Money
Prabhu, Grand start joint ops after merger
Prabhu Bank and Grand Bank Nepal started joint operations on Friday after their merger. The amalgamation of the two follows a flurry of mergers that has brought down the number of commercial banks in Nepal to 29.Prabhu Bank and Grand Bank Nepal started joint operations on Friday after their merger. The amalgamation of the two follows a flurry of mergers that has brought down the number of commercial banks in Nepal to 29.
So far, eight financial institutio- ns have been merged into Prabhu Bank. Following the latest merger, its paid-up capital has swelled to Rs5.2 billion. Nepal Rastra Bank (NRB) has directed commercial banks to increase their paid-up capital to Rs8 billion within two years, setting off a merger spree.
Speaking at the inauguration of joint transactions on Friday, NRB Governor Chiranjibi Nepal said the central bank would be enforcing a merger policy to enable banks and financial institutions (BFI) to invest a large amount of capital in mega projects. He stressed the need to invest in research and development to identify diverse loan portfolios. The governor asked the merged entity to focus on rural areas. “We are planning to introduce measures under which BFIs have to improve banking access to rural areas,” he said.
Likewise, Prabhu Bank Chief Executive Officer Ashok Sherchan expressed happiness that the merger was successfully completed despite encountering a number of challenges. “In the future, we have targeted capacity building of the staff besides upgrading the technology of the institution for quality service delivery,” he said.
The number of employees at the bank has increased to 1,200 after the merger, 300 of them joining it following the merger with Grand Bank Nepal. The bank will now be providing services to 750,000 customers from 136 branch offices and 122 ATM terminals.
Swarup Gurung Koney, who was chairman of Grand Bank Nepal, said they had given first priority to the settlement of its employees. “The process was completed after 14-15 months of joint efforts,” said Gurung, adding that NRB also facilitated the process.
Before the merger, Prabhu Bank earned a net profit of Rs400 million in the first half of the current fiscal year while Grand Bank Nepal earned a profit of Rs140 million during the same period. Prabhu Bank Chairman Devi Prakash Bhattachan said they had targeted increasing the net profit of the unified institution to Rs1 billion by mid-April.
Upendra Poudel, president of the Nepal Bankers’ Association, said the merger had helped banks to strengthen their capital base. “Besides benefiting from economies of scale, it also provides a synergistic effect to the merged entity,” Poudel said.
Poudel stressed the need for prudent preparation and proper communication with stakeholders for a flawless merger. “Giving importance to human resource management and operational integration is the key to achieving result-oriented objectives,” he added.
After the central bank directed BFIs to increase their paid-up capital fourfold through the monetary policy statement this fiscal year, there has been a growing number of mergers. While the trend of development banks and finance companies merging into banks started much earlier, moves to merge commercial banks started after the monetary policy was introduced this fiscal year.
A merger has been planned between the Bank of Kathmandu and Lumbini Bank. Likewise, Kumari Bank and NCC Bank have been contemplating coming together.