Credit bargaining tough in banks

By Satyendra Timilsina

KATHMANDU, Aug 4 – Against the central bank’s directive that allows a bargaining up to 0.5 per cent with the parties while extending loans and advances in the declared interest rates of commercial banks, the actual bargaining range has been up to 2 per cent.

The sources at the credit departments of some commercial banks informed The Kathmandu Post that sanctioning loans at lower rate than declared rates is not a new practice to keep their tight griping on some reliable parties. "Growing competition among banking sector along with soaring liquidity are also influential factors for such widespread practice," sources said. They admit that the bank has been issuing loans at 9 per cent rate against the declared rate of 11 per cent.

"There is almost no competition in the interest rates on deposits but the competition is much tough in the interest rate charged on loans and advances. Due to excess reserves of funds with the banking system, the actual lending rate is lower than the mentioned rates." says an officer at Nepal Bangladesh Bank.

Some officials of the commercial banks argued that the competition has become extremely tough as all the commercial banks are passing through excess liquidity position as the result of shrinking demand of credits. The lack of reliable huge projects for large scale long-term investment, which help to reduce cost of capital, are the major problem for the commercial banks, they said. "In such situation if the bank fails to attract the lenders by providing extra incentives and by lowering interest rate, how can commercial banks sustain?" they asked.

The problem of excess liquidity with the commercial banks has remained one of the major factors that has reduced the interest rates on both deposits and lending far below than two years back. The average interest rate in one year fixed deposit was as high as 10 per cent in 1999 which has declined to touch around 6 per cent. Similarly, during the same period, the industrial lending rate has also decreased to remain 12 per cent on average from 16 per cent

In addition, the four fold over subscription of treasury bills’ purchase witnessed in recent weeks also clearly indicates the excess liquidity position of the banking system.

Experts divide the current banks into two categories. In the first category there are some banks engaged in the profit-motive investments for whom the bargaining in the lending interest rate has become essential. While, there are some other banks, which are enjoying handsome profits not through investments, but simply playing in the foreign currency market.

"Nepalese banks can be divided into two groups. Banks that are playing in the money market with less investment activities and the Banks with higher engagement on such activities," said one of the commercial bank official.

Nepse Index slumps by 5 points

Post Report

KATHMANDU, Aug 4 - The aspirant investors in the Nepalese stock market had to face yet another set back after the slump in the Nepse Index by over 5 points this week following the plunge of over 27 points since last
two weeks.

According to the stock information released by Nepal Stock Exchange (Nepse), on the opening day of the share transaction Monday, the index stood at 322.45 points, which on the closing day fell down by 5.53 points to settle at 316.92 points. The Nepse index has been falling down since last two weeks. Just in the last week it fell down by 9.63 points while the picture was more alarming with
the fall of 17.61 points in the previous week.

In sector wise break down of the index, the index of the commercial banks, which is the major shareholder in the stock market, slumped by 7.69 points and settled at 333.85 points from 341.54 points this week. The index of the commercial bank had shown the decline of 14.25 points last week falling from 353.96 points to 339.71 points while the index had tumbled by 23.24 points in the previous week.

The index of hotel group recorded a highest plunge of 18.09 to touch 247.85 points from 265.94 points. The index of this sector had also shown the highest fall of 17.36 points last week while such slump in the previous week was 8.04 points.

Despite the fall in the index of the major share trading sectors, the Insurance and Finance sector has shown marginal improvement of almost 2 points from 325.93 points to 327.91 points. This group had recorded a marginal increase in the index last week against slight decline of 1.35 points in the previous week.

During the week the indices of the manufacturing and processing group, trading group and others group remained unchanged at 333.98 points, 118.11 points and 180.34 points respectively.

Similarly, in the market participation, propelled by the record level share transaction of Soaltee Hotel, the Hotel sector, for the first time captured 81.64 per cent of total share transaction. In the last week, its transaction had stood at 0.12 per cent. In yet another surprise in the share transactions this week, the Finance group surpassed the commercial banks group and retained its usual second position. The financial sector recorded 10.5 per cent of the total share transactions this week against 45.61 per cent recorded in the last week.

Similarly, the participation of Commercial banks group slipped to the third position with just 6.5 per cent. The commercial banks group was in the first position in the last week and in the previous week with 52.43 per cent and 65.02 per cent respectively.

During this week the participation of manufacturing and processing group was 0.93 per cent, Insurance group was 0.38 per cent and others were 0.05 per cent, while no transactions were recorded this week for trading sector.

In this week the share market recorded the total turnover of Rs 132.04 million in 953 share transactions with the trading of 995,924 units of shares whereas 40,947 units of shares valued at 21.2 million were transacted in 985 share transactions in the last week.

During this week, Nepal Merchant and Banking Company topped the list in terms of number of share transactions with 648 share transactions. While, in terms of volume of transaction and the units of share traded, Soaltee Hotel Limited topped the list with the trading of 920,947 units of shares that valued Rs 107.75 millions.

