Banks flood Nepal

It seems banks are flooding Nepal.
Two commercial banks; Bank of Asia and Sunrise Bank, started their operations from October 12 making the total number of commercial banks in operation at 23.
Similarly, two more development banks; Country Development Bank (CDB) based in Banepa and Kasthamandap Development Bank (KDB) based in Kathmandu, also started their operations from today.
Bharatmani Sharma Risal is the founding chairman and Uday Lal Raj is the managing director (MD) of the CDB and Samundra Kaji Shrestha, Bishnu Sundar Rimal and Mohan Bahadur Thapa are the Board of Directors.
The authorised capital of Country Development Bank is Rs 200 million, while Rs 100 million is issued capital and Rs 51 million is paid-up capital. The bank aims to float shares to the general public of Rs 49 million."
Due to Nepal Rastra Bank’s (NRB) directive, those financial institutions that have already registered must get operating licence within the month of Ashwin or they will betreated like the new ones," Bhishma Raj Chalise, chief operating officer (COO) of KDB says explaining the reason of the sudden flood of banks.
Jagannath Gyawali is the chairman and Krishna Gyawali is the director of KDB, where there are 23 promoters. On one hand, data from NRB shows that only 20 per cent of the populace have access to banking services leaving the vast majority out of the banking reach. And on the other hand, all the banks though they claim of going to rural areas are urban-centric and promise to provide modern banking services.
"There has been no market expansion and the banks are operating on very thin-margin," says one banker adding that the size of the market should rise and the banks explore new areas of investment.As the market is not growing in proportion to the number of players in this field, banking yield has also gone down.
The cut-throat competition has also given rise to unhealthy practise like ‘stealing’ the customers and staff.Both the new commercial banks have Rs 2 billion authorised capital and Rs 1 billion issued capital — 70 per cent promoters and 30 per cent public.
T M Duggar group is one of the promoters of Sunrise Bank, while Shangai group and Bishal group are the major promoters of Bank of Asia.
NRB has lately awarded licence to operate commercial banks and development banks after increasing their authorised capital, for commercial banks Rs 2 billion and fordevelopment banks Rs 640 million. But with the increasing number of financial institutions, NRB has to increase its supervisory capacity also, which is going to be a major challenge.
The more number of commercial banks means the more difficult it will be for the NRB to supervise promptly.
"The other factor that no one has questioned till date is why all the business houses want to own bank. Banks should be operated by the professionals. Each of the business houses in Nepal owns a bank," says one banking professional adding that Nepal Bangladesh Bank should be an eye-opener for the public, supervisory authority and ‘yes of course’ to the court.
"The trend cannot be said healthy," he adds.

NDB refutes
KATHMANDU: Nepal Development Bank (NDB) has refuted the allegations NRB has made against it by organising a press meet on Friday. "We are not a troubled-bank like the NRB has alleged us," says Prabhukeshar Man Pradhan, chief executive officer of the bank adding that it has been following the NRB’s directives. NRB, the regulatory authority, has directed NDB to follow its directives as NDB has been found troubled. NRB has earlier also intervined in the Nepal Bangladesh bank to protect depositors' savings. NRB must be strict on the issue of depositors otherwise, noone will tomorrow deposite in any bank. NRB must intervine in the troubled banks.