Standard Chartered Bank cheapest, Agriculture Development Bank most expensive according to base rate of commercial banks

The commercial banks have published the base rate for the first time, after the central bank had asked them to calculate the base rate — as reference rate — for lending on the basis of five indicators; cost of fund, Cash Reserve Ratio, Statutory Liquidity Ratio, operational cost, and Return on Assets, to make the interest rate regime transparent for borrowers.

The base rate is expected to ensure the stability of the monetary market in the current volatile situation as interest rates are fluctuating and could hit the sustainability and long-term stability of the financial system, according to the central bank.

Though Nepal Ratra Bank had asked the banks to implement the base rate before Tihar, bankers wanted some more time for calculation and study on its sustainability and started from mid-January. 

Banks — Base rate
Standard Chartered Bank Nepal — 6.80 per cent
Rastriya Banijya Bank — 6.81 per cent
Everest Bank — 7.04 per cent

Nabil Bank — 7.26 per cent
Nepal Investment Bank — 7.8 per cent
Himalayan Bank — 8.23 per cent

Bank of Kathmandu — 8.29 per cent

Nepal SBI Bank — 8.76 per cent

Citizens Bank International — 8.92 per cent
Nepal Bank — 9.19

NB Bank — 9.26 per cent

NMB Bank — 9.32 per cent

Sunrise Bank — 9.5 per cent

Global IME Bank — 9.58 per cent
NIC Bank — 9.58 per cent
Laxmi Bank — 9.65 per cent
Mega Bank — 8.75 per cent

Bank of Asia Nepal — 9.79 per cent

NCC Bank — 9.81 per cent
Kumari Bank — 9.92 per cent
Lumbini Bank — 9.94 per cent
Commerz and Trust Bank — 10.14 per cent
Prime Commercial Bank — 10.19 per cent
Kist Bank — 10.26 per cent
Janata Bank Nepal — 10.29 per cent

Siddhartha Bank — 10.30 per cent

Machhapuchchhre Bank — 10.34 per cent

Sanima Bank — 10.36 per cent

Grand Bank — 10.53 per cent
Civil Bank — 10.91 per cent
Century Commercial Bank — 11.07 per cent

Agriculture Development Bank — 12.35 per cent

Government to divest shares of Agriculture Development Bank by this year end

If everything goes as planned, the government will complete the divestment process of Agriculture Development Bank within a year.
The government has been planning to divest 30 per cent of its shares in the Agriculture Development Bank under its reform programme. "The technical committee will forward its recommendations on the process, bid documents, and minimum bid price within six months to the privatisation committee," said joint secretary of the Finance Ministry Khum Raj Punjali, who leads the technical committee that also has representatives from the central bank, Finance Ministry, Securities Board of Nepal and the bank itself.
The privatisation committee will ask for bids from interested parties on the basis of the recommendations provided by the technical committee, he said, adding that the international standard framework is key for the bidder which could either be a foreign or a domestic investor to become a strategic partner of the bank which was established in 1968.
Earlier, Agriculture Development Bank had listed 30,375,000 unit shares at the share market at a face value of Rs 100 per unit making it a total of Rs 3.03 billion paid up capital of the listed shares. Its share was traded at Rs 100 per unit today.
Currently, the government holds 51.78 per cent share in the bank. Out of the remaining 49 per cent, 30 per cent was issued to the public last year, another 14.14 per cent was distributed among its debtors in 2007, and 5.86 per cent of the shares have been allocated to the bank’s staff.After the divestment of 30 per cent shares, the government will hold only 21.78 per cent.
Under the bank's reform programme funded by the Asian Development Bank (ADB), it has to divest its shares to get the remaining loan from ADB. According to the agreement between Nepal and the multilateral donor, ADB has already provided $5.6 million loan and $8.7 million under cluster I, which Nepal received last year.
Under Cluster II, a $60.4 million loan and $12.1 million grant has to be claimed by Nepal by this December. But the government is also planning to ask ADB to extend the time frame as it believes that the process will not be complete by the end of 2012 to claim the remaining loan.
Nepal had already received $30 million but to claim the remaining amount, the government has to divest its remaining shares in the bank. Though the loan could be used by the government, the divestment of the bank's shares is a must, according to the agreement.
The divestment of 30 per cent shares will help Agriculture Development Bank raise fresh capital and expedite the capital restructuring plan as prescribed by ADB under the second phase of the Rural Finance Sector Development Cluster started in 2004.The Manila-based agency had extended support to Agriculture Development Bank after the state-controlled bank nearly went bankrupt in 2003 with its non-performing loans reaching 47 per cent.
Since then, ADB has injected Rs 8.7 billion into the bank as preference shares and has extended technical support by upgrading its IT infrastructure and providing IT related training to its staff.In return, ADB had asked Agriculture Development Bank to completely overhaul its governance practices, management structure, business processes and the way it has been delivering services, along with divestment of shares owned by the government.
The bank's financial health has improved of late. It generated a net profit of Rs 1.6 billion last fiscal year. Over the years, the bank has also converted Rs 2.30 billion of the ADB loans into debentures.
The Agriculture Development Bank has been operating as a class 'A' commercial bank since July 14, 2005, according to the Company Act, and Bank and Financial Institution Ordinance which were introduced in February 2004 and which abolished all Acts related to financial institutions including the Agriculture Development Bank Act 1967.

