Statement of Problem

Format, Statement of Problem for Thesis Writing

BFIs in Nepal adopted merger strategy very lately in 2011; though it has more than 120 years long history internationally. Previously, NRB adopted the liberal licensing policy as the consequence there was a tremendous growth in numbers of BFIs and now the overcrowding is hurting the financial sector. The concept of M and A was an entirely new thing to the Banking and Financial Institutions (BFIs) of Nepal when the Nepal Rastra Bank, supervisory and regulatory body of all the BFIs has issued merger by-laws in May 2011. The objective of the merger by-laws was to strengthen the BFIs position and performance by reducing the number of institutions. The merger bylaws have a provision that can pressurize all BFIs to go for an immediate merger in the form of consolidation.

After accession to the WTO in 2004 the Nepal Rastra Bank, the central bank of Nepal, has unveiled the policies to establish foreign bank branches in the country. To face the giant and big banks’ challenges, bank should be big and efficient which is possible only through the means of M and A. Merger and acquisition of Nepalese banks and financial institutions are also necessary for the capacity building of these institutions to invest in the mega projects that helps for the formation of the infrastructure. Realizing the situation of banking industry of the country, Nepal Rastra Bank has also issued “Merger Bylaws 2068” in 2011 which facilitates the M and A of BFIs. Further, NRB is also working on the forced merger policy for the financial institutions of the same group. NRB is prioritizing M and A of Nepalese BFIs to make half the number of BFIs in the country as per the recommendation of International Monetary Fund (IMF) which has assured NRB to help with budgetary assistance to manage the financial institutions of Nepal (Chapagain, 2012).