Banks to limit savings interest at 4-6pc

Bankers under strong pressure to jack up savings interest rates have agreed to limit interest returns on savings deposits at 6 percent -- a move which goes against the spirit of open market policy. They have also concurred to set the minimum rate of returns on savings deposit at 4 percent, which is lower than what the depositors were expecting, following the central bank´s latest directive that asked banks and financial institutions (BFIs) to limit the gap between different savings rates to 2 percent or less. "A gentleman´s agreement has been reached to limit the savings rate between 4 and 6 percent," said a member of Nepal Bankers´ Association (NBA).

New commercial banks, however, have been given permission to fix higher rate by a margin of as much as 1.5 percentage point, he said, adding that the NBA will soon hold a meeting of chief executives of all 30 banks this week to formalize its implementation. NBA in May had also enforced a similar decision, whereby banks are still limiting interest rates on fixed deposits at 12 percent. Once the new decision comes into effect, depositors who were already enjoying as much as 10.5 percent annual interest returns on savings will find their return drop to 6 percent.

This will also reduce the prospect of salary account holders and other accounts holders enjoying far better returns than now. So far, the banks were providing just 2 percent annual interest returns to such accounts holders. The bankers said their agreement to limit the savings rate had become necessary mainly to avoid unhealthy competition among banks to attract additional deposits. If unstopped, they said it will ultimately drag entire banking industry toward disaster. "Competing on savings rates makes no sense, especially if it is already driving away the borrowers. Besides, our economy is also not productive and competitive enough to cope with higher lending rates," said the NBA official.

As for the rising lending rates, bankers said they will study the possibility of its downward revising only after studying the impact of the new decision. When asked to comment, NBA President Sashin Joshi said, "We had discussions on how to implement the central bank´s new directives on savings rate". He refused to make further comments on the agreement. Some of the bankers, however, noted that the new move could be risky particularly given the latest trend of customers becoming more interest sensitive and their competitors like development banks and financial institutions offering as much as 13.5 percent.

The decision to cap the fixed deposit rate at 12 percent has already caused the banks lose deposits of some Rs 4 billion to the financial institutions. Nepal Bank Limited and Ratriya Banijya Bank -- two public sector banks that offer least savings returns -- said their deposits have dropped by Rs 4 billion and Rs 5 billion respectively over the last five-and-a-half months, as BFIs offering higher returns stole their customers.

Source:
myrepublica

Nepal Bank Ltd's new branch

Nepal Bank Ltd (NBL) has restarted Chandrauta branch in Kapilvastu district on Sunday. The branch was closed during political conflicts in the country. Bank's management committee coordinator Dr Puspa Raj Rajkarnikar inaugurated the branch at a function on Sunday. With this the number of NBL branches has reached 109. The bank is planning to reinstate 11 more branches as per financial feasibility in the current year.

Source: 
tht

Fire breaks out at Nepal Bank Limited

Nepal Bank Limited (NBL), the oldest state-owned bank caught fire on Saturday morning. The fire started at 5:00 am and was brought under control only at 8: 45 am. Binod Atreya, chief executive officer of the bank said that the fire destroyed two storerooms that had old documents. "Documents that were destroyed were kept for disposal," he said. According to him, there were no important documents related to customers or the bank that were destroy by fire. The actual loss has not been ascertained yet. The bank said that there was a minor loss of the old papers kept for sell through auction and two storerooms. "As the fire started in the old storehouse at the back of the bank, the immediate response from the Nepal Army, Armed Police, Nepal Police and fire brigade was to take control of the fire to prevent its spread in the main building," Atreya said. The blaze was controlled by four fire engines. He further said the reason for the fire was unknown, but old electric appliances and other equipments kept in the storehouse might be the reason. Some 150 personnel of Nepal Army, 250 from Armed Police and 50 from Nepal Police were deployed to control the fire. NBL is the oldest commercial bank of Nepal established in 1937, which marked the beginning of an era of formal banking in Nepal. The Bank is also one of the largest in Nepal with 107 branches in 55 districts of the country. It was formed under the principle of joint venture between the government and public. NBL's authorized capital was Rs 10 million and issued capital Rs 2.5 million of which paid-up capital was Rs 842,000 with 10 shareholders. As of mid-Jan 2010, the bank has paid up capital of Rs 380 million. The capital fund against risk weighted assets in the same period was negative by 21.27 percent and the non-performing loans at 3.77 percent.

Source: ekantipur.com

Nepal Bank Limited Branch reopens in lamjung

Nepal Bank Limited has re-established its branch in Sundar Bazaar of Lamjung 10 years after it was displaced due to Maoist insurgency. The branch was reopened on the occasion of the 73rd anniversary of the bank and inaugurated by NBL deputy general manager Mahesh Sharma Dhakal. The bank also started the facility of opening accounts with a minimum balance of Rs 500 each. Some 300 people availed of the facility. The re-establishment of the branch will benefit people in Sundar Bazaar and neighbouring villages like Bhoteodar, Tarkughat, Parewadanda, Duradanda and some villages in Tanahun district.

Source:

THT

Nepal Bank Limited starts e-commerce

Nepal Bank Limited (NBL) has started e-commerce service from Sunday which enables its customers to make payment for utility services such as mobile, electricity and drinking water.

The bank has also added two ATMs at Kalimati and Jawalakhel in the Kathmandu Valley, expanding its ATM counters to seven. "We aim to expand ATM services to additional 14 places," said NBL CEO Binod Atreya. The bank started providing education loans from Sunday.

