Sujit Mundul, CEO and Director, Standard Chartered Bank (SCB) Nepal, started his career as a lecturer in Organic Chemistry but switched over to banking as he joined SCB as a junior officer in the seventies. Mundul moved on through various relationship roles in Corporate/Institutional Banking including Credit and Audit functions.  He also worked in SCB - London in Credit Management for about a year on secondment. He became Head - Corporate Banking, South India and Regional Head - Sales, for Eastern India before joining SCB Nepal as the CEO and Director. Mundul spoke to Nubiz on a wide range of issues on banking and finance. Excerpts:

You have substantially increased the interest on savings, from 2-5% a few years back to 6.5% now. Is there still cash crunch?

To answer this question, we need to set the perspective right why SCB Nepal has increased its interest rate. Till one year back, the market never experienced that kind of interest rate because of many reasons. One of the major reasons is that remittance was less. That is coming in abundance now. But for good reason or bad, the market started feeling the tightness. As a result, some stress in liquidity was felt. To be very honest, SCB Nepal never faced a liquidity strain, we have always been adequately liquid.  In fact, we had been the lenders in the inter-bank throughout the crisis period. Now, in order to build the deposit base, we decided to increase our interest rates because the market dynamics have changed. The market has slightly shifted gears from low to high interest rate environment. As we are also one of the key players in the market, we need to keep up with the market rates. That's the reason why we have increased the interest rate. Though the increase in interest rate is not that significant; we have already started seeing good positive response from the market.

SCB Nepal is known for quality banking. But competition actually has become tough. How do you view the growth of Nepali financial sector?

It is a difficult market now. The market of Nepal has become overcrowded. It cannot accommodate so many players; that's why, the competition is a bit uneven. Customers or the depositors would love to see that wherever they put their money it should remain safe and they should get high quality service. The depositors are becoming much wiser compared to what they used to be few years back. They read papers, they also follow the economy and they can make their own judgments. That is why there is the competition and, I believe, we have been able to tackle the competition successfully.

You are of the few banks that also offer insurance products. How do these two products work along?

e do not have insurance products of our own but we are co-branded with insurance. We call it bancassurance. It is very complementary with banking services. Basically, it could be used for retail banking sector. It can go very well with mortgage products. Similarly, it can go with other lending products. And it is used as one of the major products in wealth management. So we use it as a part of wealth management package. The corporate sector has also been covered by insurance. Instead of going to an ordinary agent, they can come to the bank to get their assets insured. So, these products are actually complimentary to each other.

Securities Exchange Board of Nepal (SEBON) has recently got the Mutual Fund Regulations ratified. Your bank had shown some interest in this business in the past. How is the plan now?

To run a successful mutual fund, you need to have volume. I don't think Nepali market has yet got that volume. It will take maybe a few years to create that. For a successful mutual fund, we need to see also to the stock market. Is it equipped to handle the flow? Nepal is working with India to equip the Nepali stock market with some modern tools such as Central Depository System (CDS). Mutual Fund would be very helpful to make this market more perfect. It will not then be driven by the brokers; it will be driven by the market on its own forces. The investors can come and directly play in the market.

We have a mutual fund in India under Standard Chartered. So we have the experience and I don't think there will be a problem in terms of experience or expertise.  But we need to actually have that volume.

How do you evaluate the current financial system of Nepal? Is it heading towards robustness?

It is going through transformation I can say. At this stage, it is difficult to say whether it is robust or stagnant but I think the transformation is happening in the right direction. But it takes time; there are a lot of things that need to be corrected. Fundamental corrections are required. The only point here is that there are too many players so this market would definitely require consolidation. But I don't know when the momentum will come in terms of consolidation. 

Many banks are now trying to form a subsidiary to channel the mandatory deprived-sector lending. Do you subscribe the idea? Any plan from SCBNL along this line?

We do not have any plan at this moment and I can't comment about other banks. However, I can tell you that this deprived-sector lending (micro finance) is definitely SCB Groups major focus area globally. And also here we are working on that.

What do you suggest to improve the financial services market in Nepal?

The problem is uneven competition. There are many things that need to be done to make the market stronger. Firstly, we need to have tighter corporate governance; there is enough room for improvement. It is not only the regulator's responsibility; it is the responsibility of the individual players to ensure that a robust governance framework is in place. Secondly, this market needs more reforms in the sense of widening of the market and more integration with the international market. I think players should be allowed to directly interact with the international market. Thirdly, I would love to see a universally acceptable risk management model which would compensate the short-term losses caused by fundamental imbalances in the long term. Fourth, it is necessary to develop the capital market of Nepal. It helps in the long-term management of liquidity and also makes resources available to people to make short-term investments in the productive sector.

What are the challenges and problems faced by your bank in particular and by the overall banking sector in general?

As far as our bank is concerned, we visualize the plans for next seven to ten years. I think we are well equipped to handle the challenges when they come. During crisis, we set up a very good example in the market as the only bank that lent to the market. That shows how careful we are. Our portfolio is very carefully managed. We run cautiously, we don't want to block our books and then suffer. There is problem now in the sense that the productive sector needs more credit but a lot of money is stuck in the real estate sector.

What is your future mission and vision for Nepal?

We are long-term players and we would continue to be here. We'll be expanding our ventures. We have in mind some acquisition also, when the time is right. That's not completely out of the window.  It's very much part of the game plan.

It is said that in Nepal, merger and acquisition will remain only in talks not in practice. What do you say?

Unless foreign players and foreign direct investment flow into Nepal, I don't see any possibility of merger and acquisition. Its pre-requirements are political stability and supplementing policies. It is not only the matter of tax. No investor would like to buy problem paying money. Therefore, there must be a suitable labour policy in Nepal. I don't mean the facility of hire and fire. It means keeping human resource in right size and mobilizing it. After meeting all these requirements, I think we can then talk about merger and acquisition.

What are your bank's recent activities on Corporate Social Responsibility?

We continue to focus on accseeing is believing keeping avoidable blindness in the centre point. We are very much into helping the poor schools inside and outside the valley by providing computers and creating computer laboratory and also by providing scholarships. We have helped few deserving schools in uplifting their infrastructural facilities. We are very much into the HIV-AIDS awareness and environment protection programs. As a part of our ongoing agenda, we are planting trees to maintain greenery around and are also looking at reducing the carbon requirement of our own uses.