Kathmandu University School of Management

Kathmandu College of Management

Internship Report For the partial requirement for BBA Program Program Code: RIS 401

Internship Employer Himalayan Bank Ltd., Head Office Thamel, Kathmandu

Interns Nikhil Agrawal, Redg No: A005901-05 Rishabh Tibrewala, Redg No: A005980-05

July 02, 2009

SIGNATURE PAGE I/we certify that I/we have read this document and, in my/our opinion, it is sat isfactory in scope and quality as a project in partial fulfillment for the Under graduate Course of Internship held at the Kathmandu College of Management during t he Fourth year Second semester, 2009. Date: July 02, 2009

_______________________ Project Evaluator Kathmandu University School of Management

COPYRIGHT All rights reserved. No part of this report may be reproduced, stored or transmitted in any form, or by any means, without the prior permission of the authors. No patent liability i s assumed with respect to the use of the information, contained herein. Although every precaution has been taken in the preparation of this report, the authors assume no responsibility for error or omission. Date: July 02, 2009 Kathmandu College of Management

Any consequent decision based on this report shall not make the authors responsible.DISCLAIMER The authors are confident that the results presented in this report will be take n as guidance for a more comprehensive study at the future date. These do not reflect the single rule of thumb nor are these endorsed by the College. . The authors of the report are not responsible or liable legally or by any other means against t he results of the report. The views expressed in this report are as per the findings and research undertak en. The views expressed in this report are those of project coordinator onl y.

the undersigned declare that this project entitled is a result of our own st udy/ research carried out in the year 2009.DECLARATION We. no. A005980-05 . Signature _____________________ Nikhil Agrawal BBA 2005-2009 Kathmandu College of Management Redg. A005901-05 _____________________ Rishabh Tibrewala BBA 2005-2009 Kathmandu College of Management Redg. It has not been previously submitted to any other University or any other examination(s). no.

Rabindra Pradhan. Thamel branch for tru sting us and providing access to confidential documents when and where required in the scope of the project. We would like to further thank KUSOM for providing students with such opportunit y to experience the organization culture and experience and for their structurin g of this course for the benefits of the students. Director. Mr. Mr. Our indebt gratitude also goes to Mr. Thank you all! Sincerely Nikhil Agrawal Rishabh Tibrewala . we would like to express our deep and sincere gratitude to Himalayan B ank Limited and the entire Himalayan Bank family for providing us the exciting o pportunity to be one of them and giving us thorough guidance and opportunities t o move ahead with our internship objectives.ACKNOWLEDGEMENT Foremost. stimulating suggestions and enco uragement helped us in writing of this internship report. Lhakpa Gelu Sherpa whose help. Pawan Agrawal of Credit Control Department and the entire Customer Relations Department of th e bank for providing us guidance and motivation for the project and also by shar ing their knowledge with us. We would also like to thank Mr. Vina y Sharma. We are deeply indebted to KCM s internship coordinator. Relationship Manager. Sohan B. Credit Department. We are grateful to Mr. Khatri. KCM for guiding and helping us in each and every stage of th e BBA course and the Internship Study. support. Principal. KCM and Mr. Deputy Branch Manager. interest and valuable hints fo r the preparation of this report. Bishnu Raj Adhikari. Director. DCBL. Amit Bajracharya. DCBL and Mr. Vijay Nakarmi. We would like to extend our gratitude to Mr. T hamel branch and Mr. Branch Manager. Rajendra Bahadur Shr estha. P rime Commercial Bank for all their help.