Finance Ministry brings detailed action plan

Finance Ministry today brought the detailed action plan based on the government's ambitious Immediate Action Plan that has focused on agriculture, tourism, energy and infrastructure to create half a million employment in next six months.
The Finance Ministry has planned to direct Rastirya Banijya Bank, Nepal Bank and Agriculture Development Bank to lend minimum of five per cent of their loan portfolio to the agriculture sector.
By the six months, Agriculture Development Bank will focus on creating 5,000 employment by lending Rs 1 billion to youth under self employment programme, said finance secretary Krishnahari Baskota.
The three banks coupled with Small Farmers Development Bank will focus on lending to furits, commercial and high-value crops, livestock to generate employment and contribute to economic growth, he said, adding that it will not only help substitute import but also empower the remote Karnali region that will have a special 'Apple Mission' project.
Though, the government has promised 'a great leap forward', its first relief measure brought some five months ago failed to cheer the people giving people enough room to suspect that the current plan also won't bear any fruits and the people will continue to suffer.

Personal performance evaluation
KATHMANDU: The government has introduced a 'carrot and stick' policy for heads of the concerned institutions shifting a little from its earlier policy.“The government previously used to accuse or praise the institutions in general rather than anyone particularly for the failure or success of any programme,” said spokesperson at the Finance Ministry Rajan Khanal at a programme, where the 'Detailed Action Plan for Economic Development, Prosperity and Good Governance’ was launched. The government has now departed from its earlier stance and introduced a policy that will make the heads of concerned institutions responsible for any success or failure. It has introduced a rating system to reward or punish civil servants, he said. "Civil servants who fail to execute duties according to commitments will get low gradings in the rating." The government might stop the promotion of those who fail to prove their capacity during performance evaluation, according to him. "The government may also halt promotion and foreign visits of employees who fail to make 80 per cent physical progress in big projects."

Boosting domestic tourism
KATHMANDU: Finance Ministry is planning to encourage civil servants to visit domestic tourism sites to promote tourism. The ministry will prepare a separate working procedure by mid-April that will outline the provision to waive income tax of civil servants if they promote domestic tourism, said finance secretary Krishna Hari Baskota.

