After Monetary Policy 2072/73 - Why Merger ?

This was something expected but was introduced little early. Surely, time limitation has heated up the M&A market. Big projects are not gaining momemtum due to the capital base of current banks and consortium lending takes time. Banks would become little more independent with increased capital base in the future. So far, we have only seen troubled institution getting acquired and forced merger between financial institution where there were same promoters. LBL/HISEF, GBL/IME, NIC/BOAN, etc are some examples. But now, there is a real challenge to merge promoters, HR and unique cultures these institutions have developed over the period of time. For example, i see very chance of banks like SCB going for M&A and their EPS will significantly go down with increase in their paid up capital as their growth rate has gone down every year. Also, there is a big risk that weaker banks might merge and real goal of monetary policy is not to create bigger weak banks. This is something to consider for NRB at the moment.

With mergers there are underlying challenges that finance/ banking firms will have to face. Automation of business processes will allow these firms to toughen data security, introduce best practices and mostly importantly reduce risks. Before mergers it is quintessential for these firms to review their processes to confirm data reliability and adequacy.

This is possibly the best solution, but isn't it going to affect the employment problem? People may loose their job for the same.

Thank you for your appreciation Ms. Sweta Pradhan. I have been working out on the solution regarding HR issues while M&A in Nepali BFIs. Recently we have develop the concept of "Merger Management" after merger. If you have got any idea of international practice on M&A HR issues, you are mostly welcome to share. Considering the situation there is no other option than merge for most of BFIs in Nepal to meet the target 8 billion set by NRB. More or less we have to concentrated in "Merger Management" to accomplish successful merger.

Definetly it will. But NRB should be determine on its objective and arrange additional policies regarding M&A to made successful merger. "Merger Management" today's requirement for all the BFIs.