Methodologies 49 The methodology and procedures of projects 49 . ideas and knowledge learned 27 Influence on Academic Decisions and career choices Part Two Projects/Assignments/Tasks undertaken Section I 32 Brief background of the Study 32 Objectives of the assignment/project. Background 3 Goals and Objectives of internship 4 Introduction of Himalayan Bank Limited 7 Section B 15 Tasks performed at HBL 15 Project work 16 Strengths and weaknesses in carrying out projects Section C 21 Description and analysis of roles of fellow workers Learnings from fellow workers 22 Section IV 25 Perceptions and expectations of Interns 25 Skills.TABLE OF CONTENT Signature Page Copyright Disclaimer Declaration Acknowledgement Letter from the organization Letter of Recommendation from college Table of contents List of Figures List of Tables List of Acronyms Executive Summary Part One Operational Duty Section A Page No. Problem Statement 34 Research Problem 34 Scope of the Study 35 Limitations of the Study 35 17 21 30 32 General Literature Review 37 Section II SWOT Analysis 37 Five Pillars of Credit analysis used at Himalayan Bank Limited 38 Financial Ratio Analysis 44 Section III Conceptual Framework Conceptual framework 46 46 Section IV .

Section V Industry Analysis Banking Sector as a whole Commercial Banks 56 Hydropower Industry 57 53 53 Sections VI Analysis of Credit 63 Five Pillars of Credit Analysis 63 IEE and EIA 79 Detailed Feasibility Study 80 NEA and Power Purchase Agreement 80 Important Conditions in PPA for Projects up to 5 MW 81 Strategies made by the government 85 Policies 86 Provisions under Hydropower Development for Private sector Other aspects to be considered 89 Sections VI Findings from the Analysis Critical Success Factors 91 Key Risk Areas 94 Normal Risk Sharing Arrangement 99 Section VII 101 Conclusions and Recommendations Reflection References Appendices 101 91 87 .

LIST OF FIGURES Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure 1: Executive Committee Members 2 2: Management of Himalayan Bank Limited 2 3: All Services of Himalayan Bank Limited 2 4: Deposit Products offered at Himalayan Bank Limited 5: Loan Products of HBL 2 6: SWOT Profile 2 7: Five Pillar Credit Risk Analysis 2 8: Industry Analysis 2 9: Porter Five Force Industry Analysis 2 10: Financial Risk Analysis 2 11: Conceptual Framework for the project 2 12: Phases of Research 2 13: Working of a Hydropower Plant 2 14: Shaft connecting Turbine and Generator 2 15: The Generator 2 2 .

LIST OF TABLES Table Table Table Table Table Table Table Table Table 2 Table Table 1: 2: 3: 4: 5: 6: 7: 8: 9: Comparison of Important Balance Sheet Items 2 Financial Institutions in Nepal 2 Number of Consumers of Electricity in Nepal 2 Hydropower Projects in Nepal 2 Future load calculation 2 PPA Concluded in the FY 2007/08 2 Key Financial Indicators of NEA 2 Environmental Requirement 2 Unit rate of energy for different projects fixed between NEA and IPPs 2 10: Royalty for Internal Consumption Project 11: Royalty for Export Oriented Project 2 .

It holds a vision of becoming a leading bank of the country and p roviding the customers with premium services to give substantial return to its s takeholders.e. Socio-cultural. Threat Research and Development Information Technology Megawatt Nepal Electricity Authority Gigawatt Hour Kilowatt International Monetary Fund German Technical Cooperation Department of Drug Administration Federation of Nepalese Chamber of Commerce and Industry Customer Relationship Department Credit Control Department Giga Joule Initial Environmental Examination Environmental Impact Assessment Department of Electricity Development Standard Chartered Bank Limited Everest Bank Limited Net Present Value Internal Rate of Return Small and medium Enterprises Gross Domestic Product Independent Power Producers EXECUTIVE SUMMARY Himalayan Bank Limited is one of the pioneer private banks of the Nepalese banki ng industry being established in 1993 AD as a joint venture with Habib Bank Limi ted. Opportunity. Technological Chief Executive Officer General Manger Senior General Manager Board of Directors Strength. Economic. NPA ATM PEST CEO GM SGM BOD SWOT R&D IT MW NEA GWh KW IMF GTZ DDA FNCCI CRD CCD GJ IEE EIA DoED SCBL EBL NPV IRR SME s GDP IPP Himalayan Bank Limited Credit Approval Package Nepal Rastra Bank Nepal Investment Bank Limited Bank and Financial Institution Ordinance Human Resource Fiscal Year Nepalese Rupees That is Non Performing Assets Automatic Teller Machine Political-Legal.LIST OF ACRONYMS HBL CAP NRB NIBL BAFIO HR FY Rs. The internship period was spent in three phases. Weakness. i. HBL has a huge base of customer base and especially A rated clients w hich are there due to HBL s long history of customer satisfaction and innovation i n services. Pakistan. second in the Customer Relations Department to know about h . first working in the Customer S ervice Department for two weeks to know the zest of what kind of customers and c lients the bank has.

