Bank of Asia to raise Rs 300m

Parshuram Kunwar Chhetri holds the reins of the Bank of Asia Nepal as chief executive officer. Chhetri said the bank, armed with 220 years of banking experience, was striving to expand services by opening more branches and establishing a strong and deep-rooted banking culture and structure. Krishna Regmi of the Post discussed with him the bank's strategies to compete and grow. Excerpts:

How do you gauge the bank's performance?

Instead of looking at earning small profits, say Rs 5 or 10 million annually, we are focused on establishing a strong base of banking culture, network and governance. Merely holding an operating license and setting up a head office does not make a true and complete bank. We are trying to sharpen the staff's skills. Efforts are on to put in place strong policies and procedures. We feel that the bank has opened for business, but it is not yet well established. We are working on it.

How would you want to make your bank different from others?

First and foremost, we are among the very few banks in Nepal which pay very good interest on deposits. Presently, we are offering 6 percent interest on daily balance and 6.5 percent on monthly balance. As can be seen in the market, the interest paid by other banks is far below what are we offering. Another area on which we are focusing is service. In fact, what new banks can do to win the hearts and minds of customers is offer better services.

You have a high deposit rate. What is your strategy for growth?

We are working on a really low spread, which is the difference between deposit and lending rates. Obviously, it is difficult to sustain the bank with this level of spread that we currently have. We are making hard efforts to raise the volume of capital substantially so that the cost will be split. As a result, the current spread level will be adequate to run, sustain and foster the bank. Another healthy source of revenue for us is non-interest income, which is commission from opening letters of credit, and foreign exchange. We are making continued efforts to increase this revenue. Compared to other new banks, our non-interest earnings are very good. This has added to our profitability and prospects.

Do you think that the competition resulting from the rising number of banks is healthy and moving in the right direction?

I am facing problems in finding and exploring new deposits. Although the deposit crunch has eased somewhat in the last few weeks, the flow of funds is very slow. Our own recent research reveals that deposit mobilization is far below the lending ability of banks and customer demand. Tougher days are ahead. As political instability is fast coming to an end and the economy is on a revival course, everybody will be encouraged to start some enterprise. This means the demand for loans will rise considerably. But it is really difficult to find the money to lend to them. Therefore, we need more capital regardless of how it arrives, whether in the form of new banks or a growth in the lending capacity of new banks.

What plans do you have for growth and focused investment? How are you going to raise capital?

We still have a long way to go to make the bank well established, which is our immediate task. New branches will be opened aggressively. Our economy is too small to focus on a particular area for survival. So we want to invest in every sphere of the economy, from hydropower to consumer and corporate lending. Regarding increasing the paid-up capital that currently stands at Rs 700 million, we are going to make an initial public offering (IPO) in the next fiscal year to raise Rs 300 million. In the following year, we will distribute right shares in the ratio of 1:1 and meet the central bank's requirement of Rs 2 billion.

What do you suggest that the government do to let the banking sector thrive?

The main hurdle is that the environment is not friendly to investors, thereby diminishing the lending prospects of banks. The government should give a clear message that its policy is to support investors by making a move to solve the labor problems or build necessary infrastructure. Its policies and programs should be designed to attract investors. The major complaint of the banking sector is that the government taxes it at a very high rate. We pay 31.5 percent tax. We feel we are being penalized for being transparent.

With political stability returning, how would you forecast the country's economic performance in the next fiscal year?

It is very encouraging that political stability is fast materializing. We are fully optimistic that the economy will get preference over politics in the nation's agenda from now on. We expect Nepal to become a better place to work and invest. There are strong signals that the economy will be on the track to full recovery.
Source: eKantipur