Standard Chartered Bank Nepal, one of Nepal's leading commercial banks, is gradually shedding its image as a conservative bank with an aggressive strategy. As the country moves towards political stability, Anirvan Ghosh Dastidar, new CEO at the bank, is highly optimistic about the future of Nepal, its economy and overall banking outlook. With people perceiving SCBN as a 'difficult bank', Ghosh said he wants to change this image with a special focus on young entrepreneurs, emerging and affluent segments, high-end retail and business banking when he sat down with Mukul Humagain and Sanjeev Sharma of New Business Age for an exclusive interview. Excerpts:

Was Nepal your choice or an outcome of normal changes? Any specific reasons for accepting this assignment?
We are corporate soldiers. So, it is not that we always choose locations for postings. When I was given the opportunity among many choices, I chose Nepal. What I am trying to say is that, at a point, it was a conscious decision to come to Nepal.

You had the privilege of leading markets in Sri Lanka, Philippines and Brunei as CEO of SCB.  How different do you believe will the financial landscape and socio-economic structure of Nepal vis-a-vis previous markets be?
I don’t compare because every market and their demographics are different. The political, social, culture systems are different. For me, there is a fair amount of positive outlook in these four months in Nepal. On a personal note, I think I have come to Nepal at the right time.

If we closely follow SCB Nepal’s activities and initiatives, we clearly see a ‘never before’ kind of aggression in conducting business that your bank has been adopting in recent times.  Given the operating model/ policies that int’l banks usually have and we have seen in other markets, can this be called aggression?
I want to clarify that we are committed to Nepal. We are a locally listed company here and an old Nepali bank. If you're committed to the country, you obviously want to grow. I want to be clear that we are an international bank, and have a certain participation model. Unlike local banks, we cannot be everything in Nepal but we really want to be aggressive in areas we want to grow.

We can be very good, can be very aggressive and really grow in spaces where we, as an international bank, are very strong which is our network – the multinationals, FDI, the flow business, or even our niche retail business. Yes, we also want to grow, be competitive, and want to occupy the space among the top banks. Besides, we want to be like a Nepali bank which appeals to the young, emerging and affluent.

So which areas are you eyeing?
Clearly, it is our network.  For us, network means corridors, because we are present in India as well as China. These countries are the dominant corridors for Nepal and we are the only bank which is big on both sides. Secondly, multinational companies in Nepal. The multinational firms are in our bread-and-butter core strategy, that we are present in the country where they operate.

We still have our local corporate business, but our focus will be on network. In the retail side also, we want to really sharpen our participation model because we do business banking which caters to the financial needs of the upper-end of the SMEs. Our priority banking business, I think will also go through a full kind of refresh because we want to bank the affluent. SCB Nepal is the only international bank with the international offerings and the kind of products it offers internationally.

Similarly, we really want to invest in digital banking. It is because as a country where the median age is 23 along with large number smartphone users, Nepal will change faster than its neighbours. I guess, India and Bangladesh are already there in terms of digital development, but Nepal’s switch to digital will be very fast.

A new phase of banking sector consolidation has started in Nepal with the central bank pushing for mergers between commercial banks.  How will it set a new direction for the banking sector of Nepal?
There are two views we would have in this respect. For us, we always felt that there needs to be focus on the corporate governance which in terms of priority, is a very big area. Currently, there are 28 class ‘A’ banks in Nepal and the country’s banking sector is overcrowded. Is merger and acquisition the right thing? Probably. Is the way it's being done the right thing? That I can't comment because I am fairly new to Nepal. But, I am sure the central bank has its own reasons for doing it.

If you see globally, wherever the banks have merged, it is largely to make the balance sheet stronger. So, if the objectives of the merger and the merging partners are right, I don’t think it’s a bad thing for the country. It will probably bring down the number of banks to a manageable number and make their balance sheets much stronger.

