Banking sector in troubled watersOctober 17, 2004
Amidst economic difficulties and increased deteriorating law and order situation in the country, the banking sector is not aloof from this menace that has explored a number of challenges for its survival.
S S Dabas, executive director of Everest Bank Limited (EBL), in an exclusive interview to The Himalayan Times said, banking sector is now facing a difficult time. Dabas was of the view that unless the banks control their non-performing assets and run the banks professionally in lending and recovery of loans, they will face problems. “The timing is getting tough in the days ahead,” he added.
In Nepal, the size of the banks is small and capital base is also same. With global and regional trading bodies such as World Trade Organisation (WTO), SAFTA and BIMSTEC came into being, the business environment tional progress and horizontal its achievement of containing whether it is trade, banking or growth. “Despite the fact that NPAs with gross NPAs restricted to others are sure to face tough com- economy is not sound and facing 1.72 per cent of the total credit petition, opined Dabas. In such a ups and downs’, EBL has main- whereas net NPA being reduced to situation, bankers need to think tamed a steady grow over a nil. The bank has been able to regseriously of mergers and acquisi- decade and has increased its cus- ister remarkable progress which is tions which may strengthen them tourer base manifold and shown attributed to its culture of corpoto grow in a sustained way, he growth in all parameters of bank- rate governance on which the commented.
When talking to The Himalayan posits, advances as well as profits “Introduction of new products Times on the eve of 10th anniversary of the EBL, Dabas commented that the bank has been able to set up an example of effecient and effective working culture by serving the customers fast. He said ‘Everest Bank, Which is joint venture with Punjab National (PNB), India, has been emerged as one of the fast growing companies in the country.
He said that the bank has two ways of progress – one is operational progress and horizontal growth. “Despite the fact that economy is not sound and facing ‘ups and downs’, EBL has maintained a steady grow over a decade and has increased its customer base manifold and shown growth in all parameters of banking. The bank has doubled its deposits, advances as well as profits during the past three years in spite of the fragile security situation in the country,” Dabas commented.
The bank’s operating profit during the financial year 2003-04 has grown up by 55 per cent and the net profit has increased by 52 per cent, he informed. The average credit growth has been over 26 per cent reaching a figure of Rs 6099 million and deposits have touched Rs 8064 million.
A notable feature of the bank is its achievement of containing NPAs with gross NPAs restricted to 1.72 per cent of the total credit whereas net NPA being reduced to nil. The bank has been able to register remarkable progress which is attributed to its culture of corporate governance on which the bank lays utmost emphasis. Introduction of new products is as important as monitoring of credit portfolio to achieve success,” said Dabas.
“However, the bank maintains a system of constant and regular review and monitoring of all regular accounts,” he informed. Talking about challenging in banking businesses, Dabas said ‘ in the competitive environment , where the interest rates are falling regularly, the bank is cautious of controlling its cost of funds. ” The bank does not offer high interest rates to corporate circle,” he said, “The bank lends at an interest rate ranging from seven per cent to 12 per cent”.
Mentioning about the actual progress of the bank, Dabas said the management has been successful in registering the operating profit of Rs 330 million in comparison to Rs 153.3 million three years back which is attributed to the bank’s timely steps to redefine its strategies and diversified activities in deposit mobilisation, introduction of new products in order to retain lending segments, increased direct housing fnance,EBL property plus, loan against lease rentals, educational loans and professional loans.
According to Dabas, the bank has grown horizontally by adding new branches which totals 15 at present scattered across the country. All branches are computerised and interconnected through anywhere branch baking system (ABBS). The latest branch of the bank is in Birgunj.
Not only that the bank has already opened up its representative office in the Indian capital New Delhi, which is the only and first ever Nepali bank’s branch outside Nepal to facilitate Nepalis living in India to remit their money back home. Nepalis in India have been able to remit thier money through banking channel without any hurdles and most economically. It also enables them to open their accounts to any branch in EBL in Nepal without being in Nepal, he said.
“The bank also helps resolve the problems of both Nepali and Indian exporters and importers. Over Rs 2.0 billion is remitted from India to Nepal from EBL alone,’ he informed.