Sun, Jan 13, 2019 9:07 AM
“Nepali janata ko Bank, Janata Bank Nepal”
Janata Bank Nepal has left no stone unturned in order to substantiate this tagline among its clients, corporates and associates. The motto of this tagline does not simply reflect the objective of Janata Bank Nepal. In fact, the tagline also aligns with the banking journey of Mr. Parshuram Kunwar Chhetri who is in the position of CEO at Janata Bank. Mr. Chhetri attained his primary education from India but completed his remaining education from Nepal. He attained his MBA degree from Shankher Dev College. He first joined Grindlays Bank Nepal and served the bank for seventeen years. In the process, he also became a part of Nepal Bank Limited where he worked under Bittiya Sudhar Karyakram (Reformation of Banking Sector) for around three and half years. Post this, Mr. Chhetri joined different private banks, however, he could never let go his aspirations for financial reform. In 2012, he decided to leave banking sector and started working as a consultant and trainee to reform the financial sector of the country. He also participated in different projects of World Bank Nepal, ADB and international organizations. In this process, destiny had a minor role to play when Mr. Chhetri joined Janata Bank as a financial consultant and his hard work had a bigger role to play as he owns the position of CEO in the same bank today.
- What strength does Janata recognize?
Janata Bank is diversified exactly like Nepalese janata from East of Mechi to West of Mahakali. Our strength lies in the networks that we have built from this diversification. The branches that we have established overtime has helped us build our infrastructures for retail deposits, loans and other products. So, Janata’s strength is the access it has created through this network and the employees who have made this possible.
- What strengths can we identify in the financial figures of 1st quarter of Janata Bank?
If we simply compare the first quarter financial reports of last year and this year, Janata Bank has performed better than the industry average. In the first quarter, commercial bank’s average deposit growth has increased by 2.5% whereas Janata Bank’s deposits increased by 4.5%. Similarly, in the same quarter, the commercial bank as a whole grew by 17.3% whereas Janata grew by 20.4%. Our lending portfolio is also better than the industry average. Similarly, our free profit after regulatory adjustment increased from around Rs 6.5 crores to Rs 25.25 crores. Net profit as per NFRS also made a significant positive impact. In first quarter, 48 of our branches were in loss yet we could come up with the statistics as such. So, in the upcoming days, when all of these branches will be making a positive impact in the financial statements, hopefully within this fiscal year, imagine the position of Janata Bank.
- If we analyze Janata’s performance over the last year, the growth of the bank has been quite incredible. A 294% growth in free profit, 99% growth in net profit, a 65% increase in ROA, 73% growth in ROE and 74% growth in EPS. However, when it comes to secondary market, its stock is at around Rs 170. How do you justify the gap?
Had I been a keen follower of stock market, I would have been the perfect person to answer this question. Therefore, I would like to stay neutral on this query. However, the resources that we have been putting in suggest Janata Bank will have a bright future in the long term. In remittance itself, if we compare last years’ five months of remittance to this year’s, it has become more than double. This simply counts the domestic remittance. We are now exploring international remittance for which I visited three countries and consulted experts. We will initiate international remittance within few months. In banka insurance, we come among the top three banks. We are continuously encouraging our partners to make maximum utilization of our branches and our resources. We are encouraging our clients to opt for insurance.
- Among all commercial banks, Janata Bank Nepal Limited has always been in the front space when it comes to raising interest rates. An interest rate of 12% for 75 days for an amount of Rs 1 lakh is quite infrequent in Nepalese banking. Janata, infact had to withdraw the same decision of 12% after words of caution from NRB. Is Janata comparatively more affected by liquidity crisis than the rest of the bank?
If we dissect the organizational framework of today’s Janata Bank Nepal, we are actually a unit formed by seven banks where six banks are development banks. Janata Bank was merged with Triveni Development Bank and Siddhartha Development Bank. Prior to this, Triveni Development Bank had acquired both Public Development Bank and Bright Development Bank. Similarly, Siddhartha Development Bank had acquired Nepal Aawas Development Bank and Ekata Development Bank.
If we consider this, although we are licensed as “A” categorized bank, as per our clients’ profile, loan and deposit portfolio, 55% to 65% of Janata Bank is a development bank. In a way, we need to compete with both commercial and development banks. At times, in order to manage our balance sheet needs, we need to undertake such steps. However, our advertisements clearly mentioned that the 12% interest rate scheme was for a short time and we did not increase our borrowers’ interest rates during the period. We have not violated any rules and regulations or compromised anyway with governance while undertaking such measures.
- Do you believe that increasing interest rate is the medium to get ahead in the competition at the moment for commercial banks?
Definitely not. It could be a short term solution but will never work in the long run. We will never be able to sustain if we keep on increasing the interest rates. If we keep on increasing interest rates, our borrowers will be affected. This will discourage the productivity of the country. In fact, we will need to import more goods if our country fails to maintain the productivity level. At today’s scenario, we need to discourage import and encourage export in order to maintain our balance of payment. Simply, raising the interest rates far above the inflation will not help us anyway.
Our mission should be to lower the interest rates. Even in India, interest rates have been rising. However, in their case, after the increment, the interest rate reached to 7.5%. In our case, we are still around 2% above that level. So, we should be able to at least match that level and serve the best to the borrowers.
- How has Janata’s deposit collection changed after implementation of online deposit service?
It has been around two and half months since we have introduced the online accounting system. We have received a good response from our clients. We need to build up technology to improve the banking sector and we are continuously into this.
