In just one and a half year of its successful merger, Mahalaxmi Bikas Bank has become a major player in the development banking sector.
BY Bijay laxmi Duwal
Mahalaxmi Bikas Bank, an outcome of merger among seven different financial entities, has emerged as one of the largest development banks with a wide network of branches, strong customer base and a big balance-sheet for a development bank in the country. The bank is also the first development bank to meet the minimum capital requirement of RS 2.5 billion set by Nepal Rastra Bank (NRB); the bank today has a paid-up capital of Rs 2.84 billion, as of the first quarter of 2018/19. As a leading national level development bank of the country, Mahalaxmi Bikas Bank today has adopted national level policy, based on the latest NRB directive, to expand its presence. Similarly, the bank plans to set up separate regional hubs in all seven provinces of the country. “We are setting up a cluster each in all seven provinces. For the purpose, we are also adopting a regional policy,” shares Krishna Raj Lamichhane, CEO of the bank.
When the NRB set up the minimum paid-up capital requirement for the national level development banks at Rs 2.5 billion in 2015, many banks approached different ways to meet the criterion.
“There were two ways to meet the paid-up capital requirement-either enhancement of capital through bonus/ right issue or through the further public offering (FPO) and merger of financial institutions. We chose the second option of mergers to optimize the return on capital employed, increase our business size and even increase dividend,” recalls Lamichhane.
Mahalaxmi Bikas Bank was formed after a series of mergers among different financial institutions at different times. Yeti Development Bank, which merged with Mahalaxmi Bikas Bank in 2017, itself was formed after the merger of Manakamana Development Bank, Valley Finance Ltd and Yeti Finance Ltd in 2013. In 2014, Siddhartha Finance was formed with merger of Imperial Finance Ltd and Siddhartha Finance Ltd. Siddhartha Finance later merged with Malika Vikas Bank Ltd and Mahalaxmi Finance Ltd to form Mahalaxmi Bikas Bank in 2016. The merger process ended with the final merger of Mahalaxmi Bikas Bank and Yeti Development Bank July 02, 2017 to form today’s Mahalaxmi Bikas Bank.
Mahalaxmi Bikas Bank is first development bank which prepared its financial statement of FY 2074/75 as per NFRS (Nepal Financial Reporting Standard).
Merger: A Challenge as well as an opportunity
All the seven companies, before the merger, were regional level operators. The merger of such companies with cultural diversity itself was challenging for Mahalaxmi Bikas Bank in terms of integrations of the workforces. “Bringing uniformity among staff of different levels, cultures and systems was challenging. But we internalized the challenge as opportunities after the merger,” says Lamichhane.
The scattered workforce over the country became strength for the bank to grow easily. Lamichhane says, “It was an opportunity to meet the paid-up capital requirement, increase deposit, profit, balance size and also the boost customer and service base.”
A Year of Consolidation
Lamichhane says, “We went for the consolidation of staff members for a year after the final merger instead of focusing only on growing and branding.” According to him, the quality of the staff members was different and the benefits they were getting were also different, and all staffs were not equally trained. The bank bridged such gaps and inequalities through training, increasing services and salary and preparing required documents within a year after merger.
Resolving all these complexities, the bank now is focusing on business growth and branding its image. “In the coming month also, we are giving training to all senior members of our all branches,” informs Lamichhane.
Lamichhane claims the customer base and saving base of the bank are stronger than other development banks. According to him, it has around 4.5 million customers scattered throughout the country.“Our saving base is stronger as we have almost 70 to 80 percent saving deposits only from rural parts of Nepal,” shares Lamichhane adding that there is a culture of opening savings accounts rather than keeping fixed deposits in the rural parts.
The merger has also financially boosted the bank. According to Lamichhane, at present the bank has a paid-up capital of Rs 2.84 billion, deposit of almost Rs 29 billion and loan and advances of more than Rs 25 billion. “If the net worth is added, the paid-up capital would reach almost Rs 4 billion. Considering all this, we can say we are financially strong. We have been very comfortable in lending loans so far. We have not suffered from any liquidity problem or credit crunch till date. We have remained stronger in this regard as.”
Products and Services
According to Lamichhane, Mahalaxmi Bikas Bank is the first development bank to introduce the chip-based dollar card service in the country. It is a new product introduced by the bank in December 2018 targeting the people going abroad. “The fully secured card was launched to mitigate insecurities like ATM pin hacking, theft etc.”The card holders can avail cash up to USD1,500 on the basis of confirmed air ticket and valid passport. The bank has been providing each product and service including even foreign currency transaction in a secure manner.
“We are the only development bank among four banks in Nepal to provide online bill payment service of Nepal Electricity Authority through the mobile app banking service,” shares Lamichhane. This service can be taken by those who even do not have a bank account via any counter of the bank.
Recently, the bank started online services to open account from home. In order to enable its customers deposit from their homes, the bank plans to launch a new product for recurring nature of deposit in collaboration with F1 Soft.
The bank’s network of branches is extended from Mechi in the east to Mahakali in the west of the country. The bank is planning to expand its branch network to up to 101 branches within this fiscal year. It is adding 12 branches to its existing 89 branches within this year. With this addition, the number of staffers in the bank will reach above 800 from the existing 750.
Mahalaxmi Bikas Bank is the bank which has been conducting CSRs before NRB announced CSRs as a mandatory part for each bank, claims Lamichhane. Each branch of the bank is required to compulsorily conduct CSRs. “We believe that CSR activities are to be done not for publicity, but for contributing to society. We are tying up with one of the biggest NGOs to contribute to the education sector focusing on government schools with poor infrastructures".