ow a credit appraisal is done and to learn the other aspects of the department l ike financial analysis, loan extension etc. and third in the Credit Control Depa rtment to learn how a loan application is critically examined to pass the loan a nd also to learn about the special aspects of project financing. The major funct ion of CRD is to interact with the loan applicant/client and discuss the need of the credit facility and other various factors related to it as well as understa nd that there is inherent credit risk in any business proposal in the banking se ctor. The main function of CCD is to make thorough and critical analysis of the credit approval packages forwarded by the CRD of the various branches all over t he country. During the internship, substantial work was done in the various departments whic h included making of Credit Approval Packages, making site visits, preparing fin ancial statements and analyzing them, preparing group exposures, making overdraf t statements etc for which the bank showed utmost trust and confidence to give a ccess to confidential information within the scope and vicinity of the project. An industry analysis of pharmaceutical company was also done to help the bank wi th their credit appraisal process to extend loan to pharmaceutical companies. The major portion of the internship was also dedicated for making the credit app raisal of the hydropower industry which includes one of the major exposures of t he bank as it is one of the major interests of the country today. Hydropower ind ustry has great potentials in the country as the gap between the demand and the supply is huge creating a great scope for the hydropower projects to come in. Th ough this industry seems lucrative for the banks to finance, thorough considerat ions should be given to the various details of the hydropower projects for the i nvestment to be assured of without any risks. Since this sector is a capital int ensive sector, a small error or problem creates huge complications in costs whic h should be properly analyzed by the bank for acting on the best interests of it s stakeholders. These various details have been explained in the report in detai l. On the basis of the research conducted and analysis of the industry on the basis of various theories and concepts, it was found that the hydropower project if s uccessful gives the bank an IRR of almost 15% which for the size of the projects is quite substantial. Further, we have formulated few guidelines as recommendat ions for the bank to maintain as necessary to ensure that the project being fina nced is profitable. From this study, we gained a better understanding of what project financing is a nd how this is applied in the Nepalese Commercial Banks. Furthermore, we could i dentify what are the opportunities and threats for commercial banks to finance p rojects especially the hydropower projects. All these and other works done in th e internship period enabled us to incorporate our theoretical knowledge into rea l working situations which has increased our level of knowledge and understandin g.

