Regional grameen bikas banks to merge

HIMALAYAN NEWS SERVICE

KATHMANDU: Paschimanchal Grameen Bikas Bank’s shares will not be traded even after listing due to its merger procedure with the four other regional rural development banks.

Paschimanchal’s share listing at Nepal Stock Exchange (Nepse) yesterday coincided with it signing a Memorandum of Understanding (MoU) for a merger between five regional rural development banks. Following MoU, regulation requires the trading of shares in secondary market to be suspended till merger is finalised.

“Shareholders of Paschimanchal will receive more benefits later as they will already own shares of merged entity which will be stronger and in better financial health,” said spokesperson for Nepal Rastra Bank (NRB) Bhaskar Mani Gyanwali.

The bank had issued its Initial Public Offering in July and has 340,000 unit shares listed at Nepse. To make micro credit services expansive, the central bank and government have finalised the establishment of a microfinance enterprise by merging the existing five regional rural development banks.

Five rural development banks including Purbanchal Grameen Bikas Bank, Madhyamanchal Grameen Bikas Bank, Pashchimanchal Gra-meen Bikas Bank, Madhya Pashchimanchal Grameen Bikas Bank and Sudur Pashchimancal Grameen Bikas Bank have signed a MoU to become a single national level class ‘D’ microfinance development bank.

After the merger, the entity will have a paid up capital of Rs 400 million. However, the government and central bank are also discussing possibility of injecting more capital to make the institution larger.

“The merged entity will have a larger capital base, operation cost will also go down and, moreover, its area of operation will also be large and outreach will also increase,” added Gyanwali. Financial health of the banks has deteriorated in the years due to bad management and political intervention so NRB had pressurised them to merge.

The performance of those in the western and eastern regions are considered to be relatively well, but the performance of these banks in the mid and far western regions is alarming.