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  • Economics Updates 2

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    Sudip Parajuli
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    This document discusses mergers and acquisitions (M&A) in the banking sector in Nepal. It provides reasons for mergers such as liquidity issues, capital requirements, and increasing competitiveness in an open financial market. Mergers benefit banks by allowing them to cut expenses, expand into new markets, increase network access for account holders, and prevent insolvency. Examples of mergers in Nepal include the combination of NIC Bank and BOAN to form NIC Asia Bank, and the merger of Global Bank, IME Financial Institution, and Lord Buddha Finance to create Global IME Bank.

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    This document discusses mergers and acquisitions (M&A) in the banking sector in Nepal. It provides reasons for mergers such as liquidity issues, capital requirements, and increasing competitiveness in an open financial market. Mergers benefit banks by allowing them to cut expenses, expand into new markets, increase network access for account holders, and prevent insolvency. Examples of mergers in Nepal include the combination of NIC Bank and BOAN to form NIC Asia Bank, and the merger of Global Bank, IME Financial Institution, and Lord Buddha Finance to create Global IME Bank.

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    32 views9 pages

    Economics Updates 2

    Uploaded by

    Sudip Parajuli
    This document discusses mergers and acquisitions (M&A) in the banking sector in Nepal. It provides reasons for mergers such as liquidity issues, capital requirements, and increasing competitiveness in an open financial market. Mergers benefit banks by allowing them to cut expenses, expand into new markets, increase network access for account holders, and prevent insolvency. Examples of mergers in Nepal include the combination of NIC Bank and BOAN to form NIC Asia Bank, and the merger of Global Bank, IME Financial Institution, and Lord Buddha Finance to create Global IME Bank.

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    © All Rights Reserved
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    of 9

    GROUP -ORGANI SER

    Mergers and Acquisitions


    Reasons behind merging
    Benefits of merger
    Examples of merger


    Presentation by
    1) Sneha Karki
    2) Sudip Rimal
    3) Pawan Raj Lohani
    4) Sanjeet Dahal
    5) Gudiya Shah



    Mergers and Acquisitions (abbreviated M&A) refers to the aspect of corporate
    strategy, corporate finance and management dealing with the buying, selling,
    dividing and combining of different companies .

    similar entities that can aid, finance, or help an enterprise grow rapidly in its
    sector or location of origin or a new field or new location without creating a
    subsidiary, other child entity or using a joint venture.


    Mergers and Acquisitions



    Liquidity Crunch:
    Liquidity refers to the amount of money in the form of cash. The amounts of
    deposits in bank are very low and the rate of loan recovery rate is also very
    low. Hence, M&A is believed to solve the liquidity problem as the deposits of
    the two banking institutions are combined as one.

    Capital requirement:
    The paid-up capital requirement of the Nepalese bank is currently Rs. 2 Billion.
    However, the government is planning to raise the paid-up capital requirement
    from 2 Billion to 5 Billion.



    Reasons behind merging
    Continued

    Open Financial Market:
    It concerns about the capacity of local banks to compete with its foreign
    counterparts. Hence, M&A will minimize costs, increase the economies of scale,
    and increase institution's capacity, thus being able to compete at international
    level.




    (As Published on October 2012 Issue of BOSS- A monthly business magazine
    of Nepal)


    BENEFI TS OF MERGI NG
    Bank mergers bring benefits to banking entities, shareholders, employees and
    account holders. Banks that merge can cut expenses, and this enables banks to pass
    on those savings to account holders in the form of lower-priced products.

    Expansion
    To expand into a new market, a bank can either buy real estate, build
    banks, train employees and pay advertising costs, or it can merge with
    another banks.

    Expenses
    When two banks merge, the new entity can cut costs in a number of
    different ways. The combined entities save money overall by eliminating
    one set of each internal department after the merger.
    Continued

    Network
    Account holders benefit from bank mergers because they have access to a wider
    network of branches and automated-teller machines.


    I nsolvency
    When banks become insolvent, account holders' deposits are only federally insured
    for up to $250,000 per account. Additionally, when a bank goes bankrupt, the
    shareholders lose their investment and employees lose their jobs. The Federal
    Deposit Insurance Corporation attempts to broker mergers between strong and
    banks before the failing bank goes bankrupt.
    EXAMPLES OF MERGER
    NI C-ASI A Bank has emerged as the first bank to commence its operation
    after completing its merger as per the schedule proposed by both the banks.

    Merger is not easy. One must realize that a bank is not like a cement
    factory or other establishment and the merger should not be taken as a way
    to evade taxes or other such things," said Governor Dr. Khaitwada,
    inaugurating the corporate office.

    Before the merger, NIC Bank had 36 branches and BOAN 29 branches.
    With the consolidation of 13 branches and addition of a Corporate Branch,
    NIC Asia Bank now have 53 branches and 57 ATMs which will be expanded
    to a total of 66 branches within 1 year with the re-location of the 13
    branches.
    Continued

    Global I ME Bank Ltd. emerged after successful merger of Global Bank
    Ltd (an A class commercial bank), IME Financial Institution (a C class
    finance company) and Lord Buddha Finance Ltd. (a C class finance company)in
    year 2012. Two more development banks (Social Development Bank and Gulmi
    Bikas Bank) merged with Global IME Bank Ltd in year 2013.


    Thank You

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