‘We are securing our banking further, and bringing more people into the system’

Ajay Shrestha CEO, ank of Kathmandu (BOK)

Ajay Shrestha is the CEO of Bank of Kathmandu (BOK). In an interview with Sweta Sharma of The Corporate, Shrestha talked about challenges in the banking sector. Excerpts:

How have you evaluated BOK’s performance during the last two years?
The bank’s financials have been stable for the last three years. The bank is also in a reasonable state in terms of profitability. 

What are the challenges facing the bank and the entire sector in general?
As the core market for the banking sector is still not developed in the country, there is a cut-throat competition among banking and financial institutions to get the maximum share of this limited pie. The cost level has also increased with increasing competition. Thus, it is very challenging for a bank to survive in such a competitive market. 

The central bank has recently introduced changes to the account opening procedures. What is your take on the changes?
NRB has recently directed banks to implement a new system, called Know Your Costumer, to keep better records of clients. We welcome the new system. But it definitely has made it difficult for banks to run smoothly.

NRB has come up with this new procedure at a time when majority of people still do not have access to banking. But now the procedure has been implemented to some extent. In my view, there are still large numbers of people who need to be encouraged to comply with the new system.

The central bank has said plans to increase the minimum paid up capital requirement for commercial banks to Rs 500 million. What is your bank’s strategy?
The central bank is yet to decide on the issue. If NRB does increase the paid up capital requirement to Rs 500 million, we will comply with the directive. Earlier, we were successful in meeting the paid up capital requirement of Rs 200 million using our own sources.

The operational risks in banks have been reported to be quite high. How are you coping with that?
Operational risks are inherent in the banking sector all over the world. As more and more customers start using banking services, banks have no option but to switch to advanced banking procedures. The risks need to be addressed and minimised. We are complying with all prevailing laws to deal with operational risks. We are continuously reviewing our banking processes to make them more secure.

BOK launched a special scheme to invest in SMEs (small and medium enterprises) and clean energy. How has the experience been so far?
SMEs are relatively new to Nepali banks. There are is no fixed definition of a small enterprise. It has been around four months since our bank started its SMEs scheme. The process of SME financing is not easy. A lot of research needs to be done before issuing loans.

In this regard, we are running financial literacy programmes for prospective SMEs, especially outside the valley. As part of the programme, we are working on building the knowledge base among people to help them understand the banking system. This has helped encourage people to some extent.
Clean energy is basically associated with environment. We are taking SME and clean energy schemes together.

While most banks have already adopted branchless banking, BOK is still to do so. Why is the bank so slow in adopting new technology?
Switching to branchless banking requires equipment and investment. We do not rush to adopt new technology as we are very conscious about the outcome a change may bring in. At the same time, we are also into increasing our customer base. Our main mission is to bring more people into the banking system. We are mainly focused on sustaining our bank as a whole.

We are planning to provide branchless banking service at 11 locations for now. At the end of the fiscal year, we will be running branchless banking from 25-30 locations. Similarly, we will launch mobile banking soon.

Would you like to say something to your customers?
We have increased our customer base to 2.5 lakh from 90,000 within three years of time. This is very encouraging for our bank. We want to double the number of customers in the next few years. Our greatest achievement is that we have 50 outlets. We also have 57 ATM counters. We have been successful in meeting our targets till now.