- While banks are trying to focus on productive loans, Janata has a different product known as Taxi Loan. What is the purpose of such product focused for middle class population? Are you planning to bring in more of such products?
Taxi loan also comes under deprived sector loan. It has an outstanding portfolio. We have also recently launched a cattle rearing loan product. However, we have not gone into mass marketing for the product. We aim to uplift living standard of middle class income holders from such products.
- Will Janata be providing more of margin loan to investors now that the margin loan capacity has increased to 40% of the core capital?
We never had any capacity constraint in regards to margin loan. Even now, we won’t have any kind of restrictions on margin loan.
- Is Janata opting for foreign loans in the days to come? Is Janata also planning to issue any debentures or bonds this fiscal year?
We are discussing to bring in the foreign loan with our team. However, we need to convince our international parties as well. We need to put the evidence of political stability now that a stable government has been formed. Similarly, we need to convince our international agents that Nepal might be poor however; we have no records of defaults. We need to convince them about our resources and potentiality. These processes require time.
We are comfortable with our Capital Adequacy Ratio as of now. However, in the upcoming two years, we might be issuing debentures to the general public.
- Why are we facing such seasonal fluctuation in interest rates? Will the scenario change in days to come?
At this moment, the increased interest rate is because of the increasing credit demand. However, if the deposit collection does not increase with the increased credit demand then it is of no surprise that interest rate will increase. This process is validated by economics theories.
I believe the demand for credit will continue even in the days to come. In fact, the increased credit demand reflects an effective economy where people are motivated to undertake new initiation, venture, projects, startups, industry and businesses. So, I don’t think this increased demand should be taken negatively. However, this is a challenge for all the commercial banks and NRB. We need to meet the demand for credit by identifying new sources of avenues.
- As a finance student, I remember being told “Do not run behind a bank that provides higher interest rates. When a bank increases its interest rates, it might also reflect a problem with the bank on the other side.” With due respect, could you please enlighten me on this topic in Nepal’s scenario?
I would not suggest generalizing a bank based on one factor. Even Indian banks are raising interest rates in India. Yes, there might be problems with few national level banks in India however; private banks are also involved in increasing interest rates. Everyone expected RBI to increase interest rates in recent monetary policy however, RBI did not. Had they increased, interest rates would have increased further more. One should find out the reason for the increased interest rates. For instance, if inflation keeps on rising then, no matter what, interest rates will rise. So, simply generalizing a bank just because it increased interest rates would not be a fair debate.
- Your LinkedIn profile suggests that you are someone dedicated to work in the field of Financial Literacy in the country. I think that is the biggest yet the rarest contribution that a person specialized in finance can provide to this field. What are your contributions so far?
Back in 2012, I left banking sector thinking I will work in other areas. I started working as consultant trainee and became part of projects from World Bank Nepal, ADB and other international organizations. In this process, I provided trainings to bankers of different banks. I always preferred to be recognized as someone who contributed to banking reform of the country than a CEO. I have always desired to enhance the capacity of bankers in our industry. Even today, I want to work for the betterment of banking employees. There is no doubt, after my tenure in Janata bank; I will be again involved in providing trainings to bankers, enhance their capacity till my last breath. Those are the contributions that I have provided and will provide for financial literacy.
If provided opportunities, I would like to even stay with rural communities and share the banking and financial knowledge that I have to shape a better financial future for these communities.
- As you have provided trainings to so many bankers, how do you develop the employees of Janata bank as a CEO?
I don’t believe that a CEO should simply handle big files throughout his/her tenure. I rather believe CEO is meant to go among employees, develop them so that they will be able to handle these big files in the days to come. Janata Bank was a 2 arba bank turned to 8 arba, bank with 350 employees to bank with more than 1000 employees, 25 branches to 100 branches. This was possible when seven different banks came together. Meaning, there were employees with multi-cultural background, ethnicity, professionalism, academics and experience. Many of our colleagues had worked day and night to provide trainings to these employees. I also gave trainings for five to six hours continuously a day. Moreover, even today, I visit several locations with our branch managers to discuss on several banking aspects. Among five regions, even in the last quarter, I had visited three regions to understand their perception on Janata and what should be the upcoming steps for Janata. Trainings and review meetings are compulsory in Janata. We conduct management training every week which is also a medium of training. I don’t believe simply a classroom structure is the medium of training. Several meetings, workshops, discussions can also train employees and managers so; we are doing the same at Janata.
- You are someone who entered banking, left banking, trained bankers, reentered banking and will train bankers. There are youths who have recently joined banking, are about to give up on banking or even thinking to build a career on banking. What would be your motivating words for these youths?
If you are interested to be in banking, be it Janata or other banks, it is your analysis to see where you want to be. If you want to be in central bank, that’s your decision on which areas you will be working, the match between your interest and the requirement of central bank, the contribution that you can provide. However, if you prefer other sectors other than banking such as entrepreneurship, manufacturing- why not? If that is your desire, go for it. However, no matter which sector you involve in, there will always be one common factor- YOUR HARDWORK. Do not get into career that forces you to look at the calendar and your watch. Get into a career that forces you to look into results. Your commitment and sincerity is required in every job however, how much you enjoy that career is equally important. Leave the job right then if you believe you are not enjoying it.
ShareSansar wishes Mr. Parshuram Kunwar Chhetri a fruitful tenure at Janata Bank Nepal Limited. We hope his desire to see enhanced capacity of employees at Janata and a reformed banking economy comes true. We hope Nepalese banking comes across more individuals like Mr. Chhetri who is into redefining the banking and financial sector of the country.