Sudhir Khatri is the CEO of Grand Bank Nepal Limited, a category ´A´ financial institution, which until April 12 was known as Development Credit Bank Limited (DCBL). Khatri, who has remained the bank´s CEO since its inception in 2000, holds a Masters´ Degree in civil and industrial engineering from Rostov-on-Don Civil Engineering Institution in Russia and MBA Degree from Da La Salle University in the Philippines. He has also taken microfinance executive education course from Harvard University and acquired diploma certificate on international bank management from Sweden. In an interview with Republica he talked about the bank´s performance ever since it changed its name and its future plans. Excerpts:
How has been the performance of the bank ever since it changed its name from DCBL to Grand?
Last year during this period, the country´s banking sector was facing liquidity crunch. At that time, out deposits fell to around Rs 9 billion. However, in the last one period, we have managed to raise it to Rs 14.80 billion, which is a growth of over 60 percent. This is the best deposit growth the bank has recorded in its history. Likewise, our credit portfolio currently stands at Rs 11.25 billion, which a year ago was limited to Rs 8 billion. We are also expecting 100 percent increment in net profit this year from last year´s Rs 89 million. These figures show the performance of the bank has improved tremendously ever since we changed the name.
The bank also introduced some new products and services after changing its name. How have they contributed in increasing the revenue of the bank?
Yes, we did introduce some new services like Grand Remit after we renamed the bank. Using the Grand Remit, the bank is currently bringing in remittances from Gulf countries and countries like Australia. This has helped us increase our foreign currency revenue to around Rs 40 million this fiscal year from around Rs 10 million a year ago. In addition, mobile, SMS and internet banking services have also contributed in giving a push to our customer base.
But what about credit growth which has slowed down?
The problem of managing liquidity, which is in surplus in the banking industry, can only be addressed by increase lending. In this regard, we are planning to extend more credit to sectors such as agriculture, tourism, infrastructure and trading in the next fiscal year. We hope this this will expand bank´s credit portfolio to Rs 16 billion in the next fiscal year, while deposits are expected to grow to Rs 20 billion.
There are claims that banks and financial institutions have not been able to extend loans because of problems related to capital adequacy. What is your say?
Yes, the average capital adequacy ratio (a measure of capital reserves against assets at risk) of private-sector led commercial banks stands at around 12 percent, as against the central bank´s requirement of 10 percent. Since the gap between the regulator´s requirement and capital buffer maintained by banks is not very big, more than half of banks cannot go on issuing loans unless they strengthen their shock absorbing capacity by raising fresh capital or retaining large chunk of earnings. However, our bank has maintained capital adequacy ratio of over 18 percent, which is among the highest in the industry. So this gives us ample room to raise business volume. And by the end of next fiscal year, our capital adequacy ratio will hover at 12-13 percent.
Currently merger fever has gripped the banking industry. Do you have any such plans?
If rumors doing rounds in the market are true, the central bank will soon raise minimum capital requirement for category ´A´ financial institutions to Rs 5 billion from existing Rs 2 billion. In this regard, we have kept options open on merger or joint venture.
Are there any other new plans that you´d like to discuss?
Lately, our focus has been on reducing our exposure to unproductive sectors such as real estate. Currently, loans extended to real estate sector make up only 6-7 percent of the credit portfolio, while housing loans contribute to around 15 percent of the credit portfolio. We will also be giving priority to fee-based income, which are revenues generated from activities like issuance of letter of credit, trading, draft issuance, remittance, foreign currency transaction, sales of travelers´ checks and extension of bank guarantee.
How will these measures benefit bank´s shareholders?
We have been extending dividend to our customers in the form of bonus share or cash every year, except in the first year of establishment. This year we are planning to extend dividend equivalent to seven percent of net profit. Next year, we are planning to raise it to double digit, which is around 10 percent, if not 12 percent. This is important because it is our belief that shareholders should get dividend equivalent to yields offered by savings deposits.
Lastly, there are claims that remunerations of bank CEOs are exorbitant and they get paid regardless of their performance. What is your say?
Yes, bank CEOs are highly paid individuals. Even I fall among top 25 high earning individuals in the country. But we also make huge contribution to the state´s coffer by paying taxes to the tune of millions of rupees every year.
Source: Republica, Kathmandu, July 16, 2012