Mr. Tulasi Ram Gautam is CEO of Machhapuchchhre Bank Limited (MBL) since Ashoj 26, 2069. He started his banking career as an office Assistant at Nepal Bank Limited. He holds a Master of Business Administration degree. Recently, ShareSansar team had discussed about current affairs pertaining to MBL with Mr. Gautam.
- If we look at the financial reports of Machhapuchchhre Bank Limited, Non Performing Assets (NPA) has gone down dramatically, operating profit is growing satisfactorily, EPS has increased and other indicators are also positive. What are the major factors that played role for such growth?
At present our NPA is below 0.5 %, operating profits are growing every fiscal year, and EPS stands at Rs20.80. We were also able to recover big chunk of NPA which was putting a dent in our balance sheet. We have dramatically grown the loan as well as deposit portfolio of the bank in the last three years. The other factors behind our growth and bringing the bank into good shape are our disciplined banking habits for higher degree of compliance and good governance within our institution.
- In the first quarter of previous fiscal year the net profit stood at Rs 190.35 million. With the massive earthquake, ongoing unrest in Terai, and all political situation of Nepal, what kind of first quarter report can we expect from Macchapuchchhre?
Frankly, it is very early to make speculation about the financial report of first quarter of this year. We do not have branches in the districts of Gorkha, Sindhupalchowk, Dolakha, and Ramechhap, hardest hit by the massive earthquake. So, we expect minimal direct effect of the earthquake on our financial report. However, we have good exposure in Terai region of Nepal. As we all know, most of the Terai region is facing bandh for about a month; this will affect the banking sector as a whole not just Machhapuchchhre. Almost all industries are based in Terai and the daily economic activities have been brought to grinding halt due to the unrest. If this continues for prolonged period of time, then negative impact can be seen in the financial sector of Nepal.
- Nepal Rastra Bank has directed Bank and Financial Institutions (BFI) to increase their paid up capital within two years. A few promoters of various BFI have gone to parliamentary committee requesting them to relax or scrap this requirement from NRB. What is the Bank’s official response on the directive and ongoing drama surrounding it?
First of all, as NRB is the governing body for BFIs in Nepal, we will have to follow their every directive and we do not question that. Secondly, we were expecting such directive from the NRB. However, it took us by surprise when the directive required banks to quadruple the current requirement for paid up capital in just two years. It is just that the directive hit us harder and faster than we have expected. Our bank along with other BFIs through Nepal Bankers Association requested NRB for some relaxation on the directive. We wanted more time to increase the paid up capital or wanted the Rs 8 billion requirements to be core capital instead of paid up capital. However, NRB does not seem to be in a mood for such relaxations. Thus, as of now, we have to reach the paid up capital within two years.
I have no comments regarding discussions in the parliamentary committee on the issue.
- Through a follow up directive, the NRB has asked all BFIs to submit the proposal regarding increasing paid up capital by the last day of Bhadra, 2072. So what’s in the proposal the Machhapuchchhre Bank has submitted?
We have submitted the plan to NRB. However, I cannot go into more details of the plan. At this stage, I can tell you that at present we are raising around Rs. 550 million additional capital through a 5:1 rights share issue which is under process and will be completed in about 45 days time. That included, our Bank’s paid up capital is going to reach Rs. 3.33 billion. Then we will have 3 years profits including that of the last fiscal year at our disposal which will help increase the paid up capital by a sizable amount. For the remaining amount, we will go for merger/acquisition, and if any gap remains that will have to be met through further right share issue.
- There are rumors about merger between Machhapuchchhre Bank and Janata Bank? What’s your take on this? (Editor’s Note: This question was asked on Tuesday Bhadra 29, 2072)
There are so many rumors of merger and acquisition pertaining to our bank. These rumors might have been spread by some people to serve their own interest. If they see any of our officials, directors or promoters meeting with other bankers, then the rumors start to spread about merger and acquisition of MBL.
- After attending the paid up capital of Rs 8 Billion what would be banking business like?
Supposing that a sizable part of the increment in paid up capital is through merger and acquisition, there should not be any misgivings about matching level of business as business already booked by the merger partner/s will also be added. We give loans to all kinds of customers. We have loan products for individuals to big corporate houses. We are financing hydropower projects of various sizes as a lead bank or participating bank of the consortium. When we are the lead bank generally we finance in excess of Rs. 50 crore to the project. Recently, we concluded the financing for a 25 MW project arranging around Rs 3 billion loan. In short, if many of the banks/FIs opt for merger/acquisition in order to meet the new capital requirement, then I think the problem for booking enough business to match the raised capital will not be big. However, if many of the banks/FIs opt for raising the capital through injecting additional capital, then finding enough business to serve the raised capital is going to be a big problem. Since our Bank will be exercising all the available options to raise the capital (i.e., bonus shares, merger/acquisition and right share, if required) in an optimal combination, I hope return to the shareholders will not be affected much.
- What are the future plans of this bank?
We have been offering various kinds of loan and deposit products to customers with diverse categories. We intend to continue offering such products along with some new products. In addition, we have plans in the near future to go for remittance services in a big way. We have shelved branch expansion programme for the time being in view of the probable merger/acquisition as the merge partner/s may already have branches in places where we do not. So, at present, we are focused on making plans to meeting Rs 8 billion paid up capital within two years.
- You have just launched MBL easy car loan. Under this offer your bank will issue prospective borrower a loan eligibility certificate in two minutes, if borrower meets certain criteria. What are the criteria your bank is using for the judgment?
There are three things that we look into before issuing the loan eligibility to a customer. These are assets to be financed, adequacy of income source and credibility of the borrower. Assets in this case would be the auto we will be financing. If a borrower is able to satisfy our officers on these three criteria then we will issue the loan eligibility certificate. This certificate only means we have a preliminary assessment. This facility is available from all branches of MBL till the end of Ashwin 2072.
- What message do you have to shareholders of Machhapuchchhre Bank Limited through our platform?
I would like to thank all our shareholders for being part of our Machhapuchchhre Bank family. After the directive from the NRB regarding the increase in the paid up capital of the bank, we are working diligently to meet the paid up capital requirement by the deadline. We will strengthen our core business in the coming days while meeting the expectation of our valued shareholders.
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