"Nepali banks have no choice, but to comply with Basel II"
Sujit Mundul, CEO of Standard Chartered Bank Nepal Ltd., shares his views on the present situation of Nepal's banking industry and the strategy and focus of Standard Chartered in Nepal. Excerpts from an interview:
It’s been about two decades that Standard Chartered Bank has been in the banking industry of Nepal . How has it evolved in terms of its focus on different consumer segments?
You are aware that the bank began its operation initially as a joint venture company under the name Nepal Grindlays Bank Ltd. and in 2000 after Standard Chartered Bank acquired the Grindlays franchise, the Bank’s name was changed to Standard Chartered Bank Nepal Ltd. in 2001. The bank’s status changed to that of a subsidiary of the Standard Chartered Group in 2004 with them acquiring 25 per cent more stake and taking their holding up to 75 per cent. We are the only truly international bank operating in the country.
Since its inception the bank has been a leader in introducing most of the innovative products and services which are currently available in the market. In the past two decades the bank has not only evolved in terms of gaining better understanding of the market but has been able to capitalise on the long experience and expertise of the Standard Chartered Bank in similar markets and has been able to adapt and introduce more innovative products and services suitable for the local market.
Initially the bank’s focus was on corporate banking but in 2003 it was our bank which led the way and revolutionised the market and developed consumer banking in the country by re-vamping some of its old CB products and introducing quite a few new and attractive products and services. We are the leaders and have set standards in auto and mortgage loans.
For our corporate business, the bank has been setting high standards on credit analysis, monitoring and acting as a partner and solution provider to the corporate client segment. We are continuously introducing innovative products and services suitable and beneficial for our clients like transaction banking products such as WebBank, Quick Collection Services, Quick Payment Services etc.
We believe that our true success lies in making our customers happy with the quality of our services. We continuously review our processes and technology and find ways of improving them. We have invested and constantly upgraded our banking platform in the last two decades with the changing market and customer requirements. We have invested in new franchises, footprints and ATMs to give wider reach to our customers. We invest continuously in upgrading the skills of our people and are proud to have the best talents in our bank.
We have been the best performing bank for about a decade now continuously giving highest returns to our shareholders. We have lived our values and brand promise and are pleased to say that in the past two decades we have gained the trust of all our stakeholders, i.e. our customers, people, shareholders and the community as their “Right Partner” which is testified by the various prestigious recognitions we have been continuously receiving as the best commercial bank.
How does the banking system in Nepal compare with those in the South Asian region?
The fundamentals of banking system are the same all over the world. It is the qualitative factors that lead the difference in the markets. To compare Nepal ’s banking system favourably with that in the South Asian Region, we need to work hard in dealing with certain crucial issues viz good governance, transparency, and adherence to the policies laid down by the Central Bank. Banking system in Nepal is in the process of being modernised and needs time for a wider reach to build further confidence in people.
How do you view the current monetary policy? Do you think it is headed to address the relevant and more urgent issues?
The monetary policy has touched upon issues of managing the capital base of commercial banks in greater depth, has allowed trading in derivative products and initiation of effective steps towards development of domestic money market. I think these are all very positive moves to strengthen the banking system. There is more to be done yet but the policy and the Central Bank are definitely on the right track
It was found out that SCBNL is far behind the target set by the Central Bank to reach the Rs. 1 billion paid up capital. And it is argued that the relaxation granted by the current monetary policy to the banks about this target was meant to help SCBNL. What is your comment?
We have a well-thought out plan and we see no problem or hurdle in complying with the requirement within the stipulated time. The relaxation granted by the current monetary policy was unexpected. It, however, has no bearing on our capital plan as it is nearly a question of putting our reserve build up under another account head.
The monetary policy now allows trading in derivative products as well. Do you think the market is ready for it?
The monetary policy has introduced many positive changes for the financial system. One of them is the trading in derivative instruments like forward, option, swaps and futures. It is an effort from the Central Bank to make the banks and other financial institutions geared up to face foreign competition which will enter the market in 2010, under WTO. It also depends on the financial stability and performance of players. However, it is imperative for individual players to understand the full risk implications of these products before entering this arena. Already there is an emerging need by the corporate customers to avail these products.
The monetary policy has also announced the plan to implement Basel II from 2007. Do you think the banks and the banking system in Nepal are ready for Basel II? What impact do you think the implementation of Basel II will have on the Nepali banking industry?
