Wither Banks
Need Productive Competition
With the number of commercial banks nearly exceeding two scores, they have to act quickly to change their strategies. Continuing the present competition in consumer loans is not going to be sustainable and all the bankers realise this. Soon this market will saturate which will lead to a situation similar to the one in Lebanon where banks have started offering “Plastic Surgery Loans”.
As things stand today, consolidation of the banks by mergers and acquisitions seems to be a distant dream. Bankers’ ego is working as the hurdle. No one seems to be ready to merge his entity with the one being run by his business rival. Therefore, multiplicity of banking institutions is going to be a unique feature of the Nepali economy for at least some years to come whether or not this makes business sense. Against this background, one right strategy for the banks would be to develop investment projects on their own and remain ahead of their competitors.
One good news in this context is the proposal presented by the Everest Bank Ltd. to the National Planning Commission to invest in the proposed Kathmandu-Hetauda tunnel road. This is a worthy example for other banks.
The world over, banks have been investing heavily in new sectors such as energy and biotechnology. Nepal has immense untapped potential in both these sectors owing to the extensive geographical and biological diversity as well as water, solar and wind resources. Various project proposals have been developed in these and the developers are searching for financiers. Banks are hesitating to finance them on the pretext of one or another weakness in the proposals. This puts them on the same footing as village moneylenders.
If the banks limit themselves to collecting deposits and lending it only to those who request a loan with 24 carat project proposals, this is their marketing myopia. The banks themselves have to take the initiative and develop some sound project proposals and invite investors to take these up. Gone are the days when such an activity was thought to be the exclusive domain of development banks. Elsewhere in the world, universal banking is becoming the norm and almost every banker in Nepal is professing the same ideology. The proof is in the fact that despite the lawful presence of different categories of banks allowed to carry out different types of banking, they all are demanding that the central bank let them carry out all sorts of banking activities namely – development banking, investment banking, merchant banking and commercial banking. They have to practice what they profess.
If the existing laws and rules are posing any hindrance for the banks to go ahead on those lines, they should publicly put forward their suggestions. The banks should now launch schemes not only for consumer lending but also for long-term investment projects that use the internally available natural resources and develop infrastructure.
