Annual Report 2012 Nepal Sbi_new
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19Annual Report
You are always a winner.
THE BOARD OF DIRECTORS
Ms. Hasana Sharma Chairperson Representing Employees’ Provident Fund
Mr. Hemant G. Contractor D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Rajan Srinivasan D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Vijay Jasuja D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Manoj Kumar Agrawal Mr. Niranjan K Tibrewala Mr. Keshav Raj Acharya D ire c to r D ire c to r D ire c to r R e p re s e n tin g P u b lic S h a re h o ld e rs R e p re s e n tin g P u b lic S h a re h o ld e rs P ro fe s s io n a l E x p e rt D ire c to r
Mr. Alok Kumar Sharma Managing Director Representing State Bank of India
External Auditor T.R. Upadhyaya & Co. Company Secretary Mr Ramesh Ghimire
TABLE OF CONTENTS
• • Performance Indicators Annual Report of Board of Directors o Review of the Fiscal Year 2068-69 • Economic Environment • Banking Industry Recent Developments Impac ng • Banking Business o Measuring our Success o Corporate Ci zenship o Value Crea on and Alloca on o Progress Report for the Current Year o Changes in the Board of Directors o Statutory Auditors Further Informa on and o Disclosures o Path Ahead o Acknowledgement Ad o di onal disclosures Organi za onal Structure Management Team Head of Departments/ Units Human Resources and Industrial Rela ons Business Promo on and Social Responsibility Ini a ves Products And Services Corporate Governance Our Network Risk Management Shareholders’ Informa on Five years’ financial highlights Independent Auditor’s Report Financial Statements for the FY 206869 2 3 3 3 4 5 6 9 12 12 12 13 13 13 13 14 17 18 19 20 20 21 24 26 31 32 33 34 3693
• • • • • • • • • • • • •
•
Approval from Nepal Rastra Bank
94
Design & Produc on by: Ul mate Marke ng (P.) Ltd. 4352223, 4385610 | info@marke ngul mate.com Printed at: Ul mate HiTech Press (P.) Ltd.
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19Annual Report
2068-69
N epal S B I B ank Lim ited
PERFORMANCE INDICATORS
Deposit (Rs. in Billion)
53.3 42.4 34.9 17.96
Advances (Rs. in Billion)
26.46 21.72
206667
2067-68
2068-69
206667
2067-68
2068-69
Total income (Rs. in Billion)
1.41 1.11
Net profit (Rs. in Million)
1.5 391.7 464.5 480.1
2066-67
2067-68
2068-69
2066-67
2067-68
206869
Investment (Rs. in Billion)
24.5 16.3 18.9
NPA Amount (Rs. in Million)
265.13 239.30 143.8 5
2066-67
2067-68
2068-69
2066-67
2067-68
206869
NPA Gross (in %)
1.48 1.10
0.54
206667
2067-68
2068-69
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Nepal SBI Bank Limited
19Annual Report
REPORT OF THE BOARD OF DIRECTORS
challenges to the The Board ofglobal economy, a Directors of Nepalrecovery from the SBI Bank haveeconomic crisis tenta pleasure in presen ngvely started this Annual reportemerging, albeit together with theunequally distributed. audited BalanceThe developing world sheet and Profit &reported rela vely loss account for thestrong growth, year ended 31 Ashaddespite apparent risks 2069 (15.07.2012). of overhea ng. While most advanced economies s ll con REVIEW OF THE FY nue to experience 2068 69 sluggish recovery, persistent unemployment, and ECONOMIC financial vulnerability, ENVIRONMENT par cularly in Europe, WORLD ECONOMY which adversely The year started with aaffected the business levels, word of cau on, indicaconfidence ng decelera on in keywith no clear horizon growth indicators in thefor improvement. In on, rising world economies andaddi apprehension of concommodity prices nuing weakness ineroded the major economies, parpurchasing power of cularly in Europeanconsumers and markets. The Internaslowed down the pace onal Monetary Fundof recovery. Uncertain (IMF) has projectedes emana ng from the global economic growthdoubts on to decelerate and growsustainability of only by 3.3 percent inpublic debt of some 2012. Economic growthadvanced economies, projec on in ourkept the global neighboring countries also showed incipient signs of slow down during the year under review. Amidst mul ple
The economic investment climate andenvironment in investors’ confidence atNepal has been low levels during thetough for many period. The veryyears and the review viability of the euro asyear is no excep on. an alterna ve to USCurrent poli cal, Dollar came in to queseconomic scenario on and becameand other debatable for most partinfrastructural issues of the year. made the things more difficult for Most of the Asianbusiness and countries, includingindustries. Economic Nepal showed resilienceindicators of the to adverse globalcountry showed posi developments. ve change during the However, majoryear under review, economies in themainly backed by Region, viz. India andconsiderable China, which are alsocontribu on from the major tradeAgriculture sector. partners of Nepal, conOur country expects nued to show lowerto post a real GDP growth rates repeatedlygrowth rate of 4.6% on QoQ basis. at basic price, as against 3.8% growth Overall, high vola lity induring the previous global equity, currencyyear. The growth is and commodity markets,largely a ributable to emerging threat of rising4.9% rise in infla on, sta c orAgricultural sector. deteriora ng financialIndustry, health of large BankingManufacturing sector conglomerates in theshowed a drop in developed countriesgrowth rate at 4.3% remained the majoras against a growth areas of concern of theof 4.5% during the year. financial market playersprevious Services sector across the world. posted an increase of 4.3% over 3.4% ECONOMIC during the previous ENVIRONMENT IN fiscal Year. NEPAL
