State-owned bank bid to good corporate governance

KATHMANDU, APR 15:

Rastriya Banijya Bank — the wholly-government owned commercial bank — has attributed strengthening of internal control mechanism as the reason for its better financial health in recent years.

However, the bank has started operating professionally after the competition increased in the market following the rise of private sector banks.

“We have been following strong corporate governance in order to keep the bank on right track,” said chief executive of the Radtriya Banijya Bank Krishna Prasad Sharma, addressing the sixth and seventh annual general meeting of the bank held in Kathmandu yesterday.

Since past 15 years, the bank’s financial health had undergone massive decline following mounting bad loans and subprime collateral among other things like negligent management. The bank also went through almost a decade long Financial Sector Restructuring Programme since 2002, which improved the bank’s performance but the bank’s core capital remained negative.

However, in last couple of years the bank has been able to improve its performance, recover loans, earn substantial profits and even got its capital fund positive along with appointing chief executive through free competition. “Though, the bank has slashed the number of employees to 2,600 from 5,600 through voluntary retirement schemes, its responsibility of establishing banking branches in remote areas for being government agents for its social security payments, is difficult to further downsize the employees.”

Extremely high numbers of staffs was considered as one of the reasons for the bank’s downfall. The bank minimised the numbers of employees through voluntary retirement schemes in more than eight stages so that it can cut cost and adapt to new technology for banking, apart from injecting fresh blood.

“The bank will use technology to expand its business and make the employees more productive as per the five-year plan to make the bank more competitive,” Sharma said.

Rastriya Banijya Bank is providing modern banking services through its 141 branches, nine branchless banking network and 50 ATM consoles all over the country.

It’s core capital also turned positive by the second quarter of the current fiscal year as the government has approved its proposal to convert special drawing rights (SDR) worth Rs 2.5 billion into domestic currency.

State-owned bank has become the second largest commercial bank of the country in terms of paid up capital, after the government invested in right shares in early January increasing its paid up capital to Rs 9 billion. Its non performing assets stand at 6.5 per cent by the end of second quarter.

Besides the government’s fresh injection of Rs 4.32 billion in mid-July, 2012, the bank’s profit has also helped it reduce its negative net worth.

Source: THT