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April, 2004 |
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Sectoral |
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Growth in Major Commercial Banks by Kamal Subedi Comparison
between the 1st six months of fiscal year 2002-03 and 2003-04 shows that
every commercial bank, except Nepal Bank Ltd. (NBL) and Rastriya Banijya
Bank (RBB), has achieved noticeable increase in credit outflow. Lending is the major source of income of
a commercial bank though it involves high risk. In this regard Kumari
Bank Ltd. (KBL) seems to have recorded the highest increase (67.06%).
Though the credit-deposit (CD) ratio of Himalayan Bank Ltd. (HBL) is the
highest, its credit increment (26.78%) is less than that of KBL. In case
of NBL and RBB, the credit figure has gone down by 10.41% and 5.99%
respectively. It may be because their concentration was only on recovery
of the huge NPA. However, it can be pointed out that no matter what its
size and circumstances, each bank has to collect the deposit in order to
create a lending and to invest in the new ventures. KBL is placed at the
top also in the regard with the significant increment of (80.34%) in
deposit collection as compared to that of the same period of the
previous year. All of the rest of the banks have made noticeable
increment in deposit collection expect RBB in which case it has gone
down by 0.62%. A decrease in CD ratio (the percentage of
the deposit mobilization over the credit) signifies the presence of high
liquidity and comparatively lower fund mobilization and vice versa. High
liquidity and idle funds will result in lower profits. Among the
commercial banks analyzed here, HBL has the highest growth (18.47%) in
CD ratio as compared with that of the previous year. Similarly, NABIL,
Everest Bank Ltd. (EBL), Nepal SBI Ltd. (SBI) have recorded growth rates
of 6.28% 11.83% & 7.45% respectively in their CD ratio. However this
ratio of other commercial banks has declined, largely due to factors
external to the banks. As per NRB directives, all commercial
banks have to maintain Loan Loss Provision according to the size of
overdue loans. Nepal Credit and Commerce Bank (NCCB) was able to
decrease its loan loss provision by 27.63% as compared to the previous
year indicating a good recovery of interest as well as principal. In
case of Nepal Investment Bank (NIB), growth in loan loss provision
(which in fact decreased by 6.73%) was much less than the growth of the
total credit (which increased by 53%). Similarly, NBL and HBL were able
to maintain a healthy composition of loan loss provision (decreased by
9.49% & 0%) and credit (increased by 3.70% and 26.78%), again
signifying good results from their loan recovery efforts. In case of
remaining banks, the situation is not satisfactory as the growth of Loan
Loss Provision is higher than the growth of credit.
As per NRB's new directives, all
commercial banks have to increase their paid-up capital to Rs. 1 billion
(for national level operation) and Rs. 250 million (for regional level
operation) by the fiscal year 2066 BS. But while NRB wants that target
to be met with paid-up capital, the Nepal Bankers Association is
insisting that it should be allowed to be met with the summation of
paid-up capital and reserves. In this regard, NIB has increased its
capital to Rs. 295 million by issuing the bonus shares out of the profit
of the fiscal year 2001-2002. Similarly, HBL, NBB, EBL and SBI have
increased their paid-up capital by 10%, 0.75%, 13.94% and 0.04%
respectively as compared to the previous year. The national and international events,
political and economic instability and lack of long-term plan while
venturing into new projects have also laid the obstacles before the
growth of Nepal's banks. In such a situation the stability and the
safety of the banks is the matter of prime concern. A bank's stability
depends on the reserves it maintains. In this regard Laxmi Bank Ltd.'s (LBL)
reserve growth (23,525%) is very high. But due to the short period of
its operation in the FY 2002-03, this figure is not practical to compare
with other banks. Leaving aside LBL, NABIL's reserve growth is very
good, i.e. 1400% on retained earning and 67.86% on other reserves.
Similarly, all other banks have except NCCB and KBL made noticeable
increment in it. NIB has the highest growth in total
income (by 77.11%). However, if one compares the interest income, KBL
appears at the top with the growth of 80.52%. NCCB has the highest
income from the other sources. Similarly, HBL, Bank of Kathmandu (BOK),
Everest Bank Ltd. (EBL), NSBI, Nepal Industrial and Commercial Bank (NICB),
NCCB, and RBB have the growth of 15.74%, 14.72% 24.92%, 1.70%, 21.10%,
11% and 25.82% respectively as compared to the previous year. However,
the total income of NABIL, Nepal Bangladesh Bank (NBB), Laxmi Bank Ltd.
(LBL) and NBL has declined by 0.41%, 2.66%, 5.67%, 26.53% and 13.82%
respectively.
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