How will SCB Nepal determine its course of action and what can we expect as a possible outcome regarding the merger directive of the central bank? Does SCB Nepal hold any reservations over the central bank’s directive?
Our participation model and priorities will not change; we will stay on our course. I don’t think you will see any outcome on this as far as SCB Nepal is concerned. Likewise, we don’t have any reservations. We have a participation model in Nepal that is well established, well acknowledged and well accepted. We will not deviate from it as our priorities are very clear.

Many are still skeptical over the central bank's role as a strong regulator. What's your take on this?
I think the country is blessed with a very strong regulator. I don't see any reason why NRB should not be able to regulate the banking system. In Nepal, the banking industry is probably the pillar of all the industries, and it is fairly regulated.

It seems that SCB Nepal is trying to change its image as a ‘conservative lender’. How do you think this strategy of your bank will help you to compete with local banks?
The word ‘conservative’ is a subjective one. Obviously, our risk-appetite is tuned to the sectors we want to be aggressive in. As I said earlier, we will not get into all sectors because there are enough lenders in the market. The image we want to change is that people perceive us as a difficult bank (to bank with). Obviously, we are not in every nook and corner of Nepal. But at least in the sectors we bank in, whether it is youth entrepreneurship, emerging and affluent segments, high-end retail and business banking, we want to be a bank which is friendly, easy and digitally forward looking. We want to be digitally innovative plugging into the startups, entrepreneurs, digital wallets and e-commerce in Nepal. Further, we would like to be seen as a Nepali bank.

The Nepali banking sector time and again faces a shortage of liquidity and this has become quite seasonal now.  Given the unhealthy competition among the banks to attract deposits, do you think interest rate management has also become a major issue within the banking system?
The interest rate management within the Nepali banking system has reached a point where the regulator recognises that over time that the interest rate management has to change to a certain kind of arrangement. But it can’t happen overnight. Secondly, the liquidity issue is also recognised, which is cyclical and a bit historic; when government’s capital expenditure gains momentum, the tightening of liquidity in the banking system eases off.

I am confident that over the next year and a half, you will see development of debt capital market in Nepal. I won’t be surprised if banks start going in for liquidity bonds and borrowing offshore money. Nobody can confirm that, but we get the sense that the regulator wants to, there is intent, there’s a lot of talk and lot of regulations are getting reformed. The country has had political stability after so long. So now, it’s about the execution of policies. I think there are some very good discussions coming up the pipeline in this context.

One of the measures taken by the Finance Ministry and the central bank to manage liquidity issues was allowing banks to get funds from abroad. Is this the correct prescription?
It is one of the many prescriptions. We can also have a debt capital market where banks issue their own liquidity bonds, raise money and invest in such securities. My view is that Nepal will evolve in the next one or two years where you will see debt capital markets emerging onshore in Nepal.

Given the political stability in the country and urgency for the government to attain higher economic growth rates, how do you think will the Nepali banking sector evolve in the next 3-4 years?
As I said earlier, there will be alternative instruments which will also allow retail investors to diversify their investments. It is because currently their investments are limited to traditional bank deposits. Already, the consolidation in the banking sector has started which will have its own effects.

Similarly, interest rates will probably become a bit more transparent and settle down. You will see better corporate governance in the banking sector. And, with the economic growth, banks will play a very important role to trickle down the wealth. If Nepal is trying to move, and which I feel very strongly, from a low-income country to the middle-income country, the economy must grow at the rate of 10 to 12 percent annually. If we want to have higher growth, then the banks must play an important role because the economy needs credit and consumption activities.

How do you think technology will come into play in this regard?
Technology has already become a major aspect in the financial sector. Because the biggest threat today in the banking system is cyber security and the ability of banks to engage in partnership for all the digital disruptions. So, the bank which invests faster in its digital technology and capability will be the one to succeed. The market will force us to adopt technology and it’s happening in every country.