Private banks continue to increase assets size

Can you guess which the largest bank in Nepal is?
Not surprising, Rastriya Banijya Bank (RBB) is the largest bank in Nepal based on its total assets size of the balance sheet.
It holds almost 10 per cent of the total assets of the commercial banks followed by Agriculture Development Bank Nepal (ADBN) and Nepal Investment Bank, according to the unaudited report of the fiscal year 2009-10 of the 31 commercial banks.
The government-owned Rastriya Banijya Bank has Rs 81.22 billion worth assets which is 9.75 per cent of the total assets of the 31 commercial banks that stands at Rs 832.74 billion.
Agriculture Development Bank Nepal is ahead of Nepal Investment Bank marginally. The ADBN has Rs 59.37 billion worth assets that is 7.13 per cent, whereas Nepal Investment Bank has Rs 59.10 billion worth assets, which is 7.10 per cent of the total assets of the banks.
The private sector bank Nepal Investment Bank is fast closing the gap to become the second largest bank in Nepal meaning government-run banks are losing their grip.
The size of the assets of banks can give a range of competition and comparable institutions. "It is one of the tools to measure banks based on total assets of balance sheet but it does not reflect the performance of banks, it includes only market share,” according to share analyst and chairman of the Securities Research Centre and Services (SRCS) Rabindra Bhattarai.
From the assets size, the banks can be divided into four groups; largest (with above Rs 60 billion worth assets), large (Rs 40 billion-Rs 60 billion), middle (Rs 20 billion-Rs 40 billion), and small (with below Rs 20 billion worth assets).
Only one commercial bank features in the largest bank category, whereas eight banks feature in the large banks category. The middle banks category has seven banks and the small banks category has 15 banks among the 31 commercial banks.
The huge gap in the size of the banks calls for the necessity of merger immediately. The size of the banks can give some indications on which banks should be merged and how can a strong bank be formed.
The merger could be successful, if many banks of equal size be merged and made a competitive one. The data also revealed that the government banks have been dominating currently but the private banks are coming to give them tough competition.


Top five (Based on Assets)
1. Rastriya Banijya Bank — Rs 81.22 billion
2. Agriculture Development Bank — Rs 59.37 billion
3. Nepal Investment Bank — Rs 59.10 billion
4. Nabil Bank — Rs 58.94 billion
5. Nepal Bank Ltd — Rs 52.60 billion

ADBL to float largest primary issue in Nepal's banking history

Agriculture Development Bank Ltd (ADBL) is floating the largest ever Initial Public Offering (IPO) in the banking history of Nepal.
Having got licence for A-class bank from Nepal Rastra Bank (NRB) after the 38th year of its establishment, the bank has decided to go public with Rs 960 million worth ordinary shares from April 4. Ace Development Bank has been appointed the sales and issue manager. ADBL has registered Rs 1.72 billion profit before tax in the last fiscal year.
Meanwhile, Securities Board of Nepal (Sebon) has given permission to Prime Life Insurance Company Ltd to float initial public offering (IPO) of 10,80,000 unit shares worth Rs 100 each. The insurance company has appointed NIDC Capital Market the issue manager for the IPO worth Rs 108 million. PrimeLife Insurance has total capital of Rs 252 million and earned a net profit of Rs 56.75 million. It has issued 181,000 policies and collected premium worth Rs 488 million till last month.
Sebon has also authorised Surya Life Insurance, Manakamana Development Bank, Gaurishankar Development Bank and Yeti Finance to issue ordinary shares worth around Rs 2 billion.
Surya Life Insurance will issue shares worth Rs 108 million, Manakamana Development Bank is floating Rs 300 million worth shares, Gaurishankar Development Bank is issung Rs 60 million worth ordinary shares and Yeti Finance will issue shares worth Rs 62.5 million. Nilgiri Vikas Bank Ltd is also issuing ordinary shares worth Rs 150 million and its issue manager is Elite Capital. City Development Bank is planning to issue IPO worth Rs 60 million at face value and its issue manager is also Ace Development Bank.
Surya Life's issue manager is NMB Bank, Gaurishankar Development Bank's issue manager is Ace whereas Mankamana Bikas Bank's issue manager is NIDC Capital market.

Nepse to go outside the Valley
KATHMANDU: Investors from outside the Kathmandu Valley -- Pokhara, Butwal, Birgunj, Narayangud and Nepalgunj -- can buy and sell shares from March. Nepal Stock Exchange (Nepse) is planning to go outside the valley in a bid to make the share transaction possible across the country. According to the sole secondary market of the country, brokers can do transaction from Pokhara, Butwal, Birgunj, Narayangud and Nepalgunj very soon. The Kathmandu-based secondary market has said to be discouraging investors from outside the capital.

