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Sagarmatha Insurance Company and Lumbini General Insurance Company have signed the final agreement for the merger. Both companies signed the final agreement on Tuesday. The agreement was signed by Manohar Das Mull, Chairman of Lumbini General Insurance, and Ramakrishna Manandhar, Chairman of Sagarmatha Insurance. As per the agreement, the name of the new entity formed after the merger will be Sagarmatha Lumbini Insurance Company Limited. A special proposal regarding the merger will be tabled in the upcoming general meetings of both companies. Based on the initial agreement between the two companies and the DDA report, the share swap ratio will be maintained at 100:80. Post-merger, the paid-up capital of the company will be Rs 2.62 billion. There will be three each from Sagarmatha Insurance and Lumbini General Insurance on the board of the Sagarmatha Lumbini Insurance Company. The current CEO of Sagarmatha Insurance Chunki Chhetri will be the chief executive officer of the Sagarmatha Lumbini General Insurance Company. The merger drive in the Nepali insurance sector is in full swing. In the last one year, a series of merger agreements have been signed among both, life insurance and non-life insurance companies. The merger momentum in the Nepali insurance sector intensified after the Nepal Insurance Authority (NIA) increased the minimum paid-up capital requirements for insurers of both categories. The authority has increased the paid-up capital of non-life insurance companies to Rs 2 billion while it is Rs 5 billion for life insurance companies. The authority has been pushing for consolidation in the Nepali insurance sector since the new Chairman Surya Silwal took charge of NIA. Of the 19 insurance companies involved in the merger process, six companies have merged to become three and have started their integrated business while 13 others are still in the process of completing their merger process. According to NIA, 10 non-life insurance companies have signed merger MoUs to become five, while nine life insurance companies have also signed merger deals to become four entities. So far, two life insurance companies and 4 non-life insurance companies have completed the merger process and started their integration business. The remaining seven life insurance companies and six non-life insurance companies have not been able to start integrated businesses yet. There have been two successful mergers in the non-life insurance sector in the past year. In July 2022, Himalayan General Insurance and Everest Insurance merged to form Himalayan Everest Insurance Insurance Co. Ltd. Similarly, in October, Sanima General Insurance and General Insurance Company merged to form Sanima GIC Insurance Ltd. The first merger among the life insurance companies took place in the last week of December 2022 when two life insurance companies - Surya Life Insurance and Jyoti Life Insurance - completed their merger process and started integrated business as Suryajyoti Life Insurance Company.

In a clear indication that the liquidity situation in the banking system is easing notably, Nepal Rastra Bank (NRB) issued a reverse repo worth Rs 5 billion last week. A reverse repo is the central bank's monetary instrument to mop up excess liquidity from the market. While issuing the reverse repo, the central bank borrows money from commercial banks to mop up liquidity in the banks. It was the first time in 18 months that the central bank took a move to absorb excess money in circulation. Earlier, the NRB issued a reverse repo amounting to Rs 28.35 billion on July 20, 2021. According to an NRB official who spoke under the condition of anonymity, the latest reverse repo was issued to test the market response. “The banks responded by parking their funds in the central bank which suggests the liquidity situation in the banking sector is easing,” said the official. Easing of liquidity also means that loanable funds are available with the banks. Another indication of the easing liquidity in the banking system is the decreasing interest rate of inter-bank lending which has come down to 4.23 percent on January 27 from 7.34 percent on January 18. According to NRB, the interest rate was 8.15 percent on January 1. “The banks are not using the standing liquidity facility (SLF) and the overnight liquid facility (OLF) to inject liquidity for the last few weeks,” another official of NRB said. “This suggests that liquidity has eased in the banking sector. It will help to reduce interest rates in the coming days.” According to the official, banks have already started lowering the interest rate on deposits and interest rate on lending is also expected to be lowered at least after the fourth quarter of the current fiscal year. The banking system faced a prolonged and a severe liquidity crunch which resulted from massive lending and slow deposit collection in the early months of the last fiscal year 2021/22. With deposits not increasing in the proportion of the lending, the banking system faced a severe liquidity crunch forcing the banks and financial institutions to suspend new lending from the second half of the last fiscal year. Through the monetary policy for the current fiscal year, NRB announced measures to help banks and financial institutions to maintain more liquidity. NRB reduced the targeted growth rate of credit expansion to the private sector to 12.6 percent from the targeted 19 percent in the last fiscal year. As the overexpansion of credit caused a steep jump in imports leading to the depletion of foreign currency reserves besides contributing to high inflation in the last fiscal year, the central bank came up with a plan to reduce the expansion of credit and money supply in the market through the monetary policy. With the banks focusing on deposit collection mostly through fixed deposits, total deposits from the start of the current fiscal year increased by Rs 200 billion till January 28 while the total extension of loans increased by Rs 103 billion, according to NRB. “With deposits increasing by a higher percentage than lending, there has been improvement in liquidity,” the NRB official said. However, most of the deposits the banks and financial institutions received are in the form of fixed deposits. The ratio of fixed deposits to total deposits is around 60 percent, according to NRB. “That’s why many banks will face a liquidity shortage if a few big fixed depositors withdraw their deposits,” said a CEO of a commercial bank.

The price of gold has increased by Rs 500 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 106, 300 per tola today. The gold was traded at Rs 105, 800 per tola on Tuesday. Meanwhile, the price of silver has increased by Rs 5 and is being traded at Rs 1,370 per tola today.

The Nepal Stock Exchange (NEPSE) plunged by 15. 70 points to close at 2,111.68 points on Tuesday. Similarly, the sensitive index dropped by 2. 36 points to close at 400. 62 points. A total of 7,553,235 unit shares of 259 companies were traded for Rs 2. 82 billion. Meanwhile, Adarsha Laghubitta Bittiya Sanstha Limited was the top gainer today with its price surging by 10. 00 percent. Likewise, Prime Life Insurance Company Limited was the top loser with its price dropped by 5. 21 percent. At the end of the day, the total market capitalization stood at Rs 3. 04 trillion.