Has the transition of the past four years as Nepal Investment Bank been smooth?
Nepal Investment Bank Ltd. (NIBL), previously Nepal Indosuez Bank Ltd, was established in 1986 as a joint venture between Nepali and French partners. The French partner (holding 50 percent of the capital of NIBL) was Credit Agricole Indosuez. With the decision of Credit Agricole Indosuez to divest, a group of companies comprising of bankers, professionals, industrialists and businessmen, acquired the 50 percent shareholding of Credit Agricole Indosuez in Nepal Indosuez Bank Ltd and on June 2002 the name of the bank was changed to Nepal Investment Bank Ltd. Ever since, the transaction has been very smooth and the bank has moved aggressively on all fronts and our valued customers have continued to bank with us.
How does it compare: running a foreign joint venture bank and a wholly Nepali-owned and Nepali-managed bank?
There is not much of a difference. All banks have to be run with a great deal of prudence and risk management. However managing a wholly-owned Nepali bank gives me a greater sense of responsibility and challenge. Over the years we have proved that a Nepali-managed bank can consistently provide top quality service and be the best in Nepal. We are the first all-Nepali managed bank to win the Bank of the Year 2003 and 2005 awarded by the The Banker of the Financial Times Group in London. Running a wholly-owned Nepali Bank has helped in speedier decision-making and it is also comforting to know that all our profit stays within Nepal.
So do you think a Nepali-owned bank must display more corporate social responsibility?
We are fully committed to extend funding under NRB directive in regards to deprived sector loan at concessional rates of 3 ? 4 percent and being a 100 percent Nepali-owned bank certainly carries greater corporate social responsibility. Ever since the all-Nepali management took over, the bank has recognised its social responsibility and has contributed towards heritage renovation, the Kal Bhairab temple restoration being the latest. The bank has also provided assistance to the Heart Foundation and the Nepal Apanga Sangh. We have also supported various sports activities.
How does the banking sector as a whole cope in times like these when the economy is sluggish, investment is stagnant in a liquidity-rich environment?
The banking sector as a whole has struggled through difficult times over the past few years. Despite the political instability most commercial banks have managed to maintain positive growth trends and overcome obstacles. However, we are truly worried about the future if this situation deteriorates and investment opportunities decline. As you say, we have a scenario of excess liquidity and low demand for bankable projects in spite of low interest rates in borrowings. What worries me is the disparity in Nepali deposit rates compared with other countries and continued upward trend in inflation, which means that eventually interest rates have to climb, resulting in higher lending rate leading to further stagnancy in borrowings. Continued increase in remittance is the only positive indicator in our economy, however this could lead to further increase in money supply and contribute to further inflation.
What would you like the government as the regulator to do to facilitate further growth in the banking sector?
It is not the number of banks but quality of banks that matter. I would like to see a smaller number of financial institutions with much broader capital base, providing excellent service at competitive rates. I would like to see the Central Bank encourage mergers so that there is more stability in the financial sector, this will also go towards creating strong capitalized banks.