Mahalaxmi’s Shift to a Digital, Disciplined Future

In Nepal’s rapidly changing financial landscape, where development banks face shrinking margins, rising non-performing loans (NPLs), and the pressures of digital transformation, Mahalaxmi Bikas Bank has spent the last four years quietly but decisively rewriting its institutional playbook. Through a measured blend of cultural alignment, digital investment, operational discipline, and ecosystem partnerships, the bank has repositioned itself as one of the most agile and future-ready development banks.

What began as a post-merger integration exercise has since evolved into a comprehensive transformation — spanning governance, service delivery, financial structure, and technological modernization. Industry observers now cite the bank as a model for how medium-sized development banks can reinvent themselves even amid sector-wide turbulence.

As CEO Dipesh Lamsal puts it, “Our merger journey taught us that integrating technology and processes is relatively straightforward - unifying people and culture is the real challenge. When people understand the direction and the value of coming together, operational integration becomes far smoother.” Four years on, that philosophy now underpins much of the bank’s stability and its growing reputation for prudent management.

The Transformational Journey

The bank’s transformation began with a clear strategic target: strengthening service delivery. Branch operations were streamlined, customer touchpoints redesigned, and traditional bottlenecks removed. During this period, the bank focused on enhancing accessibility across demographic groups, improving front-end interactions, and creating a consistent experience across all branches. These early reforms proved essential, helping stabilize the bank’s operational core before the launch of more ambitious initiatives. This phase, according to senior officials, created “the platform on which every subsequent transformation stood.

Rising to Global Standards

The second year of the transformation marked a major milestone — the successful attainment of ISO 9001:2015 certification, one of the most recognized global standards for quality management and service consistency. The certification reinforced several institutional shifts: standardized processes, stronger documentation, transparent governance, and measurable service benchmarks. It also supported a cultural transition toward data-driven performance tracking, improved complaint handling, and better monitoring of customer satisfaction.

Ecosystem Banking

By the third year, the bank shifted from traditional branching strategies toward ecosystem banking, emphasizing partnerships that integrated financial services into daily life. Without naming individual partners, these collaborations spanned education, mobility, digital commerce, community enterprises, healthcare, and hospitality.

The goal was simple: make banking accessible wherever customers learn, shop, travel, or work. These partnerships expanded the bank’s utility beyond savings accounts and loans, enabling seamless payments, digital onboarding, service access, and merchant solutions — without large capital expenditure on new branches.

Financial Strength & Discipline

Perhaps the most striking area of progress over the last four years has been the bank’s financial restructuring. In an environment where Nepal’s development banks posted a 52.35% drop in net profit in the last quarter, the bank managed to strengthen its margins, improve liquidity structure, and expand profitability.

Rebalancing the Deposit Base: The bank restructured its deposit composition to prioritize stable, low-cost deposits. Savings deposits now exceed 50% of total deposits, while overall CASA has crossed 60% — one of the highest among development banks.

Cost of Funds Declines to 3.95%: As a direct result of the improved deposit mix, the bank’s cost of funds (CoF) has fallen to 3.95%, placing it among the lowest in the industry. This decline provided a buffer against margin compression while enabling competitive lending rates.

Base Rate Now 6.21%: The CoF decline supported a favorable base rate of 6.21% for Kartik 2082. Internal projections suggest the base rate will fall below 6% by the end of the fiscal year’s second quarter, making the bank one of the most competitive lenders in the category.

Liquidity Discipline and CD Ratio at 83–84%: Unlike institutions stuck with excess liquidity, Mahalaxmi has maintained its CD ratio at 83–84%, an indicator of balanced deployment and prudent liquidity management.

Profitability and Dividend Growth: The bank’s distributable profit improved despite sector-wide stress, pushing the dividend up to 10.37% from 7% the previous year.

Provisioning Above 110% of NPLs: In a sector strained by rising NPLs, the bank maintains provisioning at over 110%, representing one of the strongest buffers among development banks.

Navigating a Challenging Banking Cycle

While celebrating its own progress, the bank remains aware of the sector’s challenges. Lamsal notes that the profitability slump across development banks is a product of weak loan demand, compressed spreads, and rising provisioning requirements. “Even small increases in NPLs trigger disproportionately higher provisioning under NRB norms,” he explains. He adds that liquidity pressures — including excess reserves — have forced banks to park funds in low-yield assets, depressing net interest income. Mahalaxmi’s improved CASA, controlled costs, and stronger capital structure have helped it mitigate many of these pressures.

Inclusivity, Culture and Community

Recognizing Women Entrepreneurs: A major initiative during the transformation was the formal recognition of women entrepreneurs across Nepal. The program celebrated women-led enterprises and highlighted their grassroots economic contributions. The initiative aligns with the bank’s belief that “inclusive growth is sustainable growth” — a principle that now shapes its CSR and community programs.

On its 31st anniversary, the bank honored 36 long-serving employees, reinforcing a culture of appreciation, loyalty, and performance. Post-merger cultural alignment has been a major focus, especially given the complexity of integrating histories, expectations, and work habits.

The Mahalaxmi Corporate Cricket League became a much-talked-about event in the financial sector. The tournament brought together teams from across banks and financial institutions, improving inter-bank relations and boosting the bank’s visibility.

Digital Innovation

Over the past four years, the bank’s digital transformation gathered remarkable pace, reshaping its service model and positioning the institution firmly as a digital-first bank. The introduction of the Digital Premium Lounge created a sophisticated space for seamless digital services, while the Scan2Cash feature allowed customers to withdraw cash from ATMs using only a mobile banking QR scan, eliminating the need for cards. The bank also fully digitized its remittance channels, enabling customers to receive international transfers instantly and securely. Its credit card EMI facility offered flexible repayment plans ranging from three to twelve months, broadening financial accessibility for retail customers. A structured Child Savings Recurring Deposit was introduced to support long-term family planning needs, while automated loan recovery systems helped modernize internal workflows and strengthen credit discipline.

Behind the scenes, the bank upgraded its API-based payment architecture to ensure faster, more reliable digital transactions. It also integrated PhonePe QR capabilities and digital card support, expanding the way customers could make payments both online and at merchant locations.

CEO Lamsal emphasizes risk management, diversification, and disciplined growth as the cornerstones of future strategy. “Proactive monitoring is essential,” he says, stressing that banks relying solely on interest income remain vulnerable. Diversification into fee-based income and advisory services is becoming essential. “Early planning and cultural alignment matter as much as system integration,” Lamsal reiterates, reflecting on the bank’s multi-merger journey. A strong CASA base and disciplined pricing have kept the bank’s cost structure competitive even during liquidity fluctuations. Green lending, financial literacy programs, and strong governance are increasingly shaping long-term strategy.

Looking Forward

After four years of sustained transformation, the bank now stands as a markedly different institution from the one it set out to reform. It has evolved into a quality-certified bank with standardized processes and governance systems that meet international benchmarks. Its investment in technology and digital service delivery has repositioned it as a truly digital-first development bank, capable of serving customers with speed, convenience, and modern efficiency.

As Nepal’s development banking sector confronts rising asset-quality pressure, digital disruption, and shifting customer expectations, the bank’s combination of operational resilience, disciplined lending, cultural cohesion, and digital innovation positions it strongly for the road ahead.

“This piece was originally published in the December 2025 issue of New Business Age magazine.”