19Annual Report
2068-69
N epal S B I B ank Lim ited
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Tourism industry observed a lowerThe increasingly complex poli cal condi ons growth of 19.3% in terms of touristalso propelled liquidity in the market and arrivals by Air during the first 11 monthsinvestment outlook remained subdued in the of the FY 2011-12 as compared to 21.1%domes c economy. during the corresponding period of theOwing to con nuously rising liquidity, the previous FY. incremental credit-deposit ra o (CD ra o) of
commercial Banks suffered and worked out The annual average consumer inflationat about 51% for 2068-69. Your Bank’s on point-to-point CPI, decreased to 8.0%incremental credit to local currency deposit during FY 2068-69 (2011-12) as againstra o during the period was compe vely placed at 118.26%, which helped the Bank to 9.6% in previous year. register a sa sfactory credit to local currency On external front, the country’s Balance Ofdeposit ra o of 80.40% as at the end of the payment (BOP) recorded a surplus of Rs.year. CDC (Credit to Domes c deposit and 113.22 billion due to rise in exports andcore capital) ra o of your Bank also rose from decline in imports, as against deficit of Rs.68.43% to 73.30% during 2068-69. 33.56 billion in the previous year. The huge challenges in the overall BOP surplus was mainly backed by remiDespite economic environment, the Bank posted ance inflow, which crossed Rs.320.38 billion thereby registering an increase ofhigher opera ng profit (before loan loss 39.6%. During 2068-69, the US dollarprovisions) of Rs.751.66 million, as appreciated by about 20% as againstcompared to Rs.720.56 million in Nepalese currency, NPR. As such, in theprevious year and achieved qualita ve backdrop of weakening NPR in 2068-69,improvement in asset por olio, with the pos ng of surplus BoP reveals inherentgross NPA and net NPA level at 0.54% strength and promising future of theand 0.32% respec vely, down from 1.10% and 0.47% respec vely, as at the end of country’s economy.
the previous year.
Foreign exchange reserves of USD 4.82 billion at the end of Jestha 2069 wereA number of measures have been taken marginally lower, as against USD 4.84 billionby Nepal Rashtra Bank to improve the investment scenario and channelize the during the same period last year.
excess liquidity into produc ve sectors. Amidst uncertain es in local condi onsThis, besides others, includes increase in and poli cal scenario, the inflow ofReserve ra os and incen ve to export and foreign direct investment remainedagriculture sector. weak. India with the highest contribu on and China as the next, con nue to be theTHE BANKING INDUSTRY Banks operate in a highly competitive major source of FDI for the country. arena where 32‘A’ class commercial The review period witnessed sudden Banks, 88‘B’ class Development Banks reversal of ght liquidity condi ons since and 70 ‘C’ class Finance Companies and ‘23’ other financial intermediaries beginning of the year. The trend compete for a share in the financial became more prominent during the market. Net interest margins have come second half of the year. Highly liquid under pressure, as attractive investment markets also kept Banks’ opera ng opportunities have dried up amidst margins under pressure. liquidity in the market and resultantly
yields on investments are steadilyassets at the highest order, concentrate declining. This warrants Banks toon enhancing non-interest income, and increasingly maintain the quality ofefficiently
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Nepal SBI Bank Limited
19Annual Report
2068-69
liquid assets of the BFIs and will warrant more prudent management of funds to protect spread and profitability. Your Bank During the first eleven months of FYhas sufficient liquidity to meet the 2068-69 (July 2011- July 2012), depositenhanced criteria. accre on in Banking industry wasMERGER AND ACQUISITION reported at 18.2% or Rs.149.92 billion.Nepal Rastra Bank introduced Merger However, Loans and advances of thebylaw, 2011 during the review period in industry during the same periodorder to encourage BFIs to undergo merger increased by 14.1% or Rs. 120.14 billion.process with an objec ve of enhancing Liquidity Ra o of Banking industry as aresilience of banking industry. Recently, whole improved to 32.5% as on Jesthamerger of two commercial Banks and five end 2069 (14th June 2012) as againstfinance companies resulted in the forma on 30.6% as on Ashad end 2068 (16th Julyof two Banks and a finance company. Addi onally, four development banks and four 2011). finance companies have been merged to The capital adequacy ra o of most of theform four development banks. Further, 17 Banks exceeded both local and internafinancial ins tu ons have submi ed their onal regulatory requirements. Theapplica ons to obtain the le er of intent for financial market infrastructure hasmergers. Backed by our reach through 59 improved substan ally in recent yearsopera ng units, 75 ATMs, dedicated work reducing systemic risks. Significantforce, technology driven opera ons, and progress in product innova on andsupport of large client base, your Bank has service delivery was also observed,developed intrinsic strength and is well poised to take on the compe on in the during the year under review. changed market condi ons.
