How is SCBNL doing of late?
We are doing pretty well. The business in the first quarter grew by 10 percent, which I think is good. We have always been liquid and a lender to the market. Our deposits as at first quarter this year stand at Rs 32.97 billion and investments at Rs 15.83 billion and loans and advances at Rs 18.18 billion. We earned Rs 265.53 million in net profit, according to unaudited financial results. We have 429 staff and expanded our branch network to 15. We also have four extension counters, which are as good as branches.
But don´t you think your expansion is pretty slow compared to others?
Our expansion goes in line with our strategy to reach places with adequate business and type of businesses we cater to. We are SME(small and medium enterprise)-focused. We opened a branch in Teku recently because there are lots of SMEs there. We do not have capability to run village banking. Hence, we have no branches in rural areas. Nonetheless, we are working with a few micro-financial institutions -- private companies and NGOs -- to reach the rural population.
Nepal Rastra Bank recently imposed cap on CEO salaries. What´s your opinion on this?
It´s a controversial subject. Also, it is an issue that should be dealt with by the board of the bank concerned. Only the board knows what it expects from the CEO and contribution coming from his/her leadership.
Personally speaking, the salary CEOs are getting here (may be higher than in other industries, but) is not very high when compared with similar and difficult countries (e.g. African markets, Sri Lanka and Bangladesh). But the issue is; have the banks´ boards taken into considerations attributes like the size of the market, past track record and knowledge of individuals about contemporary financial markets - both regional and global - while deciding on salary? The board should justify its decision when the regulator asks questions. Only time can tell whether the NRB move is appropriate.
Nepal´s real estate, where banks have substantial loan exposure, is showing initial signs of a crash. How will it impact you and the banking sector as a whole?
For us, the impact is zero. Speculative lending is very dangerous. Hence, we have kept away from it. The asset bubble inevitably bursts and this process has started in Nepal. This will hit loans repayment. It will gravely hit banks that did not follow a rigorous screening process.
The government recently jacked up duty on automobiles. Real estate too is in bad shape. How will that impact banks?
The retail business will be affected for sure. But these changes have added responsibility on the banking system to make the productive sectors grow. These will force the banks to reshape their lending priority and strategy. Banks will have to go to productive sectors like SMEs, agriculture, hotel, tourism, power sector. This will help create employment and ensure inclusive growth. It will not happen overnight, but will definitely happen over a period of the next three to five years. I am supportive of this move.
Of late, deposits at development banks and finance companies have grown more rapidly than of banks. What does this mean to the banking sector?
Their deposits growth has to do with the higher interest rate they are offering. But it is not a good sign for commercial banks. The commercial banks should go to the public and ask, are you aware of the incipient risks associated with a higher interest rate offer? For higher interest return they will need to invest in risky sectors. Are these formal sectors? I don´t think the formal sector can sustain such high borrowing rates. These are informal sectors. The regulator should make a deeper analysis of the situation.
Are you happy with your CSR(corporate social responsibility)-related activities?
Yes we are. Under ´seeing is believing initiatives´ we have reached more than 30,000 people. Our group has also given US$ 1 million to a regional eye project in Biratnagar. It is constructing an eye hospital there. HIV/AIDS is another important area where we are contributing. We are also part of Vitamin A capsule distribution. We are into environmental protection activities, supporting schools and students, providing them computers and other supports, and linked with Maiti Nepal in anti-women trafficking activities. We have added more activities as we moved along these years.
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