Evaluation report to decide merger fate
NDB Bank PLC and DFCC Bank PLC which were supposed to merge under the Central Bank’s financial sector consolidation plan are now awaiting the results of an evaluation conducted by a committee appointed by Prime Minister Ranil Wickramasinghe.
“In terms of the engagement with both DFCC and the new regime, there’s a discussion regarding the views of the new regime in terms of their philosophy on the consolidation. There is a formal committee also appointed by the Prime Minister to look into this,” NDB Bank CEO Rajendra Theagarajah said.
Former President Mahinda Rajapaksa, during his budget speech in 2013, had singled out DFCC Bank, its subsidiary DFCC Vardhana Bank PLC and NDB Bank to merge, with the Financial Sector Consolidation Plan being spelt out the following year.
Its intention had been to create banks and financial institutions with greater capital and assets to act as buffers against external shocks, and be more attractive for foreign investments.
Following the completion, a total 58 non-banking financial institutions would have been merged to 20 which had assets above Rs.8 billion and stated capital above Rs.1.5 billion, while of the 34 local banks, those with assets less than Rs.100 billion would have merged, and 5 banks would have maintained assets over Rs.1 trillion.
A Central Bank report last December said that DFCC Bank and NDB Bank were working on a smooth transition to a single entity. However the plans were halted following regime change.
Despite t he state pushing t hem into t he merger, Theagarajah said that both he and DFCC Bank CEO Arjun Fernando would welcome it.
unfaltering. In fact, it’s greater than before,” Theagarajah said.
He noted that both entities have expressed their views on the merger to the committee, which will be publishing a document in April, disclosing its findings and recommendations.
“So what we have done in the past month or two is to give them the space to take this exercise and (we) focus on the organic part of the growth strategy.”
However, organic growth of the bank had also stunted in face of the mergers. NDB Bank had only opened 3 branches in 2014 hoping to rely on a merged network, while the first 2 months of 2015 had witnessed the opening of 5.
Theagarajah assured that the final say on the consolidation would remain in the hands of the shareholders.
The Prime Minister during the election campaign had also maintained that shareholders should remain supreme.
“NDB’s appetite to grow inorganically remains