Citizens Bank International Limited Chief Executive Officer Rajan Singh Bhandari

KATHMANDU, APR 21 -

Tell us about the progress you have made over the last four years.


The bank’s progress in the last four years has been encouraging as the financial results have remained good. We are able to distribute dividends within two years of starting operations. Last year, we gave 12.63 percent dividend and were among the top 12 banks in terms of percentage of dividend we issued to our shareholders. As of the third quarter of the current fiscal year, our branch network has expanded to 26 locations. Our deposits stand at Rs 13.86 billion and credit amounts to Rs 12.6 billion. Our bank’s financial health is also sound with the capital adequacy ratio at 16.4 percent and non-performing loans at 0.4 percent.


Don’t you think a dividend of 10-12 percent is small?


There is intense competition in the market. Banks have been compelled to operate at a very low spread rate due to an increased cost of funds. Our spread rate is just 2.57 percent, and we have enhanced our efficiency to make a profit. Overhead costs are increasing, and banks have also been forced to reduce lending due to a liquidity crunch. Despite this situation, issuing dividends at least in the amount of the maximum interest rate on deposits should be taken positively.


You failed to increase the paid-up capital to Rs 2 billion by the deadline set by the central bank. How long will it take for you to increase the capital to the required level?


The paid-up capital is not a big issue in terms of the bank’s health. However, we are committed to increase the paid-up capital to Rs 2 billion in the next two weeks. Our paid-up capital already amounts to Rs 1.92 billon, and it is not difficult for us to increase it to Rs 2 billion. We will first try to raise money from our promoters. We have other options too. We may also issue bonus shares for the purpose. As our primary capital is already Rs 2.05 billion, the bank suffers no problem in terms of banking health.

How is the liquidity situation in the banking sector at the moment?


It is still tight, but I hope it will ease in the coming days. With government spending increasing in the fourth quarter, banks get liquidity in terms of loan repayments and deposits. Lately, deposits in the bank have swollen with the increased government expenditure. Still, there is a huge amount of unspent budget in the government’s treasury which must come out. However, the worrying factor is that banks are still failing to attract deposits in large amounts that have remained outside the government coffers.


How have scandals like at Gurkha Development Bank affected deposits in the banking sector?


The scandals in development banks and finance companies affect commercial banks both positively and negatively. There may be a positive impact in the sense that people think commercial banks are more secure than other financial institutions. People may also think that the entire banking industry is bad. However, if such scandals take place in commercial banks, they may invite a systemic impact on the banking system.


Has the recent easing of realty and stock market lending by the central bank given respite to banks?


Of course, removal of restrictions on home loans up to Rs 6 million has helped us. We were not in a comfortable position to make extra lending in the realty sector earlier due to the liquidity crunch and relatively higher loan exposure. Now, our actual real estate loans have come down to 17 percent while it is 26 percent inclusive of home loans. We want further easing in the provision by classifying the housing sector as an industry.


Has bankers lobbying against the proposed amendment to the Banks and Financial Institutions Act (BAFIA) yielded any fruit?


Our stance that the salary of chief executive officers and investment in venture capital should not be fixed in the act itself is clear. The regulator should be given authority to determine such issues. Once such a provision is put in the act, it will take time to adjust them as per the time. Bringing the stake of business promoters down to 5 percent from the existing 15 percent is not practical as it will lead to a flood of shares in the market leading to a stock market crash.


What are your future plans?


We go for consolidation and focus on ensuring the quality of loans. We will also expand our services. We are going to issue international credit and debit cards in the near future. Quality service is our priority. In terms of lending, we are ready to issue credit to any worthy sector if there is a good proposal within the parameters fixed by the central bank.

Posted on: 2011-04-21 09:19
http://www.ekantipur.com/2011/04/21/business/well-increase-paid-up-capital-to-rs-2-billion-within-next-two-weeks/332837.html