We have learnt not to rely on institutional deposits

KATHMANDU, APR 20 -

The Kathmandu Post talked to the bank’s chief executive officer Rajan Singh Bhandari about its achievements and the current situation of the banking sector. Excerpts:

What are the major achievements of Citizens in the last five years?

We have collected deposits of Rs 15.28 billion and made lending of Rs 13.5 billion while our operation has spread over all the 14 zones of the country. We provide services including Visa card and remittance. Our customer base reached 128,000 over the period. We distributed a 33 percent dividend over the last four years and this year’s dividend is yet to be distributed.

While providing banking service for five years, we have learnt a lot about banking in Nepal too. We should not be overly dependent on institutional deposits as pulling out of deposits by them can result in liquidity stress in banks. That’s why we are focusing on generating more resources from individual depositors. Even in lending, we will increase lending to small businesses. Our focus has been to reach out to people outside the towns, and we have adopted the policy of accepting farmland as collateral to provide loans from Rs 50,000 to Rs 500,000.

You said that Citizens distributed a 33 percent dividend four times. Is that a big benefit for your shareholders when some banks are providing a dividend of more than 30 percent in a single year?

It may not be an exceptional benefit, but it is not bad either. We are 12th or 13th among banks that provided high dividends to their shareholders. We have maintained that the dividend should not be lower than what the shareholder can earn by putting the money in a fixed deposit in a commercial bank. Our bank should not be compared with old banks. We are doing well among banks that came into operation at the same time as we did.

Banks have complaining about lack of areas for investment. How will that affect their profits?

Although banks have a lot of liquidity, they are suffering from suppressed demand for credit. Lack of an investment-friendly environment due to political problems, energy crisis and other problems will have repercussions on the profits of banks. As of the first nine months of the current fiscal year, our net profit has come to Rs 100 million from last year’s Rs 170 million. It is natural to see a decline in profits as long as banks have adequate liquidity and they don’t find investment areas.

What has been the state of recovery of loans that went to the realty sector?

Interest rates on real estate loans have started to come down, and it will help boost trade in lands and houses. I am hopeful that it is a very good indication for the revival of the realty sector. The government’s measures such as increasing the ceiling on investments in the realty sector without disclosure of the source of income have made a positive impact.

What’s your view about the central bank’s policy directing banks how much they should invest in a particular sector?

Speaking as the vice-president of the Nepal Bankers’ Association (NBA), the position of the NBA is clear that the central bank should not force us to lend a certain percentage in a certain area. We should have freedom to invest where we think is right. However, we have to follow the NRB directive even if we are not comfortable with it. There is a necessity for special financial institutions to make certain investments in certain sectors like Agriculture Development Bank Limited (ADBL) and NIDC. When ADBL has also gone into commercial banking, it is not logical to force us to invest a certain percentage of our investment in a certain sector.

Mergers have become fashionable in banking. Do you have any merger plans?

There has been no effort from our part to go for a merger, but we are open to the idea as long as it is agreed that out shareholders will get a dividend of more than 20 percent annually. Mergers should not be forced, it will happen if banks feel it is necessary and is in their interest

Source: The Kathmandu Post