Kathmandu, December 24

Bank of Kathmandu (BoK) and Lumbini Bank Ltd (LBL) entered into a memorandum of understanding (MoU) for merger today.

The MoU was signed by BoK Chairman Satya Narayan Manandhar and BoK Director Hem Raj Subedi and LBL Chairman Prakash Shrestha and LBL Director Subarna Lal Shrestha.

As per the understanding, the merged entity’s name will be Bank of Kathmandu Lumbini Ltd, according to a statement. The swap ratio of shares of BoK and LBL has been agreed at 1:0.8281. This is, however, subject to all regulatory and general meeting approvals of both the banks. The merger is planned to be completed within current financial year.

Both banks have entered into MoU in line with their plan to meet minimum paid-up capital requirement of Rs eight billion to be achieved within financial year 2016-17 as stipulated by Nepal Rastra Bank.

The paid-up capital of Bank of Kathmandu as of mid-October was Rs 2.12 billion, which will increase to Rs 2.67 billion after approval of the proposed bonus shares. Similarly, the paid-up capital of Lumbini Bank in the same period was Rs two billion, which will rise to Rs 2.30 billion after approval of the proposed bonus shares.

Total deposits and loans of BoK as of mid-October were Rs 39.46 billion and Rs 33.39 billion, respectively. Likewise, total deposits and loans of LBL in the same period stood at Rs 20.28 billion and Rs 17.24 billion, respectively.

BoK has been operating with 51 branches all over the country. It is in the process of adding five more branches in near future. LBL has 18 branches operating within the country.

Similarly, Bank of Kathmandu and Lumbini Bank are operating 57 and five ATMs, respectively, throughout the country.

Besides meeting the minimum capital requirement, both the banks expect that the proposed consolidation will yield benefits of larger scale and efficiency, the statement adds. They also expect that the merged entity ‘will be financially stronger to mitigate possible risks and make a positive contribution towards improving access to finance in the country’.