Thukten Zangpo

The National CSI Development Bank Limited has merged with the Bhutan Development Bank Limited (BDB) following the approval of merger by the Registrar of Companies on October 26.

The merger happened from October 1.

On July 14, the merger of CSI bank was discussed by the merger committee appointed by the finance ministry, with member representatives from senior management of two banks after the Royal Audit Authority (RAA) asked the finance ministry to re-assess the relevance of CSI bank.

The function of the two banks, the RAA found, was overlapping.

The CSI bank had incurred consecutive losses since its inception in February 2020 and depended heavily on the government’s equity injection. The government provided 90.82 percent equivalent to Nu 712.5 million as equity injections in 2020 and Nu 185.2 million in 2021.

On August 21, the Cabinet approved the merger and the Royal Monetary Authority authorised the merger on August 25.

According to the BDB’s press release, the approach of merger is lock-stock-and-barrel mode, which means that all assets, liabilities, employees, including legal rights and obligations of the CSI bank will be taken over by the BDB.

It added that the merger would ensure minimal disruption for continued operations and services.

“The amalgamation of BDB and the CSI bank is more than a financial transaction; it is a testament to the shared vision of both banks to provide funding to support agricultural, industrial and commercial activities of our country through combined strength and enhanced mandate of the two banks,” according to the press release.

The chief executive officer of BDB, Tshering Om, said that the merger offers an opportunity to streamline operations, enhance efficiency, and strengthen financial stability under the finance ministry.

She added that it would also provide the platform to redefine the institution’s mandate as a partner in economic development, ensuring a more robust and sustainable bank with a stable capital base in the long run.

The CSI bank employees, 39 in all, Tshering Om said, would be integrated and mapped with BDB service rule, preserving employment continuity and ensuring the welfare of the employees.

With the merger, the BDB’s core capital ratio, capital adequacy ratio and leverage ratio were projected to increase to 16.05 percent, 20.87 percent, and 10.40 percent against minimum regulatory requirement of 7.5 percent, 12.5 percent, and 5 percent respectively.

The CSI bank had assets worth Nu 2.2 billion, including active loans of Nu 1.3 billion, while its liabilities was reported at 0.94 billion.

The CSI bank has non-performing loans (NPL) ratio of 31.4 percent as of September this year.  Post-merger, Tshering Om, said that a dedicated team was established to address the bank’s NPL.

“This involves implementing a range of strategies to effectively manage NPLs, such as regular follow-ups, restructuring, and rescheduling in accordance with established guidelines,” she said.

What about customers?

The existing borrowers of the CSI bank loans’ terms and conditions will be as per the initial agreements with CSI bank, including the restructuring for existing loans. However, any new or additional loan required would be based on the BDB’s existing lending norms.

The CSI bank customers can avail the financial services from the BDB branches. The clients can continue to avail services like loan repayments from any nearest BDB branch offices to continue to use Epay, Mbob, and Mpay.