Mr. Laxman Risal
, recently appointed Chief Executive Officer (CEO) of NIC Asia Bank
, holds a Bachelor in Science degree. He has a wide range of experience in Banking and Insurance sector. He started his career with Grindlays Bank. At NIC Asia Bank, he held various positions and rose through the ranks to become the CEO of the Bank.
In an interview with ShareSansar, Mr. Laxman Risal told our financial reporters Priyanka Jha and Jashma Sainju that the capital raised by the Bank would be used mainly for business expansion and some amount is expected to be used for network expansion of the Bank as well.
- Tell us about your journey in banking sector (educational and professional background). Do you feel any sort of pressure to replace Mr. Sashin Joshi?
Well, it's been around 26 years in banking and insurance industry in different leadership positions, I started my career in 1990 with the then Grindlays Bank, now Standard Chartered Bank, then joined erstwhile NIC Bank in 2004 as Chief Operating Officer. In 2008, I went to Prime Life Insurance as Chief Executive Officer and then I was again back in banking industry, in 2009 I joined erstwhile Bank of Asia Nepal Limited as General Manager, and from June, 2015 I was serving as the Acting Chief Executive Officer of the Bank and now recently in May 2016, I have been appointed as Chief Executive Officer of the Bank.
Mr. Joshi is a very renowned and experienced banker, and rather than pressure, I do have the challenges to grow the business with sustainable healthy return on assets and deliver superior returns to our shareholders.
- What is the reason behind NIC Asia’s outstanding growth in Net interest Income in Q3?
The growth in net interest income in Q3 is largely contributed by impressive increase in average risk assets business volume along with better utilization of the resources which has been reflected by way of improved CD ratio and decrease in overall cost of deposits compared to previous quarters. At present, we are targeting to maintain the current level of Net Interest Margin (NIM) and with expected business growth in pipeline, the Net Interest Income (NII) is expected to improve in coming quarters compared to earlier quarters.
- How will the bank utilize its increased capital? Does the bank have any plan for loan expansions or business expansions?
The capital raised by the Bank would be used mainly for business expansion and some amount is expected to be used for network expansion of the Bank as well.
In fact, we have the Bank's five year long term strategy, "Strategy 2020",
the current fiscal year being the first year of the strategy period; the strategy has well spelled out the Bank's business priorities and financial aspirations. We are aiming to aggressively book retails and SMEs loans, and by the end of the strategy period, we are targeting to underwrite our two third of the total loans portfolio from retails and SMEs loans. Similarly, we are equally focused on increasing the mix of current and savings (CASA) deposits in our liability book to around more than fifty percent, which would enable the Bank to be more competitive. Among others, the Bank has endeavor to achieve operation efficiencies vide automations with imagination of paperless office environment. At present also, most of our business processes are automated, and we believe we are the very few banks in Nepal to leverage and integrate the information technology in daily business need.
The Bank would soon foray into the micro finance and merchant banking business through its own wholly owned subsidiaries andthe preliminary work has already been started.
- At present there is excess liquidity in banking sector. How should banking sector cope with excess liquidity?
This market is very strange. The moments are too quick within a short period of time. It was 4-5 months back we had excess liquidity in the market. At present the liquidity is moderate.
The credit demand shoot up post blockade. The things that were stopped due to blockade started progressing, which led to increment in credit demand. We saw immense growth of credit demand in this quarter compared to the previous quarter.
Post-earthquake there was excess liquidity and the banks were struggling with surplus cash. The central bank did a very good thing and mopped up about Rs. 150 billion from the market, which gave some breathing space to the banks.
At present neither its tight nor surplus. One week back some tightness was there, the interbank rate went up to 5%, which has now come down to below 0.5%. The reason behind it is the liquidity mopped up by central bank was for 90 days, so that started maturing and coming back to the banks.
We managed the excess liquidity with the help of central bank, though the yield was very low. With the gradual credit growth the liquidity is moderate now.
- Inflation is in double digit. The interest rate provided by the banks on deposits is very much minimum? Why has banks not been able to provide better interest rates on deposits? Inflation and very low interest rates will discourage deposit and encourage capital flight. How will the bank encourage deposits in such case?
In India, the role played by central bank to manage inflation and interest rate on deposit is phenomenal. They are prepared to intervene at any extent to stabilize inflation and interest rate. Such mechanism is not found in Nepal.
Here in Nepal, the interest rate cycle is too short. For three months, the interest rates are high and for three months the rates are lower. There is a huge mismatch in the way government absorbs money from the market as tax revenue and they pump money in the market as development expenditure. The month of Poush is the mid of the year and it is the due date for first installment payment of the advance tax.The market normally becomes tight during that time. Later in the month of Ashad the government pumps in so much of money in the market that market becomes flushed with liquidity. This very short cycle of six months is hurting everyone.
Central bank is trying to manage liquidity and interest through money market instruments. For example, the central bank mopped up Rs 150 billion from the market and it was a very courageous decision of the central bank. In the past, such interventions never happened.
For stabilizing the interest rate the role of government and central bank is very crucial which is not happening to the extent required. Banks can hardly do anything in stabilizing the interest rate. Banks work on spread and as long as their spread is maintained they are happy.
- What are your plans regarding Merger/ acquisitions?
We don’t have any plans for merger or acquisition. The reserve created after the merger between two "A" class commercial banks in the country,i.e. Banks of Asia and NIC Bank together with profit generated from the business are adequate enough to meet the capital requirement set by Nepal Rastra Bank.
Plus, we are coming out with 25% right shares in Jestha for the increment of paid up capital. Our capital plan also mentions another 25% right issue next year, which was based on some assumptions, but the results are much better than what we forecasted at that time. The next 25% right shares may not be required or even it is required, the ratio will be lower.
- Tell us about the new product NIC Asia personal loan and others if any.
NIC Asia personal loan is targeted towards a selected group of professionals. It is provided to professionals without collateral. The maximum limit of the loan is Rs. 1.5 million or equal to salary of two years, whichever is less. We are coming out with credit card very soon.
We are also coming out with easy business loan in SME segment, which will provide a loan up to Rs. 5 million. The process to take loan is very simple and quick decisions are made to provide a loan. If all the required documents are intact, then the decision regarding the loan will be given the very next day. We are also working on products that will provide loan starting from Rs 5 million to 30 million.
In retail banking, we have all the products provided by our competitors and rates offered are also very competitive.
- The stock NICA is one of the most favored stocks in NEPSE. What returns can shareholders expect in FY 2073/74?
We are not coming out with cash dividend for next two fiscal years. We will be providing stock dividends to our stockholders. Last year, we gave 39% stock dividend and we are issuing 25% right shares. Even on increased capital, next year we will be able to give stock dividend close to 30%. Thus, shareholders can expect a good return for current fiscal year as well.
- On behalf of NIC ASIA Bank what message do you want to give to the stakeholders?
First of all, I would like to take this opportunity to sincerely thank to all the stakeholders of NIC Asia for their support and faith in us. I would like to reiterate that the Bank's fundamentals and values are ever strong and practice ensuring high level of corporate governance at all levels. We are committed to deliver highest level of quality services and value to all our stakeholders and maximization of our shareholders' wealth.