INTERVIEW

I do not see possibility of privatizing NBL

Prof Dr Dev Raj Adhikari

Co-ordinator, Management Committee
Nepal Bank Limited

Prof Dr Dev Raj Adhikari is the newly appointed Co-ordinator of the Management Committee of Nepal Bank Limited (NBL). He also serves as the Head of Central Department of Management and the Co-ordinator of Management M Phil Program at Tribhuvan University. Known as management and industrial relation expert, he has written and published several books and written articles for many international journals. In an interview with Sujan Tiwari of The Corporate, he shared his views on the challenges and possibilities of NBL in particular and of Nepali banking sector in general. Excerpts:

As the Co-ordinator of Nepal Bank Limited, what are the visions that you have for the Bank?

Ours is an old bank, yet we want to operate it in a modern way. We are moving ahead with this vision. I want to make Nepal Bank Limited more competitive in today’s scenario. We want to be able to compete with all the privately owned banks. We want to provide our customers with all the modern banking facilities, and reach out in rural areas that need banking services. This is the overall vision of the bank, and mine as well.

You are involved in Tribhuvan University and many other academic institutions. How do you explain this involvement?

I am the Head of the Central Department of Management and the Coordinator of M Phil program. I am working in these two positions now. I don’t have any other involvements, except for a few lecture classes now and then.

As a management expert, what are the problems that you see in the management of Nepali banks?

We can’t isolate the banks from the current situation that the country is going through, and that is definitely not satisfactory. The more the country moves ahead economically, the more the banking industry flourishes. Keeping this fact in mind, I can say that the future of the banking industry seems very promising. The banking industry is affected by, and is closely connected with issues of political stability, peace, investment, productivity and energy among others. All these external factors are impeding the growth of the industry for present, and we are not able to move with a fast pace. The banks have sufficient liquidity now, but the investment avenues are uncertain. There should be enough economic activities in the country, only then the banking industry too can thrive.

Do you agree that the Financial Sector Reform Program (FSRP) has changed the banking culture in Nepal?

Definitely there have been some positive changes after the program. The program mainly focused on reforming the regulatory mechanism and the technological aspects of Nepal Bank Limited, Rastriya Banijya Bank and Nepal Rastra Bank. The program educated us on how to effectively run the management and the banking services. It provided us with some important rules and guidelines. These have helped to move the banks forward.

What is the immediate move that NBL would be making?

At present, we do not have the sufficient capital for efficient operation. So, we are all geared up to bring a new capital plan. The central bank has already granted us consent to implement the recapitalization plan. The government is also in favour of it. We will increase the capital of our bank, and also increase our investments very soon.

When do you think Nepal Bank Limited will be able to neutralize its negative net worth?

Regarding this, our bank already is in a satisfactory position. We have significantly reduced the non performing loans. At the first quarter of previous fiscal year, it was 4.87 billion which has now reduced to 4.29 billion this year. This shows it is on a decline. We will be able to neutralize it as soon as we implement the recapitalization plan. Before the introduction of financial sector reform program, the negative net worth was around 60 per cent. Now it has reduced to 4.8 per cent. This also depicts an improved trend. We are just waiting for the implementation of the plan.

What are the major challenges that NBL is facing at present?

One of the problems we are facing is the lack of capital that we will soon try to solve through the new plan. Another problem for us now is the retirement of the employees within the next 3 to 4 years. Around 34 per cent of the employees will retire within that time. There will be a shortage of manpower if we do not focus on this problem from now. The private banks are growing in terms of technology and manpower. We have to build our capacity and we should be able to compete with them. We have to expand our services and make them accessible to the common people. We have to expand modernized services to all the 75 districts on the basis of business feasibility. We need to adopt new technologies and have to be compatible with other banks in terms of new advancements.

Has NBL adopted any new technologies lately?

We are currently using Pumori and Newton banking software. But very soon we will upgrade to a new Core Banking System. The board has approved the use of it and the procurement process for the software has started. The implementation of this system will help us operate more efficiently.

The government has ownership of a few banks. Should the government own the banks in the present scenario?

We have seen and learnt from recent happenings inside Nepal and other countries around the world that it is the government that saves the banks from going bankrupt. It has been the same in the US, Japan and in Europe as well. Ours is a small country and a small economy. We cannot even call ourselves an emerging economy. In such a scenario, I think that the government should have some sort of involvement in the banking industry. The government should maintain its control over the banking sector in some ways. But the management and operation of the bank should be very professional. As there are numerous private banks now, I believe that the ownership of the government on a few banks will not have a negative impact. Even if the government has the ownership, we try to compete head to head with the private banks.

How soon can NBL be privatized?

I do not see the possibility of Nepal bank limited being privatized for now.