PART I: Operational Duty Section A Background The internship was carried out for the partial fulfillment of the BBA program co nducted by the Kathmandu University School of Management (KUSOM). The primary ob jective of the internship program is to enable the students to transform the aca demic knowledge learnt through the years into the practical real world environme nt where the organizations are facing tough competition with the effect of globa lization. The practical approach of internship enables the students to learn wha t the organizations face in terms of employee diversity, the pressures that ever y organization face, the regulatory environments they have to work in and other variables that are prominent in the real working environment. The two interns ha d the main objective of working in the banking industry and hence internship exp erience proved to be a nice platform for them to realize what the needs and the requirements for the job are. HBL is one of the pioneer commercial banks in the Nepalese banking industry with it being one of the initial private commercial banks in Nepal. HBL is known for its expertise in project financing and having a reputed and A rated clientele. Es pecially with its BOD containing reputed business houses like the Khetan Group, this bank has a good business in hand. HBL is well known for its friendly work c ulture with educated and professional employees motivated to work for long worki ng hours. Hence, HBL was chosen so as to experience the professional working cul ture and acquire the best possible knowledge of HBL s expertise i.e. project finan cing and other credit related functions and products. HBL was established in the year 1993 as a joint venture with Habib Bank Limited, Pakistan and soon became a pioneer in the banking industry attracting huge numb ers of customers both for deposits and for lending. HBL has also been known for its innovative products like Personal Savings Account, Millionaire deposit schem e, HimalRemit etc. Goals and Objectives of the Internship program The primary goal of the internship program for the interns was to experience the banking industry of Nepal and to experience how much has this industry evolved from the traditional banking practices of loans and deposits. Furthermore, trans forming the academic bookish knowledge into practical knowledge and to understan d how the concepts and theories are applied in the real working environment. Fur thermore, working in the banking industry also enables the interns to know what are the recent business changes taking place in the economy and what further opp ortunities are present in the business market. Learning a professional attitude and learning the value of time was also one of the major goals of the internship program. These aspects can only be learned thr ough practical orientation as they are learnt only when it is adapted in the beh avior of the individuals. The goals and objectives set at the beginning of the internship period of each intern (i.e. assignment 1) has been included in the ap pendix. The personal goals and objectives of each intern are given below: Nikhil Agrawal Internship program is a medium to provide students with real time working experi ence so that they acquire knowledge in a practically oriented manner. This knowl edge is different from the textbook knowledge because the theories in textbooks are based on many assumptions which are not levied in the practical environment.

I joined Himalayan Bank for my internship due to these various reasons: To know about the various processes and working environment of a commercial bank : A bank is an important part of any country s economy as it plays direct and indi rect roles in the various parts of the economy. So to know about what are the va rious processes in a bank as this work is a matter of great interest and importa nce, the best way to know about these things was to attain practical knowledge f rom the internship program. To access a career option in this sector: Banking is a considered as a high stat ure job with its glamorous outlook with its good pay and stability. I aspire to get into the banking industry and hence to know whether this job was really mean t for me or not, internship program was the best possible way to know about it. To assess the various processes banks go through to overcome the risks associate d with loans: The credit appraisal process during giving out a loan is very impo rtant part of the banking sector. Correct processes and steps help to differenti ate between an ordinary bank and an outstanding one. To experience the professionalism in work culture and to learn for future prospe cts: Professionalism in today s working culture is evident and to learn this attit ude is very important to be successful in today s competitive environment. Since t his cannot be learnt from textbook knowledge and requires real working experienc e, internship would be a big platform for this aspect as well. To learn practically the knowledge learnt from academic courses: A practical ori entation for every student of what he learns is very important. Hence the intern ship program would be useful for putting the academic knowledge learnt in the pa st years into practical reality. Rishabh Tibrewala An internship program exposes us to all aspects of the chosen industry while giv ing an exclusive look into a career in the same field. Internship program at HBL was joined to have an extraordinary opportunity to explore the Private Bank and gain insight into its strategy, products and business groups. This experience will help me choose a career path that is interesting, challenging and has a goo d payoff. My Goals for the internship are summarized as follows: Get acquainted with real working conditions: Academically I understand how a ban k works. I also have good knowledge on how various activities are carried out in a bank and various management theories are used but this internship program wil l help me relate my academic knowledge to the real working environment of Nepale se banks. Get a hands on experience of commercial bank: An organization to an external cus tomer is different from that to its internal employees and by taking hands on ex perience on all departments of the organization, a better understanding of the f inancial sector can be gained. I will also gain a better understanding of how mu ch is actually practiced and what is more theoretical. With this internship prog ram I intend to understand the Nepalese banking sector. Understand the Nepalese Economy: Since all the other sectors are integrated with this sector of the economy I will also get an exposure to various other sectors . It is said that a banker is a master of his trade and jacks of all other trade s. Hence the exposure that I will get from this internship program will not only be limited to banking only. Develop Personal Relation Skills: This program shall also help me understand how the most important resource that is the human resource is managed by profession

