Kathmandu, July 2

Bankers have sought tax incentives from the government for merger and acquisition (M&A) between banks.

Citing that all the commercial banks have been operating legally by taking licences from Nepal Rastra Bank (NRB), bankers have said that the central bank cannot force banks to merge but can encourage banks to do so by announcing certain tax incentive packages.

“Even bankers have a common perspective that the number of banks in Nepal is high and the plan to reduce the number through M&As is good.

However, it is equally important to note that all banks have been operating legally and the government cannot pressurise any bank for forced merger,” said a chief executive officer of a commercial bank seeking anonymity.

As per him, the government should encourage banks towards merger by incentivising them in taxes.

Moreover, the meeting of Nepal Bankers’ Association (NBA) held today also decided to seek incentives from the government before starting the merger process.

Bankers have said that the government should reduce income tax levied on banks by at least five percentage points for a period of five years through the budget for those banks who choose to merge with others. “Doing so will definitely encourage banks to merge,” added the banker.

Along with tax incentives, bankers have said that they should get enough time for M&A, as choosing a partner for business is a matter of taking risk.

The central bank last week had summoned chairpersons and CEOs of all 28 commercial banks in operation to discuss possible M&A in the sector. Moreover, it had asked bankers to submit the names of banks that they wanted to merge with or submit a commitment letter for merger to NRB before the Monetary Policy is announced in mid-July.

“It will be difficult for us to complete the whole M&A planning by the time the Monetary Policy is announced,” the banker said.

Meanwhile, a number of commercial banks have already started discussions with other banks for possible M&A.

“The number of banks in the country is certainly high when taking the market size into account. However, the government should encourage banks to merge instead of forcing them to do so,” the banker said.

The government, through the budget for fiscal year 2019-20, had also announced to adopt policies to encourage mergers between banks and financial institutions.

“We are encouraging mergers among BFIs not just to reduce the number of banks but also to create good governance in the banking sector of the country,” said Laxmi Prapanna Niroula, spokesperson for the central bank, adding that the Monetary Policy for 2019-20 will adopt this policy and will also try to address the concerns of bankers.