manage their resources to achieve growth in profitability levels.
For the last few years, there has been notable expansion in the geographical andINCREASE IN DEPRIVED SECTOR numerical presence of the Banks andLENDING financial ins tu ons with expanded financialNepal Rastra Bank has increased the deprived sector lending transac ons as well. At the end of Ashadmandatory target for ‘A’ class commercial Bank to 4 2069, branches of the commercial Banks, development Banks, finance companies% from 3.5% by end of upcoming fiscal and micro – finance ins tu ons expanded toyear 2069-70. This is part of NRB’s to gradually increase 1369, 686, 331 and 550 respec vely. Thisendeavor investment to deprived sector during has significantly improved the public next 3 years. Your Bank closed the year access to formal Banking channel. with Deprived Sector lending at 3.74%, thereby surpassing Deprived Sector RECENT DEVELOPMENTS lending targets set by NRB for the year. IMPACTING BANKING
BUSINESS
OPPORTUNITIES, CHALLENGES AND OUTLOOK INCREASE IN CRR/LIQUIDITY The year 2069-70 exhibits signs of OVERFLOW/ LOW INTEREST IN reasonable promises for the industry at GOVERNMENT SECURITIES Nepal Rastra Bank through monetarylarge and Banking in par cular, with poli cal policy 2069-70 increased Cash Reserve Raconsensus for major economic issues, o to 6% from earlier 5%. This will e upappearing around the corner and the
Banking industry undergoing structuralIn the Interim Budget, the Government of changes backed by support and measuresNepal announced considerable taken by NRB. expenditure to provide impetus to the economy and keep the business sen ments afloat.
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Your Bank has received the approvalachieve improved efficiency indicators. from NRB for opening of branches at 6MEASURING OUR SUCCESS new loca ons, which will be opened during the current FY. The recentBUSINESS PERFORMANCE measures and policy delibera ons mainlyYour Bank posted 25.75% growth in Deposits on Agriculture, Power and Avia on sectorand 21.85% growth in Advances, which are expected to improve overallexceeded the industry averages during the investment climate in the country. Theyear. Your Bank con nues to maintain its country is expected to achieve a higherpremier posi on in the country, as one of the GDP growth rate of 5.5%. most efficient and financially robust Banks. With proximities to two major economiesThe overall business of the Bank (deposits of the world, Nepal is likely to emerge asplus gross advances) reached a level of Rs. a preferred investment destination.7980.09 crore as at the end of 2068-69 as Presently, India continues to be the majoragainst Rs.6413.42 crore as at the end of trade partner and source of foreignprevious year, recording a growth of investments for Nepal. With the highRs.1566.67 crore (24.43%). The total potential of infrastructure growth indeposits increased by Rs.1092.18 crore to Nepal and neighboring countries andreach a level of Rs.5333.73 crore while continued positive growth rate all aroundadvances increased by Rs.474.49 crore to the Region, the Banking industry in Nepalreach a level of Rs. 2646.37 crore by the is expected to receive better businessend of the reported year. In line with the opportunities. The country offerscon nued rise in interest rates, par cularly significant opportunities in potentialduring the first half of the year, the cost of areas such as textiles, handicrafts, agrofund of the Bank rose from 5.18% to 5.48% based industries and tourism in 2068-69, while yield on loan and advances improved from 12.20% to The foremost challenge before the Bank12.73%. Yield on interest earning assets of will be to improve its market share withthe Bank also improved from 8.05% during emphasis on stable and long term low-the FY 2067-68 to 8.18% during the FY cost deposit base. Maintaining asset2068-69. quality, developing new products and improving delivery channels,The total number of deposit accounts restructuring business processes in theregistered an increase of 76,123 and techno-driven environment, developingreached a level of 384,767 showing an sophisticated risk management systems,accre on of 24.66%. Likewise, the improving net interest margin, andborrowal accounts of your Bank profitability through non-fund basedincreased by 2,245 reaching a level of business, ensuring high quality of12,244 as at the end of the year. customer service and adopting best Corporate Governance practices, wouldTREASURY AND INVESTMENTS continue to remain important guidingExcess liquidity condi ons in local market factors for your Bank. and low investment opportuni es amidst uncertain es, affected the equity markets as well. The year witnessed decelera on in Your Bank will continue to remain aliveinvestment avenues and affected margins and abreast of the emergingin treasury opera ons. On the back of ac ve opportunities and will continue topar cipa on in the short term money