This will also increase skills such as communication. honesty and a strong work ethics. It will help me develop better Personal Relation Skills and Co mmunication skills. coaching. as well as content skills including admini strative. It will help me make contact with people of the business wor ld which will come into use in the later part of my career. An internship experience will allow me t o develop proficiency in these areas. . teamwork. management and research. analytical. Professionalism in terms of how to work in the offic e and commitment in terms of giving the best I can towards work. interpersonal along with motiva tion. Bring Professionalism in work style: This internship will develop professionalis m and commitment within me.al organizations.

1 1063.1 7471.0 511. At the beginning of 1980s there were only two commercial bank and tw o development banks. Table 1: Comparison of Important Balance Sheet Items Amount in Millions €Particulars SCBL HBL Borrowings 0. 25 are "A" class commerci al banks.6 21514. and 4 6 are NGO. Products such as Premium Savings Account. Himalayan Bank s Mission The Bank s mission is to become preferred provider of quality financial services i n the country. Out of them.7 Share and other investments Loans and advances 13355. There are two components in the mission of the Bank.5 705.2 970.2 Other Assets 1755.7 19985.0 154. Preferred Pr ovider and Quality Financial Services. has been able to maintain a lead in the primary banking activities.9 1191. After the adoption of economic liberalization policy.5 511. established in 1993 in joint venture with Habib Bank Limited of Pakistan. parti cularly the financial sector liberalization that paved the way for establishment of new banks and non-bank financial institutions into the country.9 278. thus ensuring attr active and substantial returns to the stakeholders of the Bank. 78 "C" class finance companies.4 5077. Himalayan Bank is known throughout Nepal for its innovative approaches to mercha ndising and customer service.6 1607.0 NABIL 1600.6 5280.Lo ans and Deposits despite the cut-throat competition in the Nepalese Banking sect or. altogether 235 banks and non-bank financial insti tutions licensed by NRB are in operation.0 4906.2 Investments 8146.0 870. HBL Prop . The Bank always strives positioning itself in the hearts and minds of the customers.8 NIBL 1050. therefore we at HBL believe that the miss ion will be accomplished only by satisfying these two important components with the Customer at focus. by the end of mid July 2008.3 314.6 18814. List of Commercial Banks in Nepal has been provided in the appendix f or reference. 58 "B" class development banks. 16 saving and credit co-operatives. 12 "D" class micro-credit development banks.0 Himalayan Bank Limited ranks among the top commercial banks of the country but i t also faces tough competition from other established banks like Standard Charte red Bank. Nepal Investment Bank. Himalayan Bank s Vision Himalayan Bank Limited holds of a vision to become a Leading Bank of the country by providing premium products and services to the customers.5 3155.0 Cash Balance 414.0 Fixed Assets 440.Himalayan Bank Limited During the last two and half decades the Nepalese financial system has grown sig nificantly. Introduction Himalayan Bank.1 EBL 300.0 823. Himalayan Bank s Objective Himalayan bank has set is objectives as To become the Bank of first choice .4 4889.5 3724.0 5756.3 27145. Nabil Bank etc. Consequently .0 1464.9 1155.

