CHAPTER ONE

INTRODUCTION
1.1Background of Study
Nepal is a land locked country situated between 80 to 8812' east-west
longitude and between 26 22' to 3027' north-south latitude and surrounded by hina
in the north and !ndia in the south" east and west# !t co$ers a total area o% 1&7"181 s'#
k(# )he topography o% Nepal is di$ided into regions* +ountains region" ,illy region
and )erai region#
)he banking sector is largely responsible %or collecting household sa$ing in
ter(s o% di%%erent types o% deposit and regulating the( in the society by lending
di%%erent sectors o% econo(y# )he di%%erent sector has now reached to the (ost re(ote
areas o% the country and has e-perienced a good deal in the growth o% the econo(y#
.y lending their resources in the s(all scale industries under intensi$e banking
progra( has enabled the banks to share in the econo(ic growth o% the econo(y#
.anking concept e-isted e$en in the ancient period when golds(iths and the
rich people used to issue the co((on people against the pro(ised o% sa%e keeping o%
their $aluable ite(s on the presentation o% the receipt* the depositors would get bank
their gold and $aluables o% the paying a s(all a(ount %or sa%e keeping and sa$ing#
1.1.1 Introduction of Himaayan Bank !imit"d
,i(alayan .ank /i(ited was established in 1002 by the distinguished
business personalities o% Nepal in partnership with 1(ployees 2ro$ident 3und and
,abib .ank /i(ited" one o% the largest co((ercial banks o% 2akistan# .ut it actually
started its operation %ro( 18
th
4anuary 1003 with an authori5ed capital o% 6s# 2&" 00"
00"000# !ssued capital o% 6s# 12" 00" 00"000" o% which paid-capital was 6s# 6" 00"
00"000# 7hares o%%ered to the general public were o$ersubscribed by (ore than 20
ti(es# )he ,ead o%%ice o% ,i(alayan bank is in the 8ar(achari 7anchaya 8osh
.uilding" )ha(el# ,i(alayan .ank started its ser$es with only 77 e(ployees and
now its total nu(ber o% e(ployees is around 327 e(ployees#
1
,i(alayan .ank has e-perienced a dyna(ic growth o$er the last 1& years#
)he new pro$ision (ade by the central bank to establish a co((ercial bank is to
(aintain (ini(u( o% 90 crore as paid up capital# )his also stands %or other e-isting
co((ercial bank that also needs to raise its paid up capital to 90 crore by the %iscal
year 2060:61# ,i(alayan .ank li(ited has raised its paid up capital in last years %ro(
6s#6&#39 crores to 77#22 crores by issue o% bonus shares only %ro( the retained
earning# !t has e-panded its ser$ice by establishing its branches in di%%erent parts o%
the country# )he .ank has $ery aggressi$e plan o% establishing (ore branches in
di%%erent parts o% the kingdo( in near %uture
T#" ca$ita %tructur" of HB! i% gi&"n '"o()
;uthori5ed apital 6s#1000"000"000 :-
!ssued apital 6s# 772"200"000 :-
2aid up apital 6s# 772"200"000 :-
Branc#"% of Himaayan Bank !imit"d
7#N# Na(e o% .ranch <%%ice /ocation =istrict
1# orporate <%%ice >
)ha(el .ranch
)ride$i +arg" )ha(el 8ath(andu
2# New 6oad .ranch .ishal .a5aar" New 6oad 8ath(andu
3# +ahara?gung .ranch )eaching ,ospital .uilding 8ath(andu
&# ard enter 2ulchowk /alitpur
9# 2atan .ranch 2ulchowk /alitpur
6# 2okhara .ranch New 6oad 2okhara
7# Narayangarh .ranch 2ulchowk" hitwan hitwan
8# )andi .ranch 7auraha howk" )andi hitwan
0# .irgun? .ranch +aha$ir 6oad" .irgun? 2arsa
10# ,etauda .ranch +ainroad" ,etauda +akawanpur
11# 7iddarthanagar .ranch 2olice olony" .hairawa 6upendehi
12# .iratnagar .ranch +ain 6oad" .iratnagar +orang
13# .anepa .ranch .anepa 8a$re
1&# .haktapur .ranch 7urya$inayak" .haktapur .haktapur
19# =haran .ranch 2utali /ine" 7unsari =haran
16# .utwal .ranch )ra%%ic howk" .utwal .utwal
Source: Himalayan Bank Annual Report, 2009
2
1.1.* Introduction of Cr"dit Card
; redit ard as the na(e suggests" is a card on which you get credit# redit
ard is the pay(ent %or goods and ser$ices en?oyed by the person in lieu o% cash# !t
allows the cardholders to use it to a$ail goods and ser$ices without being necessary to
pay on the spot# !t is such a ser$ice where the cardholder can en?oy credit %acility e$en
though he doesn't ha$e su%%icient balance in his account# !t is the concept o% buy now
