Anil Shah is a well-known name in the banking sector of Nepal. A young, energetic and

dynamic personality, Shah has been in the financial sector for over two decades. Presently, he is

driving Mega Bank Nepal Limited as its Chief Executive Officer (CEO), which claims it has

been catering banking service from the people at the grassroots level to the prominent business

tycoons, with the theme of Halo to Hydro. Shah had started his banking career since 1991 as an

assistant level staff at Nepal Grindlays Bank (now Standard Chartered Bank Nepal). He also

served at Nabil Bank as General Manager and CEO.The dynamic banker recently talked

toLaxman Kafle of The Rising Nepal on the current   issues of Nepalese banking sector and

overall economy of the country.

 Excerpts:

  

How is the present scenario of the banking sector in Nepal?

                                                                                                         

Financial sector is the heart of the country’s economy. If the body itself is unhealthy, the heart

could not operate unhealthy body for a long time. But healthy heart could give life to unhealthy

body. We fear whether this heart will also become unhealthy if the body continues to ail for a

long time.

 

Nepalese economy is now in sinking trend. It is not just stagnating but getting narrowed day by

day as no new factory and huge project were coming for the past couple of years. All sectors and

individuals are in a 'wait and see' situation. They are eagerly watching the ongoing political

situation and the upcoming constitution.

 

The whole economy of the country has suffered badly due to the political instability, power

outage, labour disputes and insecurity among others. These have also triggered low economic

growth. However, if the government manages these things, the economy of the country will grow

immediately.

 

Similarly, the banking sector has been facing excess liquidity problem. Due to lack of investment

resulted by the complex investment climate, the investors are not making any investment. This

has also had  impacted the banking sector as the deposit is like raw materials and loan as the

finished product. A large number of skilled and even unskilled Nepalese are flying abroad

seeking better opportunities.

 

The government and planners should ponder over the issues of managing our available resources

promptly in an efficient manner.

                 

 

Liquidity in the commercial banks has grown up significantly and still the banks are

unable to mobilize the deposit. What are the reasons?

 

Political instability is what has affected the disbursement of loan most. There is no certainty of

political stability and even the drafting of the new constitution. As such,  no body is ready to

invest in mega projects because they have to make plan for more than 25 years before investing

in any mega project. It is natural people fear to invest when they cannot predict the political

situation of next three months.  

 

Besides, power cut, insecurity, labor problems are equally spoiling the investment environment. I

think, access to finance is not an issue. No body is ready to invest even when we are ready to

provide loan to them. We have heard that some Nepalese are investing aboard due to political

insatiability in home.

 

                                  

Do you think the growth in the deposit was mainly due to the change in the saving habit of

people?

 

Saving habit has been developed among the people but the main cause behind the increased

deposit was due to remittance. Secondly, the people are looking for the capable institutions to

save their money. People are saving their money in  the ‘A’ grade banks after the spread of

negative message news about cooperatives and other financial institutions. Growth rate of

deposit is normal but abnormal uptake of loan is greatly worrying.   

                                                                                                                             

 

What are the challenges being faced by the Nepalese banking sector?

 

 

The greatest challenge of the banking sector is lack of human resources. Qualified and capable

people are going abroad seeking  jobs. In absence of skilled people, it is difficult to accelerate the

country’s economic development. Besides, political instability and insecurity are other

challenges faced by the banking sector.

 

 

 

The commercial banks are reducing the interest rate lower than the inflation rate. What do

you say about this move of the banks?

 

Really, the interest rates are less than the inflation which is not good. The interest rate should be

higher than  the inflation rate. The unhealthy competition and low investment against the flows

of deposit have compelled  the banks to cut the interest rate.  So, balance and natural interest

should be fixed for the betterment of the depositors and borrowers. If the market gets expanded

as per the flows of deposit, the interest rate will not come down like this. 

 

                                                                                            

 

The banks and financial institutions are undergoing merger. What is your take on this?

                                                                                 

Definitely, the merger policy of the central bank is quite positive for the sustainable development

of the banking sector. We have to focus on quality rather than quantity.

As the number of banks increased significantly despite the sinking market, it has created

unhealthy competition among them.  Ongoing unhealthy competition will pose a threat to the

banking sector. So the initiative taken by the central bank on merger and acquisition  is positive

to control unhealthy competition among the banks.

 

Mega Bank is not searching merger, but if some capable bank proposes for merger we don’t

ignore the proposal. We will go for  merger for a leapfrog move. The Mega Bank is looking for

the best bank to expand the banking services rather than increasing the capital.

 

There are many BFIs. Some of them are facing trouble in sustaining them. What do you

think are the proper ways to ensure the sustainability of the BFIs?

                             

The NRB has taken a strong move to strengthen the capacity of the banking sector by controlling

the mushrooming growth of banks. In my view, the recent strong policy introduced by the central

bank is good to control the unhealthy competition. Sustainability of the banks depends on

individual and management team which are driving the bank. The luxurious and attractive

buildings do not ensure success of any bank. We don’t believe that the new bank could not

sustain. If the experienced and capable human resources are in the bank, they could operate

effectively.  

 

The government has issued directives to the banks to increase their portfolio in agriculture,

tourism and energy to 20 per cent by 2014. How could the banks succeed to invest as per

the government direction?

 

Why they cannot. The government should promulgate constitution we will invest 40 per cent not

only 20 per cent in the maintained sector.   But the banking sector could not invest alone, the

security, constitution and investment friendly environment are prerequisites for this. We have to

invest in hydro, tourism, and agriculture and other potential sectors. All youth are going abroad

and all farm lands have been left barren, so how we can invest in the agriculture sector.

 

 

How is the current financial status of your bank?

 

Mega Bank is now at a comfortable position. We have strong capital base. The bank succeeded

to earn Rs.160 million in the second quarter of the current fiscal year. We also offered 9 per cent

cash dividend to the shareholders. The number of customers has reached 150,000. Concentration

risk is very low of the bank as we have a huge numbers of small depositors and creditors. Our

deposit is around Rs.15 billion and we have  lending of Rs.14 billion.  We are moving with the

view to get recognition as the banker of the people. The share price of  our bank is higher

compared to other banks which were opened at the same time. We are moving on the right track,

but we have to do many things to achieve our goal.

 

 

How is the bank’s investment portfolio?

 

Around 1,219 promoters from various sectors including professors, bankers, teachers, farmers

are involving in the bank. We have maintained inclusiveness from the time of inception. We are

focusing on Small and Medium Enterprises (SEMs) and micro finance so that the grass root

people will have access to our service. If we succeed to provide loan to the SMEs, it will be a  

help for the economic development of the country.

 

Like others, we are in wait and see for new constitution and political stability to accelerate our

business even though  we are expanding  it now.