NBL starts looking for new CEO

KATHMANDU:

Nepal Bank Limited (NBL), the country’s oldest commercial bank, has finally initiated the process of appointing a new CEO to completely release itself from the grip of the central bank.

The bank, which is 62 per cent owned by the government, today issued a public notice seeking applications from qualified candidates aspiring to become chief executive of the bank.

“If things go as planned, we will be able to wrap up the selection process within a month and hand over the management to the new CEO,” said NBL CEO Maheswor Lal Shrestha, a staff of Nepal Rastra Bank (NRB), the central bank, who was deputed at the financial institution around four years ago to head the NBL management.NRB had taken over the management of NBL on March 14, 2002, after its financial condition worsened beyond repair.At that time, the bank’s networth stood at a negative of Rs 6.35 billion, net loss at Rs 2.17 billion and level of bad loans at 50.80 per cent of the total credit portfolio. This was the result of ineffective management, weak internal control mechanisms, haphazard lending practices and unnecessary government intervention. The bank was also overstaffed at that time and had not conducted audits of past few years.

To implement reforms in the bank, NRB deputed different teams and later decided to hand over the management in contract to a foreign firm under the financial sector reform programme launched by the World Bank.The foreign management stayed in office from July 22, 2002, to July 21, 2007. Since then NRB officials have been heading NBL’s management.

During all these years, NBL did decide to appoint a CEO through open competition. In this regard, the bank made public announcements to fill the vacant post on January 16, 2008, February 29, 2008, January 06, 2009, July 06, 2009, and December 23, 2009.After all these attempts failed, the NBL board decided to first initiate recapitalisation process and hand over the management of the bank to a new team within mid-January, 2012.

Although the management of that time could not meet the deadline, things started looking up for the bank in fiscal year 2011-12, when it decided to launch recapitalisation drive and issue rights shares at the ratio of 1:9.5.

From sales of these shares, the bank received Rs 1.39 billion from the government — its major shareholder — in fiscal 2011-12 and Rs 2.23 billion from other shareholders in fiscal 2012-13. At that time it alsointroduced a plan to sell fixed assets to aid its recapitalisation plan.

To further strengthen the financial condition of the bank, the government in fiscal 2012-13 made a capital injection of another Rs 2.5 billion. During that year, it also accumulated around Rs 620 million from sales of land.Due to these initiatives, the bank’s paid-up capital has now soared to Rs 6.46 billion and its networth, as of mid-October stood at Rs 4.13 billion, which is lower than its paid-up capital because of negative reserve of Rs 2.33 billion.Although the bank’s networth is finally in the positive territory, it may not be able to expand its business in a desirable manner as its capital adequacy ratio currently stands at around 4.78 per cent, which is below the regulatory requirement of 10 per cent. This means the bank will not be able to expand lending aggressively.

Source: THT