Having grown impressively in its seven-year journey of establishment, this commercial bank is poised to win in the long race.
Tulasi Ram Gautam
With its mission statement of “Saral Banking…Sabaiko Lagi” (Easy Banking…For All), Century Commercial Bank Limited (CCBL) is actively engaged in increasing access to simplified banking services in Nepal for the last seven years. The bank aims to provide services to its customers by optimally utilising innovations in modern information and communication technologies.
Established on January 23, 2011, CCBL is the youngest national level commercial bank in the country. Nevertheless, the bank has come upfront as a strong bank in this relatively short period. The bank was just in the fourth year of its establishment when it faced a huge challenge – to increase its paid-up capital to at least Rs 8 billion as directed by Nepal Rastra Bank (NRB) in 2015. CCBL, which had a paid-up capital of Rs 2.48 by the end of FY2015/16, increased the amount to Rs 8.06 billion by the end of the third quarter of the current fiscal year. Over the last three years, the bank met the new minimum paid-up capital requirement of Rs 8 billion by issuing bonus shares and right shares and acquiring five development banks and financial institutions.
Merger and Financial Position
The acquisition of five development banks and financial institutions, namely Araniko Development Bank, Alpine Development Bank, Innovative Development Bank, Sagarmatha Finance and Seti Finance gave CCBL the much needed financial strength as well as countrywide branch network coverage. “After the acquisition, the financial strength of the bank improved significantly within a year,” says Tulasi Ram Gautam, CEO of CCBL. He was appointed to the post mid-March. Gautam who has 36 years of experience in the banking sector has worked as CEO of Machhapuchchhre Bank Limited.
The unaudited report for the third quarter of the current fiscal year clearly indicates how the acquisitions have made the bank stronger financially compared to a year earlier. The report shows that CCBL has noticeably improved on most of the indicators including paid-up capital, collection of deposits, extension of loans, reserve and net profit, among others. According to the report, the bank has registered a net profit of Rs 630.05 million in the first nine months of the current fiscal year, 102.63 percent up from Rs 310.94 million in the corresponding period of FY2016/17. In the review period, the bank’s net interest income increased by 59.28 percent to Rs 1.22 billion from Rs 771.08 million in the last fiscal year. The operating profit of CCBL reached Rs 853.73 million by the end of the third quarter of current fiscal year, up 81.22 percent from Rs 471.09 million in FY2016/17.
In the meantime, the bank collected deposits amounting to Rs 52.73 billion in the review period, an increment of 59.10 percent from Rs 33.14 billion in the same period of last fiscal year. In the first nine months of the current fiscal year, CCBL’s extension of loans, meanwhile, has totaled Rs 50.02 billion, an increment of 66.38 percent from Rs 19.95 billion in the corresponding period of FY2016/17. There has been some increment in the non-performing loans (NPL) of the bank. The bank’s NPL has risen to 0.76 percent in the review period which was at 0.53 percent in the first nine months of the last fiscal year. Nevertheless, this is an improvement compared to the second quarter end of FY2017/18 when CCBL’s NPL stood at 0.99 percent.
“The acquisitions have concluded very smoothly. We are now moving ahead to achieve our organisational objectives,” expresses Gautam. Among the five BFIs which merged with CCBL, four were using the same banking software that CCBL has been using. “So we didn’t face troubles in technological integration,” he shares. After the acquisitions, the bank also focused on creating an environment where its employees who came from different BFIs could work towards achieving the common organisational goals. “We merged the staff and provided them with necessary training to bring uniformity in the work. It has created a new work culture in the bank”, he mentions. According to Gautam, most of the bank's financial parameters are optimistic. Similarly, the bank is also in a good position in terms of yield (loans and investments). However, out of 28 commercial banks in the country, the base rate of cost of fund of CCBL is comparatively high. “We are planning to reduce the cost gradually,” shares Gautam.
Like other BFIs, the shortage of investible funds has affected CCBL as well in terms of expanding its credit portfolio. Gautam says, “We are not being able to provide loan in a full-fledged manner due to the ongoing liquidity crunch.”
Products and Services
CCBL has introduced several deposit related products. It has a range of savings schemes including Century Premium Savings, Century 5 Savings, Platinum Savings, Century Rastra Sewak Bachat Khata, Social Security Savings, FYC Deposit Account, Students Savings, Sharedhani Bachat Khata and Kishan Bachat Khata. The bank has also been offering normal fixed deposit and current account services to the depositors. The bank provides different services such as free e-banking, discounts on locker and SMS alerts to its customers.