Under them are the various departments of the bank w ith one person heading each department. fee payment facility are some of the products and services. This has hel ped the Bank provide services like Any Branch Banking Facility . All Branches of HBL are integrated into Globus (developed by Temenos). HBL believe s that they lead the banking sector of Nepal. Organizational Structure Himalayan Bank Limited has a very typical organizational structure where the top level management includes the Chief Executive Officer. Internet Banking a nd SMS Banking.rietary Card and Millionaire Deposit Scheme besides services such as ATMs and Te le-banking were first introduced by HBL. These departments also have been further departmentalized based on need. The major decisions of the bank are taken by th e Executive Committee which includes the following: Figure 1: Executive Committee Members Figure 2: Management of Himalayan Bank Limited Products/Services offered by Himalayan Bank Limited The services offered by HBL are summarized as follows. With the highest deposit base and loan portfolio amongst private sector banks and extending guarantees to correspondent banks covering exposure of other local banks under their credit standing with foreign correspondent banks. the singl e Banking software where the Bank has made substantial investments. Living up to the expectations and aspirations of the Customers a nd other stakeholders of being innovative. Looking at the number of Nepalese workers abroad and their need for formal money transfer channel. IELTS. HBL very recently introduced several new products and services. Millionaire Deposit Scheme. They have various assort ments of products offered to the public in the deposit market are summarized in the figure below. thus ensuring attr active and substantial returns to the stakeholders of the Bank. Figure 4: Deposit Products offered at Himalayan Bank Limited . Himalayan Bank Limited holds of a vision to become a Leading Bank of the country by providing premium products and services to the customers. Figure 3: All Services of Himalayan Bank Limited Since the major products are the deposit and the loans. Small Business Enterprise s Loan. Other financial institutions in the cou ntry have been following their lead by introducing similar products and services . SAT. etc. the Senior General Manag er and the General Manager. Consumer Fin ance through Credit Card and online TOEFL. International Travel Quota Credit Card. HBL has developed exclusive and p roprietary online money transfer software. Pre-paid Visa Card. HBL also has a dedicated offsite Disaster Recovery Management System .Himal Remit.

1 and Rs. HBL has been providing competitive products at competitive prices. Visa Credit and Debit Cards: With Nepalese people becoming aware of product such as credit/debit card. 1. Card Services: In order to keep its customers satisfied. HBL has 12% coverage on the manufacturing sector in terms of amount. HBL is not on e of the players who fight solely on price. convenient. the entry of two big A-class commercial banks will not only swell the numbe r to 27 but also force them to look for new investment avenues. growth and expansion o f small and medium sized enterprises. banks in Nepal have introduced them here as well. At a time when the marke t pie has not increased and over four dozen industries are lying closed across t he country. also recently got p ermission from Nepal Rastra bank to operate after it deposited five per cent of its paid up capital with the central bank. it's available anytime. the 26th commercial bank.The major products offered in the loan market are as follows: Figure 5: Loan Products of HBL Competition Fierce competition has erupted in Nepal s banking sector.000. more than ever. banks have started providing services of utility bill s payments such as telephone. Some of the new products brought in by competitors are: Low Balance Accounts: Banks have come up with deposit schemes where the customer can open accounts with a minimum balance of Rs. Internet Banking: With the change in technology. Bishesh Savings Account: 'Bishesh Savings Account' is a deposit product targeted to special section of society which includes minors. With this Himalayan Bank s competition is increasing as the new banks come up with cheaper and attractive products. real-time transactions to its customers. Any Branch Banking: All the branches are inter-connected with V-Sat and are capa ble of providing online. the 27th commercial bank. schools etc through counters and internet. the rise in number of financial institutions is leading to cut-throa t competition in the domestic banking sector. Internet Banking: Internet banking helps doing many banking transactions using t he Internet. senior citizens completing the age of 50 years. Apart from over a half dozen finan cial institutions. Banks. Customers can enjoy ABBS facility in almost all the commercial banks. physically challenged and illiterate individuals. Mero Bank Ltd. Even after so much of competition. Its loan portfolio shows that 7% of the total loan market is captured by HBL as per the NRB report. Some of the competitive products that HBL came up to fight with the new banks ar e: Small and Medium Enterprise Loans: to help establishment. It's easy. The proposed Peoples Bank Nepal Ltd. With th is customers have to convenience of not carrying too much cash. . 0. one has the convenience of operating their accounts throu gh their mobile which removes boundaries such as availability of branch or inter net. HBL came up with this product to counter other low balance accounts of banks. HBL provides VISA Debit and VISA Credit cards to its customers at competitive prices. Himalayan Bank has developed a special loa n package meant just to suit small and medium sized enterprises. Mobile Banking: Today. including B-class development banks and C-class finance compa nies. got the green sign al on September 25. HBL is one of the most sought banks. It has a brand name and customers co nsider HBL to be trustworthy and they bank on HBL because of this itself. or even Rs. and best of all. Zero balance account: Customers can open an account for a minimum balance of zer o. Now customers can access and ha ve full control over their accounts 24 hours 7 days a week over the internet. felt the need for banking convenience for their clients. Utility Payment Services: With the advancement in technology and increasing comp etitiveness in the market.

