From a bank on the verge of collapse to the country’s highest profit earning banking entity, this state-owned bank has made a remarkable turnaround.

--BY  BIJAYA LAXMI DUWAL    

The revival of Rastriya Banijya Bank Limited (RBBL) is nothing short of astounding. The wholly government-owned bank, which until 8-9 years ago was struggling to stand on its own feet, is now the highest profit earner among the banks in the country while also making noticeable progress in the area of corporate governance.

RBB successfully secured the top position among the commercial banks in terms of net profit in the fiscal year 2018/19 by registering a figure of Rs 5.32 billion, which was Rs 3.65 billion in FY2017/18.

This revival is due to the carefully implemented institutional reform measures over the years that have reflected as improvements in the bank’s balance sheet and other parameters. In July of this year, RBBL was named the ‘Asiamoney Best Bank for CSR in Nepal’ by Asiamoney, a subsidiary of Euromoney magazine.

This recognition proves how RBB has moved past its problems towards a brighter future. And, behind all these reforms is the hard work put in by the bank’s management led by CEO Kiran Kumar Shrestha who is known as a ‘turnaround specialist’ in the Nepali banking sector. After taking charge as the bank’s chief executive in April 2016, Shrestha’s focus has been in a range of areas including business growth, people management and expansion of services.

RBBL is also the first financial institution in Nepal to operate branches in all 77 districts of the country with the number of branch offices totaling 238.

Initiation for Transition
In recent years, RBBL has also focused its efforts to enhance the quality of its services to change the public perception towards the bank. “One of our aims is to change the perception of the public towards state-owned banks by developing ourselves as a model bank. Looking at the working systems and inferior infrastructure of government offices, people generally think that such institutions have staff with traditional mindset who aren’t good in decision making, unfamiliar with modern technologies, adopt lengthy procedures, irresponsive to customers, have slow delivery channels, and so on,” expresses Shrestha. RBB aspires to deliver quality service by being more competitive, profitable, productive tech-friendly and customer-oriented. “It is very important because it is the public sector institutions that return all the profits to the general people,” he says.

For this, RBB is carrying out a cleanliness and standardisation campaign inside the bank with the slogan ‘Clean and Smart RBB’. The slogan is even extended as ‘Clean and Smart RBB with Consolidation’ to focus on sustainability of profit with a core focus on aspects including business growth, compliances, regulatory, human resource, physical infrastructures and finalising pending issues. “We want to make our bank  perfect in all aspects, not only in profit or other financial figures. We want to make RBB the number one institution in the whole government sector,” says Shrestha.

Turning Points
In its five decades of journey, RBBL for many years has gone through turbulent times. Established in 1966, the bank’s non-performing assets (NPAs) volume started to rise up from 1993 which continued for a decade. RBB was on the verge of collapse in 1998 when its skyrocketing NPAs resulted as cumulative loss of Rs 24 billion.

Janardan Acharya, former CEO of RBB recalls, “Our NPA reached 62 percent and negative net worth also increased to Rs 24 billion due to which the Nepal Rastra Bank (NRB) with the support of the World Bank approached a British agency to handle the bank’s management. But due to the deteriorating situation caused by the Maoist insurgency during that time, the agency denied to come to Nepal and handle the bank’s management.” Nonetheless, the Financial Sector Reform Programme (FSRP) commenced from February 3, 2003 with active support from the World Bank with a view to improve and strengthen the Nepali financial sector which also constituted institutional reform of troubled financial institutions including RBBL and another state-owned bank, Nepal Bank Limited. The programme continued for ten years.

“I do not want to take all the credit for the bank’s position today as the foundation to revive RBBL was laid by FSRP,” says Shrestha, adding that the programme created a path for the bank in terms of following regulatory compliance, strengthening its control mechanism and long-term financial standing and streamlining of the workforce. As part of its reform drive, RBBL resolved the issue related to overstaffing by reducing the number of staff. The bank which had 6,000 employees prior to the implementation of FSRP reduced the number to around 2,000 through the Voluntary Retirement Scheme (VRS). “All these steps cultivated excellent behaviour among the staff of the bank and helped to change the perception of the general public towards RBBL,” remarks Shrestha.

Human Resources and Technology
Hiring skilled and competent human resource is one of the major priorities for RBBL management at present. The last three years have seen RBBL replacing old generation staff with young and energetic staff. The total number of new staff in the bank will reach 1,861 after the ongoing hiring process is completed. “1,200 people were recruited in the last three years and we have opened vacancies for 661 different positions through public service announcements. We have received 6,500 applications till date for the latest hiring,” informs Shrestha. Hiring on such a massive scale over such a short period has never been done before in Nepal.  “It is not possible to initiate institutional change endeavours at any time. But this time is perfect for transition in the banking sector by welcoming a new generation of employees and bidding farewell to the old generation. Now, there are only 5 percent employees remaining from the old generation,” Shrestha notes.

RBBL’s business size and branches are increasing, but the slimmer yet result-oriented workforce is handling the bank’s business more efficiently. “In the past when our business volume was relatively small, we had 3,000 employees. But now we are doing our best with a total of 2,300 employees,” says Shrestha, adding, “We are adding 30 more branches this year, but we are not increasing the number of workforce than what is required. Our focus has been to enhance efficiency and productivity of staff.”

With the growth in business, RBBL has been adopting advanced technologies in banking. According to Shrestha, the bank uses Pumori 3rd Banking Software. “We recently completed an audit of information security (IS) as mandated by NRB. We are preparing to replace the existing IT system with the latest technology because our transaction volume is so high with deposits amounting to Rs 190 billion and extension of loans totaling Rs 144 billion,” shares Shrestha.

Promoting Government Schemes
RBBL has been actively promoting the subsidised loan programme announced by the government whereby women, people from marginalized communities and small business owners can get up to Rs 1.5 million in loans without any collateral. According to Shrestha, RBBL’s base rate is lowest among commercial banks at 5.5 percent.

Currently, loan products targeting women entrepreneurs, migrant returnee workers, earthquake victims, students of deprived groups, loans against collateral of educational certificate to graduates, and business loans to uplift underprivileged group are available at RBBL with interest subsidy of up to five percent which is six percent for women. This means one can get a loan at the rate of just 1.5 percent from the bank. “This is a big opportunity for those who wish to do something on their own,” says Shrestha, adding that the scheme has become very popular in rural parts of the country. According to him, RBBL is also planning to invest in electric vehicles.

“Being a state-owned bank, RBBL has responsibility towards nation due to which we are not only focused on profit but at the same time working as a social bank as well,” he says.

Branch Network
With 236 branches across the country, RBBL became the first bank to operate outlets in all districts of Nepal.

Till 2018, the bank had a presence in 67 districts. The bank is planning to increase this number to 250 in near future. Likewise, with 200 ATM outlets, RBBL is also among the banks with the largest ATM network.

CSR
The bank has been following NRB’s directive to spend 1 percent of the profit in CSR. For RBBL, education and health are the two major sectors for CSR. “We received the Asiamoney Best Bank in Nepal award for CSR because of our focus on CSR activities targeting marginalised groups and SMEs. At present, SME lending covers 60 percent of our loan portfolio,” shares Shrestha. Besides, the bank also organises different programmes to promote financial literacy, cleanliness campaigns and provides physical material support to public schools and scholarships to students from deprived communities, among others.