Nepal Rastra Bank (NRB) has given the final approval to the planned merger of NMB Bank with Bhrikuti Development Bank, Pathibhara Development Bank, Clean Energy Development Bank and Prudential Finance.

The combined entity will commence operations under the name NMB Bank from October 18, and it will be one of the largest banks in the country, NMB Bank said.

“This move will establish the bank’s position as one of the leading commercial banks in the country with a bigger capital base to serve its customers better in every aspect,” it said in a press release. NMB Bank and the other financial institutions had signed merger agreements on different dates in the last fiscal year.

The amalgamation follows the central bank’s instruction to commercial banks to increase their paid-up capital to Rs8 billion in the next two years, setting off a scramble among them to fulfil the requirement.

Currently, banks are required to maintain Rs2 billion as their paid-up capital. The central bank’s directive has forced many banks and financial institutions to go for mergers and other measures to boost their capital base.

“The merger approval has put NMB Bank among the front runners to fulfil the requirement to increase the capital base in two years,” said the bank.  “The bank’s paid-up capital will swell to Rs5.6 billion after the merger once the investment by our foreign joint venture partner is also added,” said NMB CEO Upendra Poudyal.

Similarly, FMO (Financierings Maatschappij-voor Ontwikkelingslanden) of the Netherlands, which has a stake in Clean Energy Development Bank, is

expected to make a further investment.

However, NMB’s Malaysian joint venture partner, Young Lian, is expected to leave Nepal as the central bank has barred non-banking institutions from holding stock in banks and financial institutions.

FMO, the International Development Bank of the Government of the Netherlands, with an investment portfolio 3.4 billion euros is one of the largest bilateral development banks worldwide. FMO’s alliance will expand NMB Bank’s exposure, specifically in energy sector investment and international trade, which will directly boost its strength in the equity capital market, said the bank.

Poudel said that NMB had planned to fulfil the Rs8 billion capital requirement through the profits of the next two years. After the merger, its total capital and reserve will reach Rs6.2 billion, with a consolidated deposit of Rs54 billion and loans and advances of Rs41 billion.

According to NMB Bank, the merger process, which was initiated in the last fiscal year 2014-15, strategically incorporates the regional representation of two of the largest regional development banks which will strengthen its retail base nationwide.

The bank’s footprint will increase to 68 branches, eight extension counters and 38 ATM counters.