Source: 
ekantipur.com

Banks drop in Non-Performing Loan

Kantipur Report
KATHMANDU, Sept 7 - The commercial banks are doing fine by and large in terms of reduction in their Non-Performing Loan (NPL) in the previous fiscal year, according to the central bank.
While 16 of the 25 banks witnessed a drop in their NPL, three saw it rising, states a recent report of Nepal Rastra Bank (NRB).
Financial institutions with NPL hovering below five percent are considered sound.
The NPL of Nabil, Machhapuchhre and Development Credit Bank Limited went up slightly but it is still manageable with Nabil having 0.8 percent at the lowest and Machhapuchhre with 2.8 percent at the highest.
The rise and fall of the NPL in case of Global Bank, Citizens Bank, Prime Bank, Sunrise Bank and Bank of Asia could not be assessed as they have not reported their their NPL status to the
central bank either in the last fiscal year or the previous year or both years.
NIC bank's NPL remained constant at 0.9 percent in both years.
NCC bank has been able to reduce its NPL significantly last year from 16.36 percent to 2.7 percent during the 12-month period.
Chief Executive Officer of NCC Bank Ratna Raj Bajracharya said recovery of loans from some major groups - including the N.B. group, which is also the promoter of the NCC bank - was the principal reason behind sharp decline in the NPL of NCC.
"The Harisiddhi Brick Factory owned by N.B Group itself had owed the bank five percent NPL," he said. "We acquired its lands as a part of recovery." The bank was to recover loans of Rs. 330 million from Harisiddhi.
The bank also acquired
the lands owned by Tribeni Distillery to recover around Rs. 60 million loans last year, Bajracharya said.
"We will reduce the NPL to one percent within the next six months," he said.
There are still five banks whose NPL level is higher than five percent: Nepal Bank Limited, Rastriya Banijya Bank, Nepal Bangladesh Bank, Lumbini Bank and Agriculture Development Bank.
RBB CEO Janardan Acharya said they would reduce the NBL below five percent within
the next two years. The government owned bank has still 15.7 percent NPL which represents
Rs. 4.9 billion.
"We have plans to recover around Rs. 2.5 billion this year and recovery of the remaining amount in the next year," he said. The bank recovered Rs. 2.4 billion in the last fiscal year.NPL Change in TOp 20 Banks
2007/08 2008/09
Bank NPL (%) NPL (%)
NBL 8.05 5.9
RBB 21.63 15.7
Nabil 0.79 0.8
NIBL 1.12 0.8
StanChart 0.92 0.7
HBL 2.36 2.2
NSBI 3.65 2.0
NBBL 31.11 19.3
Everest 0.64 0.5
BoK 1.76 1.3
NCC 16.36 2.7
NIC 0.90 0.9
Lumbini 14.87 9.1
MBL 1.04 2.8
Kumari 1.35 0.4
Laxmi 0.13 0.1
Siddhartha 0.60 0.5
ADBL 10.40 8.8
DCBL 1.26 1.6
NMB 1.52 0.5

New board in Nepal Bank Limited

KATHMANDU, Aug 18 - Nepal Rastra Bank has appointed Dr. Puspa Raj Rajkarnikar as coordinator of the management committee of Nepal Bank Limited with effect from Aug. 12.
He was sworn-in by NRB governor Bijaya Nath Bhattarai on Monday. The central bank appointed six-member management committee for indefinite period until next decision is taken in this regard. Other members of the committee are Pramod Raj Sharma, Dr. Keshav Raj Khadka, Surendra Mani Tripathi, Dr. Chandra Mani Adhikari and Ramesh Prasad Sharma Upadhyaya. - Kantipur Report

Commercial banks reduce NPA

KATHMANDU: The Non-Perfoming Assets (NPA) of commercial banks have come down. NPA is one of the key indicators that gaue the financial strength of any bank or financial institution.“By the end of the fiscal year 2006-07, the NPA of A-class commercial banks was 10.3 per cent, which came down to 6.3 per cent by the end of the fiscal year 2007-08,” said the Monetary Policy 2009-10.The NPA decreased to 4.9 per cent by April 13, 2009, according to the unaudited report of the commercial banks.Of the total 25 commercial banks then, except three government and semi-government commercial banks — Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL) — 22 commercial banks’ NPA is at 2.4 per cent, the eighth Monetary Policy said. NBL and RBB — by the end of the fiscal year 2007-08 — had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced their NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. They have succeeded in reducing the NPA under the Financial Sector Reform Programme which had categorically said them to reduce the NPA.However, the number of commercial banks, development banks and finance companies has also increased. Currently, there are 26 commercial banks, 63 development banks, 78 finance companies, 12 micro-finance companies — making it a grand total of 173 banks and financial companies.By April 13, 2009 — the end of fiscal year 2008-09 — the total number of branches of commercial banks also increased to 681 from 555. Within six months, 126 new branches of commercial banks were added, according to the policy that has stated that regionwise the branches of commercial banks stood at 127 in Eastern Development Region, 337 in Central Development Region, 135 in Western Development Region, 51 in Mid-Western Development Region and 31 in Far-Western Development Region.Though commercial banks claim that they are moving towards rural areas, their reach through branches is less in the hilly region. According to the report, the populace in Western Development Region has little access to commercial banks. “The urban-centric banks should go to rural areas,” NRB governor Bijaya Nath Bhattarai said during his reinstating ceremony the other day.
What is NPA?
KATHMANDU: Non-Performing Assets (NPA) is a classification used by financial institutions that refer to loans in jeopardy of default. Once the borrower has failed to make the interest or principal payments for 90 days the loan is considered NPA and also known as Non-Performing Loan (NPL). Non-performing assets are problematic for financial institutions since these institutions depend on interest payments for income. Troublesome pressure from the economy can often lead to a sharp increase in financial institutions’ NPA and often results in massive write-downs. — HNS