pays later# +any risks are in$ol$ed in carrying bundles o% cash %or purchase o% goods
and ser$ices# redit ard helps to o$erco(e such di%%iculties as it is si(ply a card
with high security and easy to handle %ro( place to place# !t is issued by %inancial
institutions" which is the (e(ber o% +aster ard !nternational: @isa !nternational#
+ost o% the banks o%%er three kinds o% redit ards" )he lassic ard" )he 7il$er
ard" and )he Aold ard# )hese ha$e di%%erent salary re'uire(ents and accordingly
di%%erent credit li(its# ;lso" Aold cards usually ha$e other cool bene%its like discount
$ouchers %or hotels and restaurant" or special pro(otions# !t is based on the resol$ing
line o% credit" i#e# cardholders can (aintain a (ini(u( balance on account redit
ard users are pro$ided with a (onthly state(ent o% transaction and a(ount that has
been spent %or each transaction# )his helps the cardholder %or proper planning o% his
budget in hierarchy on i(portance basis#
)he (ain %eature o% this ser$ice is that the cardholder can en?oy credit %acility#
redit ard is di%%erent %ro( ;)+ ards" which allows withdrawals against deposits
only# 7i(ilarly is also di%%ers %ro( harge ard" which can be used as redit ard
e-cept you ha$e to settle the account at the end o% e$ery (onth#
1.1.*.1 Ty$"% of Cr"dit Card%
)here are essentially two types o% credit cards B secured and unsecured# ;
secured credit card is one that a cardholder secures with a sa$ings deposit to ensure
pay(ent o% the outstanding balance i% the cardholder were to de%ault on pay(ents#
Cnsecured credit cards are not guaranteed by any collateral# +ost credit cards are
unsecured debt" which is a (ain reason why their interest rate is higher than other
%or(s o% lending" such as (ortgages" which utili5e property as collateral# ;ll credit
cards %it into one o% the %ollowing three categoriesD
3
1.1.*.1.1 Bank Card%
)hey are the cards issued by banks# 3or e-a(pleD @isa and +aster ard#
1.1.*.1.* Tra&" and Ent"rtainm"nt+T , E- Card%
1-a(ples o% this type o% card are ;(erican 1-press" =iners lub and arte .lanche#
)ra$el and 1ntertain(ent and National ,ouse cards ha$e the sa(e ter(s and
conditions where$er you apply#
1.1.*.1.. Hou%" Card%
,ouse cards are good only in one chain o% stores# !t is generally a local and national
retail card#
1.1.*.1 Hi%tory and D"&"o$m"nt Cr"dit Card in N"$a
redit ard .usiness started in Nepal" %ro( when ;lpine )ra$el 7er$ices
E;)7F %irst obtained the license %ro( @!7;: +aster ard !nternational# !t introduced
@!7; and +aster ard ser$ices in Nepal back in 1089 as the representati$e o% the
hase +anhattan bank" N; 7ingapore" and therea%ter o% the <$erseas Cnion .ank"
7ingapore#
;%ter that" ac'uiring business started in Nepal" by N;.!/ and 7.N/ %ro(
1080 ;=" but N;.!/ ac'uired +aster ard and 7.N/ ac'uired @!7; only# !n
1000" 7.N/ also ac'uired +aster ard# 7i(ilarly" N;.!/ started ac'uiring
business o% =iner's card in 1002 and @!7; !N 1003# !n 1002" 7.N/ started
ac'uiring business o% 4apan o((ercial .ank ard E4.F also#
)he !ssuing .usiness was %irst started in Nepal by ,./ and N;.!/ also
started the business since No$e(ber 1003# N;.!/ issued +aster ard and ,./
issued ,./ 6egular ard" which was Nepal's %irst Nepali redit ard# !n =ece(ber"
1007 it started issuing and ac'uiring @!7; also# )hen" !N ;pril" 1007" 7.N/ started
issuing @!7; and +aster ard in 4uly" 1008# ;t present" there are %our banks in$ol$ed
in redit ard .usiness" ,!+;/G;N .;N8 /!+!)1=" N;.!/ .;N8 /!+!)1="
7);N=;6= ,;6)161= .;N8 N12;/ /!+!)1= and N12;/ !N@17)+1N)
.;N8 /!+!)1=#
&
1.1.*.* Com$on"nt% of Cr"dit Card
)he co(ponents o% a credit card are discussed belowD
1.1.*.*.1 Uni/u" Card Num'"r
redit card nu(ber %or each credit will be e(bossed on the card by an e(bossing
(achine# ard nu(ber will be di%%erent %or di%%erent credit card account# )he
beginning card nu(ber di%%ers depending upon the settle(ents banks# 3or
e-a(pleD +aster ard begins with the nu(ber 9 and @isa ard with &#
1.1.*.*.* Nam" of t#" Card Hod"r
Na(e o% the cardholder is e(bossed on the card with an e(bossing (achine# )he
cardholder (ay be an account holder or any third party#