markets, and remaining dynamic to theexcess funds in safe condi ons, your Bank selec vely deployed
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Nepal SBI Bank Limited
19Annual Report
2068-69
avenues. In the face of uncertain es incost (over 11% rate) deposits to total fixed the equity markets, your Bank refraineddeposit was brought down from 39.49% as from taking fresh exposures in equi es,at end-Ashad 2068 to 22.66% as at endexcept taking some trading calls.Ashad 2069. The Government securi es markets becamera o of low cost deposits (deposits a rac low income yielding proposi on in theng 0%-5% RoI) increased from 42.78% as second half of the financial year. at end-Ashad 2068 to 43.22% as at endAshad 2069. This improvement was Despite s ff compe on for Dollar deposits,aided by robust increase of 28% in your Bank mobilized higher foreignSaving Bank deposits. currency deposits during the year. These foreign currency deposits are placedRETAIL BANKING SEGMENT back to back at overseas centres, as With aggressive marke ng, be er permi ed by NRB. This growth in foreign services and increased customer currency deposits was achieved with confidence, retail segment deposits higher profit margins for the Bank, this recorded a growth of Rs.273.47 crore year. We were able to significantly during 2068-69 as against the growth of improve our margins on this business Rs.238.90 crore during the previous from 14bps in 2067-68 to 24bps in 2068- year. This was an all me high growth 69. recorded by your Bank. Number of Retail segment deposit accounts grew by 75069 to reach at 379721, thereby showing a CREDIT MANAGEMENT The overall credit demand remained growth of 24.64% during the FY 2068-69. subdued during 2068-69, amidst low Interest rates were revised periodically economic ac vity in the country. during the year in line with the market scenario. Special deposit mobiliza on Nevertheless, the Bank con nued to focus on qualita ve credit growth and faster campaigns were launched for improving credit delivery with special emphasis on the pace of acquiring new customers both produc ve sector to generate qualita vefor savings and current deposits. Your Bank opened 69,568 new savings deposit growth in advances. A total of 2245 accounts, pos ng a good growth advance accounts with a fund based sanc oned exposure of Rs.915.61 crore wereof 24.97% during the year. added to our books during the year. During the year, your Bank sanc oned credit faciliAmidst so ening of demand from es aggrega ng Rs.104.04 crore to 22 highmanufacturing sector, the retail loan value new customers besides increasingsegment witnessed s ff compe on. The Retail credit limits of the exis ng customerssegment advances stood at Rs. 848.68 crore based on their requirements. In view of thein 2068-69 as against Rs.752.21 crore in the prevailing economic scenario, proac veprevious year. During the year, the schemes dialogue was ini ated with customers withfor financing car, housing, educa on and regard to their expecta ons from yourmortgage were modified from me to me, Bank. keeping in view the market dynamics of the
segment. Overall, your Bank booked 1,767 new retail advances accounts and sanc oned REPLACING HIGH COST DEPOSITS Your Bank started a major exercise ofRs.256.35 crore under various loan schemes replacing high cost deposits by a rela velyunder the Retail Banking Segment. more stable personal segment deposits during the year 2068-69. The ra o of highDEPRIVED SECTOR LENDING
As at end-Ashad 2069, your Bank’s Deprivedthe previous year. This cons tuted 3.74% of sector advances increased to a level ofthe advances, and was above the benchmark Rs.86.80 crore as against Rs.60.22 crore inof 3.50% prescribed by Nepal Rastra Bank.