Basel II is not something specific to Nepal , it is a global phenomenon. Yes, Nepali banks are not as geared up for the requirements of Basel II. That’s why a simplified version has been brought out for Nepal which specially concentrates on credit and market risk. I strongly feel that banks in Nepal will be able to fulfil the requirements demanded by Basel II by forming a greater awareness of risks associated with their businesses. The banks have no choice but to comply with Basel II to manage their risks assets well, as they will be exposed to even tougher competition once more foreign players enter Nepal in 2010.
We have learnt that the Nepal Rastra Bank governor had, soon after being appointed to the position last year, asked SCN to suggest changes in the Nepali laws to facilitate SCN to use its global expertise in managing distressed assets of other banks. What has been the progress so far in this regard?
We have suggested some changes through the Nepal Bankers Association (NBA). We want the legal framework to be strengthened where banks can take recourse to security. We are glad that Secured Transactions Act and Insolvency Act are in place. However, some of the infrastructure that needs to be in place for implementation is yet to be done. The judiciary needs to be especially vigilant and provide support in the bank’s recovery process. Without the basic framework in place, formation of an Asset Management Company (AMC) will make no material difference.
Standard Chartered Bank is involved in various community activities. Among these which are the areas where the bank’s focus is really concentrated? How is SCB adding value through CSR activities? What are the learnings?
Standard Chartered has a history of over 150 years in banking, and throughout its long history it has played an active role in supporting those communities in which its customers and staff live. Youth, health and education for the economically disadvantaged people are the key focus areas of the bank’s community initiatives.
We are proud to have built strong community programmes at Standard Chartered. Our key programmes – ‘Seeing is Believing’ and ‘Living with HIV’ – aim to tackle important issues with maximum impact across all Standard Chartered communities.
There are 37 million people in the world who are blind, yet a staggering 75 per cent of this blindness is avoidable or can be cured. Seeing Is Believing is Standard Chartered Group’s major community initiatives with the aim to make a difference to the problem of avoidable blindness around the world. This is being done by raising funds for sight restorations, through cataract operations, training of eye care doctors, building of training facilities and vision centres. One year ahead of schedule, through the efforts and generosity of Standard Chartered employees, flagship sponsors, customers, shareholders and other stakeholders the fundraising target has been achieved for restoration of eyesight to one million people around the world. But we do not want to stop there. We want to make a lasting impact on avoidable blindness.
In Nepal , till date we have been instrumental in supporting restoration of sight locally to over 2,000 people by sponsoring eye camps and intraocular lenses for cataract surgeries at eye camps conducted in remote places by eye hospitals - in Pokhara, Hetauda, Bhairahawa, Janakpur and Duhabi. This has been possible due to the support we have received for fund raising activities from all our stakeholders – staff, customers and vendors.
Living with HIV is an important programme for Standard Chartered. It is mostly a peer-to-peer education project. Its aim is to spread understanding of the HIV virus and the symptoms of AIDS to our employees, their families and the communities in which they live. We want to reduce the stigma attached to HIV and AIDS so that more people can learn about prevention and take advantage of testing and treatment.
All employees of the bank have undergone this programme and we have taken the initiative to share this programme with our other stakeholders, our customers and the community. We have also provided support and help to people living with HIV/AIDS
Corporate Social Responsibility (CSR) is the mainstay of our bank’s values. We aim to ensure that our corporate responsibility aspirations are aligned with our business strategy. We believe that CSR is not just about corporate philanthropy but much more than that. CSR is about responsibility and transparency for the whole organisation and to all our stakeholders. It includes exemplary governance and ethics and management discipline. We believe in delivering shareholder value in a socially, ethically an environmentally responsible manner.
Our approach to CSR is straightforward. We believe that by operating to high standards of corporate responsibility we are not only meeting the expectations of our stakeholders but also strengthening the bank’s reputation, its brand and creating new ways for our business to grow. Standard Chartered encourages and provides opportunity to its people to become involved in the communities. Making a difference is second nature to almost all our people.
How do you see the future of banking system in Nepal ? Where do you think it is headed?
I see a great future for the banking system in Nepal. After implementation of Basel II, the banking system will grow in terms of capital efficiency. We will see consolidation process in the banking system, which will bring about cost efficiencies and synergy in the system. It will also move on to the untapped areas. I also hope that the two large ailing banks will be revived adding strength to the banking system.
