December 12: Nepal Rastra Bank is not in favour of merging banks and financial institutions (BFIs) with cross holding of one or more individuals of the same family or group.
Although the central bank had some time ago sought details of cross holding to impose forced merger of different BFIs owned by the same individual or a group of persons, a study conducted by Nepal Rastra Bank has suggested such move would not be much beneficial as the cross holdings were found to be negligible.
As per the existing law, any person or family member holding more than 15 percent of primary share of an institution cannot hold more than 1 percent share of other institutions. In this context, many individuals were found investing in different organizations but their shares were negligible, the study has revealed.
Therefore, the central bank has decided not to make impose forced merger in case of cross holding.
The central bank had sought details of BFIs with cross holding in July/August earlier this year in a bid to impose forced merger of BFIs with cross holding.
The central bank had asked all the BFIs, finance companies and microfinance companies to provide details of their shareholders having 0.1 percent share in other companies.
Deputy Governor of Nepal Rastra Bank Chintamani Shiwakoti says cross holding itself demands forced merger. He said the central bank encourages BFIs with cross holding to go for merger but it isn’t mandatory.
“We want voluntary merger instead of forced merger,” he said, adding that the central bank expects the number of commercial banks to reduce to 15/16 after big mergers.