Central bank halts dividend distribution of Himalayan Bank Ltd ahead of merger

KATHMANDU: The Nepal Rastra Bank (NRB) has halted dividend distribution of Himalayan Bank Limited. The bank had proposed to distribute a total of 26 percent dividend this year (21.38 per cent bonus shares and 4.62 per cent cash dividend) and the bank had taken a proposal to this effect at the central bank for approval. However, NRB has set a condition for the distribution of cash dividend for the bank.

NRB has asked Himalayan Bank to distribute cash dividend only after the merger process with Nepal Investment Bank is completed. NRB has already given the bank approval to hold the general meeting. However, Himalayan Bank has not been able to fix the date of the general meeting yet.

As per the NRB directive, banks and financial institutions will have to hold annual general meeting within six months of the start of the new fiscal year. According to this provision, Himalayan Bank will have to complete its general meeting by next January.

It is said that shareholders of the bank have filed a case against the NRB in this regard. A source said that the case was registered at the court seeking an interim order against the NRB’s decision to withhold cash dividend of Himalayan Bank. This issue is likely to further delay the mega merger between country’s two largest commercial banks.

Similarly, the merger committee asked NRB for additional time after the merger process between Himalayan Bank and Nepal Investment Bank could not complete on time.

HBL and NIBL had inked merger agreement on May 13. Following the agreement, both the institutions had formally informed the Nepal Rastra Bank (NRB), Nepal Stock Exchange (Nepse), Office of the Company Registrar and Securities Board of Nepal (Sebon) about the merger agreement. With this, shares of both the institutions has already been suspended until the integrated transaction is completed.

Following this mega merger agreement, Ashok Rana of Himalayan will be the chief executive officer (CEO) of the new institution while Jyoti Pandey of NIBL will be the deputy CEO with some designated special authority. Meanwhile, Prithvi Bahadur Pandey of NIBL will be the chairman of the merged entity while remaining promoters will be selected based on the share structure.

Rastriya Beema Samiti, Mahalaxmi Investment and Chhaya Investment, among others are the major investors in NIBL while Habib Bank (Pakistan), Employees Provident Fund (EPF) and Aabha International, among others are top investors in HBL.

The merged entity will follow Staff Regulation and Laws of Himalayan Bank. This means that employees of NIBL will have their salaries increased. Currently, NIBL has almost 1,500 staffs while HBL has some 1,000 staffs.

The merger agreement also states that the merged entity will introduce voluntary retirement scheme to downsize staffs later but will not forcefully downsize staffs.

The swap ratio is estimated to be around 1:1 as agreed by both NIBL and HBL.

 

 

Fiscal Nepal |
Monday December 6, 2021, 01:44:51 PM |


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