Private banks and financial institutions (BFIs) are on a merger spree, but state-owned enterprises are yet to be overcome by similar enthusiasm.

Efforts to tie up NIDC Development Bank with another government-owned entity have repeatedly come to naught. One of the reasons behind the failure of its planned merger is the government’s frequent policy changes and disagreements with potential partners.

A proposed merger between NIDC, Rastriya Banijya Bank (RBB) and Hydroelectric Investment and Development Company Limited (HIDCL) and plans to transform NIDC itself into an infrastructure development bank have failed to get off the ground.

Recently, Nepal Bank Limited (NBL) had proposed to merge with NIDC and sent a proposal to the Finance Ministry for its blessings. However, NIDC rejected the idea, a senior Finance Ministry official said.

“We asked NIDC for its opinion after receiving a proposal from NBL, but NIDC turned down the offer saying that it planned to transform itself into an infrastructure development bank,” said

a senior Finance Ministry official.

However, NIDC’s Chief Executive Officer Shivji Roy Yadav said that they had not rejected the idea and that it was the government which should decide how to operate the development bank. “Every institution wants its institution valued, and we think that NIDC is still relevant for the purpose it was established,” he said.

According to CEO of NBL Devendra Pratap Shah, they had proposed a merger with NIDC to make NBL a stronger bank. However, there is a strong feeling among NIDC officials and staff that other banks are interested in tying up with it because they covet its land and buildings in the prime location of Durbar Marg.

The idea of merging NIDC with other state-owned enterprises was born in 2011, but the government has been frequently changing the policy on operating NIDC in the last five years.

The government had planned to merge NIDC with RBB as it would have saved it from injecting capital into the country’s largest bank.

“The proposed merger between the two did not happen because NIDC was not very keen on the idea. Moreover, it had its own plan to develop in an infrastructure development bank,” said a Finance Ministry official.

NIDC’s sustained financial revival raised the confidence of its management that it could survive on its own and did not need to merge with big financial institutions. The state-owned development bank, which was once teetering on the brink of bankruptcy, has posted a cumulative profit since the fiscal year 2011-12.

Subsequently, the government announced in the budget statement for fiscal 2013-14 that NIDC would be transformed into an infrastructure development bank as per its proposal.

However, the plan failed to make any headway due to poor preparations and objections by Nepal Rastra Bank that NIDC lacked the financial and managerial capacity to become an infrastructure development bank.

The budget statement for fiscal year 2015-16 announced that NIDC would be merged with HIDCL.

A year later, the plan was abandoned when the next budget was announced. 

HIDCL CEO Deepak Rauniyar said that they had discussed the plan with a taskforce led by former National Planning Commission vice-chairman Prithvi Raj Ligal. “We had said that it would be appropriate for HIDCL to enhance its capacity from within instead of going for a merger,” he told the Post. “No further discussions took place regarding the matter after that.”