Dr Atreya visited Dhaka to attend the Annual Banking Conference held from November 7-8 at the Bangladesh Institute of Bank Management, Mirpur. He talked to this correspondent at the sidelines of the conference.
Before joining the BFIN, Dr Atreya worked as an Executive Director at the Nepal Rastra Bank, which is thecentral bank of Nepal. Prior to that, he worked at Nepal Bank Ltd as its CEO from 2007 to 2010.
How many banks and financial institutions are there in Nepal?
Our financial system has been classified into four categories -commercial banks, development banks, finance companies andmicro financial institutions. In total, there are 152 banks and financial institutions in Nepal, out of which 28 arecommercial banks.
Tell us about the performance of Nepal's state-owned banks.
Similar to the state- owned banks in Bangladesh, the ones in Nepal also performed poorly compared to the private banks in the past.
Following reformation and restructuring, state-owned banks are nowperforming very well. Performance-wise, all three state-owned banks - Nepal Bank Ltd, Rastriya Banijya Bank Ltd, and Agricultural Development Bank Ltd are making profits now.
What is the state of NPLs and ADR of Nepal’s banking sector?
Although the NPLs (non-performing loans) level was higher in the past,like the ones in Bangladesh, thetotal NPLs of the Nepalese banking sector is now less than 3%. Our advance-to-deposit ratio (ADR) is 78 to 79%, as the maximum limit is 80%. Total loan size is NPR (Nepalese Rupee) 2.2 trillion, while deposit size is NPR 3 trillion.
What are your suggestions for Bangladeshi banking sector to address soaring NPLs”
While lending money, banks should ensurethat theborrowers have high creditworthinessand that the project they are borrowing for is feasible. They should verify whether the borrower is trustworthy or not, andcheck if the collateral is sufficient to cover the risk. Loans should also not be given out due to pressure from political groups.
Previously, Nepalese banks also did not evaluate loans properly,or verify the credibility ofa project. These loans then became default. However, things have changed now, and all stakeholders have become more diligent, leading to thereduction of our NPL level.
There are many new banks in Bangladesh, while many more are awaiting approval. What is your opinion about this?
At this moment, I do not see any logic behindgiving licences for new banks in Bangladesh. In Nepal, the central bank is not giving out new licences for any new banks. However,they made an exception for the A-grade Nepal Infrastructure Bank, since it provides long-term financing for national infrastructure projects.
Right now, Nepal’s policy is to encouragemergers and acquisitions among financial institutions. Many development banks and finance companies have already merged. The main problem is not the number of banks, rather the quality of the service they provide and the number of branches these existing banks have. Bangladesh should ensure the expansionof banking services by creating more branches to reach rural areas.
