Two state-owned FIs submit business plans

KATHMANDU, FEB 01 -

Of the five government-owned financial entities from which the Ministry of Finance had sought business plans and investment strategies, two have submitted their plans. Three others are still preparing their strategies.

The ministry had sought long-term business plans from Rastriya Banijya Bank (RBB), Agriculture Development Bank Limited (ADBL) and Nepal Bank Limited (NBL). Employees’ Provident Fund (EPF) and Citizens Investment Trust (CIT) were asked to furnish strategies for utilising their long-term funds.

They were given January-end deadline to submit their plans, but only RBB and ADBL have submitted their business proposals.

MoF Joint Secretary Baikuntha Aryal said the plans were sought from the entities after they failed to invest adequately in government-prioritised sectors despite huge investment from the government.

Based on their business plans, the government may introduce a separate policy, if necessary, to ensure better utilisation of funds with them. “We will first go through their plans and take necessary decisions,” said Aryal.

In its five-year business plan forwarded to the ministry and the Nepal Rastra Bank (NRB), RBB has proposed increasing its deposits to Rs 121 billion and lending to Rs 78 billion in the next five years. As of the first quarter of this fiscal year, its deposits stand at Rs 87.66 billion and credit at Rs 41.25 billion.

Even the central bank has been expressing dissatisfaction over the low level of investment from the two big state-owned banks.

“We are going to increase lending massively so that the credit-to-deposit ratio will remain around 65 percent,” said RBB CEO Krishna

Prasad Sharma. Currently, the bank’s C/D ratio is less than 50 percent.

RBB plans to increase in investment in agriculture, hydropower, tourism and small and medium scale enterprises (SMEs).

“We will make efforts to increase investment in these sectors going beyond the compulsory level of investment as directed by the central bank,” said Sharma.

As far as NBL is concerned, it is preparing its five-year long-term business plan. “We are still under discussion on the plan and yet to fix the target of deposit, credit, profit and branch expansion for the period,” said Kiran Kumar Shrestha, acting general manager of the bank, adding bank probably would hand over the plan next week.

NBL’s credit-to-deposit ratio is also too high as its deposits as of the first quarter stand at just Rs 56.11 billion against the lending of Rs 29.81 billion.

EPF, country’s largest institutional lender, said it has prepared a draft of the strategies to be adopted for better utilising its long-term funds. EPF Administrator Krishna Prasad Acharya said they would propose increasing investment in key infrastructure sectors such as hydropower, while seeking ‘some kind of guarantee of return’ in areas the government asks to invest.

“We are also proposing a model of direct lending from us or through government’s instruments such as power bonds,” he said.

EPF has already announced plans to increase its investment in areas that contribute directly to the economic growth, to 30 percent from the current 20 percent of its resources. EPF’s total resources stand at Rs 125 billion as of the last fiscal year. It has issued loans worth Rs 118 billion, with 56.08 percent going to its members.

EPF has deposited 19.91 percent of its resources in commercial banks and invested 12.57 percent in government treasury bills and bonds, 9.22 percent in projects and 1.86 percent in shares of banks and financial institutions.

CIT’s business plan is also in final preparation stages. “I have received a draft on the measures to be taken on utilising our funds,” said CIT Executive Director Rishiram Gautam. “I am, however, not satisfied with the draft. I will make necessary revisions before submitting it to the ministry.”

Source: The Kathmandu Post