E-Kantipur

KATHMANDU, NOV 02 -

Nepal Bangladesh Bank (NBB) and Nepal Sri Lanka Merchant Bank (NSLMB) on Monday jointly applied to Nepal Rastra Bank seeking approval for their merger as the central bank didn’t recognise its previously announced merger.

The central bank didn’t entertain the previously announced merger between the two financial institutions saying that they didn’t follow the Bank and Financial Institution Act (BAFIA) that clearly states that the merging companies should take permission from the central bank.

Although the merging financial institutions claimed that they took the central bank’s permission some four years ago, Nepal Rastra Bank refused to listen to their argument saying that the permission given four years ago was no longer valid. The earlier merger process turned invalid after NSLMB’s 13th annual general meeting held on May 4, 2009 decided not to go for a merger with NBB.

Officials of the merging banks had knocked on the doors of NRB officials’ houses to seek approval of their merger announcement. “But they had to restart the process as we didn’t entertain their request,” said a senior NRB official.

After announcing the merger, NBB had repaid some Rs 100 million owed by NSLMB to different depositors. The central bank has already told NBB to stop such payments given that NRB has not approved the merger.  NRB has also said that it could take action against the officials involved in making such payments. The head office and other offices of NSLMB have been converted into branch offices of NBB after the announcement of the merger during the Dashain festival.

Before restarting the process of taking approval from the central bank, the NBB board had decided to postpone the merger in response to the clarification sought by the central bank on Oct. 24. 

NRB had sought clarification from both NBB and NSLMB why they had violated the BAFIA while announcing their merger. Responding to NRB’s letter, NSLMB said they went for a merger on the basis of NRB’s notice regarding approval for merger on Dec. 5, 2006.

After the cancellation of the merger plan by NSLMB’s AGM, shares of NSLMB were traded on the Nepal Stock Exchange too. NRB officials say that whenever a crisis arises for NSLMB, they raise the issue of merger. NSLMB was facing difficulty even to repay the deposits after the fixed deposits matured.

NSLMB was supposed to merge with NBB along with NB Finance four years ago, but the Office of the Company Registrar gave its nod to the merger between NBB and NB Finance only after NSLMB backtracked from its earlier position.

NSLMB then decided to do seek the possibility of a merger with Nepal Credit and Commerce Bank (NCC) promoted by the same group; but the NCC declined to merge the finance company on Dec. 7, 2009, according to a NSLMB letter sent to NRB.

Finally, the two financial institutions informed NRB on Aug. 20, 2010 about the merger plan along with the decision of the two financial institutions. But they had not taken the approval of the central bank as per the BAFIA before announcing the merger.

 

Posted on: 2010-11-02 08:55

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