CCBL provides loans in three segments, namely Retail, Corporate and SME. Under Retail Lending, the bank provides personal, mortgage, education and auto loans. In the recent years, the focus of the bank has been on lending to the productive sector activities such as infrastructure development and agriculture sector. The bank has already provided loans to 22 hydropower companies. “We are also in the process of consortium lending of three hydropower projects as the lead bank,” mentions Gautam. The bank has a number of products in loans and advances including Overdraft, Trust Receipt Loan/Demand Loan, Export Finance, Term Loan, Mortgage Loan, Education Loan, Vehicles Loan for commercial and personal purposes, SME Loan, Flexi Loan, Loan Against Gold and Silver, Loan Against Fixed Deposit, Loan Against Shares and Bonds, among others. “We have a quick decision making process in terms of processing of loan applications,” says Gautam. “We do not have any old loan application pending. Due to this, our managerial and loan department staffers can focus on their jobs efficiently,” he adds.
Similarly, the bank is planning to introduce lending schemes for the deprived sector and the agriculture sector. “We are working towards bringing new products for the agriculture sector which will be available through all our banking outlets. Similarly, we will increase the Letter of Credit (LC) Guarantee. We have partnered with Indian banks for the purpose,” says Gautam.
The bank has been providing its services across the country through 111 branches. According to Gautam, there is a plan to add 12 more branches gradually. The number of the bank's customers has reached 400,000. “We are engaged in mass banking and we have customers of all levels,” he says, adding, “For us every customer is special and we ensure their satisfaction by providing services timely.”
Measures to Tackle Ongoing Liquidity Crisis
Century Commercial Bank plans to diversify the deposits to minimise the effects of the ongoing liquidity crisis. “At present, we are concentrating our efforts on collecting deposits of small to large amounts to ensure a smooth cash flow,” Gautam explains the bank's strategy. He says that the bank has kept the credit-to-core-capital-plus-deposit (CCD) ratio well under the statutory level of 80 percent.
According to Gautam, the slow capital expenditure by the government has been one of the main reasons for the recurring shortage of investible funds in the financial system. “The demand for loans has outpaced the growth of deposits. With the improving political landscape and business environment in the country, the demand for loans has increased significantly but the deposits haven’t grown at the same pace,” he says.
He hopes the government will take appropriate steps to resolve the liquidity related issues. “We hope the new government will expedite the capital expenditure on time after the announcement of the budget for the next fiscal year,” Gautam says. He also expects the liquidity crisis will ease in the coming days as commercial banks have been borrowing money from foreign financial institutions in recent months. NRB in early April allowed class ‘A’ banks to borrow up to 25 percent of their core capital in convertible foreign currency to lend to productive sectors and infrastructure development projects.
Local Level Reach
CCBL has been expanding its network at the local level across various parts of the country to comply with the NRB directives to provide financial services in the rural areas. “We have been increasing our local level presence. At the moment, some service expansions are in the pipeline,” mentions Gautam. He adds that financial awareness is necessary to bring rural residents in the banking system. “Access to banking will also have positive impacts on deposit collections,” he says. The bank seeks to gradually increase lending at the local level. “We will provide loans after understanding the financial requirements of our rural customers.” The bank will also provide money transfer services at the local level. Gautam says the bank’s branch network will have more than 120 outlets by the end of the current fiscal year. “More branch offices will be opened in various parts of the nation in the coming days,” he shares.
Human Resource Management
It is the team work and cooperation among the staffers that has ensured CCBL’s success in a relatively short period of time of its inception. “Team effort is essential to get better results in financial parameters. Our team work is highly result-oriented and the board of directors is also very supportive,” says Gautam. Currently, the bank has 900 employees.
He says it's good that the required workforce is available in the banking sector. “However, there is still some shortage of workforce in the upper level management posts. The demand of human resource in the banking sector has been rising because of the aggressive expansion of branch networks,” he observes. The bank has not been able to get trained workforce in all places where it has been expanding its business at the moment. “It is a problem of the entire industry. Almost all banks are facing the same challenge,” he says.
CCBL has been undertaking various CSR initiatives since its establishment in 2011 as the bank believes that such activities benefit both - the bank and society. According to Gautam, the bank is yet to finalise long term plans for CSR activities. “We have come up with a concept to conduct CSR activities from each branch according to the local needs. We will also actively support the people from deprived communities,” he says.
• Growing branch network.
• Experienced employees.
• High quality of service.
Weaknesses/Areas to Improve
• Post-acquisition staff consolidation to bring uniformity on work
• Business potential in the rural areas
• Recurring shortage of investible funds