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19Annual Report
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19Annual Report
You are always a winner.
THE BOARD OF DIRECTORS
Ms. Hasana Sharma Chairperson Representing Employees’ Provident Fund
Mr. Hemant G. Contractor D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Rajan Srinivasan D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Vijay Jasuja D ire c to r R e p re s e n tin g S ta te B a n k O f In d ia
Mr. Manoj Kumar Agrawal Mr. Niranjan K Tibrewala Mr. Keshav Raj Acharya D ire c to r D ire c to r D ire c to r R e p re s e n tin g P u b lic S h a re h o ld e rs R e p re s e n tin g P u b lic S h a re h o ld e rs P ro fe s s io n a l E x p e rt D ire c to r
Mr. Alok Kumar Sharma Managing Director Representing State Bank of India
External Auditor T.R. Upadhyaya & Co. Company Secretary Mr Ramesh Ghimire
TABLE OF CONTENTS
• • Performance Indicators Annual Report of Board of Directors o Review of the Fiscal Year 2068-69 • Economic Environment • Banking Industry Recent Developments Impac ng • Banking Business o Measuring our Success o Corporate Ci zenship o Value Crea on and Alloca on o Progress Report for the Current Year o Changes in the Board of Directors o Statutory Auditors Further Informa on and o Disclosures o Path Ahead o Acknowledgement Ad o di onal disclosures Organi za onal Structure Management Team Head of Departments/ Units Human Resources and Industrial Rela ons Business Promo on and Social Responsibility Ini a ves Products And Services Corporate Governance Our Network Risk Management Shareholders’ Informa on Five years’ financial highlights Independent Auditor’s Report Financial Statements for the FY 206869 2 3 3 3 4 5 6 9 12 12 12 13 13 13 13 14 17 18 19 20 20 21 24 26 31 32 33 34 3693
• • • • • • • • • • • • •
•
Approval from Nepal Rastra Bank
94
Design & Produc on by: Ul mate Marke ng (P.) Ltd. 4352223, 4385610 | info@marke ngul mate.com Printed at: Ul mate HiTech Press (P.) Ltd.
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19Annual Report
2068-69
N epal S B I B ank Lim ited
PERFORMANCE INDICATORS
Deposit (Rs. in Billion)
53.3 42.4 34.9 17.96
Advances (Rs. in Billion)
26.46 21.72
206667
2067-68
2068-69
206667
2067-68
2068-69
Total income (Rs. in Billion)
1.41 1.11
Net profit (Rs. in Million)
1.5 391.7 464.5 480.1
2066-67
2067-68
2068-69
2066-67
2067-68
206869
Investment (Rs. in Billion)
24.5 16.3 18.9
NPA Amount (Rs. in Million)
265.13 239.30 143.8 5
2066-67
2067-68
2068-69
2066-67
2067-68
206869
NPA Gross (in %)
1.48 1.10
0.54
206667
2067-68
2068-69
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Nepal SBI Bank Limited
19Annual Report
REPORT OF THE BOARD OF DIRECTORS
challenges to the The Board ofglobal economy, a Directors of Nepalrecovery from the SBI Bank haveeconomic crisis tenta pleasure in presen ngvely started this Annual reportemerging, albeit together with theunequally distributed. audited BalanceThe developing world sheet and Profit &reported rela vely loss account for thestrong growth, year ended 31 Ashaddespite apparent risks 2069 (15.07.2012). of overhea ng. While most advanced economies s ll con REVIEW OF THE FY nue to experience 2068 69 sluggish recovery, persistent unemployment, and ECONOMIC financial vulnerability, ENVIRONMENT par cularly in Europe, WORLD ECONOMY which adversely The year started with aaffected the business levels, word of cau on, indicaconfidence ng decelera on in keywith no clear horizon growth indicators in thefor improvement. In on, rising world economies andaddi apprehension of concommodity prices nuing weakness ineroded the major economies, parpurchasing power of cularly in Europeanconsumers and markets. The Internaslowed down the pace onal Monetary Fundof recovery. Uncertain (IMF) has projectedes emana ng from the global economic growthdoubts on to decelerate and growsustainability of only by 3.3 percent inpublic debt of some 2012. Economic growthadvanced economies, projec on in ourkept the global neighboring countries also showed incipient signs of slow down during the year under review. Amidst mul ple