status of cheque. . Now customers can take care of banking needs without ever having to wait in queues. last three transactions and the Bank s foreign exchange rate.Mobile Banking: Himalayan Bank also provides SMS Banking. Customers can chec k their balance. all from their cell phones.

Credit Department We spent most of the time at the credit department where we first understood the working of this department. and the internet. institutions such as De partment of Drug Administration (DDA). Information on various sectors was col lected visiting various websites and institutions regulating the sector. Customer Department We were posted to the customer service department where we understood the variou s deposit products of the bank and the working at the front level which helped u s understand how banks perform at a basic level. . Department of Electricity Development (DoED). Our main task was to g ather information and compile them for the bank so that credit appraisal can be done. Federation of Nepalese Chamber of Commerc e and Industry (FNCCI) etc. We did a research about pharmaceutical industry in Nepal. This helped us learn enormously and also helped t hem finish up their work and meet deadlines. This is used as a document sent to the above level for ap proval and also is maintained for future reference. there were only 6 Relationship managers working. We gained knowledge of how a bank initiates credit process and how approval is done. This was mainly very interesting as it required critical assessment based on the industry in which th e client was operating and we could show our academic talents in doing so. Site Visit Reports: Site visits are done to understand the business of the client and to check the s tatus of the assets kept lien with the bank. Valuation Report and company turnover Based on the report of the valuator. Benefits that we got from working i n the bank were the knowledge about real work and hands on experience on what sh ould be done when. This was supported by various activities at th e bank such as Credit Approval Package: The basic assortment of products that a client is entitled to is designed and a credit approval package document is made which contains all the related informa tion about the client.Section B Tasks Performed at HBL Research Work While working at the bank. Benefits that the bank got may be termed as a supporting hand in completing the work and intellectual inputs at various stages. Independent Power Producers Association of Nepal (IPPAN) etc. We also calculated the account turnover of each client and the group in which it belonged to create a report of business given b y the client to the bank. Firstly. The credit department earlier had 16 Relationship managers working to serve the clients request but now due to increasing branches of the bank. Financial Statement Analysis We prepared the financial statements of the bank based on the bank s format for th e clients and assessed them with various financial ratios. one of the major tasks given to us was to find inform ation about various sectors of the economy which they se to understand the indus try potential while appraising a project. we had to make the valuation report of the client s business and collateral. we collected information about hydropower industry visiting websites an d offices of Nepal Electricity Authority. The work pressure was high and therefore we were given their part of the duty. Sources of information were old cases at the bank. This was done by extracting data from the IT system Gl obus and putting it into excel. This helps us get a better understa nding of the client and the security aspects of credit.