1.1.*.*.. 0aidity Dat"
@alidity date is the date a%ter which the card e-pires which is also e(bossed on
the card# )he e-piry (onth associated with speci%ic year is (entioned on the card#
1.1.*.*.1 I%%uing Bank
Na(e o% the redit ard issuing bank is printed on the card# )he issuing banks o%
Nepal are N;.!/" ,./" and 7.N/#
1.1.*.*.2 Brand Nam"
)he .rand Na(e o% the card associated with certain settle(ent bank is also
printed on the card# 3or e-a(pleD +aster ard" @isa ard" =iners ard etc#
1.1.*.*.3 4agn"tic Stri$"
+agnetic 7tripe will be on the back o% the redit ard# !t is the (ain part o% the
card# ;ll the data associated with the credit card is (entioned on it which can be
studies with the help o% speci%ic (achine#
9
1.* !it"ratur" R"&i"(
redit ard is one o% the (ost $igorously sought a%ter and growing business o%
the world# )his business had been carried out either by banks or %inancial institutions
all o$er the world# !t is actually an e-tra or a kind o% bene%it that is gi$en to the
custo(ers# redit ard is a plastic card with a credit li(it used to purchase goods and
ser$ices and to obtain cash ad$ance on credit %or which a car holder is subse'uently
billed by the issuer %or the repay(ent o% the credit e-tended# redit card is issued by
%inancial organi5ations which is the (e(ber o% +aster ard !nternational and @isa
!nternational" in the na(e o% a person or a party# )he person or the party holding the
credit card is known as redit ard ,older# )he cardholder can (ake pay(ent %or
goods and ser$ices purchased by ?ust presenting the card#
;ccording to a study conducted by Aabish 4oshi" Hredit ard and its
)ransaction in NepalH ,e %ound out that within last 9 years" total o% 12"720 credit
cards has been issued and total ac'uired transaction o% 20"69& (illion has been (ade#
!n issuing N;.!/" 7.N/ and ,i(alayan .ank are co$ering nearly 36I" 9&I and
10I respecti$ely o% the total (arket share# !n ac'uiring N;.!/" 7.N/ and
,i(alayan .ank are co$ering nearly 30I" 30I and 31I respecti$ely o% the total
(arket share#
;nother study conducted by 7watantra .aral" Hredit ardD ;n <$er$iewH"
concluded that the whole credit card business depends upon the in%or(ation
technology or the data trans(ission $ia co((unication line# )he growth o% business
purely depends on the in%or(ation technology and nowadays it is a business o%
!n%or(ation )echnology ;ge# )hus" the in%or(ation syste( o% bank should be (uch
reliable and it also helps in (a-i(u( reduction in losses through %raudulent card
acti$ities# )here is high pro%itability in card business and this can be reali5ed only
when the bank de$elops (odern in%or(ation technology" reliable custo(ers and
spreads its business %ro( its concentration areas to other parts o% the country as well#
6
1.. 5i"d(ork Proc"dur"
)he %ield work proceeded in the $arious stages# 3or the purpose" %irst o% all sub?ect
%or the pro?ect work selected then %ield $isit was planned and appoint(ent with the
bank o%%icial was (ade and schedule was prepared with their consent o% o%%icial# 3or
this" the $isit was (ade to the head o%%ice o% the ,i(alayan .ank /i(ited" which is
located at 2ulchowk in /alitpur# o-operation %ro( the e$ery (e(ber o% bank was
obtained# )hey pro$ide the related date and in%or(ation needed %or the %ield work and
are also collected# ;ll the data are realistic#
1.1 O'6"cti&" of t#" Study
)he basic ob?ecti$e o% the study is to know detail general in%or(ation about
redit ards transaction (echanis( and redit ard <peration in ,i(alayan .ank#
,owe$er" the speci%ic ob?ecti$e o% this report will sort out %ollowing 'ueriesD
)o analy5e the types and co(ponents o% redit ard holder
)o speci%y the operation o% redit ard and the pay(ent syste(
)o analy5e the risk and %raud associated with redit ard .usiness
)o enlist the trend o% redit ard .usiness o% the last se$en years#
1.2 4"t#od of Data Co"ction
; syste(atic (ethodology is re'uired to pick out an actual result %or any
special study# 6esearch (eans the search %or knowledge and (ethodology re%ers to
$arious se'uential steps that are adopted in the study# )his %ieldwork is undertaken to
