Bill passed to merge three banks

Further progress was made last month by banks and finance and leasing companies (NBFIs) on the financial sector consolidation process.

The Bill to facilitate the proposed merger of three banks, viz., DFCC Bank, National Development Bank PLC and the DFCC Vardhana Bank PLC, was passed in Parliament.

The joint internal committees worked closely to ensure that the integration of operations was smooth to form a strong bank with a focus on development, as envisaged in Budget 2014.

The proposed amalgamation of the Merchant Bank of Sri Lanka PLC, MCSL Financial Services Ltd and MBSL Savings Bank Ltd has reached the final stage of completion.

Shareholder approvals were obtained and the merged entity will operate as a licensed finance company.

The Central Bank with the concurrence of the Ministry of Finance and Planning issued guidelines on the ascertainment of cost of Acquisition or merger as a qualifying payment and on the claimability of any unabsorbed input credit in terms of the Inland Revenue Act and Value Added Tax Act.

The guidelines are applicable for licensed banks, licensed finance companies and specialised leasing companies and are effective from April 1, 2014. The guidelines specify the items of costs in relation to the acquisition of a business as a going concern or the acquisition of shares or the merger with another bank, finance or leasing company. This concession is expected to further promote the financial sector consolidation process and ensure the expeditious completion of the on-going mergers and acquisitions of banks, finance companies and leasing companies.