A merger agreement has been signed between Nepal Investment Bank and Himalayan Bank, the two largest banks in Nepal. The bank to be formed after the merger will be the bank with the highest paid-up capital of Nepal at Rs 26.94 Arab.
The merger agreement between the two big banks is analyzing the pressure on other banks to merge.
Chandra Dhakal, Chairman of Global IME Bank, the largest commercial bank so far, said today’s merger agreement would encourage other banks to merge as well. He said that the merger of the two big banks would encourage other banks as it is the policy of NRB to reduce the number of banks.
Stating that the pressure to merge will not work, he said that a suitable environment should be created for merging by giving incentives by the Bank. But he says there should be no pressure to merge.
Recalling that Global IME Bank is also a bank made up of 18 different banks and financial institutions, he said, “If the environment is created, the banks will merge on their own. NRB does not have to keep up the pressure.”
Similarly, Nabil Bank Chairman Upendra Poudel said that they have been saying that the number of banks should be reduced from the very beginning. However, he said that despite various efforts, it has not been successful, and now that the two big banks have signed a merger agreement, they will force other banks to think about it.
Until now, the mental block, that is, the mentality that we are capable of, has made the banks hesitant to merge, but now that the positive move has come, the banks may take a different direction, he said.
He says that the size of the bank has to be bigger to easily ‘absorb’ even the smallest ‘shock’. Compared to India, the so-called small banks of India are also bigger than the big banks of Nepal, so the banks need to ‘explore’ more for the merger, he said.
He says the current merger agreement is the right and appropriate step and it will motivate others as well. However, he said that since there would be no merger due to pressure, he would have to make a strategy voluntarily and now he would have to follow this strategy.
He says that he has to go for the merger only after preparing in advance, assessing where he is now and where he will reach after the merger.
Chairman of Mega Bank Bhoj Bahadur Shah said that the merger could not pick up speed as the NRB would bring a merger policy but would not provide the necessary incentives. That is the reason why commercial banks have so far only acquired small institutions and now that the big banks have merged, it has created pressure on other banks, he said.
He says healthy competition between banks is needed and other banks need more paid-up capital for that, creating pressure for mergers.
He said that now that the banks are running according to ‘Struggle for Existence’, there is no option for the banks that cannot run and compete to merge.
Laxmi Bank Chairman Raman Nepal says that the merger of the banks in Cross Holding is good and will bring a synergy effect. This is another
He said that he would encourage the bank and send a good message. But he suggests going to a bank of the same level when merging. He says that the bigger the size of the bank, the less likely it is that the bank will fail.
But he says the banks need to merge only after seeing the results of the current merger. He said that the merger would bring good results if all the issues of management and staff were coordinated.