ha$e a clear picture o% redit ard operation o% ,./# )he research (ethodology
adopted %or this study contains $arious (ethods and techni'ues are con$enience and
appropriate %or analy5ing the data and in%or(ation collected# )he research
(ethodology used in this research includes personal obser$ation" secondary data
collection" annual report and inter$iew# ; brie% outline about (ethodology adopted is
(entioned below#
1.2.1 Sourc"% of Data
1ach %ieldwork has its own data needs and data source# =ata %or this study has
been collected %ro( basic two sources na(ely" 2ri(ary data and 7econdary data#
7
1.2.1.1 Primary Data
)hey are %irst hand data# )hey are obtained directly %ro( the 7ource# 3or
pri(ary data collection inter$iew was taken with di%%erent sta%%s with the concerned
depart(ent +eeting with workers" custo(ers and (anage(ent groups were %ew
e%%ecti$e tools to get the correct in%or(ation and to statistics and know the e-isting
proble(s#
1.2.1.* S"condary Data
7econdary data are those data that has already been generated by others#
7ources o% secondary data %or this study includes sales in%or(ation" accounting data"
internally generated reports which are %ound within the co(pany# ;nd sources re%ers
to books" publications periodicals" data ser$ices and co(puter data banks" reports and
statistics gathered and co(piled by others prior to study
1.2.* Data Co"ction Proc"dur"
.oth pri(ary and secondary data were used in preparing this report# ;nd the
data was obtained directly %ro( redit ard enter" 2ulchowk# )he o%%icer o% the card
depart(ent pro$ided all the consolidated data records o% the Nepal ard +e(ber
3oru(#
; direct inter$iew with the o%%icer o% the redit ard enter was also (ade#
)he o%%icer clari%ied all the data and ga$e all the re'uired in%or(ation in relation to the
report# <ther %inancial in%or(ation such as annual reports" unpublished reports etc#
were collected %ro( ,./" 2ulchowk .ranch and o(puter data bank#
8
CHAPTER 7 II
DATA PRESENTATION AND ANA!8SIS
*.1Data Pr"%"ntation and Anay%i%
*.1.1 Tran%action Proc"%%
)he transaction begins when the cardholder purchases any goods and ser$ices
%ro( a (erchant# )he (erchant prepares a sale dra%t using an i(printed:electronic"
which contains card nu(ber" cardholder's na(e" and e-piration date o% the card" the
a(ount and the %ull signature o% the holder# )he (erchant" then" sells the sales dra%t to
the ac'uirer and gets the a(ount on the sales dra%t rei(bursed at less an agreed
discount rate by the ac'uirer# !t is called as H+erchant 7er$ice 3eeH E+73F# )he
settle(ent bank" +aster ard and @isa ard !nternational then rei(burses the
ac'uirer who sends the data either through line or by processing it through %loppy and
sub(itting sa(e# )he settle(ent bank charges the issuer and the issuer then bills it to
its cardholder who ulti(ately repays the issuer#
!n case o% cash ad$ance EwithdrawsF %or %oreigner" transaction process begins
when cardholder goes to the (erchant or ac'uirer or issuer bank %or cash ad$ance#
)hey act as (oney pro$ider %or the cardholder# )hen" this case" the party who is going
to gi$e cash ad$ance that (ust know that" whether the card is genuine or not# 3or this"
the (oney pro$ider (ust take an authori5ation nu(ber# 3or this" it needs less than 10
(inutes o% ti(e# !n this process" %irstly (oney pro$ider has to call the redit ard
enter" 2ulchowk" and gi$e details Ei#e# card nu(ber" e-piry date" a(ount to be
ad$anced etcFthe o%%icer will send tele- to the @!7; !nternational# )hen instantly get a
si--digit authori5ation nu(ber and that will be pro$ided to the (oney pro$ider#
+oney pro$ider" then" %ills up the charge slip along with authori5ation nu(ber and
gets the cardholder's signature" one photo copy o% passport# )hen place the credit card
and charge slip i(printer and i(printed# )he charge slip will ha$e three copies" one is
%or cardholder" one is %or (erchant Ein case o% (oney pro$ider is the (erchantF and
one is %or ,i(alayan .ank# )hen" cardholder gets the re'uired a(ount o% (oney#
0
*.1.* Diff"r"nt S"r&ic"% C#arg"% in Cr"dit Card
)here are di%%erent ser$ices charges in redit ard o% ,./ which are discussed
below.
