NBL in Policy Dilemma

Improve your financial status: NRB governor

Nepal Bank Ltd (NBL) is in a policy dilemma regarding financial structure -- whether to privatize or run under publicprivate partnership. The government has 41per cent stake in NBL, the country's oldest bank established in 1938.

Regulator Nepal Rastra Bank (NRB)is looking for a new strategy for NBL to revive it as a competitive modern bank, said NRB governor Bijaya Nath Bhattarai."Even NRB is not sure what measure to take," he said, "Issue of new shares or inviting new stakeholders can be options." Without strong effort NBL's status will not change soon, he added.

NRB is managing NBL since July 27, 2007 after five years of foreign management. NBL had been handed over to foreign management in 2002 when the bank got ruined due to billions of rupees in bad loans. NRB has invested Rs 2.55 billion to improve NBL's financial status under the Financial Sector Reform Project (FSRP) which ends in 2011.

"We are open to all alternatives as the FSRP deadline is nearing," Bhattarai said adding NBL's new management must work hard to turn its negative capital into positive. NBL needs Rs 8.87 billion to become capital positive. NBL has bad loan Rs 6 billion reduced from Rs 8 billion in last eight years.

Weak decision-makers, inefficient employees and government interventions are the causes behind NBL's failure.

Paid-up capital is another challenge -- the bank has paid-up capital Rs 380 million which is too low to compete with other banks having Rs 2 billion.

NBL needs strong management, a professional chief executive officer (CEO) and increase in paid-up capital, employee unions said. "If we want change, the CEO must have capacity to utilise employees," said Semanta Kumar Gauli, union representative. The union has suggested revaluation of property to turn the negative capital to positive. "If it is possible, I will do it," respond CEO Dr Binod Atreya.

NBL had gained Rs 79.4 million and Rs 59.26 million as net and operating profit in the fiscal year 2008-09 respectively.

The bank has allocated Rs 80 million as bonus of employees.

It's collection is Rs 44 billion and invested Rs 21 billion which are seven and four percent of total deposit and investment of Nepali banks.

Meanwhile, NBL has started reviving its strength through training employee and reestablishing branches. Sundar bazaar branch of NBL is reestablished as 106th branch on the occasion of 73rd anniversary of the bank today while ATMs are added in Kalimati and Jawalakhel branches.

NBL starts e-banking services (SMS banking and Internet banking) and education loan service from today. Likewise, NBL honored its 11 branches from best branch award amid a function.