Priority is to reclaim public faith

KATHMANDU, FEB 16 -

Gyanendra Prasad Dhungana is the newly appointed chief executive officer of Nepal Bangladesh Bank. Prior to joining NBB, he served as the general manager at NCC bank for about a year. He was with the Nepal Rastra Bank as director before starting his career in private banking. Dhungana talked to the Post about NBB’s plans and current situation of the banking sector. Excerpts:

Tell us about the latest financial status of Nepal Bangladesh Bank amid reports that the bank’s capital adequacy ratio is below the required minimum level.

It has just been a month since I joined NBB and I am working to revive the bank’s financial status. Of course, the merger with Nepal Sri Lanka Merchant bank has hit the bank’s capital adequacy ratio as the finance company had huge losses. Our capital adequacy ratio stands at 10.02 percent as of the second quarter, whereas the minimum required level is 10 percent.

I have plans to increase the figure to 12 percent within the third quarter. My main focus is on loan recovery and I have already recovered bad loans worth more than Rs 250 million in the period between mid-January and mid-February. It helped improve the capital adequacy ratio. NBB’s financial performance had been fair before the merger. But the merger increased the bank’s NPL level as it had to adjust losses of the finance company.

As a CEO, what are your plans for this year?

I plan to reduce NPL below 5 percent at the end of this fiscal year. Improvements are already visible, as the figure has come down to 14 percent from the second quarter’s 19 percent. By end of the year, I plan to increase the capital adequacy ratio to above 12 percent and earn a net profit of more than Rs 1 billion.

As of the second quarter, profits of most of the banks, including NBB, have decreased drastically. Isn’t your plan to increase profit to above Rs 1 billion ambitious?

Of course it is a challenge, as lending has slowed and recovering loans from the real estate sector has been challenging. But even in such a situation, we earned a profit of Rs 102.8 million as of the second quarter. We are in a position to earn a profit of Rs 300-350 million through regular interest earning and other earnings. I hope the bank will earn additional profit of Rs 600-650 million from efforts such as loan recovery and write offs. As we have recovered Rs 250 million over the last month, we also can recover equivalent amount of bad loans in the coming one month. After the bad loan recovery, there will be right back of our provisioning. So, earning a profit of Rs 1 billion by end of the fiscal year should not be an ambitious target.

Tell us about the progress made regarding the sale of shares by Nepali promoters to the Bangladeshi partner?

International Finance Investment and Commerce (IFIC), the Bangladeshi promoter, has already received approval from Bangladeshi central bank to make further investment in NBB by purchasing Nepali promoters’ shares. After the purchase of the shares, IFIC will have 51 percent stake in the bank, in which the general public will have 49 percent stake. After IFIC received Bangladeshi central bank’s approval, we have sought NRB’s approval for the purpose. We hope NRB will approve the proposal within a week. During the share sale process, loans that went to Nepali promoters will also be recovered and it will help improve the bank’s health. This will also help improve customers’ faith in NBB.

What are the major challenges facing NBB?

Enhancing its image and convincing the market about its financial strength is the biggest challenge. Recovering realty loans is another challenge at a time when the banking system is witnessing realty loan defaults. Most of our deposits are the savings of individual investors. Due to relatively higher NPL level, institutional depositors feared making deposits with us, but I hope they will come back soon.

What are your other new plans?

After the recovery bank’s NPL, we will focus on expanding our presence in the country which has been restricted by the central bank due to relatively higher NPL level. We will go for tapping opportunities in the remittance business. We will also introduce new products in deposit and credit. We are also going to expand more credit in agriculture and other productive areas.

Source: Kantipur