*.1.*.1 Su'%cri$tion 5""%
7ubscription %ees are one o% ser$ice charged by the ,./# Nor(ally" it (eans
renewal %ees" reissue or da(age %ees and lost or replace(ent %ees respecti$ely#
Ta'" 1) Su'%cri$tion 5""%
=escription 7ubscription:
+e(bership
3ees
;nnual 3ees 6eissue:
=a(age
3ees
/ost:6eplace(ent
3ees
=o(estic
ards - N26
@!7; A</= 900 1900 1000 1900
7upple(entary 900 1000 1000 1900
@!7; lassic 900 790 900 1000
!nternational
ards- C7=
@!7; A</= 29 29 29 &0
7upple(entary 10 29 29 &0
@!7; lassic 20 20 20 29
7upple(entary 10 19 20 30
)he 7ubscription %ee $aries %or di%%erent cards# 3or @isa Aold =o(estic
ards it is 6s#900" %or 7upple(entary it is also 6s#900# 3or !nternational ards" it
is C7J 29 %or @isa Aold and C7J 10 %or supple(entary# 7i(ilarly" it is 6s#900 %or
@isa lassic in case o% =o(estic ards# ;nd in case o% international ards it is
C7J 20 %or @isa lassic and C7J 10 %or 7upple(entary#
*.1.*.* O&"r !imit C#arg"
ardholder gets credit ser$ices a%ter obtaining their redit ard but gets credit
ser$ices only %or certain li(ited a(ount as per their redit ard# !t (eans that
cardholder can consu(e in credit till the li(ited a(ount only# !% the cardholder
consu(es (ore than his credit li(it" than he will be charged a %lat rate o% 6s#900
in the case o% do(estic cards and in case o% international cards a %lat rate o% C7J
10 is charged as per <$er /i(it harge#
10
*.1.*.. !at" Paym"nt 5""%
;%ter getting the transaction detail by the cardholder he has to pay the bill to
the issuer# ;nd i% he %ails to pay it in ti(e he will be charged 6s#190 %or do(estic
cards and C7J 9 %or international cards as /ate 2ay(ent 3ees#
*.1.*.1 4"rc#ant S"r&ic" 5""
Nepal ard +e(ber 3oru( has (aintained a (ini(u( o% 2#9I and a
(a-i(u( o% 3#9I +erchant 7er$ice %ee applicable %or all +aster ard and
@!7; ard transaction# =etailed 3ee /ist could not be obtained as it was
con%idential in%or(ation
*.1.. Stat"m"nt of Ac/uiring Data of Cr"dit Card
)he state(ent o% ac'uiring data o% credit card can be clearly shown in the table belowD
Ta'" *) Stat"m"nt of Ac/uiring Data of Cr"dit Card
ard )ype
urrently
;c'uired .y
+e(ber
)otal
+erchant
,./ N;.!/ 7.N/ N!./
=;)1 N<# =;)1 N<# =;)1 N<# =;)1 N<#
@!7; 3083 1007 631 1003 600 1080 2230 2003 &23
+aster ard 2020 - - 1000 600 1000 2230 -
=iners 200 - - 1002 200 - - -
4. 99& - - - - 1002 99& -
)otal 7666 - 631 - 1980 - 9032 &23
Source: Nepal Card Member Forum
3ro( the abo$e table No#2 in the state(ent o% ac'uiring data o% credit card"
there are $arious types o% card currently ac'uired by the (e(bers o% ,./" Nabil and
7.N/ which are @!7; ard" +aster ard" =iners" and 4.# ;(ong which @!7;
ard includes 3083" +aster ard includes 2020" =iners ard includes 200 and 4.
ard includes 99& total (e(bers respecti$ely# ; pie chart below shows that @!7;
card is the (ost popularly used card as it co$ers 92I o% the (arket#
5ig 1) Card Ty$" Ac/uir"d 'y 4"m'"r According to Tota No. of 4"rc#ant%
11
Diners ,
200, 3%
JCB , 554,
7%
Master
Card ,
2929, 38%
VISA ,
3983, 52%
*.1.1 Stat"m"nt of I%%uing Data of Cr"dit Card
)he state(ent o% issuing data o% credit card can be clearly shown in the table belowD
Ta'" .) Stat"m"nt of I%%uing Data of Cr"dit Card
ard )ype
urrently
!ssued .y
+e(ber
)otal
Nos#
,./ N;.!/ 7.N/ N!./
=;)1 N<# =;)1 N<# =;)1 N<# =;)1 N<#
@!7; lassic
ENepal: !ndiaF
0"&1& =ec '00 1"780 ;ugK09 2"038 ;pr'00 9"383 4ulK07 213
@!7; lassic
E!nternationalF
- - - - 4ulK07 -
@!7; Aold
ENepal: !ndiaF
1"922 =ec '00 1"&62 - - 4ulK07 60
@!7; Aold
E!nternationalF
9&& =ecK03 916 - - 4ulK07 28
@!7; 1lectron
E!nternationalF
23"006 - ;prK06 8"070 - ;ugK06 1&"036
+aster ard
ENepal: !ndiaF
2"&78 - No$'09 2"&78 - ;ugK06 200
+aster ard
E!nternationalF
7&8 - No$'09 7&8 - -
+aster ard
Aold
ENepal: !ndiaF
272 - - 4ul '02 272 -
+aster ard
Aold
E!nternationalF
- - - - -
12
)otal 38"18& 3"798 1&"23& 9"699 1&"937
Source: Nepal Card Member Forum
3ro( the abo$e table No#3 in the 7tate(ent o% issuing data o% redit ard"
there are $arious types o% card currently ac'uired by the (e(bers o% ,./" N;.!/"
7.N/ and N!./ which are @!7; lassic ENepal: !ndiaF" @!7; lassic
E!nternationalF" @!7; Aold ENepal: !ndiaF" @!7; Aold E!nternationalF" @!7;
