Some banks have been kept under the Prompt Corrective Action (PAC) of the Central Bank for mounting losses and Non-Performing Loans (NPL).

The number of banks are very large comparing to the size of the economy and the similar economies in the region. Hence, the market is highly competitive.

The industry as a whole has been suffering for high NPL, fragmented market share, unhealthy completion and lack of good governance in some banks.

The government and the Central Bank have recently decided to merge some of the banks. It has been decided that Bank 'B' will be merged with Bank 'A' and continue services under the title of Bank 'A', some key indicators of the two banks are given as follows :

[Figures are in million local currency]

	Bank A	Bank B
Deposit	5,000	3,000
Loans and Advance	4,250	2,700
NPL	8%	20%
Provision against NPL	No deficiency	Notable deficiency
Branch Network	Limited	Wider network across the country
Deposit mix	Mostly short term	Mostly medium and long term
Business	Retail focused	Retail focused, but has some large corporate clients
Profitability	Profitable with increasing trend	Incurring losses with high NPL
Regulatory oversite	N/A	Under PCA due to losses and high NPL

Task :

As a banking professional, evaluate the proposed policy decision by analyzing the given scenario. The contexts are :

(i) Calculate the NPL rate of the merged bank;
(ii) What challenges will Bank A face after the merger?
(iii) What synergies and benefits might be availed from the merger?
(iv) The proposed merger may or may not bring the expected outcome. Briefly explain.