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Opportunities and Challenges of commercial banks of Nepal
Transcript of Opportunities and Challenges of commercial banks of Nepal
Ashik Man Shrestha
Shristi Koirala History & Evolution of Commercial Banking in Nepal Nepal bank Ltd.,the first commercial bank of Nepal
Established in 1937 A.D.
Semi government bank
Played the role of central bank
NRB established as central bank in 1956 A.D.
Industrial Development banks aws established in 1957 A.D.
Rastria banijya Bank was established as second commercial bank in 1965 A.D.
Agricultural Development Bank was established in 1968 A.D. History & Evolution of Commercial Banking in Nepal In 1980 HMG/N emphasized the role of private sector
Deregulation of interest rates, relaxation of entry barriers, restructuring of public sector commercial banks
Opened doors for foreigners
Third commercial bank, first joint venture, Nepal Arab Bank was established in 198 A.D.
Then Nepal Indosuez Bank Ltd. in 1986 and Nepal Grindlays Bank Ltd in 1987 was established. Present Scenario More Liberalized,modernized,systematic management
Various types: Central, Development,Commercial,Financial,Co-operative &Micro Credit
Technology: Banking Software, ATM, E-banking, Mobile Banking,Debit Card, Credit Card, Prepaid Card, SME banking etc.
Presently 31 commercial banks are approved by NRB under Class 'A' Emerging Nation Nepal a developing nation.
Various projects undertaken ro develop the economy
Bank loans are major source of investment Merger Tough Competition
Banks need to strengthen and increase capital to compete
Merger strengthen banks
It brings economies of scales
It leads to synergy effect
It helps in cost saving Technology Almost all banks have e-banking and mobile bankin facilities
Bank's customers have easy access to their bank account and its services
Most banks have their own mobile apps for security concerns.
Customers are notified regarding changes to their account Remittance Remittance thorugh foreign employment, significant contributor on savings
The no. of migrant population for employment in increasing
Most of them are unskilled
Major portion is consumed and some saved.
Appropriate products should be designed to target this growing migrant population Banking Habit Only 30% of the people have access to banks
No compulsion to go through banks for transactions
Commercial banks have concentrated mostly in urban areas Transfer of fund without prior approval of central bank
DRI and the police are responsible for investigating and punishing
Migration has icreased hudi transatcions Hundies Base Rate Non Performing Assets Assets that does not yield any income, reduces profits
To reduce impact of NPAs, following procedures are followed:
iv. Transferred to non banking assets
v. Debt recovery tribunal NRB Directives Corporate Governance Board members use public deposits as their own
Board members take loans from thier own company
Provide collateral for loan purposes for own or for others
Big houses are transferring the funds within the group and manipulating public deposits Technology as a threat Not enough cyber laws to control cyber crimes
Phishing emails under the name of reputed banks
Due to large customer base, the chances of falling prey is high Competition Total of 31 commercial banks
Competition is intense for:
i) winning depositors
ii) winning loans
Spreads according to the market competitors Introduced to keep interest rate regime transparent
Banks have to publish their base rate monthly
Banks cannot lend ae less than base rate
Base rate: cost of fund, CRR, SLR, operating cost, minimum predetermined return on investment Includes regulatory measures of international standards and practices
BFIs are responsible for complying these directives according to NRB Act 2058
Complying pose challenges to the banks Conclusion Hundi system, major challenge banks face
Challege from NRB but will strengthen too
If some portion of the untouched 70% can be tapped, will be major boost
Technology poses great opportunities keeping in mind its severe challenges
Strict regulation by NRB, cause for strengthening banking sector