1lectronE!nternationalF" +aster ard ENepal: !ndiaF" +aster ard E!nternationalF"
+aster ard Aold ENepal: !ndiaF and +aster ard Aold E!nternationalF# ;(ong which
@!7; lassic ENepal: !ndiaF includes 0&1&" @!7; lassic E!nternationalF includes Nil"
@!7; Aold ENepal: !ndiaF includes 1922" @!7; Aold E!nternationalF includes 9&&"
@!7; 1lectronE!nternationalF includes 23006" +aster ard ENepal: !ndiaF includes
2&78" +aster ard E!nternationalF includes 7&8" +aster ard Aold ENepal: !ndiaF
includes 272 and +aster ard Aold E!nternationalF includes Nil nu(ber respecti$ely#
5ig *) Card% i%%u"d according to ty$"
13
3ro( the abo$e chart" it is clear that @!7; 1lectron is the (ost popular type o%
card issued which holds a total o% 60I#
*.1.2 Stat"m"nt of Ac/uir"d 0oum" of Cr"dit Card
)he state(ent o% ac'uired $olu(e o% credit card can be clearly shown in the table
belowD
Ta'" 1)Stat"m"nt of Ac/uir"d 0oum" of Cr"dit Card
NR!000" #From $% &ul200% to $' &an200()
ard )ype urrently
;c'uired .y +e(ber
,./ N;.!/ 7.N/ N!./ )otal
@!7; 7&"8&9 9&0"01& 970"708 283"28& 1"&77"891
+aster ard - 286"820 2&9"901 - 932"&11
=iners - &"008 - - &"008
4. - - 1"280 - 1"280
)otal 7&"8&9 830"032 826"970 283"28& 2"019"6&0
Source: Nepal Card Member Forum
3ro( the abo$e table No#& in the state(ent o% ac'uired $olu(e o% credit card"
there are $arious types o% card currently ac'uired by the (e(bers o% ,./" Nabil and
7.N/ which are @!7; ard" +aster ard" =iners" and 4.# ;(ong which @!7;
ard includes 6s# 1"&77"891"000" +aster ard includes 6s# 932"&11"000" =iners ard
includes 6s# &"008"000 and 4. ard includes 6s# 1"280"000 o% total $olu(e o% redit
ard respecti$ely#
*.1.3 I%%uanc" Co&"rag"
)he issuance o% redit ard by di%%erent banks out o% the total issuance is
shown in the table gi$en belowD
Ta'" 2) I%%uanc" Co&"rag"
!ssuer Nu(ber o% ards 2ercentage EIF
7.N/ 9699 1&#80087
N;.!/ 1&23& 37#27730
,./ 3789 0#012920
1&
N!./ 1&937 38#07002
)otal 3818& 100
Source: *""uin+ data, Nepal Card Member Forum
!n )able No#9 it clearly shows that credit card issued by 7.N/ a(ounts to
9699 cards" credit cards issued by N;.!/ a(ounts to 1&23& cards" ,./ a(ounts to
3789 cards" and that by N!./ a(ounts to 1&937#
5ig .) I%%uanc" Co&"rag"
3ro( the abo$e %igure" we can see that 7.N/ co$ers 19I o% the total
issuance" N;.!/ co$ers 37I o% the total issuance" ,./ co$ers 10I o% the total
issuance and N!./ co$ers 38I o% the total issuance# )hus" N!./ co$ers the highest
co$erage in ter(s o% issuance o% credit card#
*.1.9 Ac/uiring Co&"rag"
)he ac'uiring o% credit card o% di%%erent banks out o% the total ac'uiring is
shown in the table belowD
Ta'" 3) Ac/uiring Co&"rag"
;c'uirer ;c'uired @olu(e in
N26' 000
2ercentage EIF
7.N/ 826"970 &0#9I
N;.!/ 830"032 &1#9I
,./ 7&"8&9 &I
N!./ 283"28& 1&I
)otal 26"&6"726 100
Source: Ac,uirin+ -olume, Nepal Card Member Forum
19
)able No#6 re$eals the ;c'uired $olu(e o% di%%erent banks in total# !t shows
that N;.!/ has the highest ac'uiring $olu(e" which is 6s# 830"032 Ein '000F than that
o% 7.N/" N!./ and ,./" which is 6s# 826"970" 6s# 283"28& and 6s# 7&"8&9 Ein
'000F respecti$ely#
5ig 1) Ac/uiring Co&"rag"
)he pre$ious %igure shows that 7.N/ and N;.!/ ha$e the highest
;c'uiring o$erage at &1I" whereas N!./ co$ers 1& I and ,./ co$ers & I#
*.1.: Num'"r of 4"rc#ant%
)he )otal nu(ber o% (erchant that accepts cards o% the di%%erent banks is
shown belowD
Ta'" 9) Num'"r of 4"rc#ant%
;c'uirer Nu(ber o%
+erchants
2ercentage EIF
7.N/ 9032 69#6
N;.!/ 1980 20#6
,./ 631 8#2
N!./ &32 9#6
)otal 7666 100
Source: Ac,uirin+ -olume, Nepal Card Member Forum
)able No# 7 shows the nu(ber o% (erchants holding by di%%erent banks# ;s per
the table" 7.N/ holds 9032 (erchants" N;.!/ holds 1980 (erchants" ,./ has 631
and N!./ has &32 (erchants#
5ig 2) Num'"r of 4"rc#ant%
16
;bo$e %igure shows the Nu(ber o% +erchants" the di%%erent banks hold# the
%our banks* 7.N/" N;.!/" ,./ and N!./ banks hold 69I" 21I" 8I" 6I
respecti$ely#
*.1.; Pr"%"ntation of Ac/uiring Bu%in"%% Data of HB!
)he presentation o% ac'uiring business data can be (ore clear %ro( the gi$en
table no#8
Ta'" :) Pr"%"ntation of Ac/uiring Bu%in"%% Data of HB!
