By Sudeshna Sarkar

Kathmandu, Sep 29 (IANS) Almost two decades after it entered the banking sector in neighbouring Nepal by opening a joint venture bank with 20 percent equity, India's Punjab National Bank (PNB) is now eyeing further investment in Nepal, a report said.

The 116-year-old PNB is now in talks with an eight-year-old Nepali institution, Kist Bank, to acquire 51 percent shares, Nepali daily Nagarik reported quoting bank sources.

Starting out as a 'C' class financial institution in 2003, Kist was upgraded to an 'A' class commercial bank in 2009 and currently has 51 branches.

Nepal's banking industry regulator, Nepal Rastra Bank, as well as Kist's own internal consultations are calling a merger more desirable than a joint venture, especially as PNB already has a JV in Nepal, Everest Bank Ltd.

The report said PNB is being advised to acquire shares in Kist and then seek a merger between Kist and EBL.

However, PNB officials could not be contacted immediately for confirmation.

EBL had in the past entered into negotiation for mergers with three other banks, Kumari, Nepal Investment Bank and Machhapuchhre Bank.

However, the negotiations collapsed after opposition by bank unions.

Before PNB showed interest, Kist had been in talks with India's Exim Bank.

Currently, Nepal has 31 "A" class banks, 87 "B" class banks and 79 "C" class financial companies. In addition, it also has 21 micro credit development banks and 16 licensed cooperatives. There are also 38 NGOs licensed by the apex bank to work in the financial sector.

But banks' reach still remains limited mostly to major cities and towns, leading entrepreneurs to come up with innovative products like phone banking.

This year has been a bad time for the industry with several financial institutions collapsing due to bad debts and fraud.