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22 Mar 2020

Flexibility in Bank Default Act must for project financing, says Rana

Sharmila Thakuri
Sharmila Thakuri
Ashok Rana
Ashok Rana

Ashok Rana is a CEO of Himalayan Bank who is considered as one of the very good executives in the Nepal’s banking sector.

Facing many hurdles, he has driven the bank with unbearable ups and down and has been proved as one of the excellent banking institutions of Nepal that is voyaging into a very smooth path today.

A graduated in Economics from the varsity in the USA, CEO Rana began his service career from the then Nepal Arab Bank which turned into Nabil Bank today.

After that he set up Gorkha Brewery and took up to the optimum height. Later, the company management was handed over to another party quitting himself from the brewery business.

Then after, he joined into the Himalayan Bank where he is currently serving as Chief Executive Officer.

He is a son of Himalaya Shamsher Rana- the first Governor of Nepal Rastra Bank and a well-known figure in the Nepal’s banking sector who was also one of the founders of the Himalayan Bank,

A dynamic personality and a well experienced hand in Nepali banking sector CEO Rana is completing his four-year term as CEO in the next month (April).

He talked on the current scenarios of the Nepalese banking area with Our Reporter Ms. Sharmila Thakuri in his office the other day.

Following are the excerpts:

These days, Coronavirus has been affecting the world’s socio-economic and daily life-style. Is banking sector too has been hit by it?

No doubt, Coronavirus has hit and affected negative impact not only in Nepal’s banking sector but the world’s economic activities too. As most of the banking institutions including ours’ had invested huge capital in Nepal’s tourism sector but due to Covid-19 this hospitality industry has faces unimaginable circumstances and forced to be closed down.

The next is, Nepal is also one of the importers of various goods from China in which we the Nepal’s banking sector has used huge size of our capital. Also, due to the worldwide spreading crazy-disease virus has also forced to halt many projects.

In sum up, as almost all the businesses are forced to shut down, it seem the slowdown in economic activities. This means, the revenues of the government will be downfall and the Nepalese economy will see negative scenarios.

Banks are also facing about their investment which casts in doubt today because of unbearable situation rises in the world. Let’s hope, the situation will not affect with big hole in the banking sector.

Nepal Rastra Bank (NRB) has instructed all the banks to receive “gold” deposit. What’s the process being on-going?

Investment in the gold is an unproductive. NRB has given directives to make it productive receiving gold deposit. However, banks are not able to afford in these provision as they are facing lack of extra-capital.We don’t have such huge capital to use in gold deposit scheme. If NRB introduces gold deposit in CCD ratio, that figures in 77/78 these days, then only it can be taken as a deposit otherwise it is not so easy to adopt.

It seems that banks’ loan disbursement has come down by 10%. What could be the reason that banks have fail to invest?

The import business is very low in the country. Thus, opening of Letter of Credit and demand for the business loan ratios are not as much expected. In other side, iron, cement industries’ big amount has also frozen as they are not being able to clear their products in the market. This has affected in the capital mobilization as well as the revenue collection of the government.

CEOs of most of the banks in Nepal are foreign products and have wide experiences. Even though what could be the reason that why there is lack of project financing?

There are two causes that project financing cannot implement as expected. The first is Banking Default Act and the other is Personal Guarantee provision.

On the issue of Act, it is very unbearable. Until and unless there is flexibility in the Banking Default Act it is hard to implement the project financing strategy. And on the second concern, we have discussed lots with the concerned authorities several times. However, no any remarkable progress has been made yet.

Even the provision of Hedging Fund has been introduced by the NRB, why banks are not able to bring in foreign investment?

There is no difference between the amount collected in the country and bringing from outside. The rate might cost 9% which is a costlier. As the rate of dollars is increasing day by day it is risk to bring capital investment from outside. If there comes any problem, the foreign investors might take back their investment which might create the banking sector into a problematic. However, all the banks have been studied thoroughly and are in green zone, if needed, to bring foreign investment.

As the banking frauds are being increasing what are the steps banks are taking to control?

Luckily, all banks’ core-banking-system have not been hacked yet. Whatever the frauds made earlier were through other means of system-hacked. It could be controlled which we were succeeded. Also, we learnt big lessons and need to be serious. Yes, all banks are able to control and protect all data and cautiously working to stop further hacking problems and trying to control payment-gateway-system effectively. Talking about our bank, we are updated, safe and we are able in protection all kinds of financial data and transactions.

In the market, there is rumour that Himalayan Bank and Nepal Investment Bank are going to merge soon. Is it true?

Himalayan Bank has not taken any step forward on this rumor issue till date. Our partner, Pakistan’s Habib Bank wants to take out hands of cooperation with us. Now, we are on process of clearing to bid farewell to Habib Bank. After, there departure, might be we can move ahead to welcome new partner to join in our bank. So, in the meantime, it is just a rumour.

Himalayan Bank and Habib Bank are working together in Nepal since over 26 years. Could you little clarify on the reasons that why Habib Bank is leaving?

Habib Bank is leaving Nepal because firstly, the trade volume of Nepal with Pakistan is very small. Second, Pakistani entrepreneurs doing business in Nepal are also only handful. So, in the competitive market, they might have realized now that Nepal is not their profitable destination. For your reference, not only from Nepal but they have so far withdrawn their partnership in seven more countries.

There has been news of conflict in the board of Himalayan Bank? What were the problems?

No, actually it is not conflict. There were nine member Board of Directors in the Himalayan Bank. But, as per the new instruction circulated by NRB we have to limit our members into seven. So, among the nine member board two have to quit. Certainly, this provision has made some uncomfortable. However, we compromised and refreshed our Board of Directors accordingly. I think it is not such a big problematic issue, however, we have already sorted out easily.

Could you brief out about the problems created with Melamchi Project between Himalayan Bank and China Construction Bank?

We are on the process of talking to solve it. We have to sit down on the table but because of worldwide spreading coronavirus we could not visit to China now. Thus, we are having video conference instead. However, according to the progress made so far we are hopeful that the amount will be reversed by China Construction Bank within the end of this fiscal year.

Marginalized community used to say that Himalayan Bank is not in favour to serve them. Any comments?

That is totally wrong. We have been supporting banking activities to those marginalized community through joining hands with RMDC, Chhimeki, Swabalamban and Nirdhan Uthhan Laghubitta. We are also disbursing marginalized-people benefit loan through those institutions and also expanding our branches to the various community based areas.

At last, any more information to be added?

As per the NRB’s evaluation, Himalayan Bank has been categorized as one of the perfect institutions who can handle risk-management well. We are working with a specific way and accumulating profit as per expectation. However, we have to do still more homework seriously to make our deposit volume heavy and loan disbursement figure wider.

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