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Ajod Insurance and United Insurance have signed a merger agreement on Wednesday. The Ajod-United merger initiative has come after Ajod's unsuccessful merger attempt with Prabhu Insurance. United Insurance Director Ravindra Raj Pant and Ajod Director Chiranjeevi Dwa signed the memorandum of understanding (MoU) on behalf of their respective organizations. It has been agreed that the swap ratio between United and Ajod will be 100:90 and the name of the entity formed after the merger will be United Ajod Insurance. Earlier, Ajod and Prabhu Insurance had signed a merger agreement in the last week of July 2022. However, the proposed merger did not materialize as both companies could not agree on the swap ratio. Ajod entered into a merger agreement with United after the regulatory body Nepal Insurance Authority agreed to end the merger process with Prabhu Insurance. During the signing of the agreement, both companies had agreed to merge with a swap ratio of 100:70. But, later Prabhu proposed a 100:60 swap ratio. The merger momentum in the Nepali insurance sector has intensified in the last one year after the Nepal Insurance Authority increased the minimum paid-up capital requirements of both life-insurance companies and non-life insurance companies. 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 the authority. There have been two successful mergers in the non-life insurance business in 2022. In July, Himalayan General Insurance and Everest Insurance merged to form Himalayan Everest Insurance Co. Ltd. Similarly, in October, Sanima General Insurance and General Insurance Company merged to form Sanima GIC Insurance Ltd. And, the first merger in the Nepali life insurance sector took place on December 22 with Surya Life Insurance and Jyoti Life Insurance starting an integrated business as Suryajyoti Life Insurance Company. This is the first merger among the life insurance companies in the country. While other life insurance companies have also signed merger agreements, they are yet to complete the merger process.

The Nepal Stock Exchange (NEPSE) plunged by 21. 34 points to close at 2,190. 42 points on Wednesday. Similarly, the sensitive index dropped by 0. 77 points to close at 419. 14 points. A total of 20,843,952 unit shares of 254 companies were traded for Rs 7. 65 billion. Meanwhile, Barahi Hydropower Public Limited was the top gainer today with its price surging by 9. 99 percent. Likewise, Taragaon Regency Hotel Limited was the top loser with its price dropped by 8. 74 percent. At the end of the day, the total market capitalization stood at Rs 3. 16 trillion.

In what could be described as the 'week of consolidation' in Nepali banking, one more acquisition has taken a logical conclusion on Tuesday. Prabhu Bank on Monday completed its acquisition of Century Commercial Bank to commence the integrated business. Prabhu's acquisition of Century is the first acquisition in the banking sector this year. The last was Nabil Bank's acquisition of the Nepal Bangladesh Bank in 2022. Prabhu Bank started the integrated business five months after signing an acquisition agreement with Century. Both banks signed the acquisition agreement on August 25, 2022, agreeing on a share swap ratio of 1:1. Post-acquisition, the paid-up capital of Prabhu Bank has reached Rs 30 billion while deposits and extension of loans stand at Rs 285 billion and Rs 255 billion. The bank now has a base of three million customers. Addressing a function held to mark the start of integrated business, Prabhu Bank CEO Ashok Sherchan said that the bank has written a new chapter in the Nepali banking sector with this acquisition. Sherchan also promised to further strengthen the new and digital business after acquiring Century Bank. According to him, the bank post-acquisition is in the sixth position in terms of total assets. "In terms of lending, the bank is in the seventh position while in deposit mobilization, the bank is in the sixth position," said Sherchan. Post-acquisition, Prabhu Bank has a seven-member board, of which four are from Prabhu Bank and three from Century Bank. Sherchan has been appointed as the CEO of Prabhu Bank, while Manoj Neupane, CEO of Century Bank, has become the Senior Deputy CEO. Laxmi Bank, Sunrise Bank ink merger deal Laxmi Bank and Sunrise Bank have signed a memorandum of understanding (MoU) for a merger with a swap ratio of 1:1. The MoU was signed by the Chairman of Laxmi Bank, Raman Nepal, and the Chairman of Sunrise Bank, Motilal Dugar on Monday. A merger committee, comprising four members (two each from both banks) has been formed to finalize the merger. The committee includes Dr. Manish Thapa and Swati Rungata from Laxmi Bank, and Sarda Sharma and Deepak Nepal from Sunrise Bank. The merged entity will be named "Laxmi Sunrise Bank", and the swap ratio may change after the due diligence audit (DDA) is completed. Both banks are open to discussions regarding the chief executive officer and board chair of the merged entity. According to the latest financial details, Laxmi Bank has a paid-up capital of Rs 11.55 billion, while Sunrise Bank's paid-up capital is Rs 10.11 billion. Laxmi Bank has also floated a loan of Rs 129 billion, while Sunrise Bank has floated a loan of Rs 119 billion. The deposit collection of Laxmi Bank stands at Rs 140 billion, while that of Sunrise Bank is at Rs 125 billion. The merger committee has stated that both banks are preparing to complete the merger process within this fiscal year and will begin the formal process following a green signal from the central bank. Raman Nepal, the chairman of Laxmi Bank, confirmed that the name of the merged entity will be "Laxmi Sunrise Bank" and that the swap ratio will be fixed only after the DDA is completed.