Nepse suspends dozen companies

Nepal Stock Exchange (Nepse) has suspended the trading of a dozen companies -- including two development banks, three finance companies and one insurance company -- as they failed to pay the annual fee for this fiscal year on time.
It has frozen the trading of Salt Trading Corporation (STC), Arun Vansapati Udhyog (AVU), Nepal Bitumen and Barrel Udhyog (NBBU), Raghupati Jute Mills Ltd (RJM), Shree Bhrikuti Pulp and Paper Ltd (SBPP), Paschimanchal Bikash Bank (PDBL), Bageshowori Development Bank (BBBLN), Royal Merchant Banking and Finance (RMBFI), Nepal Finance and Savings Co Ltd (NFS), Yeti Finance Company Ltd (YFL) and United Insurance Co (Nepal) Ltd (UIC).
On one hand some of the companies -- mostly industries like Raghupati Jute Mills and Arun Vansapati Udhyog -- are on the verge of collapse and have downed their shutters. They have not seen their shares traded for a long time also.
And on the other, the low contribution of the manufacturing sub-group to the total trading has made the secondary market more vulnerable as the whole market is under the concentration risk of banks and financial institutions.
According to the Stock Exchange Regulation 2002 second amendment, Nepse can suspend the trading and listing of companies. "Failure to pay renewal fee will lead to suspension of the trading," according to the provision. The companies should pay the annual fee within the first three month of new fiscal year, that ended on October 17. Once the annual fee is paid, the transaction of suspended companies will resume.
Meanwhile, the book-closure of Everest Bank Ltd (EBL) pulled Nepse down by 8.34 points leading it to close at 601.21 points. The first day of the week saw all major sub-groups perform badly. Nepse is dominated by the banking sub-index and the fall in the prices of commercial banks like Standard Chartered Bank Nepal, Nabil Bank and Everest Bank -- considered blue-chip sdhares in the domestic market -- pulls Nepse down.
The banking sub-group -- a key market propeller -- lost 9.3 points to drop to 586.33 points as the total market capitalisation came down to Rs 423,768.45 million. However, the floated market capitalisation stands at Rs 110,172.31 million today.

ADBL primary issue soon
KATHMANDU: Agriculture Development Bank Ltd (ADBL) is floating the largest-ever primary issue in the history of Nepal's capital market by the end November half. The bank has appointed Ace Development Bank as its issue manager for its mega initial public offering (IPO). ADBL and Ace Development Bank had entered into an agreement on April 21 to issue 96,00,000-unit shares worth Rs 960 million.

Commercial banks reduce Non-Performing Assets (NPA)

The Non-Perfoming Assets (NPA) of commercial banks have come down. NPA is one of the key indicators that gaue the financial strength of any bank or financial institution.
"By the end of the fiscal year 2006-07, the NPA of A-class commercial banks was 10.3 per cent, which came down to 6.3 per cent by the end of the fiscal year 2007-08," said the Monetary Policy 2009-10.
The NPA decreased to 4.9 per cent by April 13, 2009, according to the unaudited report of the commercial banks.
Of the total 25 commercial banks then, except three government and semi-government commercial banks -- Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL) -- 22 commercial banks' NPA is at 2.4 per cent, the eighth Monetary Policy said. NBL and RBB -- by the end of the fiscal year 2007-08 -- had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced their NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. They have succeeded in reducing the NPA under the Financial Sector Reform Programme which had categorically said them to reduce the NPA.
However, the number of commercial banks, development banks and finance companies has also increased. Currently, there are 26 commercial banks, 63 development banks, 78 finance companies, 12 micro-finance companies -- making it a total of 173 banks and financial companies.
By April 13, 2009 -- the end of fiscal year 2008-09 -- the total number of branches of commercial banks also increased to 681 from 555. Within six months, 126 new branches of commercial banks were added, according to the policy that has stated that regionwise the branches of commercial banks stood at 127 in Eastern Development Region, 337 in Central Development Region, 135 in Western Development Region, 51 in Mid-Western Development Region and 31 in Far-Western Development Region.
Though commercial banks claim that they are moving towards rural areas, their reach through branches is less in the hilly region. According to the report, the populace in Western Development Region has little access to commercial banks. "The urban-centric banks should go to rural areas," NRB governor Bijaya Nath Bhattarai said during his reinstating ceremony the other day.

