Ajaya Ghimire is the Chief Executive Officer of Vibor Bikash Bank. An M. Sc. in Management from MIT Sloan School of Management, Cambridge, M. Sc. in Mathematics from Panjab University, Chandigarh, India. Ghimire has also studied one semester programme in Master in International Public Policy Programme and Master in Policy Management programme respectively from Johns Hopkins University and Georgetown University in Washington D.C.
He has been working for the Nepalese banking sector for the last 28 years. Starting his banking carrier from Nabil Bank, he served there up to the post of Assistance General Manager. Before joining Vibor Bikash Bank, he had served as the Chief Executive Officer of Ace Finance Company Limited.
Vibor Bikash Bank had faced an acute liquidity crunch about 10 month back due to withdrawal of deposits in huge amount from the public and institutional depositors. The Nepal Rastra Bank (NRB) bailed out Rs. 500 million as a rescue package to recover the bank from the liquidity crisis. Ghimire has been successful in settling the liquidity crunch of the institution. The bank is going for merger with Bhajuratna Finance Company Limited, a sister entity of the Jyoti Group by making the latter a strategic partner to strengthen its financial efficiency.
Against this backdrop, C K Khanal of The Rising Nepal spoke to Ghimire on a variety of issues ranging from the crisis-ridden status of the bank to safe landing, its merger endeavor, and plans. Excerpts:
How is the bank’s current financial status?
From a very critical period, we definitely have come forward. However, there are still various challenges ahead and we are in the process of overcoming them. We are now in a much better position. However, we still have a long way to go. It is not a simple task to regain the lost confidence of customers. Anyway, we are moving towards that direction.
Key financial indicators of the bank are improving. Our inter-bank borrowing has been decreasing significantly. Deposits have started to grow. To manage the liquidity, we have decreased borrowings of the banks in significant amount. Net loss of the bank has gone down to 22.11 million as of the end of Paush 2068 from Rs. 23.12 million in Ashad 2068. Similarly, loans and advances of the bank have now decreased to Rs. 1.947 billion from 2.310 billion about 10 months ago.
What strategies and tools did the bank use to get rid of the crisis?
What we learned from the crisis is that having small capital structure is very vulnerable to any financial institution. If you want to contribute to the economic development of the country as a financial institution, its capital structure has to have reasonably higher capital structures. Realizing that fact, we have focused on increasing capital structure. To increase capital structure, we have been in the merger process with Bhajuratna Finance and looking for other strategic partners. At the same time, we have focused on enhancing the quality of assets. For this, we have managed portfolios by decreasing the volume of investments in the real estate sector. We have achieved some successes and are still in that process.
How responsive did you find the Nepalese financial market towards the financial recovery tools?
We asked the NRB for rescue after we lost supports from financial institutions. I do not know whether I would act as other financial institutions did at the time of need for help to other financial institutions in crisis. But, I was really shocked and baffled when it happened. Once the NRB provided us with the support, the central bank was left in isolation from the entire financial sector. It should not have happened. To have a positive impact of the NRB support, there should be collaborative efforts from the influencing financial players of the system. That was really lacking. Either the financial institutions intentionally acted or the NRB did not approach them for coordination is unknown. But, the lack of collaboration ultimately helped in eroding the public confidence towards the bank and the entire financial system. While talking about our customers, we found them more collaborative to overcome the crisis.
Your bank is going for merger with Bhajuratna Finance. When will the merger process complete?
In order to enhance our capital structure, we are in the process of merger Bhajuratna Finance. As we got a letter of intent from the NRB for merger recently, we have completed due diligence process of an institution so far. We are going to complete the merger process by the end of the current fiscal year.
Despite the policy of merger of the central bank, banks and financial institutions have not gone for this as expected. What could be the reasons?
The main reason behind that may be the diverse interests of shareholders and promoters of institutions. Shareholders of the different banks and financial institutions have varied personal interests and egos apart from the interests of their institutions. That has been disturbing the merger attempts of the banks and financial institutions. While talking to our bank, we got good support from shareholders. The NRB’s policy on merger has also been encouraging us.
Why has your bank chosen the Jyoti Group’s subsidiary company as a strategic partner?
As I have already mentioned that any bank and financial institution has to have a strong capital base to contribute to the economic development. We have joined hands with the Jyoti Group not only through merger with its sister organization but also the group is injecting capital into our bank. This ultimately will help us enhance our efficiency in the competitive market.
What will be the capital and managerial structures of the bank after the merger?
Our bank now has Rs. 681.82 million and Bhajuratna has Rs. 78.62 million capital. As per our understanding, the Jyoti Group will inject Rs. 148.96 million to our bank. We have planned to increase our capital to Rs. 1.36 billion by looking for other merger and strategic partners and through public offerings.
After the merger, the new board of directors of the bank will have a total of 7 members. Of them, 2 from current Vibor promoters, one each from Bhajuratna Finance and another strategic partner to be looked for, two from public and one from the independent professional.
What are the plans of your bank?
Learning from the past mistakes, the bank now is effortful in enhancing its efficiency by employing various means. We have planned to separate the core banking activities of deposit and lending from our other businesses. Our other investment activities would be continued through subsidiaries. To concentrate on the business of deposit and lending, we need a large capital structure and more branches with modern facilities. We are increasing the capital of the bank by seeking other merger and strategic partners. At the same time, we are in the way of managing portfolio in investments to improve the quality of assets. We are in the process of regaining the confidence of public.
Would you like to add anything more to this, please?
First of all, I would like to express my sincere thanks to our customers, shareholders, supporting banks and financial institutions for their helps for us to overcome the crisis. Now the bank has started growing gradually. We have been able to manage the key financial indicators in a more favourable situation. Moreover, we have the Jyoti Group as a strategic partner which will help us to enhance the bank’s financial soundness. Therefore, I urge one and all to get involved confidently in our bank’s business.