Market Watch

Agenda 2010: 200 Crore & Its Consequences

Published by Octron on September 29, 2008

By 2010, all commercial banks should have paid up capital Rs. 200 Crore, for which major banks are trying all kinds of acts – different deposit schemes, gift vouchers, multiple branches in major cities at consumer level. While at stock market level, they are issuing right shares at roaring level to raise enough capital.

Will major Nepali commercial bank make it before 2010?

In order for small and recently launched banks to meet the requirement, either they will have to invest their exisiting deposits in some fast cash cow projects (plunging cash in NEA?) or they will have to increase the capital through public once again by selling off their promoter shares or increasing shareholders (right shares, bonus shares, etc)

Banks like Laxmi Bank, Kumari Bank, Global Bank, Bank of Aisa, etc still are lagging much behind the required target, while bigger banks like NABIL, Himalayan Bank, etc are already near the destination. Now all, the big banks has to do is retain the existing customers and keep on steadily increasing new ones alike. Recent deposit schemes from HBL (5,7,10 years fixed deposit schemes), NABIL (current account reduced minimum balance), NIB are some of the major moves at the consumer level to garner the greens for the future.

On the other hand the smaller banks are busy raising the interest rates at the par of finance company to gain customers. One of rapidly growing one is Sunrise Bank, despite its loss, the bank is opening its new branches every month. It is trying to play long hand, by first gaining enough popularity before going public with IPOs.
If these smaller banks fail to meet standards before the specified time, either they will have merge or will have to dissolve it all together. So, investors of these banks must take a notice of how sound are these banks financially before leaping towards their scrips.

After etnering into WTO, by 2010 there will be one international bank established in Nepal under supervision of Nepal Rastra Bank (NRB). Definitely, it will be some major commercial bank which will take a step forward. After reviewing recent surplus deposits in major commercial banks and most of it was generated by Remmintance, major commercial bank will be bidding very high to place itself in this market.

As soon as major international player comes into play, it will be very difficult for recently opened banks like Lamxi, Siddhartha, Kumari, Global etc for even strive under the shadow of such gaints if they dont gain enough customers as well as investment oppurtunties. We all know how Grindlays Bank took over nation after becoming Standard Chartered. Its shares are till date considered as gold coins from mines.

The biggest advantage the international bank will have over local banks is safe, secure, fast and economic remmintance services at consumer level. In Texas, USA, if you want to send money to India through Citi Bank, It can deposit the amount immediately in your Indian Bank Account (of Citi Bank) immediately and without any charge. Due to huge network, much better systems, these banks can work efficiently.

Here in Nepal, till date we are facing substantial delays in cross check deposits and sepcially if it is from abroad, then give it one to two months time. So these kind of glitches can surely hamper our commercial banks, which despite having ties with major foriegn banks are till date working like snail mail in this email age.

So even after the major commercial banks making to 200 Crore target, there will still be long battle to win over consumers once again with fierce competition from foreign bank.

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