New banks to come with a bang

With the banking system facing a liquidity crunch and the central bank tightening lending in the real estate sector, upcoming banks say they will come have to come up with new strategies to tackle the situation. While the existing banks are finding it hard to attract deposits, the new banks will have to make extra efforts to get an entry into the market. According to NRB, the liquidity situation is improving as is evident with the inter-banking lending decreasing to six percent and subscription of repo (NRB injecting money against treasury bills of banks) issued by NRB standing at just Rs. 4.96 billion against the offer of Rs. 9 billion. The existing situation prompted upcoming Civil Bank to adjourn its plan to start operations by April-May to the new fiscal year that begins in Mid-July. Civil Bank's CEO Kishor Maharjan said the plan of launching operations was differed as the bank didn't want to produce a balance sheet reflecting losses as a result of a bad market situation. Banks CEOs will be under pressure for performance. High ranking officials of the upcoming banks admitted that it was a tough time to start new banks. But, they were also convinced that their new strategies would work. Maharjan said that they could learn a lot from current crisis and they could take appropriate policies without fear to reduce lending to the real estate sector and maintaining credit and deposit (C/D) ratio as directed by NRB. Former CEO of Sunrise Bank said his bank plans to introduce attractive deposit schemes with competitive interest rates and efficient services for customers. Anil Shah, CEO of upcoming Megha Bank said his bank would offer highly sophisticated ' five start banking' services to customers. "We may increase operating hours, offer door-step banking and provide more efficient service while providing loans to customers," he said. "Being a new bank, we will have to offer competitive interest rates as well to attract depositors." Of course, there will be big challenges for new banks to attract depositors. "But, one advantage for us is that we will be able to get deposits and provide credit at higher interest rates and we will save on adjustment costs of old loans as in the case of old banks," the former CEO of Nabil Bank said. The Megha is planning to start banking transaction within mid-May. Likewise, CEO of Century Bank Ganesh Kumar Shrestha said that the bank's approach would be to provide door to door service to the customers to attract deposits and lend. "Another strategy will be to keep spread rate low offering better interest rates for both depositors and loan borrowers," he said. Century is planning to start operations within the next 2-3 months. "We will probably start banking transactions from the new fiscal year," Shrestha said. Commerz and Trust Bank CEO Anal Bhattarai said his bank would address the liquidity crunch through 'product diversification' while declining to clarify what it meant. He said that the ongoing crisis was a lesson for upcoming banks and they have a chance to make appropriate preparations to tackle the situation. Janata Bank is also in the final process of getting operating license. A senior official of the bank said they would not go with ambitious targets but move ahead carefully. "We will have to collect deposit in a competitive market and we are ready for that."Deputy Governor Bir Bikram Rayamajhi is also positive about the new entrants as they will not have to face acute shortage of liquidity due to paid up capital at least Rs. 2 billion.

Source: ekantipur.com