Nepal Bangladesh Bank Case Study

In the given case, Nepal Bangladesh Bank Ltd was established in the year 1994 with IFIC Bank Ltd of Bangladesh with the goal to become The Bank for Everyone. Nepal Bangladesh Bank (NBB) is back with a bang. Also, it further states NBB, had a 3 billion profit in past years but now it is struggling to recover its bad loans and make reasonable profit. In order to meet the objective and goal, NBB implemented various structural and operational changes in the wake of banks bitter experience. Moreover, it has quite diversified investment portfolio. It has around 25% of its total portfolio in the construction sector while its investment in manufacturing sector hovers 17%. NBB is currently working hard to achieve the position what they were in past. Therefore, in order to identify the status of NBB, lets do PEST Analysis which clearly shows political, economical, social and technological factor affecting.

FACTORS Political

PEST ANALYSIS OF NBB Environmental regulation and protection. Nepal Rastra Banks limitations regarding interest rates, ratios like cash reserve, capital adequacy, Nonperforming Assets etc. Merger between NBB and Nepal Srilanka Merchant Bank Limited. Threat given by government to NBB to punish, if appropriate information is not provided regarding NPA and loan statement.

POSITION 1) Reduced NPA from 19% to 10% 2) Banks capital been raised to 14% above central banks requirement 3) Merged Lanka Limited with Nepal Sri Merchant Bank

4) 25%of its portfolio construction sector

in

5) Planning to invest in productive sector as per NRB 6) CRR = 14.16%

7) CCAR = 11.07%

Anit Maharjan

Nepal Bangladesh Bank Case Study

8) CAR= 11.9% 9) CCD ratio = 67.77%

10) NPL = 10.32% 11) Net liquidity = 50.35% Economical NBB had 3 billion profits but it is 1) NBB had 3 billion profits but it is struggling still to recover its bad loans. Loss made by merger company 2) Loss made by merger (NSMBL) was recovered by NBB. company (NSMBL) was Foreign Investor is focused to invest recovered by NBB. 3) Foreign Investor is focused on its portfolio in large volume. to invest on its portfolio in Non-performing assets are down to large volume. 10% from 19% 4) Non-performing assets are down to 10% from 19% 5) Capital is more than 2.009 billion 6) Planning to strengthen financial health to distribute dividends of 15% 7) Invested 25%of portfolio in construction company loans. 8) Planning to invest in productive sector 9) Offers 9-15% interest rate on loan and 8-11.5%on deposit 10) Total deposit million Social = 15477 struggling still to recover its bad

customer and They had donated computers and 1) Good employee relationship wheelchairs to orphanage in past 2) donated computers and wheelchairs to orphanage days.

Anit Maharjan

Nepal Bangladesh Bank Case Study

In future they are planning to 3) planning to separate budget from profit for CSR activities separate budget from profit. 4) 19 branches to serve people 5) Planning to expand its network to reach 65%of the population of the country Technological Trying banking to make by computerized eliminating 1) 16 ATMs throughout country 2) Access to NTC bill payment 3) Access to SMS and Ebanking 4) Planning to expand products based on technology

system

traditional banking structure.

From the PEST analysis, NBB is trying to improve its status by overcoming the threats and weakness with the help of proper utilization of opportunities they have got. Further, NBB is struggling at present and trying to recover its NPA and bad loans. Thus, after analyzing the PEST, see for SWOT analysis. SWOT ANALYSIS Strength Over 18 years in the banking industry Customer Loyalty Customer friendly and experience staff Synergy between local business and joint venture partners Good quality and non Weakness Challenge to receive public business. Opportunity Prospectus of economic development. Prospectus to foreign direct investment Increasing economic activities. Threats Stiff competitions Possibility of economic recession Fluid political environment

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Nepal Bangladesh Bank Case Study

funded business.

However, NBB is passing through recession because of its bad loans and NPA, they are projecting something new with best strategy in near future. Thus, they are processing internally and they are back with a bang at current scenario. The new strategies they are following are: 1. They have developed criteria to manage risk and liquidity from past experience. 2. Various structural and operational changes made to wake of bitter experience. 3. NBB planning to sell its share to foreign company to diversify its portfolio. 4. NBB is trying finding new product in market instead of traditional deposits and lending. 5. NBB is planning to expand technology based products, specialized and standardize products with structural reforms. 6. Investment in energy and agriculture by around 15% also looking to enter in newer sector like medical and education, tourism for diversification investment portfolio. All in all, the strategies that NBB using is suitable to boost up its economic growth. Except NBB, Nepal standard Charted Bank also have been focusing in foreign investment and manufacturing portfolio. Moreover, the commercial banks are coming up with new ideas and merger strategies to penetrate the market through integration process. Likewise, tough competition and regulations offered by NRB enhance the commercial bank to bring new strategies as followed by Nepal Bangladesh Bank. Despite of fact, most of the banks are passing through recession and searching for alternative strategy to sustain in market. Thus, same case of recession and competitive market encouraged NBB to follow new strategies. In such kind of situation, apart from NBB other bank would have done same.

Anit Maharjan