Gear Nu(ber o% +erchants ;c'uiring @olu(e EN26
00K000F
061:62 008 2"20&
062:63 9&6 1"627
063:6& 971 1"378
06&:69 600 688
069:66 631 7&8
Source: Ac,uirin+ .ata and Ac,uirin+ -olume, Nepal Card Member Forum
)able No#8 indicates the nu(ber o% (erchants and the ac'uired $olu(e o%
,./ in di%%erent 3iscal Gear %ro( 061:62 to 069:66# )hey were (ini(u( during
662:63" being 9&6 (erchants and 6s#1627 in '00"000 ac'uiring $olu(e# )he $alue %or
both o% the( is (a-i(u( in 061:62 which is 008 and 6s#2"20& in '00"000
respecti$ely#
5ig 3) Ac/uiring Bu%in"%% Data of HB!
17
)he abo$e %igures shows that the nu(ber o% +erchants as well as the
;c'uiring $olu(e o% ,i(alayan .ank is in increasing trend till the %iscal year 097:98
but it decreases in 098:90 due to non issue o% ,./ cards i#e# classic and gold# )he no#
o% (erchants has started increasing since 060:61 to 600 as ,./ resu(ed the issuance
o% the two types o% @!7; card#
*.* Study R"%ut
)he credit card has been introduced %or (ore than hal% a century" yet still"
people are not well in%or(ed o% its ad$antages" and to be (ore speci%ic" (ost people
lack the credibility to be a credit card holder# .anks need to analy5e the %inancial
history and current %inancial status and cash inco(e %low o% the potential credit card
holder in order to pronounce the( the title# 7uch detailed processes discourage
custo(ers %ro( procuring credit cards# +oreo$er" e$en a(ong all those who apply %or
credit are not granted such on the grounds o% the bankKs analysis# )hus" credit cards
are (ainly used by people who ha$e to high bank balance and need to %re'uently
tra$el abroad#
)his study has so(e li(itations which ha$e been %ound during the preparation
o% the report due to uncontrollable $ariables# 7o(e o% the( are listed belowD
)he study is based on the secondary data and %indings are based on the
in%or(ation pro$ided by the bank#
7tudy is done on redit ard only# ;nalysis o% this report only re%ers to credit
card#
=ata a$ailable o% ,./ are o% past %i$e years only#
urrent detailed reports were not a$ailable as they were con%idential
in%or(ation#
18
)he in%or(ation ac'uired is li(ited" so this study does not go inside each and
e$ery acti$ity per%or(ed by the ,./#
)he study is (ade on ,i(alayan .ank only so" in%or(ation about redit card
on other banks is (entioned in brie%#
)he conclusion deri$ed %ro( the study (ay not be applicable to other si(ilar
organi5ation#
CHAPTER 7 III
SU44AR8< CONC!USIONS , RECO44ENDATIONS
..1 Summary
)he success o% e$ery country is $ery (uch depending on econo(ic acti$ities
o% the country# 3inancial institute plays a $ery i(portant role in accelerating
de$eloping o% the country# !t occupies a $ital role in the national econo(ical and
de$elop(ental %ra(ework due to collection o% capital through sa$ing %ro( citi5ens"
(aking in$est(ents in di%%erent parts o% the econo(y" (obili5es the %unds# .anking
industries helps in reducing po$erty" raising e(ploy(ent opportunity" and there by
de$eloping the society as whole#
Ao$ern(ent owned bank which is spread all o$er the country" (ust be able to
operate with good (anage(ent but in control o% Nepal" the (anage(ent o% the
go$ern(ent owned bank is %or(ulated using bureaucrats and (anagerial in%luence is
e-isted# 7o" the concept o% ?oint $enture co((ercial banks are growing and applying
%aster now a days (any co((ercial bank ha$e been co(peting with each other in
there business#
10
;%ter accepting econo(ic %reedo( and pri$ati5ation policy in Nepal" ,./ was
established under the %oundation o% Nepali capitalists in 20&0 .#7# in 4oint @enture
ship with ,abib .ank /i(ited" 2akistan# ,./ has been pro$iding credit card %acility
since 1003# ,./ issues @isa ard and +asterard only and ac'uires @!7; only# )otal
issuance done by ,./ as o% 13:0&:2000 is 8"1&6 cards" which includes 1"2&1 +aster
ard redit ard and 6"009 @isa ard# ;c'uired $olu(e is 801"120"900# ,./ ards
co$ers 0#01I o% the total issuance o% credit card done in the country by di%%erent
banks# 7i(ilarly it co$ers &I o% total ac'uired $olu(e and 8#2I o% the total
(erchants hold by di%%erent banks through out the country#
)hus" %ro( all the studies it has beco(e clear that redit ard .usiness is $ery
pro%itable and is s carried out in a $ery (onitored and controllable (anner# !n spite o%
its high pro%itability" only 3 banks are in$ol$ed in this business a(ong lots o%
co((ercial banks running in the country# )here is high prospecti$e and growing
(arket %or credit card business especially ac'uiring business# Nowadays" people are
being aware about credit card %acilities and the ad$antages o% holding a credit card