The economic investment climate andenvironment in investors’ confidence atNepal has been low levels during thetough for many period. The veryyears and the review viability of the euro asyear is no excep on. an alterna ve to USCurrent poli cal, Dollar came in to queseconomic scenario on and becameand other debatable for most partinfrastructural issues of the year. made the things more difficult for Most of the Asianbusiness and countries, includingindustries. Economic Nepal showed resilienceindicators of the to adverse globalcountry showed posi developments. ve change during the However, majoryear under review, economies in themainly backed by Region, viz. India andconsiderable China, which are alsocontribu on from the major tradeAgriculture sector. partners of Nepal, conOur country expects nued to show lowerto post a real GDP growth rates repeatedlygrowth rate of 4.6% on QoQ basis. at basic price, as against 3.8% growth Overall, high vola lity induring the previous global equity, currencyyear. The growth is and commodity markets,largely a ributable to emerging threat of rising4.9% rise in infla on, sta c orAgricultural sector. deteriora ng financialIndustry, health of large BankingManufacturing sector conglomerates in theshowed a drop in developed countriesgrowth rate at 4.3% remained the majoras against a growth areas of concern of theof 4.5% during the year. financial market playersprevious Services sector across the world. posted an increase of 4.3% over 3.4% ECONOMIC during the previous ENVIRONMENT IN fiscal Year. NEPAL
19Annual Report
2068-69
N epal S B I B ank Lim ited
3
Tourism industry observed a lowerThe increasingly complex poli cal condi ons growth of 19.3% in terms of touristalso propelled liquidity in the market and arrivals by Air during the first 11 monthsinvestment outlook remained subdued in the of the FY 2011-12 as compared to 21.1%domes c economy. during the corresponding period of theOwing to con nuously rising liquidity, the previous FY. incremental credit-deposit ra o (CD ra o) of
commercial Banks suffered and worked out The annual average consumer inflationat about 51% for 2068-69. Your Bank’s on point-to-point CPI, decreased to 8.0%incremental credit to local currency deposit during FY 2068-69 (2011-12) as againstra o during the period was compe vely placed at 118.26%, which helped the Bank to 9.6% in previous year. register a sa sfactory credit to local currency On external front, the country’s Balance Ofdeposit ra o of 80.40% as at the end of the payment (BOP) recorded a surplus of Rs.year. CDC (Credit to Domes c deposit and 113.22 billion due to rise in exports andcore capital) ra o of your Bank also rose from decline in imports, as against deficit of Rs.68.43% to 73.30% during 2068-69. 33.56 billion in the previous year. The huge challenges in the overall BOP surplus was mainly backed by remiDespite economic environment, the Bank posted ance inflow, which crossed Rs.320.38 billion thereby registering an increase ofhigher opera ng profit (before loan loss 39.6%. During 2068-69, the US dollarprovisions) of Rs.751.66 million, as appreciated by about 20% as againstcompared to Rs.720.56 million in Nepalese currency, NPR. As such, in theprevious year and achieved qualita ve backdrop of weakening NPR in 2068-69,improvement in asset por olio, with the pos ng of surplus BoP reveals inherentgross NPA and net NPA level at 0.54% strength and promising future of theand 0.32% respec vely, down from 1.10% and 0.47% respec vely, as at the end of country’s economy.
the previous year.
Foreign exchange reserves of USD 4.82 billion at the end of Jestha 2069 wereA number of measures have been taken marginally lower, as against USD 4.84 billionby Nepal Rashtra Bank to improve the investment scenario and channelize the during the same period last year.
