Sanima’s Banking Simplified
Justifying the popular saying ‘morning shows the day’, Sanima Bikas Bank earned a net profit in the first fiscal year of its operation which was of just seven months in duration. The growth story has never stopped since then. The bank earned an impressive 114 percent growth in net profit in 2006-07 when it also increased the paid up capital to Rs. 320 million. The profit growth rate in the first six months of current year over the same period last year is even higher - at 134 percent. Clearly, the bank is speeding up along the line to become number one financial institution of its category in Nepal. Another outstanding feature is its ability to report zero Non Performing Assets for three consecutive years. (See table for the overall financial position of the company).
"These achievements were possible because high quality customers laid immense faith on us," says Badri Prasad Ojha, Executive Chairman of Sanima. He adds, "In fact, the success of any business organization lies solely on the trust of the customers".
Sanima's promoters are Non Resident Nepalis (NRNs), who have already proved themselves as successful business personalities, both outside and within Nepal. Ojha believes that the bank's clients have firm belief upon the Brand "Sanima". They are quite enthusiastic that promoters with such an exposure to international business can surely be a trusted partner to rely upon, he says.
Established with the vision to mobilize required resources for the national development process, Sanima has prepared sound portfolio in terms of loans and advances. The bank has been in the forefront in financing hydro power project. "We are financing various small hydro power projects through consortium and we have found some commercial banks interested to finance such projects even with us as the lead bank," claims Ojha.
Currently there are only micro hydro project in Sanima's portfolio but with the experience gained from such small projects, the bank is planning to move on to bigger projects as well. The relaxation granted by the central bank in the Single Obligor Limit for financing hydropower projects has enabled the bank to increase its exposure in this sector. With existing capital base, Sanima now can invest up to Rs 300 million on a single project.
Apart from its investment in hydro power, Sanima is also investing in other areas as other banks of the same category are allowed to. "We are not permitted by the regulatory body to open Letter of Credit. Other than that, our services are quite similar to the ones provided by commercial banks," informs Tej Bahadur Chand, Assistant General Manager.
According to him, almost 40 percent of the total lending of the bank is in the retail banking. Sanima has also innovated a special type of loan for those who are willing to go abroad for employment.
"In a competitive environment of today, Sanima foresees itself distinctly ahead due to innovation, service delivery and customer satisfaction. Remaining in the same spectrum of banking business, creating its own niche and market presence are few of many reasons enabling Sanima to foresee its future as a frontrunner in the banking industry of Nepal," adds Ojha.
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Badri Prasad Ojha, Executive Chairman of Sanima |
Now the bank is planning to concentrate on small and medium sized enterprise (SME) in a way different from what other banks are doing. " Kathmandu valley is considered as a region that has a large concentration of retail outlets in comparison to anywhere in entire South Asia and we want to tap this market by providing hassle-free credit facility to those entrepreneurs who are willing to expand their business. For this purpose, we have developed a separate product called small business growth loan," Chand explains. The bank is putting together a separate specialized team to work on this sector, he adds.
"The services Sanima is offering today are wide and cater to all the segment of the society. Whether it is business loan or education loan, hydropower financing or manpower loan, Sanima has become one stop solution to spiralling demands of the masses," adds Chand.
When asked about what makes Sanima different from its competitors in terms of service delivery, Ojha's reply is forthright: "As per our slogan Banking Simplified, we offer hassle-free banking to our customer.
As a result, our customers have been bringing other customers by convincing them about the quality service provided by us," he adds. Ojha says, "each and every customer of Sanima is a flag-bearer or part of marketing team of Sanima. The way we provide our service has enabled us to leave an impressive mark on the minds of our customer. Thus, the number of customers referred by our existing valued clients has grown by leaps and bounds".
Ojha is supported by a team of 39 employees whom he calls "skilled, highly motivated and a dedicated lot".
In its expansion drive, Sanima has already opened its branch in Damak. At the end of this fiscal year there will be one more branch in Kathmandu at New Road and another in Dhading. According to Ojha, it is a strategic move of the bank to drive its business beyond Kathmandu Valley because he foresees fierce competition in the banking sector when foreign banks with global network will enter Nepal by opening their branches after 2010. "In that scenario one must penetrate deep into the interior market creating a niche in order to survive the jolt," concludes Ojha.
Sanima’s Financial Highlights |
Amounts in Rs ‘000 |
Particular/ F.Y |
2004/05 |
2005/06 |
2006/07 |
2006/07 (1st six months) |
2007/08 (1st six months) |
Capital and Reserves |
2,24,255 |
2,33,040 |
3,47,766 |
3,34,171 |
3,59,806 |
Deposits |
2,38,355 |
7,49,996 |
18,22,705 |
11,99,431 |
2,409,511 |
Loans and Advances |
2,48,167 |
7,51,046 |
14,86,897 |
11,92,466 |
21,21,231 |
Operating Profit |
283 |
13,361 |
29,342 |
8238 |
19,333 |
Net Profit |
255 |
8,786 |
18,748 |
5130 |
12,039 |
NPA |
0% |
0% |
0% |
0% |
0.21% |
| Source: Company publications |
NIC Bank Focus on SME
Nepal Industrial and Commercial Bank Ltd (NIC Bank) is the recipient of the “Bank of the Year 2007-Nepal” award from the world renowned financial publication, The Banker of the Financial Times, U.K. According to its CEO Sashin Joshi it is on the way to meet its mission statement of being a leading bank in Nepal. It recorded a net profit growth of 64 percent in the 2006/07 fiscal year reaching Rs. 158 million. The ratio of Non Performing Asset (NPA) also decreased to 1.1 percent from 2.6 percent in the same period. The profit growth in the first six months of current fiscal year was 68 percent compared to the same period last year.
