A year after the Nepal Rastra Bank’s exemptions and concessions for mergers and acquisitions expired, banks are once again showing interest in these processes. Several banks have conveyed their willingness to pursue mergers and acquisitions by passing special resolutions during their annual general meetings.
Out of the eight commercial banks that held their annual general meetings in the last fiscal year (FY 2023/24), four including Citizens Bank International, Prime Commercial Bank, Nabil Bank, and Nepal SBI Bank passed resolutions authorizing their board of directors to decide on mergers and acquisitions. These resolutions have paved the way for the respective boards to initiate and finalize such processes.
In the current fiscal year (FY 2024/25), Citizens Bank International was the first to pass a merger and acquisition resolution. During its general meeting held in mid-October, the bank authorized its board of directors to appoint a national or internationally recognized appraiser to evaluate the bank’s movable and immovable assets, liabilities, and transactions. The board was also empowered to enter into preliminary and final agreements related to mergers or acquisitions and complete all necessary procedures.
Similarly, Prime Commercial Bank passed a special resolution during its general meeting held between mid-November and mid-December. This resolution authorized the board to adopt necessary procedures for mergers or acquisitions involving the bank and other financial institutions.
Nabil Bank, in its general meeting held during the same period, passed a resolution to authorize its board to appoint appraisers for asset and liability evaluation, explore foreign partnerships, and proceed with mergers or acquisitions deemed appropriate for Nabil Bank and other financial institutions.
Nepal SBI Bank, which had not participated in any merger process until now, also passed a resolution during its annual general meeting last Sunday. The resolution authorized the board to perform all necessary functions under prevailing laws for merging or acquiring other financial institutions.
Among these banks, Nabil Bank had acquired Nepal Bangladesh Bank just last year. Despite completing this significant merger, Nabil’s annual general meeting approved another merger agenda. Nabil Bank’s Chairman Upendra Paudyal clarified that while there is no immediate plan for another merger, the bank is keeping its options open. "We passed the proposal to remain prepared should an opportunity arise," he said.
The Nepal Rastra Bank began encouraging mergers and acquisitions in 2011 by issuing related regulations and halting new licenses. This initiative has significantly reduced the number of financial institutions. Commercial banks have decreased from 32 to 20, development banks to 17, and finance companies from 79 to 17 through mergers and acquisitions.
Bhuwan Kumar Dahal, former president of the Nepal Bankers Association, says that banks’ renewed focus on mergers might indicate that investors are looking for exit strategies.
“There is no longer a strong compulsion for banks to merge due to capital or other reasons,” he told New Business Age . “As banks’ returns decline, directors may seek to exit by merging with stronger institutions.” He also noted that larger banks face higher costs for holding special meetings, which could explain why such proposals are passed during routine AGMs.
