Himalayan News Service

Kathmandu, January 12:

Rastriya Banijya Bank (RBB), one of the largest commercial banks of the country, which was once reported as ‘technically insolvent’ in 2000, has now been able to escape its ‘survival threats’ and to generate a profit of over Rs 1.11 billion after the new management completed its two-years of the reform initiative. The two year contract of the RBB’s new management is expiring on January 15, 2005.

The bank run by the new management was initially severely criticised by businesspersons and most others, now seems to be in a ‘sound’ financial position due to initiatives focusing on reducing non-performing assets, effective portfolio management and implementing operating plans to recover past dues both in the form of principal and interest. In an exclusive interview with The Himalayan Times, Gopal Rajbahak, Chief Financial Officer of RBB said, “The bank has now reached a comfortable position financially as the new management has been able to implement reforms as per the contract. Rajbahak said that after continuous losses for many years, the bank has been able to turn around and post an operating profit of Rs 410 million and a net profit of Rs 1,110 million in fiscal year 2003-04. He disclosed that losses have been reduced from Rs 7.06 billion in fiscal year 2001-02 to Rs 4.83 billion in the fiscal year 2002-03.

Spokesperson of the bank and human resource manager, Janardan Acharya said, “In two years’ time, the new management eliminated unnecessary expenditures, brought about human resource development by rightsizing staff, establishing new credit standards, computerisation and recruiting qualified professionals to make it competitive. Various schemes of RBB such as car loans and housing loans have brought momentum to the financial market, he said. The volunteer retirement scheme (VRS) has reduced the bank’s overhead costs. Sudarshan Raj Pandey, audit manager of RBB management team, disclosed that the bank has been able to collect cash amounting to Rs 4,702 million. Similarly, NPAs worth Rs 1,619 million has been restructured, while Rs 4,526 million is under restructuring. “Total recovery of NPA amounts to Rs 10,847 million during the two years period,” said Pandey. Under the human resource segment, the bank has reduced its staff from 5,525 to 3,715, according to audited report of the bank received by this paper today.

The sound position of the bank is attributed to the reduction in the cost of funds to 3.28 per cent per year in 2003-04 compared to 4.88 per cent in 2002-03, says the audited report which was accrued from lowering of interest rate on fixed and savings deposits. The non-performing assets were 56 per cent at the end of fiscal year 2003-04, a reduction of four per cent as compared to fiscal year 2002.

The bank could increase its commission, discount and other incomes mainly on account of higher remittance income, government transaction income and other fee based income, says Ashish Garg, one of the members of management team. Garg disclosed that the interest income of Rs 2.28 billion in FY 2003-04 was higher than the income of Rs 1,745 million in FY 2001-02 and Rs 2050 million in FY 2002-03.

However, because of lack of good lending opportunities in the country and fall in investment climate, the bank has not been able to invest. But the bank has already started retail lending and focusing on the consumer segment, informed Garg. During the fiscal year 2003-04, the bank has invested Rs 3,128 million in treasury bills, NRB bonds and securities and shares.