Bank of Kathmandu (BoK) and Lumbini Bank on Thursday signed a memorandum of understanding (MoU) for merger. As per the MoU, the merged entity will be named Bank of Kathmandu Lumbini.

The swap ratio of BoK and Lumbini has been agreed at 1:0.8281, BoK said in a statement. “The merged entity will be financially stronger to mitigate possible risks and make positive contribution towards improving access to finance of the country.”

Banks and Financial Institutions (BFIs) have been coming up with merger plans after the Nepal Rastra Bank (NRB) hiked the paid-up capital requirements. In the Monetary Policy 2015-16, the regulator has asked A class financial institutions to raise their capital to Rs8 billion in two years.

As of mid-October, BoK’s paid-up capital stands at Rs2.12 billion, which will increase to Rs2.67 billion after the planned issuance of bonus shares. Lumbini Bank has a paid-up capital of Rs2 billion, which it plans to raise to Rs2.3 billion by issuing stock dividend.

The merged entity will have 69 branches and 62 ATM counters. Currently, Lumbini has 18 branches and BoK 51. BoK also plans to add five more branches in the near future.

As of mid-October, BoK’s deposit mobilisation and credit disbursement stand at Rs39.46 billion and Rs33.39 billion, respectively. Similarly, Lumbini’s deposits and loans stand at Rs20.28 billion and Rs17.24 billion, respectively.

The MoU was signed by BoK Chairman Satya Narayan Manandhar and Director Hem Raj Subedi and Lumbini Chairman Prakash Shrestha and Director Subarna Lal Shrestha. The merger plan will get final shape after the approval of the NRB and the banks’ general meetings.

Meanwhile, Siddhartha Development Bank, Ekata Bikas Bank and Nepal Aawas Finance on Tuesday signed an agreement for unification. As per the agreement, the unified company will be named Siddhartha Development Bank, which will come into operation from mid-March, according to a statement.

With 29 branches, the unified institution will have a paid-up capital of Rs1.14 billion. Its deposits and loans will reach Rs10.07 billion and Rs8.55 billion, respectively. While its capital fund will remain at 12.84 percent, its non-performing loan will be 3.53 percent. 

Vibor Bikas Bank and Society Development Bank also signed a merger MoU, under which the unified entity will be named Vibor Society Development Bank.

It will have a paid-up capital of Rs1.81 billion and deposits and loans of Rs11 billion and Rs9 billion, respectively. It will have 43 branches in 20 districts.

The central bank has asked national-level development banks to raise their capital to Rs2.50 in the next two years.