The resource crunch that the government is currently facing after failing to meet the revenue target has not prevented ruling political parties from announcing populist programs which are sure to increase the state’s long-term liability.

One of the announcements made through the Common Minimum Program (CMP) by the ruling parties on Monday is increasing the number of social security scheme beneficiaries to six million in the next five years. If this announcement is materialized, the number of beneficiaries will almost double in the next five years. As of the last fiscal year 2021/22, there were 3.57m beneficiaries of social security.

As per the 2021 population census, Nepal’s population is 29.19m. Providing a social security allowance for 6m means the country’s one-fifth of the population will receive a cash dole-out. The CMP talks about providing cash dole-outs to elderly people, widows, single women, disabled people, members of communities on the verge of extinction, and different categories of children with a certain allowance from the state. While announcing the plan, the ruling parties have not disclosed how the state could generate the resources to meet the resources needed for increasing the both number and amount of social security allowance.

Economists say it was an irresponsible act on the part of the ruling parties to announce a new dole-out package at a time when the government is struggling to meet even existing recurrent expenditure from the revenue. As of Jan 9, the government collected revenue of Rs 385.73bn while its administrative expenditure stood at Rs 436.23bn, according to the Financial Comptroller General Office.

“It is quite expensive for the state to provide a social security allowance of one in every five persons,” said a former finance secretary. “It is too big a number and making an increased number of people dependent on the state when there is no extra source of income is not sustainable in the long-term.”

Economist Posh Raj Pandey said that the government should have streamlined the social security scheme. “What is happening now, is in terms of socio-economic perspective, those who’re entitled are not getting, and those who’re not entitled are getting the scheme,” he said.

Economists say the government could spend a higher amount of state resources on improving the quality of health and services and make these services affordable to the majority of people instead of doling out cash for individuals. Cash doll out is a misguided priority of the political parties just to get political benefits. It should be very targeted and should be available to only limited people, they say.

Over the last several years, the number of beneficiaries of social security allowance and the amount to be given to each beneficiary has been rising rapidly. There were 2.04m beneficiaries of social security allowance in fiscal 2011/12 which increased to 3.57m in the last fiscal 2021/22. The amount being spent on them has however been rising even faster. For example, the government spent Rs 68.61bn on social security allowances in the fiscal year 2020/21, according to the Department of National ID and Civil Registration.

The government is expected to spend nearly double that amount in the current fiscal year due to an increased number of beneficiaries and an increased amount for them. The government has allocated Rs 105bn for social security allowance in the current fiscal year, according to the Finance Ministry.

Despite the growing burden of social security allowances, successive governments have continued adding more beneficiaries and expanding the purview of social security. While presenting the budget for the fiscal year 2021/22, the then KP Sharma Oli-led government increased all social security allowances by 33 percent, including the elderly allowance to Rs 4,000 per month from Rs 3,000 per month.

A year later, the Sher Bahadur Deuba-led coalition government, reduced the eligibility age for receiving an elderly allowance to 68 years from 70 years at a time when Nepal’s life expectancy has been rising. As a result, a total of 113,911 new beneficiaries were added to the elderly list due to the lowering of the eligibility age during the first quarter of the current fiscal year, according to the Department of National ID and Civil Registration. Besides the natural rise in the number of beneficiaries, lowering of age limit increased the number of beneficiaries substantially.

According to a World Bank report, the overall public spending on social protection rose rapidly in Nepal for a decade—from the fiscal year 2010/11 to fiscal 2019/20. According to the report, the government’s spending on overall social protection was Rs 26 billion in the fiscal year 2010/11, which surged to Rs 189bn in fiscal 2019/20, which includes both cash dole-out and other social protection programs.

The first social security scheme in Nepal was launched in 1994/95 by the government led by the then CPN (UML) leader Manmohan Adhikari. The scope of the scheme, which started by providing Rs 100 a month to the elderly, was gradually expanded to include other types of beneficiaries.