GOVT. ANNOUNCES DELAYED RELIEF PROGRAMME

GOVT. ANNOUNCES DELAYED RELIEF PROGRAMME
Kathmandu, 9 Sept.: Government Friday morning announced its promised relief programme with the installation of the government of Prime Minister Dr. Baburam Bhattarai last week.
The announcement that was to be announced Thursday was delayed by one day.
The relief measures come ahead of the festive season. MORE
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SEVEN ARRESTED WITH DETONATORS, PISTOL, BULLETS
Kathmandu, 9 Sept.: Two electrical detonators, a pistol and two bullets were seized from three persons in the northeastern suburb of the capital Thursday night.
They were arrested from a rented room in Kapan.
A passport, cheque books, and manifestos of Rashtriya Shiva Sena Party were recovered.
Four persons with five rounds of bullets were also nabbed from Thankot
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NRB TO REDUCE BFI NUMBERS
Kathmandu, 9 Sept.: In a bid to strengthen the overcrowded domestic financial sector, the Nepal Rastra Bank (NRB) is working to downsize the number of banks and financial institutions (BFIs). The central bank, according to sources, is aiming to bring the total number of BFIs down to 100 from the current 218 in the next five years, The Kathmandu Post reports.
Sources said the central bank is suggesting BFIs either to increase their capital base or merge. The rationale behind this suggestion, according to a senior central bank official, is with the current paid up capital size, BFIs cannot address the growing market demand.
As a part of its consolidation strategy, the central bank has already brought merger bylaws. It has been suggesting BFIs to go for merger on the basis of their paid-up capital size. “We will work in different phases to bring the current number of BFIs down to 100,” said a senior NRB official.
NRB Spokesperson Bhaskar Mani Gyawali also said that they were suggesting BFIs to go for merger. “We are discussing on how to we can help them merge,” said Gyawali.
The merger bylaw 2011 has offered a number of incentives to BFIs going for merger. It has relaxed the provision of promoters’ holding in the merged entity by giving them a five-year period to offload their stake if their holding in the merged entity crosses the NRB prescribed limit of 15 percent. Promoter shareholders, who have more than one percent share in BFIs and have taken loans by putting their shares up as collateral, have been given three years time to decrease their loan amount to 50 percent of the value of their total shares.
Likewise, a merged entity will get two years time to decrease its investment in shares and debentures of other corporate bodies to 10 percent. Besides, the central bank will also give priority to merged entities for upgradation if they fulfill all procedural and infrastructural prerequisites. Merged institutions will get 30 days time instead of the current five days to use the standard liquidity facility. Besides these incentives, the increased competition, lowered profits and liquidity crunch have forced BFIs to think seriously about the merger. According to NRB, 14 BFIs including commercial banks, development banks and finance companies have taken formal initiatives for merger.
Among the BFIs vying for merger are—NMB Bank and Clean Energy Development Bank, Vibor Bikas Bank and Bhajuratna Finance, Infrastructure Development Bank and Swastik Finance, Business Development Bank and Reliable Finance, Annapurna Bikas Bank and Suryadarshan Finance, Kasthamandap Development Bank and Shikhar Finance, Bageshori Bikas Bank and Shangrila Bikas Bank as well as Alpic Everest and Butwal Finance.
They all have signed memorandums understanding to go for merger. Apart from them, more than a dozen other institutions are also planning for merger through their annual general meeting and internal discussion.
In some cases, the central bank has forced BFIs to go for merger. In case of Vibor and Bhajuratna, one of the main conditions for them to get the NRB fund when it went through acute liquidity crunch was they should go for merger.
The merger bylaw has also provisioned that it can direct BFIs to go for merger on certain condition. The bylaws say NRB can direct BFIs owned by the same individual, firm or company having unhealthy financial relations to go for unification. BFIs having NPL level above five percent for three straight years and those have faced the NRB’s prompt corrective action over three times will be asked to opt for merger, according to the bylaws. However, MoU signing only doesn’t guarantee merger. “After signing MoU, the task of studying financial status and making other agreement are done,” said a CEO of development bank preparing for merger, “If all goes well, the merger is executed. Otherwise, we have to explore other partners.” NRB has forecast that there would be about 50 mergers within the current fiscal year “We are planning to create environment of merger among big BFIs in the next fiscal year,” said the NRB source.
The International Monetary Fund (IMF) had recently suggested NRB to force BFIs to go for merger by giving extra incentive. IMF has been suggesting NRB to downsize the number of BFIs to 100. It has also been telling NRB not to issue additional bank licences.
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