Merger or acquisition process of banking and financial institution.

 According to section 69 of BFIA when a bank or financial institution wants to merge with one another or acquire one under section 70. following steps needs to take.

1.     Decision by directors: first the BFIS involves to decide to merge or acquire through their board of director

2.     Joint application: They should submit a joint application to the NRB for the initial approval. This application should include followings.

• Reason and impact: Why they want to Merge or acquire and how it will be affect the bank and financial sector and the country financial system.
• Financial reports; Recent auditors report including balance sheet, profit and loss account, cash flow and net worth.
• Credit protection: Plan to protect the interest of BFIS Creditor during merger or acquisition.
• Assets and liabilities detail; A reports to an assets and liabilities along with timeliness for settling debt.
• Employee management: how they will handle employee in the merger or acquisition of BFIS
• Legal compliance: how the merger or acquisition aligned with company and securities law and any primary agreements.
• Additional detail: any other information prescribed by NRB. 

3.     Review of application by NRB: the NRB review the application, may request discussion with applicant or may ask for more document.

4.     Initiate approval: if the NRP is satisfied that the merger or acquisition won't harm the country banking and financial system and compliance with law it may give initial approval under the section 70 subsection 4 of BFIA. NRB may add additional condition or issue directives when given this approval.

5.     Valuation of assets and liability; Upon obtaining theoretical approval for a merger or acquisition BFIs are required to appoint a qualified auditor to the general meeting or by the board of director to value their assets, liabilities and transaction.

The acquiring institution may also conduct comprehensive valuation of target in the institution assets and liability. The terms and condition of the valuator service are determined by the BFIs and can carryout valuation by establishing norms procedure or directives issue by NRB and its method.

 If the NRB find the action of appointing valuator is not credible it may order to appoint another valuator.

6.     Provision on agreement: Unless directive, otherwise by the NRB the institution must enter into an agreement upon receiving initial approval of merger or acquisition considering following provision under section 72.

• Protection of interest of depositors, Creditor and shareholders

• Valuation system and matching of assets and liabilities.

• Management of investment, transaction, intra agents ownership, guarantees, assurances, non-banking transaction, assets and liabilities.

•  Merger, merging and acquisition process including time and cost.
• Operation and management structure and list of directors.

• Matching of employees' level, terms and condition of service.

• Detail of substantial shareholder and other shareholder.

• If formation of new bank or finance institution details of such banks  name, memorandum of Association, article of Association, capital structure, restructuring and class
• If a foreign bank or finance institution, it's involved in merger or acquisition, a letter of approval from the regulating agency.
• For foreign bank whether to acquire or sell the business in Nepal.
• Grievance handling system for creditor, Depositor, Employee and other stakeholder.
• Any other necessary detail required by NRB.

7.     Final approval: According to section 73 after obtaining initial approval for the merger and acquisition the institution must pass special resolution in their general meeting and submit the agreement as per the section 72 and all the required document to the NRB for finance approval.

The NRB will consider whether the merger would create healthy competition in the financial sector, prevent monopoly or control practise and avoid serious negative impact on the financial market and depositors. It will also conduct a fit and proper test of the promoter who may have significant ownership in the institution after the merger.

After completing the inquiry, the NRB May Grand Final approval for the merger acquisition under section 73 subsection three and/may prescribe any term and condition and limitation

8.     NRP notified to institution: if NRB not found appropriate to grant approval to BFIs, under section 73 subsection 3 of BFIA the NRB information within 45 days

9.     Additional provision: According to section 74 subsection C of BFIA any other provision related to merger or acquisition are prescribed by nrp

10. Acquisition of transaction; BFIS can acquire branches, office, properties or transaction of other BFIs with based on mutual consent and prior Approval from NRB