What do you think the government and the central bank need to do to better facilitate this process?
There are lots of discussions and conversations happening around for the digital transformation in several areas of the financial system. There are several moving parts in the system; there are structures being looked at for banks to follow. The encouraging thing is that everything that you are saying is being discussed. However, I cannot comment on how and when the discussions will materialise as policies and be implemented.

SCB has been one of the most loyal FDIs in Nepal, even when the country went through a very difficult period. How does SCB view this period of political stability in Nepal and how is it willing to support the country?
There are many examples where SCB has worked in countries which were going through instability and crisis. SCB has worked in many African countries I myself worked in Sri Lanka when it was in the civil war. So, not only in Nepal, SCB has a history of being committed to countries and supporting them.

For us, we are the international face of Nepal. So, we can take Nepal to the world and bring the world to Nepal. I am not a political expert. All I can say, from my four months of stay here is that the amount of interest, I’ve seen, of the outside world in Nepal has gone up which is only because of the political stability. It is not about how good the governance is, but about the fact that this government is here to stay and there will not be disturbances. Hence, there is lot of interest in Nepal. This is why big multinational companies are investing in their capacity in Nepal and have a bullish outlook for the country. I think political stability plays a very important role for the outside world.

SCB Nepal is also said to be supporting the government to get the sovereign credit rating. How is the process moving ahead?
I cannot comment on the process because there is sensitiveness attached to it. But, what I can tell you is why it is needed. Currently, there is a huge capital-funding gap in Nepal. Sooner or later, Nepal would like to issue its sovereign bonds; it could be dollar denominated or in local currency, green or hydro bonds. If there is no sovereign rating, it will be very difficult to attract investments. Once you're rated, it will benefit the local banks and the industries. It is because their own credit rating is dependent on the country’s rating. It has a trickle-down effect. For Nepal, the timing to get a sovereign credit rating is right, because all the countries in the neighborhood have already been rated. This rating is like a report card. Today, a lot of people want a piece of Nepal to invest in but they can't because it's not rated. That is why this is important.

You recently attended the Belt and Road Initiative (BRI) summit.  Since our government has already signed the MoU on China’s BRI, making Nepal a member of Beijing’s ambitious plan to revive the ancient Silk Road trade routes, how can Nepal benefit from this mega plan. Do you think Nepal has done enough work on its part to take advantage of it?
I think Nepal has. The kinds of project Nepal has selected, I think are the right projects. We are one of the leading banks on BRI because we are in 45 markets of BRI. There are a lot of hypothesis and assumptions on the bad examples of BRI which are not accurate. People talk about Sri Lanka but if you see that investment, it is a very small part of the debt. So, the assumptions are not accurate.

Secondly, Nepal is doing the right homework and picking the right projects. Nepal’s biggest strength is water. So, harnessing the hydro along with rail, airport, and road are the fundamentals. That is where all the investments are coming. Sandwiched between two large countries which are growing so rapidly, Nepal can play its role very well. Now, that role is left to the administration. But if you ask us, Nepal is doing the right thing; it has picked the right projects, and has picked absolutely the right partners. So, this is the time for Nepal to really develop its infrastructure.

As one of the banks with a strong presence in BRI countries, how is SCB helping Nepal to get the investments from abroad?
A lot of the Chinese state-owned enterprises are already working with us in many parts of the world. There are also new interested parties who because of our presence in mainland China, want to work with us. The other thing is, we know Nepal better than anybody.  When I went to speak at the BRI Forum, I was not wearing the Standard Chartered flag, I was wearing the Nepal flag. I was telling people there why they should come and invest in Nepal.

But then there is the debt trap issue that has dominated the BRI narrative in Nepal. What should countries like Nepal do to avoid this debt trap issue, while pursuing funds from the BRI window?
If you ask me, there are many theories and assumptions in many countries, but you’ve got to look at the statistics and facts. Nepal has the maturity in picking the right projects, and has the understanding in what are debt traps. At this point of time, I don’t see any issue.