Mahalaxmi Bikas Bank’s remarkable beginning indicates that the future holds bright prospects for this development bank.
--BY SUMIRAN GIRI
In a bid to become the largest development bank in Nepal, Mahalaxmi Bikas Bank merged Yeti Development Bank into it on July 2, 2017. Mahalaxmi Bikas Bank had started its journey as a B-class institution following the merger of Mahalaxmi Finance, Malika Vikas Bank and Siddartha Finance Limited in July, 2016 and started integrated transaction in September, 2016. Thus, Mahalaxmi is the result of merger of seven BFIs altogether since 2013. In 2013, Manakamana Development Bank, Valley Finance and Yeti Finance merged to form the Yeti Development Bank. Similarly, there was a merger between Imperial Finance and Siddartha Finance in 2014.
Mahalaxmi Bikas Bank merged Yeti Development Bank into it with a share swap ratio of 1:1. “After the successful union of Mahalaxmi Finance, Malika Bikas Bank and Siddartha Finance, we were confident to handle the merger of Yeti as well,” replies Ramesh Kumar Bhattarai, CEO of Mahalaxmi Bikas Bank when asked if they were apprehensive about the merger. “90 percent of the employees of the merging institutions were well-trained before the merger so that they are able to work and handle things efficiently post-merger,” he adds. Trainings for capacity enhancement of staffs were carried out extensively particularly in credit appraisal and operational risks.
The union between Mahalaxmi and Yeti is considered a mega-merger in the Nepali BFI sector. “The merger process went on smoothly. “However, the main problem we are facing right now is the integration of workforce,” mentions Bhattarai.
Formed after the merger of seven BIFs over the period of four years, the development bank has a diversified workforce. “Though diversified workforce generally means that there are chances of miscommunication and it can be hard to manage everyone for a while, our employees are the driving factor of our success”, says Bhattarai.
The bank now has over 600 employees and there are plans to provide further trainings to them for the next three months for the smooth operation of banking and other activities.
Software and data integration of the merged entities that are usually considered as the most time-consuming part of a merger were also carried out without much hassles. The bank teamed up with its service provider to handle the software and data integration smoothly.
Mahalaxmi Bikas Bank has achieved the minimum paid-up capital requirement of Rs 2.5 billion set by the central bank for national level development banks. After the merger, the bank has Rs 2.63 billion in paid-up capital. Since the merger process came very close to the end of FY2016/17, the bank focused mostly on the loan recovery. The merger has been very profitable for Mahalaxmi in terms of financial performance. In FY2016/17, the bank’s profit boosted by nearly 40 percent compared to the last fiscal year enabling the bank to enter the billionaires’ club. The bank posted operating profit of Rs 1.10 billion, while its net profit was Rs 709.1 million in the fiscal year. It has made Mahalaxmi the highest profit earner in the Nepali development banking sector in FY2016/17.
The different indicators including deposits, paid-up capital, loans, profit client network, branch and employees clearly show the bank’s outstanding performance in the last fiscal year.
“Our biggest assets are our employees and the financial statement is clearly indicative to this,” says CEO Bhattarai. The comparative figures before and after merger gives a clear view as to why Bhattarai has stated this. “One can only manage an organisation well when they can manage themselves well. Self-reliant staffs help in making the work even easier. This is why the company focuses on continuous training of the employees,” he mentions. Nonetheless, the bank also has been facing some problems in staff retention. “Extensive expansion of commercial banks in the recent years has become a problem for us in terms of retention of staffs,” he says.
The bank has plans to introduce efficient technology in practice such as paperless banking service for sustainable advancement.
According to Bhattarai, the bank will expand its network in eastern and western regions of Nepal utilising the existing network base and branches. “We will be utilising the full potential of our resources in this regard,” says Bhattarai.
Meanwhile, Mahalaxmi Bikas Bank is focusing on recovery of loans and also is in a process to revise its lending policy with an aim to manage deposits and lending.
The development bank looks to conduct CSR activities in a bid to make positive impacts in the society. “We do not want to engage in CSR activities for the sake of publicity. Rather, we’d like to really contribute to the society,” states Bhattarai. The bank plans to prioritise certain sector each year such as health, education and environment to conduct CSR activities. “A two-day meet of branch managers from across the country will soon be organised and the procedures of CSR undertakings will be discussed,” he informs.
New venture: Insurance
Mahalaxmi Insurance, promoted by Mahalaxmi Bikas Bank, is a new life insurance company which is planning to start its operation soon. The company is yet to finalise the variety of insurance products. It is in a process to fulfill the minimum paid-up capital requirement set by the Insurance Board.
• Number of branches and clientele
• Lack of enhanced technology, difficulty in managing employee incentives
• Starting new branches in rural areas facilitating large population in villages to have access to banking and financial services
• Unhealthy competition in the banking sector, staff retention.