National 4 (Spotlight Weekly)

‘I Am Confident Things Will Be Resolved In The Near Future; And The Economy Will Continue To Grow’

— Prithivi Bahadur Pande

Prithivi Bahadur Pande is the main representative of the Group, which recently bought 50% shares of Credit Agricole Indosuez, a French investment partner of the Nepal Indosuez Bank Ltd. (NIBL), after a long legal battle. Pande Group is a consortium of 24 different companies involving people with experience in Civil Service, industries, trading etc. Pande, son of illustrious bureaucrat/historian Sardar Bhim Bahadur Pande, is a former CEO of Himalayan Bank. He started his career in banking in 1978 when he joined the Central Bank. He later headed state-owned Rastriya Banijya Bank. Pande spoke to KESHAB POUDEL and SANJAYA DHAKAL on the recent taking over of the NIBL management and the performance of banking sector in the country. Excerpts:

Finally your group was able to buy the majority shares of the NIBL from the French Partner. How do you feel about the legal and other wranglings that delayed the process?

First of all we have only bought 50% and not the majority shares in NIBL. As far as I am concerned when the Credit Agricole approached us to buy Indosuez Bank, they had informed us that they had previous MOU with the Chaudhary Group, which had expired. We had our lawyers look into it and it became very clear to us that a MOU in Nepal was a pre-agreement and not legally enforceable agreement. On the top of that it was also crystal clear that the MOU had expired on July 1999. So, there was little risk for us and we applied to buy this bank. On the legal side, of course, the process was delayed but we are happy with the end result

How does it reflect on the legal and bureaucratic system of Nepal?

I do believe in legal system of Nepal. Though it was delayed, eventually there was no stay order given. Someone of the stature of the Chief Justice himself looked in the case in the Supreme Court and did not give a stay order. It surely is a signal that legal system is working in many ways in Nepal. On the other hand, sad to say, after 6 ñ 7 hearings the merit of the case had yet to be heard not because of the legal system but because of the deliberate delaying tactics of the lawyers of the Chaudhary Group. As far as we are concerned they never had any case, the party never had the chance of winning anyway.

How about the role of the Central Bank?

The Central Bank's role in this country has much improved. The Central Bank should have issued these strong directives, which they have come up with now, maybe 5 or 6 years ago. But it is never too late. We are happy that the Central Bank has come up with strong directives, which will help improve the financial systems. The only thing is that maybe some of the directives have gone from one extreme to another. Transformation from a casual to strict system cannot happen overnight and I believe that certain "adjustment time" should be given to the banks. All in all the Central Bank is finally beginning to play an effective role in regulating and supervising the financial system of this country.

Don't you think such unnecessary delays would hurt Nepal's chance of attracting foreign investment?

Foreign investment is something that has to be attracted in one's country. In this world, each country is competing to attract foreign investment including the United States. Nepal being a poor country desperately needs foreign investment to help its development. Delays in any form can create problems and is bound to send out wrong signals. You must realize that Nepal is competing mainly with the countries of South Asia like India, Sri Lanka and other third world countries. When people have so many choices, we can't just say come and invest in our country because it is scenic and beautiful. Capital will always have priorities and capital flows to countries where there is security, the rule of law and where investors can easily take their money out. The present episode, which the Credit Agricole had to experience, was definitely in a bad taste and it is going to adversely affect our investment opportunities. I am sorry it happened. I wish it hadn't happened. Of course our authorities were very cooperative and tried their best to expedite our case but then when matter goes into court, it has its own process and takes its own time and therefore, were beyond their control. Though the desire of the government was to prevent any damage but once matters went to the court, there was nothing they or we could do.

What are your plans for the NIBL now? How do you hope to maintain the credibility the bank enjoyed during the previous management?

What you must understand is Credit Agricole has time and again said that it is their responsibility to ensure that the bank falls in the right hand. So in a way we are privileged that they trust us. They were made better offers. But they made it very clear to me that though they could have made more money on their sale; they believed our credibility was the best. It was not that I approached the Credit Agricole. It was by chance we met and they made this offer. In fact, I had met the NIBL chief in a seminar of Central Bank where I told him that as I was leaving Himalayan Bank, I was, along with a group of like-minded friends, going to open an Investment Bank. He then told me instead of opening new bank, why don't I put my money in NIBL. That's how things started. Our intention was to buy this bank and slowly turn it into an Investment Bank and also continue doing commercial banking activities. We hope this will happen soon under the umbrella act the Central Bank is coming up with, called Deposit Taking Institution Act. Once that comes up we hope to increase the capital and make the bank stronger and enter into investment banking activities.

How do you find the overall economic situation of the country, in general, and banking-financing sector, in particular?

The economic condition of this country maybe at one of the worst period of its history. Combine it with what happened in New York in 9/11 — tourists are not very comfortable traveling and the reports of ongoing insurgency has hampered the tourism sector. In the export front also there is 30 —50 percent drop. Similarly, imports, too, have gone down. Economic indicator do not tell a good story. From that perspective, yes it is pretty tricky situation. It is going to be difficult to all types of industries and in particular the banking and financing sector. People have asked me why I was investing in this kind of environment. My answer is, this is my country and I have full confidence that things will be resolved in near future. We will come out of this mess and the economy will continue to grow. And we also feel good that we are contributing to the economy of our country by making investment and contributing to tax system as well.

You have vast experiences with your long time services in Central Bank and RBB. What are the new challenges that you see in the banking sector?

I had the opportunity of working with the Central Bank. Then I was sent to head one of the biggest commercial banks, RBB, at a time when there was a major restructuring going on. I had the opportunity to work closely with world-class financial consultants. After the restoration of democracy, opportunities came along with the liberalization of financial systems and I became involved with the Himalayan Bank. As far as challenges are concerned I think in Nepal we go from one extreme to another. The idea is to create an environment of fair competition and not to open so many financial institutions as to create over competition and risk. The idea is not to open so many banks and financial institutions that may eventually suggest mergers and closing down. I wish the Central Bank had created only 6 or 7 good and strong banks. Likewise 10 to 15 strong finance companies would have been enough. At present, you can see the margins of the banks have been shrinking. I take the case of Malaysia where they are suggesting there should not be more than 8 banks. Compared with them we could have 6 to 7 very good banks. The ideas of more the merrier doesn't hold much water in the financial system. The role of the Central Bank is to create sound and responsible financial system which, also provides efficient services to the people at large.

You have taken over the NIBL in a period of economic slowdown. What are the new areas you would be focusing on now?

It is true that the economic condition is not good currently. But you must realize that this is our country. If we don't invest here, who will? It does not make sense for us to invest elsewhere. Of course, we do expect to make adequate return on our investment. It is not that we are simply pouring money and hoping we will make return. We are going to work very hard. The economy may be down for 2-3 years but a point will surely come when it will rebound. We will compete with the best banks here and survive. We have many new ideas but I would rather keep them to myself at this moment.