Global Bank entered into the banking industry of Nepal with the paid up capital of Rs. 510 million and plans to increase it to Rs. 1 billion very soon which will make it the largest player in terms of the capital. Starting business since January this year, it became the nineteenth commercial bank of the country and its CEO Suman Neupane claims the bank has made its presence very strong posing a threat to the competitors.
How? One example is the associate membership of the Visa International received in June 2007 making it the 9 th commercial bank of Nepal to get such business link with Visa. The bank plans to start issuing Visa cards from October itself. And the financial report for the last quarter of the fiscal year ended on mid-July shows that the deposits collection of the bank has exceeded Rs. 3 billion compared to Rs. 2.5 billion of the previous quarter. This gives a market share of nearly one percent in terms of deposits. In terms of loans and advances, the market share of the Global Bank is over 1.1 percent.
Comparing the other figures from two quarters of the performance of the bank indicate the rapid progress of the bank. Net interest income was Rs 8 million in the first quarter and it increased overwhelmingly to Rs 25 million in the next quarter. Still, the bank is in a loss of Rs 24 million but it is only due to Rs 26 million kept under provision for possible loan loss as required by the NRB regulations. The amount on loans and advances too reached to Rs 2.6 billion from Rs 1.3 billion at the end of previous quarter. “These data reveal the eagerness of the bank to grow as one of the strongest player in the industry and that the people have growing trust in the bank as the deposit collection is increasing,” says Neupane.
This impressive growth right in the beginning is the result of the commitment shown by the bank on the quality service, says Neupane. That commitment is supported by cutting-edge technology adopted by the bank right at the beginning. The bank is using world renowned banking software called Finacle and follows electronic document management system. Furthermore, the management practice in the organization is of international standard with bunch of competent human resources, claims Neupane. However, he agrees that Nepali banking industry lacks competent human resources despite new graduates are attracted to this sector due to the professionalism and glamour in this sector.
Strategy
Since the bank is at the beginning stage, it does not need to specialize and be selective, thinks Neupane. “That is why we are involved in each and every sector like industrial and trading loans, SME loan, home loan, auto loan and so on,” he says. Regarding the service differentiation between Global and other players in the market, Neupane says, “Generally it is assumed that new banks are expensive but our pricing is at par with the established big commercial banks of Nepal and we think it is due to our service differentiation.” He further adds, speedy service without compromising quality is making customers feel that they have entered the reputed and cultured organization with good corporate history. The bank has been marketing itself with two slogans: “Banking for All” and “Bank that Cares”.
At present the bank has adopted growth strategy. Statistics reveal that only 15 percent of Nepali people are getting banking services and other 85 percent are deprived of it. “Considering this fact we have developed our vision of “Bank for all” as we want to cater all types of customers through different delivery channels and make “bank for all” a reality,” he further adds. In this regard the bank has already launched internet banking with facilities of fund transfer, various enquiries and different requests such as L/C opening, guarantee issuance, A/C statement, cheque book request etc. Similarly, the installation of ATM has already begun and the plan is to add 10 more ATMs in this fiscal year. Also the obtaining of membership from Visa International is to help in this as it enables to issue different Visa debit and credit card products. “Such new delivery channels make banking service possible from anywhere any time,” he adds.
The bank also has a highly aggressive branch expansion plan both in Kathmandu and other parts of the country extending from east to west so as to cover all the geographic area without discrimination. A branch was opened recently at Baglung. “Any other new bank would have opened its first branch in cities like Pokhara or Biratnagar but we chose Baglung because we think no one is un-bankable and that is how we are justifying our vision statement of banking for all,” says Neupane. The bank plans to add 6 to 8 branches this year.
However, Neupane also complains that the mismatch in the Central Bank’s policy is affecting his bank’s aggressive branch expansion strategy. Bank can apply for permission to open a branch in Kathmandu only when it opens a branch and starts operations outside the valley. If banks were allowed to open a branch inside the valley and another outside the valley simultaneously, it would have been easier to work, he says. Nevertheless, he welcomes the new policy of the central bank to stop the lottery schemes on deposits. “A bank should not make one of its customers wealthier by depriving others from rational services,” he argues and adds that his bank from the beginning believed in equitable return to all the customers and hence did not start any lottery scheme. It rather came out with a lucrative scheme of ceiling based savings deposit called “Global Shubhalabh” which benefits all the depositors who participate in this scheme.