which is gradually progressing in industriali5ation process and increasing inco(e
le$el a(ong the higher and (iddle class society# )hus" other co((ercial banks
running in the country should enter into the business and increase custo(ers as well
as (a-i(i5e their pro%it#
..* Concu%ion%
a# 3ro( this report EstudyF it has been %ound that co((ercial banks like ,./"
N;.!/" N!./ and 7.N/ are only allowed to issue and ac'uire credit card in
Nepal# ,./ and N!./ issues @isa ard only and ac'uires @isa ard# N;.!/
issues +aster ard and ac'uires +aster ard" @isa ard and =iner's ard#
7i(ilarly" 7.N/ issues @isa ard as well as +aster ard and ac'uires +aster
ard" @isa ard and 4.#
b# .y $isiting the %ield" it has brought good knowledge to (e about redit card
that" it is a s(all plastic card which is used instead o% (oney to pay %or goods and
ser$ices %ro( shops" tra$el co(panies" petrol station etc# )he cost being charged
20
to one's account and to be paid later# .asically" there are two types o% credit card
i#e# secured and unsecured#
c# )he ac'uiring started in Nepal Nabil and 7.N/ %ro( 1080;#=# .ut Nabil"
ac'uired +aster card and 7.N/ ac'uired @isa only# .ut 7.N/ ac'uired
+aster card# Nabil started ac'uiring business o% =iner's card in 1002 and @isa
in1003# !n 1003" 7.N/ started ac'uiring business o% 4apan o((ercial .ank
card#
d# )here are (ainly %i$e parties associated with this (echanis( areD the issuer"
the cardholder" the ac'uirer" (erchant and the settle(ent bank#
e# )he 'uali%ication needed to beco(e a cardholder that the age should be abo$e
18 years and abo$e" should regular inco(e source" (aintain account with any
branch o% ,./ 3urther(ore" i% these basic eligibility criteria are (atched then he
or she should %ill up application %or(s to beco(e a (e(ber#
%# )he process begins when the cardholder purchases goods and ser$ices %ro(
the (erchant# ;%ter recei$ing the card" the (erchant sells the ac'uirer and is
rei(bursed the a(ount o% the sales dra%t# )he ac'uirer then sub(its the dra%t to
the issuer %or the pay(ent# )he issuer then bills the cardholder# 3inally" the
cardholder repays the issuer %or the goods and ser$ices originally purchased %ro(
the (erchant#
g# 7ince" credit card is one o% the inco(ing sources o% issuing banks and
e-pecting (eans %or getting high rate o% return" (ost o% the co((ercial banks
want to enhance this %acility in growing world (arket#
h# )he 7ubscription %ee $aries %or di%%erent cards# 3or @isa Aold =o(estic ards
it is 6s#900" %or 7upple(entary it is 6s#900# 3or !nternational ards" it is C7J29
%or @isa Aold and C7J29 %or supple(entary# 7i(ilarly" it is 6s#900 %or @isa
lassic in case o% =o(estic ards# ;nd in case o% international ards it is C7J20
%or @isa lassic#
i# )he (ini(u( ser$ice %ee Ein percentageF charged to banks by di%%erent
category o% (erchants# )he (ini(u( ser$ice %ee is 2#9I and (a-i(u( is
3#9I#,owe$er" detailed in%or(ation were con%idential as such a policy o% the
bank#
... R"comm"ndation%
21
)here should be a sound co-operation between custo(ers and
sta%% o% ,./# 7o" it could (aintain the current (anage(ent practice#
redit ard 7yste( o% the bank is satis%actory but in
co(parison o% 7.N/ and N;.!/ it has low issuance co$erage" ac'uiring
co$erage as well as its nu(ber o% (erchants is also low# 7o" the bank should put
e-tra e%%ort on e-panding their credit card business so that other custo(ers also
can take ad$antage o% the %acility and on the other hand it can also (a-i(i5e its
pro%it#
)he e(ployees o% redit ard depart(ent should be able to
(ake right ?udg(ent %or e%%ecti$e and e%%icient %unctioning o% the entire
depart(ent# )he (arketing people should ha$e general knowledge about the
security aspects" should regularly consult the security (anage(ent in-charge and
should be updated with the latest and (ost recent inno$ation in the world o% card
business#
!% bank is to operate credit card center as an independent pro%it
(aking unit" then the (anpower allocation has to be done prudently with proper
?ob analysis# ;ll ?obs ha$e to be analy5ed and sta%%s should be designated with
responsibility and accountability" considering their 'uali%ication and e-perience#
ertain strategies like introducing new international branded
card like +asterard" ;(erican e-press card can help it# +oreo$er the bank can
also add new %acilities and %eatures in the e-isting card to enhance the i(age o%
the card issued by ,./# )he bank can tie up with di%%erent %inancial and other
institutions to pro$ide better ser$ice to the custo(ers# ,./ should try to create a
uni'ue i(age o% its card in the Nepalese (arket# ,./ should si(pli%y the
issuance procedures with clearly de%ined ter(s and condition
22