Kathmandu, April 29:

Five financial institutions — Mahalaxmi Finance Ltd, Birgunj Finance Ltd, Siddhartha Finance Ltd, Butawal Finance Ltd and Himchuli Development Bank — have signed an accord yesterday to merge and upgrade to ‘A’ level commercial bank.

“All the financial institutions are planning to increase their paid up capital to Rs 400 million each to make Rs 2 billion in total required for the upgradation for the commercial banks,” said Ramesh Kumar Bhattarai, coordinator of the Merger committee.

The proposed ‘United Bank of Nepal’ after the merger, will have head office in Kathmandu, according to the Memorandum of Understanding (MoU).

However, the companies that have currently Rs 50 million to 100 million paid up capital have to increase to Rs 400 million each to make a total of Rs 2 billion required for a commercial bank. “We will hold special AGM and propose 1:4 rights shares,” informed Bhatta-rai, without clarifying what will happen if they cannot raise paid up capital to almost four to eight times.

Mahalaxmi Finance, National Finance and Narayani Finance have earlier declared a merger for upgradation to a Development bank.

However, the plan didnot work.