Head of Operation RBB

Basu Deb Ram Joshi Executive Chairman, Rastriya Banijya Bank

As the chief executive of Rastriya Banijya Bank (RBB), the largest commercial bank of the country, Basu Deb Ram Joshi is a banker face-to-face with the largest problem ever in the history of the commercial banking in Nepal. Apart from being the bank with the largest amount of deposits and the largest portfolio of investment, RBB also has the dubious distinction of the Nepali commercial bank having the highest ratio of non-performing assets (NPA) to its total banking assets. Though Joshi himself does not give an exact figure for the NPA of his bank which he joined after smoothly concluding the handing over of the management of almost equally ailing big commercial bank, Nepal bank Ltd., to an international management team, it is estimated that RBB has some 48% of its assets as non-performing. What Joshi accepts is that high NPA is indeed the problem that the bank is facing and that he is now trying to fathom the depth of the problem. He also says that it was actually the severity of the problem itself that prompted him to accept the offer to head operation RBB because, to quote him, “Life without a challenge does not mean anything at all.”

Though a person with strong background in law (he topped the BL exams in 1963 and won the Vice Chancellor’s medal that year, studied international law in Manchester University and taught in the Nepal Law college), Joshi opted for banking in 1966 when he entered Nepal Rastra Bank (NRB), the central bank of the country, as a Research Officer “trying to utilize his qualifications in economics” in which he holds an MA degree from Tribhuvan University. Like in BL, he had topped also the MA exams.

In NRB, Joshi served for around 24 years and was the head of almost half of the divisions of NRB. In 1990, he received an offer from Nepal Arab Bank Ltd. (NABIL) the first joint venture bank in Nepal to work in it as the Assistant General Manger and he accepted that offer thus becoming the first Nepali national to take such a high level managerial assignment in a joint venture bank.

First he joined Nabil on deputation from NRB. Later he worked there taking leave from NRB. As NRB did not extend his leave, he resigned from NRB to work in Nabil.

After the contract in Nabil was over in 1993, Joshi started as a private consultant and worked for several employers including the Japanese and Swiss Embassy and also the Asian Development Bank (ADB) on various assignments. “I never went hunting for any job. The job offers used to come hunting for me”, recalls Joshi about what seems to be a period of his hiatus for those who did not know where he had vanished during those nearly ten years. “I accept offers that are really interesting and challenging. And I accepted this present one because it is challenging”, he says. As to the other criteria accepting an offer, Joshi says he prefers something that relates to the field of banking and financial management.

It was in 2002 April, during the conference related to the report he had prepared for ADB on money laundering that he was approached by NRB with the offer for the position of the coordinator in NBL. “It is really quite unusual in our country for the job offer to come to the person like this because it is usually on the basis of the connection and sycophancy that people are appointed”, he says.  After he succeeded in transferring the management of the NBL to the international management team selected to rehabilitate the sick bank, Joshi is now appointed the executive chairman of RBB which also has almost the same problems as those of NBL.

But the solution being tried for RBB is different from that being tried in NBL. After Deloitte Touche Tohmatsu (DTT), the international management consultant selected to manage RBB breached the contract that they had signed with NRB, the plan for RBB now is to select a CEO first and then to select the other experts separately to be in the management team. Thus unlike in NBL, there will be no single cohesive team in RBB, and the role of the chairman of the board is going to be important in coordinating the team. “That is the challenge now and that I will like to take”, says Joshi. At present, however, he is working also as the CEO, till the new person is selected. Moreover, he was also without the other members of the board of directors of bank when he was sharing his views with NBA.

The root of the problems in RBB or NBL is that both of them never had a professional management, because all the CEOs or Chairmen’s of the Board were either sitting or retired bureaucrats or politicians. They ran the bank more as a government department and less as a bank. The result is a high NPA, demotivated employees and overstaffing. But how long will it take for the rehabilitation efforts to start bearing fruits in RBB?

“Three or four years”, says Joshi. The reason? First, the problems are not developed overnight. They are accumulated over the period, and they need considerable time to be resolved. Next, the present economic condition of the country is not suitable for reducing NPAs. A bank can reduce the ratio of NPAs by either collecting the loan back or by adding new but good accounts in its portfolio so that the ratio of bad assets is automatically reduced. But during the recessionary period as the present one, neither the borrowers will be in a position to repay the loan, nor will the bank be in a position to lend to new borrowers as there is no demand for the loans. That rules out the possibility of RBB problems being solved within six months or a year. Moreover, the things are not likely to be expedited in RBB as long as the recruitment of the new management team is not completed.

What is likely however is that the management team in RBB is going to be a Nepali one, unlike in RBB, as Joshi hopes. He claims that he has always been in favour of Nepali team leading the commercial banks. Even in the joint venture banks, it is the Nepali team that is running the show while the foreign manpower in them is limited to one or two persons and they are in policy level only.

But why were not the Nepali managers successful in turning around the NBL and RBB? The answer lies in “the terms of the contract”, says Joshi. “Give similar contract to the Nepali managers with the same terms as given to the foreigners, and see the results from Nepali managers. It will be better than what the foreigners can deliver, because Nepali managers know the local situations better.” His point is that while “we are quite liberal in offering the pay and other remuneration packages to the foreigner, we are very much stingy in offering similar packages to the Nepali managers.” If the managers are given good packages and the terms of the contract are so strong that they will not be removed from the job for any trivial reason, they will be in a better position to resist the pressure from the vested interest groups. “But unfortunately this view is not accepted by the people in power”, he laments. “It is not the question of foreigner or Nepali, it is the question of how much authority, freedom and facilities do you provide the manager that cause the difference in the performance.”

What will he do after he is retired? After all, he has already crossed 60 years in age officially (his real age is a couple of months older than the official one). Joshi says he will write books. “I’ve a lot of knowledge about Nepali economy and banking, I can share it”, he says. Right now he is not doing any writing because as he says, “If you are critical in writing that will affect your professional career because the Nepali society lacks tolerance. But when you are fully retired, you can open up your heart.”