Companies whose shares were traded for all five days include Nepal Bangladesh Bank (Rs 930 - 1025), Everest Bank Ltd (Rs 630 - 671), Bank of Kathmandu (Rs 480 - 483), NIC Bank (Rs 390 -380), Ace Finance Ltd (Rs 480-485), Sagarmatha Insurance Ltd (Rs 202-216), Everest Insurance Ltd. (Rs 451 - 450) and Nepal Merchant Banking and Finance Company (Rs 287 - 286).

Likewise, the companies whose shares were transacted for four days in this week are Nepal Standard Chartered Bank (Rs 1900-1995), Himalayan Bank Ltd (Rs 1390 - 1415) Lumbini Finance and Leasing Company (Rs 200-230) and Siddhartha Finance Company Ltd. (Rs 197 - 192).

During the week shares of six companies were traded only one day, that include Nepal Arab Bank Ltd, National Life and General Insurance Company Ltd, United Company Ltd, NIDC Capital Markets and HISEF Finance Company Ltd.

IT education beyond the reach of lowest income groups

By Nityananda Timsina

KATHMANDU, Aug 4 - In the age of computer and fast-paced modern technology that offer white-color jobs, the right choices for any fresher from a high school or a mathematics graduate is B.Tech or Masters in Computer Application (MCA) which has become the most sought-after course to peep into the future.

Since the world is all heading towards a time machine-designing economy, prosperity is determined by a set of excellent manpower excelling in technological mind-set, ranging from computer engineering or manufacturing sector to highly sophisticated technologies.

And if is true that the technological wonder is going to shape the lives in the days ahead with more and more chances of employment, B.Tech and MCA in West Bengal, India managed by TECHNO-INDIA, a group of engineering colleges for technical education maybe one of the opportunities knocking at the door.

Allen Bailochan Tuladhar, Chief Executive Officer of Unlimited Software Network said that the government has allocated more budget for the fiscal year 2001-2002 towards human development resources and IT sector. He also said that nearly 61 national and foreign companies are investing this year towards IT colleges in Nepal. But the trend fueled by MCA or B.Tech has attracted more and more students in India as Nepal is yet to introduce them.

Keeping abreast the challenges of fast-spreading globalization and IT sector, the government has, however, allocated Rs two million for human resource development and nearly Rs five million for IT sector in the fiscal year 2001-2002.

If Nepalese have to learn anything from the stock-boom-infected Indian IT market and Hongkong, Singapore and Tokyo thirstily consuming IT to derive their economic boom through pursuing electronic-commerce, it were MCA pass-out and B.Tech students dominating the most sleek and slim job markets.

West Bengal alone produces 30 per cent of the total IT professionals produced by Indian sub-continent annually. Bengal Institute of Technology, Siliguri Institute of Technology and five other Institutes of West Bengal have offered five per cent of the seats to the students of Nepal, Bhutan and Bangladesh who aspire to compete in the global IT manpower services.

"The stunning success in IT fronts of India can be reflected in more and more Indian IT professionals employed in multinational companies, " said R.K. Agarwal of Water and Power Consultancy Services (WAPCOS), a consortium of technological institutions, Government of India, which owns seven engineering colleges in India.

Sanjay Mishra, Manager of Chaudhary Infotech, involved in enterprise application software development said, in today’s prospect, a mere degree has a bleak future with absolutely no good employment prospect. "Product certified degrees such as Microsoft, IBM or Novel Certified Professional are the right demands of the market today dominated by software giants like Microsoft Inc., IBM or Novel."

However, the exorbitant fee increase amounting to US $ 3000 annually in these newly competing IT colleges of India which begin in August this year sounds like they are a mere dreams for those equally competing but poor students. Thus, a competitive IT education shatters like a dream for the low-income groups peeping at the bleak future shaped by the so-called IT.

Discussion on loan recovery held

Post Report

KATHMANDU, Aug 4 - In a talk program organized today to discuss the problems associated with loan recovery systems, Dr. S P Parashar, a senior faculty member at Emirates Institute for Banking and Financial studies at Sharjah said that the problem of loan recovery has arised due to lack of bad debt management system.

Speaking in a program on "Problem Loan Management" organized by Higher Education Development Cooperative Limited (HEDCL) Dr Parashar pointed out that the loan recovery system is very weak in Nepal and also in India. "The politicians put pressure on bank administration to emburse loans and such loans are very difficult to recover. At the same time there is also a problem associated with unskilled manpower with the banks. Both of these factors are affecting the loan recovery." he said.

To come up with the difficulties on loans recovery he stressed upon the need to arrange legal provisions, develop new technologies, make the monitoring system more effecitve and provide more responsibilities. He further said that the monitoring of the central banks has to be more effective in order to make the loan recovery system more efficient.

Saying that the banks are facing bad debt problem, Damodar Regmi, the chairman of the HEDCL informed the gathering that the program has been organized to provide some solutions to poor loan recovery.

He informed that a total of 17 participants from Nepal Rastra Bank, commercial banks and finance companies attended the program. However there was no participation from the Nepal Bank and Rastriya Banijya Bank.

The participants of the program informed The Kathmandu Post that though the program focused on the problems associated with loan disbursement and recovery, there was also a discussion on other important banking issues.