5 root causes of Uncertainty over the merger of Himalayan and Nepal Investment Bank

मोहम्मद अज्मत अलि

मोहम्मद अज्मत अलि

Dec 03, 2021 | 10:20:59 AM मा प्रकाशित

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Though the deadline is nearing closer, Uncertainty looms over the merger of Himalayan and Nepal Investment Bank. The merger process isn’t going smoothly as Himalayan bank wants some certainty over few technical subjects before finalizing the merger process.

The deadline provided by central bank for finalizing the merger process is 5th December 2021. Its crystal clear that merger process cannot be completed within given time frame.  However, merger committee of both the banks have requested Nepal Rastra Bank, central bank to extend the deadline.

What is causing delay?

Nepal investment bank and central bank wants to finalize merger process as soon as possible. On the other hand, Himalayan wants certainty over 5 things, to make sure they don’t fall behind in future.

As per source with direct knowledge of the matter, Himalayan wants certainty over 5 things below.

1.       Staffing

As of now Himalayan has just over 1000 staff and NIBL has over 2400. But the total salaries and allowance that Himalayan provides to its staffs is much more than that of NIBL. Management needs to either decrease the salary and allowance of Himalayan or increase same of NIBL. Or third solution has to be brought. Discussion held over this topic hasn’t given any conclusive decisions.

2.       Share holding pattern

As of now, the ratio of promoters and public share holders in Himalayan is 85:15 and 80:20 in NIBL. Himalayan bank had submitted a formal proposal to Central bank to change its shareholding pattern. The bank is yet to get reply from center. Himalayan wants clear stance on this.

currently Habib bank, which is the largest bank of Pakistan has 20 percent stake in Himalayan bank. 

3.       Tax on FPO premium

NIBL had issued further share to public for maintaining 80:20 ratio of promoters and public shareholding. Through this process bank had collected premium of 450 crores. Tax authorities are claiming that NIBL must pay 136 crores as tax on premium earning. Himalayan wants concrete answers on that as whether that tax need to paid or not. If yes, Himalayan wants to that tax amount to be allocated now, which will have huge impact in NIBL’s balance sheet. That might arise the question over the swap ratio agreed after the DDA process. If the tax need not be paid, Himalayan wants that in written form from the tax authorities, which is unlikely to happen as Office of the Auditor General of Nepal, has been claiming tax on premium earnings.

4.       Continuation of brand

As per agreement the entity formed after merger will be called ‘Himalayan and Investment bank’. Himalayan wants some guarantee that the name Himalayan won’t be dropped after few years.

Few years back, Bank of Kathmandu and Lumbini bank went into merger and bank was caller ‘Bank of Kathmandu Lumbini’. However, after few years, the name Lumbini was dropped and it was changed to just ‘Bank of Kathmandu’.

Himalayan doesn’t want same to happen and legacy and name of Himalayan to be perished.

5.Goodwill and legacy

Himalayan bank is named after Himalayan Shamser Rana, who is the founding chairman of the bank and considered as living legend in banking industry of Nepal. He is also the first governor of the central bank of Nepal and he was the one who started private sector banking in Nepal, with having highest local shareholding. He is currently chief advisor of the bank. Himalayan bank can’t even imagine the name Himalayan being dropped later on.  Therefore, bank wants written commitment that Himalayan won’t be dropped.

As per source, how much ever pressure Himalayan get form other party or the central bank, merger process won’t be finalized until these 5 issues are resolved. Source says ‘The bank with such legacy will not finalize merger just for sake of it. Himalayan wants respect, equal status, fair and impartial merger.’ 

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