What is NPA
KATHMANDU: Non-Performing Assets (NPA) is a classification used by financial institutions that refer to loans in jeopardy of default. Once the borrower has failed to make the interest or principal payments for 90 days the loan is considered NPA and also known as Non-Performing Loan (NPL). Non-performing assets are problematic for financial institutions since these institutions depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in NPA and often results in massive write-downs.

The NPA level
2007 July 16 -- 10.3 per cent
2008 July 16 -- 6.3 per cent
2009 April 13 -- 4.9 per cent (unaudited report)

NRB not to spare rule flouters

The central bank might have some weaknesses but it will take stern action against those who flout the rules, said Nepal Rastra Bank (NRB) governor Dipendra Bahadur Kshetry at an interaction on 'Non-Performing Assets and its implication' organised here today by a monthly magazine 'Eikyabadhata'.
"The central bank is the regulatory and monitoring authority of the financial market. It gives a chance to financial institutions to revive, if they are genuine, but the central bank cannot remain silent. If necessary, it takes stern action also," Kshetry added.
He opined that Nepal Development Bank (NDB) was given enough time to improve its finaacial health and internal management but during the last two years, its financial and managerial health deteriorated further forcing the central bank to send it into liquidation. For the sound health of financial institutions, they should take care while floating loans. "The process of floating loan has created more bad loans -- the cause of NDB's present condition -- as loans are not floated according to norms but under political pressure and ill-intention," he said adding that the committee formed to identify big loan defaulters is active and has already submitted two reports to the central bank.
Acting accordingly, the central bank has frozen the bank accounts of 121 big loan defaulters -- including 21 debit and credit cards, seven lockers and one fixed account that has Rs 6 lakh -- till Baisakh. According to the amended rule, Rs 10 million and over defaulters are big loan defaulters. Earlier, loan defaulters over Rs 50 million were the big loan defaulters.
During the interaction, bankers agreed that they would have to maintain integrity while floating loans. "If we maintain integrity while floating loan, there won't be bad loans," they said.
"A banker knows better at the time of issuing the loan whether it is a bad loan or not," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "Risk analysis should be strenghtened to reduce NPA," he said. "The central bank should bring the carrot-and-stick rule," he suggested urging to improve the quality of the bankers.
Jhapat Singh Bohara, president of Nepal Development Banks' Association and CEO of Malika Bikas Bank also agreed that norms should be followed. He accused big borrowers of wilful default.
CEO of Agriculture Development Bank Ltd Janak Raj Shah concurred, saying, "Small borrowers do not default on loans. It is the big and politically-backed borrowers who default on loans," he said adding that bankers should be held responsible for loan default.
Ramesh Bhattarai, chief administrator of Employment Provident Fund (EPF), however, blamed the central bank delaying in taking action against NDB. "The central bank should have acted 10 years ago," he said remembering his bad-experience as a director in the NDB.
EPF has 10 per cent, NRB has five per cent, Beema Sansthan has five per cent and IDBI-India has 10 per cent promoters' share in ailing NDB.

Sunrise primary share lures investors

The collection centres of Sunrise Bank's primary issue were busy today collecting primary share applications for the bank that has floated 37,50,000-unit shares worth Rs 375 million -- the largest among commercial banks -- at Rs 100 per unit par value each.
According to present directives of Nepal Rastra Bank (NRB), a commercial bank has to float 30 per cent primary shares of the paid up capital among the public which comes to 30,00,000-unit shares. "Sunrise Bank has floated 37,50,000-unit shares worth Rs 375 million, the largest ever Initial Public Offering (IPO) by a commercial bank," said Kishore Maharjan, CEO of the bank. After the primary issue, the paid up capital of the bank will touch Rs 1.25 billion.
Maharjan, the CEO of the 23rd commercial bank, also expected that the IPO would be oversubscribed by above 20 times to from over Rs 6 billion to Rs 7 billion. The issue will be open till Wednesday as the Securities Board of Nepal (Sebon) in its new regulation has reduced the IPO application duration to four working days.
In the earlier primary issues, investors complained of fake applications forcing Sebon -- the regulator of the capital market -- to inspect collection centres. "We inspected various counters around the Valley today," informed Niraj Giri, director of the board. There are over 70 collection centres throughout the country for the issue.
After Sunrise Bank, Prime Comercial Bank and Agriculture Development Bank Ltd (ADBL) are also planning to flaot their primary shares. Prime has appointed Citizen Investment Trust (CIT) and ADBL has appointed Ace Development Bank as issue manager. ADBL will float the largest IPO of Rs 960 million -- more than three commercial banks put together -- soon to the public.


