged entity which will increase its capital to Rs 655 million, making it eligible to become a B class financial institution.

Earlier, these banks had been demanding that the government pick up their losses amounting to Rs 298 million. A seven-member interim board has been proposed for the unified institution. A representative from NRB will sit on the board too as it will retain its stake in the new company.

According to NRB, the share structure of all the shareholders will remain unchanged. “If found necessary, we will review the capital structure after the merger.”

The proposed board members for the merged entity are Pitambar Bhandari of Madhyamanchal, Gopal Sharma of Purbanchal, Jamuna Dhakal and Jagat Bahadur Pokharel of Pashchimanchal, Manik Ratna Shakya of Madhya Pashchimanchal and Gunakhar Bhatta of Sudur Pashchimanchal. Similarly, Dharma Raj Pandey of Purbanchal Grameen Bikas Bank has been proposed to be the chief executive officer of the new company.

After the merger, it plans to resolve human resource related issues as the first item on the agenda. “We want to conclude manpower related issues like capacity building and voluntary retirement within six months of the merger,” said Pokharel.

Published: 23-06-2014 09:05

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