Sign of recovery: RBB achieves first positive CAR in 12 years

KATHMANDU, JAN 24 -

The state-owned Rastriya Banijya Bank ( RBB ) has attained a positive net worth for the first time in 12 years. The bank has also reported a positive capital adequacy ratio (CAR) of one percent from 23 percent negative in 2002 when the financial sector reform programme was launched.

It is still a long way away from turning the CAR positive by 10 percent as required by the central bank’s directive.

  The government’s Rs 4.32 billion capital injection in July 2012 was instrumental in helping the bank get close to the fully-healthy status from the negative net worth of around Rs 9 billion.

During the 48th anniversary programme on Wednesday, RBB CEO Krishna Prasad Sharma praised the government for injecting the capital to help the bank recover.

Besides the government’s capital injection, the existing fund in the form of special drawing rights (SDR) worth Rs 3 billion into the bank’s paid up capital after converting it into the domestic currency has increased its paid up capital from Rs 1.17 billion to Rs  8.49 billion, according to the bank.

Sharma said that the bank brought down its non-performing loans (NPL) to six percent from 60 percent a decade ago and that it planned to bring down under five percent within the current fiscal year. Despite these progress, Sharma said, the bank still has to wait for the next two years to before fully increasing its CAR to 10 percent. “The bank’s cumulative loss is still high which will be brought down to zero in the next three years by increasing the bank’s profit,” said Sharma.

Finance Minister Barsha Man Pun said that despite opposition from various quarters, the current government dared to inject resources to the RBB with belief that the state-owned bank should be stronger and set an example for the rest of the banks. He, however, said the government was not fully satisfied with the bank’s performance and asked the bank’s board and management to improve its financial health.

Nepal Rastra Bank Governor Yubaraj Khatiwada said although the bank is in right direction, it has to increase its funded and non-funded activities. “The RBB has long been keeping idle its huge resource which will not help improve its financial health faster,” said Khatiwada. As of first quarter of the current fiscal year, the bank’s deposit has remained at Rs 87 billion and lending Rs 42 billion.

Khatiwada expressed dissatisfaction over the bank’s low income from non-funded activities when other commercial banks are making more than half of their earnings from there, such as foreign exchange transactions. “The income from non-funded activities has been very low in the case of RBB which should not be case in the days to come,” Khatiwada added. Given this scenario, the central bank has already demanded the RBB to submit its long-term business plan to avoid central bank’s action.

The NRB holds that the RBB will have to implement prompt corrective action if it fails to submit a viable business plan as it has already come out of the financial sector reform programme. The action is taken against the bank that fails to fulfill the required capital adequacy ratio.

RBB CEO Sharma said that the bank had already submitted the board its five-year business plan under which the bank would double both deposit and credit. It will bring down the NPL to two percent and expand branches, he claimed. The bank plans to achieve this target with its existing manpower of 2600. Assuring to implement a profit plan, Sharma vowed not to allow the bank to go into red in the days to come.

Source: The Kathmandu Post