Downside of banks’ mergers and acquisitions

The ownership of all large banks has effectively gone into the hands of a few rich businessmen.

The incumbent mandarins at Nepal Rastra Bank appear determined to continue to thrust a decade-old merger and acquisition policy on banks and financial institutions (BFIs). The proliferation of banks which is now considered "unnecessary" is the outcome of economic liberalisation that was introduced in 1984 after the implementation of the International Monetary Fund-sponsored Structural Adjustment Programme. It gained new momentum after the restoration of democracy in 1990. The decade of the 1990s witnessed not only a rapid rise in the establishment of new banking institutions but also a major paradigm shift in entertaining private investment in the sector and structural shift from largely guided to commercial lending. From only five major banks in 1990, the number of BFIs licensed by Nepal Rastra Bank reached 122 in 2004 , and 265, the highest so far, in 2012 (see table).