“The bank has been a pioneer in taking initiatives and innovation and we were the first commercial bank in Nepal to have the ISO 9001:2000 certificate for quality management system,” notes Joshi. Furthermore, NIC became the first bank in Nepal to be provided a Line of Credit by International Finance Corporation (IFC), an arm of World Bank Group, under its Global Trade Finance programme. This has enabled the bank’s letter of credit and guarantee to be accepted/confirmed by more than 200 banks worldwide.
“The achievements were the result of the endeavours of properly built management system within the organization which relies on a system dependent culture and not on one or two person,” says the CEO.
“Decisions are not made by whims and fancies of an individual no matter how capable the manager is. Everyone is given ownership of his/her own parts of business and is given full authority to perform within those limits,” he informs about the bank’s practices in institutionalizing corporate governance.
NIC is unique among other players in the market in terms of loan portfolio. It is more oriented towards SME sector which holds 35 percent share of its total portfolio. And the bank aims to increase it to about 50 percent within two to three years restricting the share of corporate and consumer financing to 25 percent each. Joshi informs that NIC wants to be entrenched in the market as a bank for SMEs and micro enterprises.
Looking at the current market scenario where financial institutions are investing heavily in corporate sector and specializing in retail banking, NIC’s strategy is quite different. According to Joshi, SME business is the backbone of any economy be it developing or developed. He finds that the corporate financing in Nepal has reached a ‘threatening proportion’ and blames that to lack of transparency in operation.
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Sashin Joshi, CEO, NIC Bank |
“Moreover, investment in corporate sectors is highly risky and yields lower return,” he says. Similarly, he finds retail banking less remunerative due to very low margin of one to two percent as a result of high competition.
NIC believes in continuously offering new and value added services to its customers. That’s why it has been in the forefront in launching innovative and superior products. In 2004, under the name NIC Life Savings Accounts, the bank launched a deposit product bundled with life insurance cover which is the only such product in the Nepali banking industry till date, as claimed by Joshi. The bank was the first to venture into bullion trading under the brand NIC Pure Gold. Now the bank claims that under this business it has ensured the availability of certified pure gold bringing the murky trade in gold above the ground and making more transparent. The government has already started earning handsome revenue from bullion business. Likewise, to facilitate Nepalis traveling to India for business, medical treatment, tourism or education, the bank issues “NIC CashCard”, an ATM/Debit Card which is also valid in India. Moreover, NIC Bank will also be launching an international brand debit cards to its customers soon.
NIC along with a consortium of other banks, has signed an MOU with IFC, Asian Development Bank and Infrastructure Development Finance Corporation, India, to promote an infrastructure bank. As a part of the corporate social responsibility, NIC has also established an independent charity called NIC Foundation where the bank is committed to contribute a certain percentage of its profit every year to be used for community development, particularly in the education and health sectors.
The bank has already been into geographical expansion drive with 11 branches already set up throughout the country within nine years of its establishment. Five more branches are planned to be opened by the end of this fiscal year including three in Western and Far Western regions. All of the 11 branches are interlinked through VSAT and the transactions are processed on a real-time basis. Currently, the bank is using locally developed software platform Pumori Plus which is being reviewed so as to replace it with other more efficient system if needed, the CEO informs.
About the possible effect on the Nepali banking industry after 2010, Joshi thinks the likelihood of foreign banks coming to Nepal in droves looks unlikely owing to the volatile political situation in the country.
“I don’t think Nepali financial organizations would get any jolt from 2010. Just because of 2010, there wouldn’t be foreign banks lining up to open shops here. For that to happen there should be proper environment including political stability and concrete policies. Under the assumption that there would be stability after 2010, I will always welcome some of the foreign banks to come here. Because, then we will have a totally different situation. It will not only be beneficial for the economic development of the country but also for the development of banking industry as well. Thereafter, Nepali banks will have to raise their bars in terms of services, products and working style,” Joshi says.
NIC Bank’s Financial Highlights |
NPR millions |
Particulars |
2002/03 |
2003/04 |
2004/05 |
2005/06 |
2006/07 |
2007/08
(6mths) |
2006/07
(6 mths) |
Total Assets |
4037.52 |
5939.37 |
7508.07 |
10383.6 |
11678.83 |
13077.38 |
10937.36 |
Loans & Advances |
2562.86 |
3743.09 |
4909.36 |
6902.12 |
9128.65 |
10499.75 |
7775.43 |
Deposits & Borrowings |
3419.07 |
5215.80 |
6691.75 |
9223.66 |
10420.36 |
11644.26 |
9711.88 |
Operating Profit |
100.52 |
150.45 |
201.87 |
211.98 |
291.36 |
181.83 |
125.65 |
Net Profit |
25.94 |
68.26 |
113.75 |
96.58 |
158.48 |
121.29 |
71.81 |
NPL |
6.66% |
3.92% |
3.78% |
2.60% |
1.11% |
0.80% |
2.3% |
