Two major commercial banks in the country - Nepal Investment Bank Ltd and Himalayan Bank Ltd - have decided to merge, creating a banking behemoth with a total paid-up capital of nearly Rs 27 billion.

NIBL and HBL today jointly signed a memorandum of understanding to merge with the intention of strengthening the banking sector of the country in line with Nepal Rastra Bank's Merger and Acquisition Policy.

The MoU was signed by NIBL Chairman Prithvi Bahadur Pandé and HBL Chairman Tulsi Prasad Gautam.

The merged bank will be named 'Himalayan and Nepal Investment Bank Ltd'.

Pandé will remain the chairman of the bank, whereas Ashoke SJB Rana, the chief executive of HBL, will be the chief executive officer of the merged entity.

The board of the merged bank will comprise three members each from NIBL and HBL, in addition to an independent member.

NIBL and HBL are two 'A' class commercial banks and their merger will result in the biggest bank in the history of Nepal's banking sector. An A class bank has to have a minimum paid up capital of Rs 8 billion. Global IME Bank with a paid-up capital of Rs 21.7 billion is currently the biggest bank in Nepal.

At present, the paid-up capital of NIBL is Rs 16.26 billion and HBL's paid-up capital is Rs 10.68 billion. After the merger, the combined paid-up capital of the merged bank will reach a staggering Rs 26.94 billion.

Combining the assets, loans, and deposits of both banks will elevate the merged entity to unparalleled heights. The bank hopes to retain the confidence of its stakeholders and shareholders through this major development and will continue to provide exemplary services to its clients post-merger, stated the chairpersons of the respective banks.

NIBL, previously Nepal Indosuez Bank Ltd, was established in 1986 as a joint venture between Nepali and French partners. Later in 2002, a group of Nepali companies comprising bankers, professionals, industrialists, and businessmen acquired 50 per cent shareholding of Credit Agricole Indosuez - the French partner - in Nepal Indosuez Bank Ltd, and changed the name of the bank to Nepal Investment Bank Ltd.

HBL was established in 1993 in a joint venture with Habib Bank Ltd of Pakistan.

Despite tough competition in the Nepali banking sector, HBL has been able to maintain a lead in the primary banking activities - loans and deposits.

A version of this article appears in the print on May 14, 2021, of The Himalayan Times.