Online profile filing
KATHMANDU: Investors can fill their forms online as well for Sunrise Bank's primary issue. NMB Bank Ltd -- the issue manager of Sunrise Bank -- has launched online share application service -- NMB e-Solutions: NMB online share application. An investor can fill the application form online and save time. After filing profile online, the investor gets ID code slip which can be registered at privileged counters of all branches of NMB Bank and Sunrise Bank including six other financial institutions throughout the country. After one gets ID code, one has to manually register at the privileged counters with mandatory documents like photos and photocopy of citizenship certificate and the amount equal to the number of shares sought. Aside from the financial institutions, the bank has opened six other counters at Dashrath Stadium for share applicants.


Nepse dips
KATHMANDU: Nepal Stock Exchange (Nepse) dropped by 5.74 points to close at 642.04 points from Sunday morning's opening of from 647.78 points. All the major markey players -- commercial banks, development banks and finance companies sub groups -- lost as only insurance sub group gaimed. For the first time, the capital market seems to have reacted from the day's political developments. Earlier the market never used to be bothered with political situation. Out of the 56 companies traded -- 16 gained and 33 lost. A total of 2,18,590-unit shares changed hands through 886 transactions. Though the Nepse opped, on Sunday -- the first day of the trading for this week -- the secondary market witnessed Rs 1,03,967,604 turnover.

ADBL readies for largest public issue

Agriculture Development Bank Ltd (ADBL) has appointed Ace Development Bank Ltd as the issue manager for its mega initial public offering (IPO) of 96,00,000-unit shares worth Rs 960 million.
Janak Raj Shah, chief executive officer (CEO) of ADBL, and Siddhanta Raj Pandey CEO and MD of Ace Development Bank Ltd signed an agreement on behalf of their respective organisations here today. The agreement paves the way for ADBL to issue the largest ever public offering. By next month, the bank will float the primary issue.
Three issue managers -- Ace Development Bank, NMB Bank and NIDC Capital Market -- had applied to ADBL to get the post of issue manager. But Ace got selected.

"Established as a development bank, ADBL is now a commercial bank," Shah said adding that the new financial institutions (FIs) cannot match its network strength. The growing number of FIs are a concern for some economists. But Shah thinks the growing number of FIs is beneficial for the economy as they will push up the rate of interest. He was of the view that policy rethink is the need of an hour as the concentration of financial insititutions is increasing in urban areas leaving the rural areas far behind.
"More FIs are needed to monetise the whole economy," he justified adding that rural sectors are still out of reach of the banks. "The increasing number of FIs and increasing deposit indicate that the market is not saturated yet," said Shah.
The growing number of financial institutions has also led to cut-throat competition and growing consumerism which has been blamed for sub-prime loan leading to the global financial crisis.
"Banks also must face business cycle and Nepali banks will have to face it sooner or later," said Shah, who is also the president of Managament Association of Nepal (MAN). He added that competition would bring good results. "FIs will be selective in investment, maintain professional ethics and culture and risk mitigation practices.
"However, as a commercial bank ADBL has also started consumer banking. Shah thinks that ADBL's case is different. "The other FIs have limitations and are forced to concentrate on consumer segment," he said, "That could lead to problems."His prescription to the central bank, Nepal Rastra Bank (NRB), is to do assessment with right policy measures and be more vigilant in mitigating risk. "The lack of a long term policy and inconsistency in policy matters have hit us and we are only into patch-up work," Shah said.
Talking about financial reform programme and privatisation, the wholly government-owned commercial bank's chief was of the opinion that Indian and Chinese experiences could be imitated. "They have not completly divested their banks but entered into partnetships," he added.Banks can be wheels of change too. "Development and commercial banks should be linked up," ADBL's first CEO Shah said. He pointed out, "Capital is key in development activities, but in Nepal the concentration of capital is in urban areas only -- that could create imbalance."