Commercial banks set for major urban branch consolidation after NRB clears merger policy

CR Bhandari

KATHMANDU: Nepal’s commercial banks are preparing for large-scale consolidation of closely clustered urban branches, following Nepal Rastra Bank’s (NRB) new policy enabling branch mergers. Bank officials say the move will deliver significant cost savings—running into tens of millions of rupees each month—and boost profitability at a time when digital transactions have overtaken physical banking.

NIC Asia Bank’s Assistant CEO (ACEO) Jayendra Rawal said excessive branch density in Kathmandu’s core business zones has become untenable. “In New Road and Bishal Bazaar alone, 60–65 bank branches exist within a 10–15 meter radius,” Rawal said. “These locations carry extremely high rentals—up to Rs 10–12 lakh per month. With NRB allowing branch mergers, every consolidated branch could save at least Rs 25 to 30 lakh monthly.”

Rawal noted that rapid digital adoption has sharply reduced physical footfall in urban branches. “Digital transactions have surged. The number of customers walking into branches has fallen drastically. This policy will help banks rationalize branches opened aggressively in previous years,” he said.

According to him, NIC Asia is currently conducting internal assessments for branch-level consolidation, and will formally advance the process once NRB releases its implementation circular. “We have not yet calculated the exact profit impact. But rental alone in areas like New Road exceeds Rs 10 lakh per branch, excluding utility and administrative costs. Only staff transfers will be required; the remaining operating expenses will be saved,” he added.

Digitalisation Driving Structural Shift

Bankers say the industry has been demanding permission for branch consolidation for more than a year as digital banking accelerates and urban markets saturate. Nepal Bankers’ Association had also recommended branch merger flexibility to NRB.

Rawal said, “There was a time when we operated 7–8 counters in the New Road area. Now, even 2–3 branches are more than enough. Mobile banking, debit cards, credit cards—these are now mainstream. At NIC Asia, 90–92 percent of total transactions already occur digitally.”

Global IME Bank’s ACEO Chandra Raj Sharma also sees NRB’s decision as timely. “Around 85 percent of our transactions are digital. Customer presence at physical branches has declined significantly. Consolidation will reduce rental, utility and administrative expenses, strengthening our financials,” he said. Sharma noted that Global IME has begun feasibility studies to ensure that any merger does not affect customer service.

According to him, profitability ultimately depends on cost and income. “If branch consolidation reduces structural costs, banks will naturally see an improvement in profits,” he added.

RBB: No Immediate Need for Consolidation

Rastriya Banijya Bank (RBB), however, said it does not plan to merge branches at the moment. Deputy Executive Officer (DEO) Pawan Regmi said financial inclusion remains the bank’s priority.

“We have no branch merger plan. Many customers still cannot fully use digital platforms. Lending, deposit mobilization, and product outreach still require physical presence,” Regmi said. He noted that the NRB policy is primarily beneficial for private banks that expanded aggressively during earlier years and now need cost rationalization.

Economic Slowdown and Digital Shift Alter Branch Economics

Himalayan Bank’s ACEO Sunil Prasad Gorkhali said several branches have been running at a loss due to the ongoing economic slowdown and the migration of customers to online banking. “Branches opened during the aggressive expansion years now face low business volume. With rising administrative costs and reduced customer visits, consolidation has become necessary,” he said.

He explained that although initial branch establishment costs—ranging from Rs 50 lakh to Rs 1 crore for furniture, fixtures, generators and office set-up—are already sunk, operating cost reductions through mergers will have a direct impact on profitability.

However, Gorkhali clarified that only closely located branches will be merged. “We will not merge far-apart branches like Thamel and Battisputali. The objective is to consolidate non-viable nearby branches. For instance, former Civil Bank branches in Bhimsenthan and Teku were only 200–300 meters apart. Shifting Bhimsenthan to Teku keeps the staff and business intact while eliminating unnecessary cost,” he said.

Industry Set for Major Restructuring

Bankers widely agree that NRB’s flexibility will help the sector remove unhealthy competition, reduce redundant operating costs, and align physical infrastructure with the digital future. With urban centers oversaturated and digital banking now mainstream, consolidation is expected to reshape Nepal’s banking ecosystem over the next several months.

Banks are now awaiting the final NRB circular, after which detailed merger maps and branch-wise rationalization plans are expected to be announced.