Uday K Upadhyay, the CEO of Kumari Bank, holds nearly three decades of experience in Nepali banking sector. He is at the helm of Kumari Bank since September last year. Before that, he was serving in the same bank as an acting CEO. In an interview with Sagar Ghimire of Republica, Upadhyay talked about the bank´s performance, merger process, liquidity situation and recent directives of the Nepal Rastra Bank (NRB). Excerpts:
How was the performance of the bank in the second quarter?
The performance was good in every aspect along with deposit mobilization and lending. However, it was still below our expectations. There were many ups and downs which we couldn´t predict. For example, we couldn´t mobilize sufficient deposit despite offering 10 percent interest in April last year when the banking system was facing liquidity crunch. After that interest on deposits started declining due to excessive liquidity.
This situation obviously impacts profitability of banks. The bank is not the business where you invest today, seek return tomorrow and shut it the next day. So, we are working to achieve sustainable growth.
Kumari Bank is yet to hold its annual general meeting (AGM). Your investors might be expecting good return. What is the plan?
We had sought the permission from NRB to hold AGM between Dashain and Tihar. But we couldn´t hold it on time due to some technical problems. We should not wait much now for the AGM. As far as the return to investors is concerned, it is the discretion of the Board of Directors (BoD). I can only say that the return will be good for our investors.
Has the bank made any progress on merger front?
We are positive about going for merger, but such merger should be a win-win situation to both the merging partners. We have formed a merger committee in the bank and it has been holding meetings on regular basis. Merger cannot be done overnight. It is a very complex process. However, we have not gone out of this process. There are regional level development banks and they could be the potent merging partners for us. This can help us to reach where we are not being able to expand our branches. This will bring synergy to both sides.
Currently, there is excess liquidity in the banking system. What is your observation?
It was not long ago when the banks were reeling under a liquidity crunch. Comparing to that situation, this is easier problem in terms of degree of intensity. If resolved shortly, this is positive. Otherwise, this could be problematic for us. To correct this problem, NRB should bring appropriate policies. The economic activities in the country should increase and fresh investment should come.
What is your take on the spread rate provision of the NRB?
While we talk about our bank, the spread rate is around 5/6 percent. As per the directive, we should bring it down to 5 percent. Personally, I have slight reservation on it. This sort of restriction in the open economy is a double standard. This should be left to the market. If the banks will charge more interest rate they cannot survive in the market.
source/photo: republica,1 feb 2014
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