excess liquidity into produc ve sectors. Amidst uncertain es in local condi onsThis, besides others, includes increase in and poli cal scenario, the inflow ofReserve ra os and incen ve to export and foreign direct investment remainedagriculture sector. weak. India with the highest contribu on and China as the next, con nue to be theTHE BANKING INDUSTRY Banks operate in a highly competitive major source of FDI for the country. arena where 32‘A’ class commercial The review period witnessed sudden Banks, 88‘B’ class Development Banks reversal of ght liquidity condi ons since and 70 ‘C’ class Finance Companies and ‘23’ other financial intermediaries beginning of the year. The trend compete for a share in the financial became more prominent during the market. Net interest margins have come second half of the year. Highly liquid under pressure, as attractive investment markets also kept Banks’ opera ng opportunities have dried up amidst margins under pressure. liquidity in the market and resultantly
yields on investments are steadilyassets at the highest order, concentrate declining. This warrants Banks toon enhancing non-interest income, and increasingly maintain the quality ofefficiently
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4
Nepal SBI Bank Limited
19Annual Report
2068-69
liquid assets of the BFIs and will warrant more prudent management of funds to protect spread and profitability. Your Bank During the first eleven months of FYhas sufficient liquidity to meet the 2068-69 (July 2011- July 2012), depositenhanced criteria. accre on in Banking industry wasMERGER AND ACQUISITION reported at 18.2% or Rs.149.92 billion.Nepal Rastra Bank introduced Merger However, Loans and advances of thebylaw, 2011 during the review period in industry during the same periodorder to encourage BFIs to undergo merger increased by 14.1% or Rs. 120.14 billion.process with an objec ve of enhancing Liquidity Ra o of Banking industry as aresilience of banking industry. Recently, whole improved to 32.5% as on Jesthamerger of two commercial Banks and five end 2069 (14th June 2012) as againstfinance companies resulted in the forma on 30.6% as on Ashad end 2068 (16th Julyof two Banks and a finance company. Addi onally, four development banks and four 2011). finance companies have been merged to The capital adequacy ra o of most of theform four development banks. Further, 17 Banks exceeded both local and internafinancial ins tu ons have submi ed their onal regulatory requirements. Theapplica ons to obtain the le er of intent for financial market infrastructure hasmergers. Backed by our reach through 59 improved substan ally in recent yearsopera ng units, 75 ATMs, dedicated work reducing systemic risks. Significantforce, technology driven opera ons, and progress in product innova on andsupport of large client base, your Bank has service delivery was also observed,developed intrinsic strength and is well poised to take on the compe on in the during the year under review. changed market condi ons.
manage their resources to achieve growth in profitability levels.
For the last few years, there has been notable expansion in the geographical andINCREASE IN DEPRIVED SECTOR numerical presence of the Banks andLENDING financial ins tu ons with expanded financialNepal Rastra Bank has increased the deprived sector lending transac ons as well. At the end of Ashadmandatory target for ‘A’ class commercial Bank to 4 2069, branches of the commercial Banks, development Banks, finance companies% from 3.5% by end of upcoming fiscal and micro – finance ins tu ons expanded toyear 2069-70. This is part of NRB’s to gradually increase 1369, 686, 331 and 550 respec vely. Thisendeavor investment to deprived sector during has significantly improved the public next 3 years. Your Bank closed the year access to formal Banking channel. with Deprived Sector lending at 3.74%, thereby surpassing Deprived Sector RECENT DEVELOPMENTS lending targets set by NRB for the year. IMPACTING BANKING
BUSINESS
OPPORTUNITIES, CHALLENGES AND OUTLOOK INCREASE IN CRR/LIQUIDITY The year 2069-70 exhibits signs of OVERFLOW/ LOW INTEREST IN reasonable promises for the industry at GOVERNMENT SECURITIES Nepal Rastra Bank through monetarylarge and Banking in par cular, with poli cal policy 2069-70 increased Cash Reserve Raconsensus for major economic issues, o to 6% from earlier 5%. This will e upappearing around the corner and the
Banking industry undergoing structuralIn the Interim Budget, the Government of changes backed by support and measuresNepal announced considerable taken by NRB. expenditure to provide impetus to the economy and keep the business sen ments afloat.
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Your Bank has received the approvalachieve improved efficiency indicators. from NRB for opening of branches at 6MEASURING OUR SUCCESS new loca ons, which will be opened during the current FY. The recentBUSINESS PERFORMANCE measures and policy delibera ons mainlyYour Bank posted 25.75% growth in Deposits on Agriculture, Power and Avia on sectorand 21.85% growth in Advances, which are expected to improve overallexceeded the industry averages during the investment climate in the country. Theyear. Your Bank con nues to maintain its country is expected to achieve a higherpremier posi on in the country, as one of the GDP growth rate of 5.5%. most efficient and financially robust Banks. With proximities to two major economiesThe overall business of the Bank (deposits of the world, Nepal is likely to emerge asplus gross advances) reached a level of Rs. a preferred investment destination.7980.09 crore as at the end of 2068-69 as Presently, India continues to be the majoragainst Rs.6413.42 crore as at the end of trade partner and source of foreignprevious year, recording a growth of investments for Nepal. With the highRs.1566.67 crore (24.43%). The total potential of infrastructure growth indeposits increased by Rs.1092.18 crore to Nepal and neighboring countries andreach a level of Rs.5333.73 crore while continued positive growth rate all aroundadvances increased by Rs.474.49 crore to the Region, the Banking industry in Nepalreach a level of Rs. 2646.37 crore by the is expected to receive better businessend of the reported year. In line with the opportunities. The country offerscon nued rise in interest rates, par cularly significant opportunities in potentialduring the first half of the year, the cost of areas such as textiles, handicrafts, agrofund of the Bank rose from 5.18% to 5.48% based industries and tourism in 2068-69, while yield on loan and advances improved from 12.20% to The foremost challenge before the Bank12.73%. Yield on interest earning assets of will be to improve its market share withthe Bank also improved from 8.05% during emphasis on stable and long term low-the FY 2067-68 to 8.18% during the FY cost deposit base. Maintaining asset2068-69. quality, developing new products and improving delivery channels,The total number of deposit accounts restructuring business processes in theregistered an increase of 76,123 and techno-driven environment, developingreached a level of 384,767 showing an sophisticated risk management systems,accre on of 24.66%. Likewise, the improving net interest margin, andborrowal accounts of your Bank profitability through non-fund basedincreased by 2,245 reaching a level of business, ensuring high quality of12,244 as at the end of the year. customer service and adopting best Corporate Governance practices, wouldTREASURY AND INVESTMENTS continue to remain important guidingExcess liquidity condi ons in local market factors for your Bank. and low investment opportuni es amidst uncertain es, affected the equity markets as well. The year witnessed decelera on in Your Bank will continue to remain aliveinvestment avenues and affected margins and abreast of the emergingin treasury opera ons. On the back of ac ve opportunities and will continue topar cipa on in the short term money
markets, and remaining dynamic to theexcess funds in safe condi ons, your Bank selec vely deployed
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avenues. In the face of uncertain es incost (over 11% rate) deposits to total fixed the equity markets, your Bank refraineddeposit was brought down from 39.49% as from taking fresh exposures in equi es,at end-Ashad 2068 to 22.66% as at endexcept taking some trading calls.Ashad 2069. The Government securi es markets becamera o of low cost deposits (deposits a rac low income yielding proposi on in theng 0%-5% RoI) increased from 42.78% as second half of the financial year. at end-Ashad 2068 to 43.22% as at endAshad 2069. This improvement was Despite s ff compe on for Dollar deposits,aided by robust increase of 28% in your Bank mobilized higher foreignSaving Bank deposits. currency deposits during the year. These foreign currency deposits are placedRETAIL BANKING SEGMENT back to back at overseas centres, as With aggressive marke ng, be er permi ed by NRB. This growth in foreign services and increased customer currency deposits was achieved with confidence, retail segment deposits higher profit margins for the Bank, this recorded a growth of Rs.273.47 crore year. We were able to significantly during 2068-69 as against the growth of improve our margins on this business Rs.238.90 crore during the previous from 14bps in 2067-68 to 24bps in 2068- year. This was an all me high growth 69. recorded by your Bank. Number of Retail segment deposit accounts grew by 75069 to reach at 379721, thereby showing a CREDIT MANAGEMENT The overall credit demand remained growth of 24.64% during the FY 2068-69. subdued during 2068-69, amidst low Interest rates were revised periodically economic ac vity in the country. during the year in line with the market scenario. Special deposit mobiliza on Nevertheless, the Bank con nued to focus on qualita ve credit growth and faster campaigns were launched for improving credit delivery with special emphasis on the pace of acquiring new customers both produc ve sector to generate qualita vefor savings and current deposits. Your Bank opened 69,568 new savings deposit growth in advances. A total of 2245 accounts, pos ng a good growth advance accounts with a fund based sanc oned exposure of Rs.915.61 crore wereof 24.97% during the year. added to our books during the year. During the year, your Bank sanc oned credit faciliAmidst so ening of demand from es aggrega ng Rs.104.04 crore to 22 highmanufacturing sector, the retail loan value new customers besides increasingsegment witnessed s ff compe on. The Retail credit limits of the exis ng customerssegment advances stood at Rs. 848.68 crore based on their requirements. In view of thein 2068-69 as against Rs.752.21 crore in the prevailing economic scenario, proac veprevious year. During the year, the schemes dialogue was ini ated with customers withfor financing car, housing, educa on and regard to their expecta ons from yourmortgage were modified from me to me, Bank. keeping in view the market dynamics of the
segment. Overall, your Bank booked 1,767 new retail advances accounts and sanc oned REPLACING HIGH COST DEPOSITS Your Bank started a major exercise ofRs.256.35 crore under various loan schemes replacing high cost deposits by a rela velyunder the Retail Banking Segment. more stable personal segment deposits during the year 2068-69. The ra o of highDEPRIVED SECTOR LENDING
As at end-Ashad 2069, your Bank’s Deprivedthe previous year. This cons tuted 3.74% of sector advances increased to a level ofthe advances, and was above the benchmark Rs.86.80 crore as against Rs.60.22 crore inof 3.50% prescribed by Nepal Rastra Bank.
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