Banking Sector of Nepal

Exclusive Interview with:

Manoj Kumar Gyawali

Head

Finance, Planning & CTO

Global Bank Limited

1. What role does a bank play in the economy of the country?

Bank are financial intermediaries of economy which help productive and industrial sector to avail financing facility. In Nepalese context, banks are the sources of revenue collection, i.e. out of top ten tax payer, 5 are banks. Being flourished sector, bank is providing better employment opportunity in the country. In this way bank helps economic growth by contributing in revenue and employment opportunities as well as  helping industrial and productive sector growth. So, Banks plays vital role in sustainable development of national economy. Banks are veins of economy from which money circulate as blood.

2. There are many banks (commercial & development) in present economy. What is your opinion on this?

Number of banks and financial institution are increasing in the economy but                           major chunk of population is out of reach from banking services. With increasing 

number of banks and financial institutions, competition between banks and financial institutions has increased but economy and bank’s stakeholders are benefited with the growth. Government is getting higher tax revenue, youths and professionals are getting better employment within the country, customers are getting better service at lower rate, network of bank and financial institution is reaching to rural and remote area so I do not see any negative effect of increased number of bank and financial institution. It’s the subjective issue and even nobody can exactly say what is adequate number of banks and financial institutions so we have to talk about total reach and network of banking sector rather than the number of bank and financial institution.

3. There is rumor to "cap the salary of Chief Executive Officer(CEO)" of banks. Is this justifiable as banks performance is dependent upon CEO? Can banks find CEO working with less salary?

"Cap in the Salary of CEO" has been made like a political issue. In the open market price of professional service is determined by demand and supply. Regulator and even government agencies are talking about the cap. Salary of CEO is determined by BOD of the bank and clearly disclosed in the annual report of each bank & financial institution. There should be no interference of third party while the person giving service and taking service could agree at certain price in the open market. Banks are not being able to get CEO’s at the present level of Salary. Anybody can check the market so reducing salary will further increase the problem in the market.

4. Nepal Rastra Bank (NRB) has decided to provide LOI ( Letter of Intend ) to Commerce & Trust Bank, (upcoming bank ). With this decision, is NRB increasing completion in banking sector?

NRB has issued LOI to CT Bank and the bank is about to start the operation. I think, NRB is not increasing the competition, it’s the better market of

bank and financial institution which is increasing the competition, so we should always welcome fair competition in the market.

5. There is unproven news that Investment & Everest Bank are merging. Is the age of merging starting in Nepal?

This news in the market but not confirmed yet. The entire merger process is usually kept secret from the general public, and often from the majority of the employees at the involved companies until the merger is confirmed.

Merger is not related to age of economy but it’s  the need of corporations and economy. A merger is very similar to an acquisition or takeover, except that in the case of a merger existing stockholders of both companies involved retain a shared interest in the new corporation. By contrast, in an acquisition one company purchases a bulk of a second company's stock, creating an uneven balance of ownership in the new combined company. It’s always considered beneficial at the time of merger because cost- benefit and strategy analysis used to be made for merger decision. 

6. What can normal people expect from the present banking sector of Nepal?

Better, every time, everywhere, hi-tech  and efficient banking financial service at lower rate.

7. What can be done to uplift the banking sector of Nepal as we can find many loopholes in banking sector?

Banking sector is considered as transparent sector because of prudent supervision and regulation of NRB. If we compare Banking sector with other corporation of country, this is the most regulated and transparent industry so I do not agree there are many loopholes in this sector. Establishment of institutions producing banking professionals, tax consideration for banking sector, more strong law for Bad Borrowers, separate court for banking cases, better law and order situation in the country can help banking sector to prosper further.

8. What role does "Nepal Bankers Association"(NBA) plays for the development of Banking Sector?

Bankers Association in Nepal is the common platform of the Banker in Nepal, where bankers meet and discuss in the issues of common benefits of banking sector. NBA is established to enhance the interrelationship and co-ordination among the commercial banks incorporated in Nepal in order to develop a fair and healthy competition among them. It’s the common platform to discuss about the policy and procedures of banking transactions. It helps to develop and adopt creative and modern technology to identify the problems and to implement the remedies associated with the business of the bank. So it is playing very positive role for bankers and banking industry in the country.