Investors will get return during my terms

Devendrapratapa Shah is a familiar name in banking sector of Nepal. Recently, he is appointed as  the Chief Executive Officer position in government-owned Nepal Bank Limited.  The situation of Nepal Bank is expected to improve with the appointment of Mr. Shah who keeps a good knowledge of the financial sector. Following is the interview taken by our colleague for bazaar Guru focusing the topics on Nepal Bank Limited’s economic conditions and overall condition of the financial sector

What do you think the reasons behind the decline in Nepal Bank’s profit by 20 million last FY compared to the previous year?

Nepal Bank earned Rs. 73 million profit in previous FY. During the FY 2071/72, profit of Rs. 52 million has been recorded. We paid the tax outstanding from FY 2061/62 to FY 2063/64 during the year and made entry in the profit and loss account. Normally, it is not practiced in Banks, tax expenses are shown in the respective year. But we had to show tax expenses of three years in the accounts of that FY. Due to which, decreases in profit was seen. We have clarified the fact in our financial report but the public goes through the numbers only and not the letters which have led the confusion.

What do you have to say about the investors’ perceptions that Nepal bank cannot afford dividend?

That might not be true. Expectation of Dividend is the right of the investors, though due to the situation that prevailed in past few years might have arouse that kind of feeling in some. But the things are changing, bank is doing well. Someday they might get dividend.

So when will the investor get profit?

We all know foreigners had taken over the bank’s management for five years due to the mindset that Nepalese cannot run the bank. Over the past half decade, investors have not got dividend, AGM has not taken place. Investors are the biggest victims. Above all, silent investors are in real pain. We need to think about the fact and work hard. I think, in the next 4 years, investors will receive dividends.

Diffuse loan of the bank seems to decrease significantly, how so?

Once, the bad debt of the bank was 50% which has now fallen to 3.99%. It is not happened in my tenure only. It was started before I took over the management of the bank. In the past3/4 months it further decline to 3.99% from 5%. We have given priority to loan recovery. Except some serious bad loan, all have been recovered. We are also tackling to settle the most problematic loans.

Reserve fund seem outstanding by 3 billion, what are your plans to manage the fund?

This is the biggest challenge of all. Once it is managed, capital of Nepal Bank would be enough as per the NRB directive. Normal profit growth will take a long time to replace the fund, thus, the bank is planning to sell its stock and properties.

How good is to sell property in order to increase profit?

Nepal Rastra Bank has directed commercial banks to keep at least 10 percent capital fund of overall risk. If it is not fulfilled bank is going to seems problematic. Even if the bank makes profit, it may not distribute dividend in lack of capital. So what to do? Properties are sold during the problematic situation; there is no sense to keep the property during the troublesome period. When the financial position of the company is worse, then it is justifiable to sell the property. In foreign countries also, banks sell properties to better up the numbers of Profit. Even banks like Standard Chartered Banks practices likewise.

When will the the process of selling the assets begin? Where does the property lies which are being sold?

Asset selling procedure was started during the previous management and board. Last year we sold some land. This year also we are planning to sell some stock and land. We are planning to sell stock of Rastriya Beema Sansthan, National Insurance Company, Hyatt Hotels and Citizens Investment Trust. We have not decided on the selling price yet. Committee has been formed for this matter and the board will decide on the recommendation of the committee. The assets worth of total Rs. 1.5 billion might be sold.

What are the plans of Nepal bank to increase capital?

Sale of properties which we mentioned above is also for capital increment. In accordance with the new policy brought by NRB, banks need to have 8 billion paid-up capitals. For that, the two-year period has been given. We are planning to issue right shares on the basis of current year’s profit.

What is the bank’s investment portfolio?

Bank has invested more than 40 percent in Small and Medium Enterprises. Corporate lending is less than 30 percent. Similarly, auto loans and home loans also provided to consumers. Only 3% of total investment is in Hydro, while Nepal Bank is capable of investing in hydro projects. In this way our credit are more in the small and medium category.

What are the conditions of investment in the agricultural sector?

The government has given top priority to the agriculture sector. Being a Public Bank, we have also given priority to Agriculture sector. We are providing agricultural loans easily and accessibly. We have given high priority to agricultural loan since the very beginning, but it is difficult to get feasible projects in agriculture. Agriculture loan is with low interest rate and also grant is available.

What are the reasons behind the disability to compete with private commercial bank? Whereas the Rastriya Banijya Bank which was in the same situation likes yours, has gone much forward?

We are behind some private sector banks and also forward from some of them. Rastriya Banijya Bank improved its situation after it sold the stock of Investmetn bank. It has the paid up capital as per the NRB directive. We have also sold and selling some stock, so maybe we will also reach there. We are set back in the use to technology and Rastriya Banijya Bank is bigger in size. Similarly, it has already started CBS, Core Banking System.

Your services are said to be ineffective?

Sometimes due to some reason, delay can be happened. Also, customers may feel difficulties due to the problems in technology. Due to the occasional problems, one might not question the whole services.

What are the problems that you personally feel in Nepal Bank Limited?

Advance Technology is the main problem, inadequate capital is also a big problem, and balance sheet with negative reserve is also a problem. Due to the use of two different software in the same bank, integration of the software is also a problem. Then the ancient legacy that the bank carries is also a problem.

Other banks are providing Internet banking, SMS banking, mobile banking and other new facilities. Does Nepal Bank provide such kind of facility?

We are providing Internet banking facilities. Even though we lack SMS banking, mobile banking and other services, we provide satisfactory services to the customers. We are focusing to provide customer services based on advanced technology. We are purchasing CBS system to provide more effective service to customers.

What are you doing to get skilled employees familiar with new software?

We have appointed 40/50 new skilled employees so there might not be problem of skill workforce. Similarly, we are conducting training to increase the efficiency of the old employees.

Due to the political influence or other reasons, it is said that the employees do not follow orders? It is also heard that the unions misuse the funds that have been set up in different union names?

There is no political impact in the upper level. But the employees are self divided and formed different unions. Right now there are 5 unions in the bank. I do not believe that the bank funds have been misused. According to them, they are working towards the betterment of the bank. If any problem arises, it will be managed accordingly.

Finally, when will we get to see Nepal Bank as a strong and successful bank?

It will take some years to correct the situation of Nepal Bank. I believe during my 4- year terms, investors will certainly get dividend.