Commercial Banks Publish Base Rate
The commercial banks have started publishing their base rates. As of January 22, four commercial banks had published their base rates. These banks namely, Bank of Kathmandu (BoK), Kist Bank, Grand Bank and Commerz and Trust Bank Nepal published their base rates on their websites.
Among these banks, BoK, Kist, Grand and Commerz and Trust have a base rate of 8.29, 11.12, 10.49 and 10.14 per cent respectively. With the publication of their financial statements for the second quarter, commercial banks have begun revealing their base rates. Sudhir Khatri, Vice President of Nepal Bankers’ Association, said that all banks will be publishing their base rates before the publication of their quarterly financial statement.
Sunil Malla, Executive Vice President of Commerz and Trust Bank, said that operational cost will be added to the base rate while issuing credit. The Nepal Rastra Bank had directed the commercial banks to reveal their base rates around a month back.
According to Khatri, new banks’ average base rate hovers between 9.50 to 10 per cent while that of the old and joint venture banks is about 7.70 per cent.
BO2 to Boost Growth of SMEs
Nepal’s first Small and Medium Enterprises Venture Fund, Business Oxygen (BO2), was launched on 15th January. BO2 is managed by a joint venture of Bank of Kathmandu Ltd and Beed Management. BO2 will be making equity investments in SMEs in Nepal and will cater to the needs of businesses that are unable to get finances through traditional banking means of collateralized loans. Beed BOK Ventures won the global bid to manage the IFC-SME Venture Fund, conceptualized and promoted by the International Finance Corporation (IFC), a member of the World Bank Group.
“Providing risk finance to small businesses in countries with limited ready access to sophisticated capital markets has been the key focus of our programme,” said Peter Tropper, Chief Investment Officer, IFC.”
“This fund will widen financing options for the SMEs in Nepal, helping SME growth and sustainability,” said Kyle F Kelhofer, IFC Country Manager for Bangladesh, Bhutan and Nepal.
“IFC is keen about strengthening SMEs in Nepal that account for 96 per cent of the total industries and play a vital role in the country’s economy.”
Ajay Shrestha, CEO, Bank of Kathmandu Ltd, said, “This kind of financing arm can provide options for developing a balanced financial structure of small and medium sized business ventures, which in turn can be comforting for the entire banking sector.”
Beed BOK Ventures won the global bid to manage the IFC-SME Venture Fund, conceptualized and promoted by the IFC.
Suman Rayamajhi has been named the CEO of Business Oxygen. CEO of Beed, Sujeev Shakya said “This is yet another step for Beed, an organization that believes in being associated with pioneering efforts and innovation. This is a very proud moment for Beed.”
The fund will invest up to USD 500,000 in equities in companies that are already six months in operations and comply with all the investment guidelines.
Merger: A morale-booster
Nepal Rastra Bank’s policy to encourage merger between bank and financial institutions seems to be paying off. The latest merger inked on February 1 between NIC Bank and Bank of Asia, both ‘A Class’ commercial banks, shows just that. This merger will create a bigger capital base and infrastructure for the new entity, which in turn would help serve the clients better and lend strength to the nation’s fledgling banking industry.
As of now, any individual bank’s lending capacity is far from being impressive. The banks are not able to finance cost-intensive projects. For business and commerce to intensify and industries to grow, a strong banking system with financial depth is a prerequisite. It’s heartening that the country has a plethora of banks. The only problem is that they lack capacity and that is a big drawback. Institutional capacity and strong capital base are the fundamental parameters for the banking industry the world over. And, Nepali banks will have to do the catching up before they are taken seriously both within and outside the country.
A merger of this kind where two commercial banks rated highly for their institutional and financial strengths are merging helps the industry in a big way. Now, the new entity can finance even more costintensive projects. This is good news for the industry and the economy of the country. Industrial development has not taken off in the country as yet but with a more stable political environment, this is likely to begin soon. And, for that to begin, banks need to be in a position to drive and sustain such growth, which basically means they need to have the institutional capacity and capital base of a different level, something perhaps unimaginable now.
But as they say, take a step at a time and take it in the right direction. This latest merger of two commercial banks is surely such a step – taken in the right direction. For Nepal Rastra Bank (NRB) and particularly its Governor Dr Yuvaraj Khatiwada, who is said to have been pursuing the merger policy aggressively, this is a big morale-booster. We hope NRB will continue with its merger policy with the same gusto and give us a cleaner and more reliable banking industry in the country.
