Bhusan Rana is chief executive officer of Manakamana Development Bank.

Bhusan Rana is chief executive officer of Manakamana Development Bank. Rana, who has been in the banking sector for a long time, has recently joined the bank as its chief executive. The Kathmandu Post talked with Rana about the bank's present status and future plans. Excerpts:

How has the transformation from CSID Bank to Manakamana Development Bank been?

The transformation has been quite smooth. We the new management have been looking after the bank for seven months. First, we took over the board and then the management. The new promoters have injected Rs. 540 million into the bank. Six of us, including myself and our general manager, took over the responsibility of the management of the bank.

At that time, the bank's non-performing assets (NPA) amounted to around 73.8 percent and capital was just Rs. 160 million. After we injected Rs. 540 million, the capital base became Rs. 700 million. After seven months of our operations, we've been able to reduce the NPA to 8.4 percent and post a net profit of Rs. 92.2 million.

How difficult was the whole process?

The process by itself wasn't very difficult. The old promoters wanted to be free of the problems of CSID Bank. And for them, our entry was more of a blessing in disguise. They just had a managing director at the bank and the others were junior staff. So taking over the management was also not difficult.

What initiatives has the bank taken after the change in promoters and management?

When we took over the management, we did the annual general meetings of the last five years. And what we found was that in the last four years, the bank was making a profit. In the last seven months, we've concentrated on the formation of the necessary policies. At the same time, we formed various departments in the bank and recruited basic level staff to build the team. A lot of money was recovered during this period.

How has the second quarter of the fiscal year been for Manakamana Development Bank?

The second quarter has been pretty good. The bank has posted a net profit of Rs. 92.2 million and the NPA has declined to 8.4 percent. If we look at the operating profit, our profit is higher than that of some commercial banks.

What are the future plans of your bank?

Apart from shifting our corporate office from Kamaladi to Annapurna Arcade, Durbar Marg, we will be making our initial public offering (IPO). We aim to collect Rs. 300 million to take our paid-up capital to Rs. 1 billion. There are plans to open four-five branches within this fiscal year.

New deposits schemes and businesses are in the offing. We're starting remittance business by this month. The bank has already made an agreement for ATM cards. We're going into the market aggressively.

We're concentrating on small scale industry by promoting cattle farming and investing in small hydro. Our aim is to post a net profit of between Rs. 150-180 million at the end of this fiscal year.

How much has your bank invested in the realty sector?

Before we took over, there was a substantial amount of investment in real estate. As of now, the bank's exposure in the realty sector is around Rs. 300-400 million. Once we start diversifying into other sectors, this exposure will definitely come down.

How much has the liquidity crunch affected development banks like yours?

Since our capital base is relatively small, we're not much affected by the liquidity crunch. It is not a major problem for us because we can manage it.

Is there any plan to upgrade to a commercial bank like many other development banks have done?

Yes, there is a plan to upgrade. We're aiming to do it next year. We hope to fulfil the criteria required for upgrading by the end of this fiscal year. The bank has been making a profit for the last four years. And this year too it will be making a profit. So we'll be fulfilling one criteria that is making a profit continuously for five years. We're aiming to reduce the NPA to below 5 percent. At the same time, our plan is to increase the paid-up capital to Rs. 2 billion. Next year, we'll issue 1:1 rights share for this. And then we'll approach the central bank. There is more scope as a commercial bank than a development bank.

http://www.kantipuronline.com/2010/02/26/business/we-aim-to-upgrade-to-a-commercial-bank/309149/