Global Bank has major remittance handlers of the country like IME and Prabhu as its promoters. According to Neupane, these and other promoters of the bank have a vision to convert the remittance inflow into local capital. “That’s why our focus is on opening new branches in the areas where the remittance is flowing in significantly,” he says. It is frequently said that the money entering into the country by means of remittance is being spent mostly on consumer durables, housing and life style. This has a very short-term positive effect in the economy and does not support the long term prosperity of the person who is earning abroad for his/her family. “We are trying to make such arrangement that when the person comes back from abroad, he will have a steady source of income for him waiting here,” he says. “This will help his family, the community and the next generation people who will not need to go abroad as a cheap labor and spend his/her productive time of life working for others,” he adds.
Financials of Global Bank
Rs. ‘000
S.N.
Particulars
Mid July 2007
Mid April 2007
1
Total Capital and Liabilities (1.1 to 1.7)
3,585,293
3,408,321
1.1
Paid Up Capital
510,000
510,000
1.2
Reserve and Surplus
(24,030)
( 16,707)
1.3
Debenture and Bond
-
-
1.4
Borrowing
30,000
360,000
1.5
Deposits (a+b)
3,023,601
2,525,853
a
Domestic Currency
2,902,931
2,495,853
b
Foreign Currency
120,670
29,237
1.6
Income Tax Liability
-
-
1.7
Other Liabilities
45,722
29,937
2
Total Assests (2.1 to 2.7)
3,585,293
3,408,321
2.1
Cash & Bank Balance
473,020
285,260
2.2
Money at Call and Short Notice
-
1,158,600
2.3
Investment
389,480
202,896
2.4
Loans and Advances
2,601,670
1,311,324
2.5
Fixed Assests
69,260
64,451
2.6
Non Banking Assets
-
-
2.7
Other Assets
51,863
25,789
3
Profit and Loss Account
3.1
Interest Income
65,629
19,989
3.2
Interest Expenses
40,324
11,790
a
Net Interest Income
25,305
8,199
3.3
Fees, Commission and Discount
5,617
1,814
3.4
Other Operating Income
-
-
3.5
Foreign Exchange Gain/Loss (Net)
9,098
3,759
b
Total Operating Income (A.+3.3+3.4+3.5)
40,020
13,772
3.6
Staff Expenses
13,265
6,919
3.7
Other Operating Expenses
24,768
10,594
c
Operating Profit Before Provision (B.- 3.6-3.7)
1,987
(3,741)
3.8
Provision for Possible Losses
26,017
12,966
d
Operating Profit (C-3.8)
(24,030)
(16,707)
3.9
Non Operating Income/Expenses (Net)
-
-
3.10
Write Back of Provision for Possible Loss
-
-
e
Profit from Regulalr Activities (D+3.9+3.10)
(24,030)
(16,707)
3.11
Extraordinary Income/Expenses (Net)
-
-
3.12
Provision for Staff Bonus
-
-
3.13
Provision for Tax
-
-
g
Net Profit/Loss (F.-3.12-3.13)
(24,030)
(16,707)
4
Ratios
4.1
Capital Fund To RWA
16%
26%
4.2
Non Perfoming Loan (NPL) to Total Loan
-
-
4.3
Total Loan Loss Provision to Total NPL
-
-
*Bank came into operations from 02/01/2007.
About the often-repeated concern regarding the survival of Nepali banks when the foreign banks start opening branches after 2010 doing wholesale banking, Neupane’s comment is simple: “I believe in Newton’s third law of motion that in every action there is an equal and opposite reaction. So, if anyone better than us comes in the industry, we too try and become better. For that we must have to have strong foundation which we should start building right now. Moreover, the foreign banks wouldn’t bring any magic wand. Nepal is a culturally and economically diversified country; therefore, localization will be a strong strategy in which the local banks will have the advantage.”
Global Bank entered into the banking industry of Nepal with the paid up capital of Rs. 510 million and plans to increase it to Rs. 1 billion very soon which will make it the largest player in terms of the capital. Starting business since January this year, it became the nineteenth commercial bank of the country and its CEO Suman Neupane claims the bank has made its presence very strong posing a threat to the competitors.