This project was given as the ba nk had a few hydropower projects coming up for loans and they wanted better info rmation and analysis of such as it includes huge commitments of funds.e. The major time and involvement in the intern ship period was dedicated towards this project. Globus. In the day to day activities of the bank. My good communication skills were pretty helpful for th e tasks assigned to me. Then the hydropower industry was analyze d including the technical and management aspects. Another major strength was the financial analytical skills. we also faced certain weakne sses that acted as barriers to quality work. This skill enabled me to complete the assigned t ask quickly and precisely. I was good at the fi nancial analysis of balance sheets and the cash flows when I was told to analyze the balance sheets which were presented for the approval of loans by clients. Another major strength was my attitude towards professionalism and co-operation. Good communication skills were important not only in the customer service department but also in credit department where communication s kills was important to build a good rapport with the customer as well as make an effective credit approval package. and information was collected from variou s sources such as NEA. Coming from a well reputed management college in the country helped me to encap sulate professionalism in my behavior. Weaknesses: . Based on this. IPPAN etc. Working environment today requires workin g in teams for which the behavior of co-operation is of utmost importance. a conclusion and recommendation was provided to the bank so that credit managers at the bank have more information and a pre-specified format for appraisal of credit of a particular hydropower project before extending any loa n. DoED. c redit appraisal at HBL was understood. I indentified some of my strengths that were ve ry helpful during the tenure in the bank. Along with strengths. For the purpose of carrying out this project. The individual strengths and weakne sses have been given below. and key risk areas and key success factors were assessed. we had certain strengths that helped us carry the ass igned tasks very efficiently. The a bility to work with almost everyone with utmost team spirit was commended by the colleagues of the bank. Strengths and Weaknesses While working at the bank. Nikhil Agrawal Strengths: While working in Himalayan Bank. T his skill of mine helped to perform well in the credit department and remove the workload of the department colleagues as this took the major chunk of their wor king time. banking sector was comprehended. we were given a project work to an industry analysis of the hydropower sector. other areas of concern were id entified. regular conversation with customers an d colleagues is evident. Working with computers appeared as a major strength as I was very comfortable an d affluent with the various applications used in the bank and also the system so ftware of the bank i.Project Work During the course of the internship.

I realized that I have a knack for numbers and have a good understanding of the financial statements. etc which helped me in interacting with the clients and gai n better insight into their businesses. manufacturing of carpet and pashmina. information technology. My super visors were very happy by the dedication with which I worked. The lack of exposure to real time working conditions was another challenge that I faced as I found it difficult to put the theoretical knowledge into practical reality. This possessed the biggest challenge to me while working in the bank. which was disappointing and embarrassing to me in many situations. Rishabh Tibrewala Strengths Working at HBL as an intern gave me a lot of theoretical and practical knowledge . I could easily make the b asic balance sheet.e. Weaknesses Along with these strengths. My skills of basic computing are good and this helped me in doing the regular wo rk. The biggest thing that I learned from this 10 weeks program was the understand ing of my individual strengths. Since this was the first t ime for me working in the office environment. The major weakness that I encountered was the patience to work for long hours. Globu s and could check the credit line and the outstanding of the customers. Though I had studied this subject earli er but the lack of update of this knowledge possessed a great challenge to me wh ile working in the bank. I w as able to understand various project and perform analysis of their credit appra isal. My motiva tion to work and learn encouraged my supervisors to guide me well and I was able to learn more than required. My regular visits to the bank and a basic knowledge on the working of the front end managers/tellers was also advantageous. I also had good knowledge about business es of different fields such as retail. The most important barrier or weakness that I faced w as that I lacked knowledge of the real world. I could easily work on MS word where the CAP was made and MS Excel where fin ancials were made. My communication skills are also good and this he lped me in interacting with the clients better. They were quite impressed by my analytical skills. I faced many shortcomings. I could easily maintain a good relation with the clients and they were generally happy with the relationship. I was assigned certain clients a nd had to communicate to them about the processing of their credit case. I wanted to gain m aximum knowledge that I possibly could in this short span of 10 weeks. This to my advantage helped me in impressing the relationship managers und er whom I was working. They showed more confidence in me and gave me more challe nging tasks to perform.While working in the bank. This possessed many situations where I found it difficult to move ahead with many problems and situations. I soon got accustomed to the software used by bank i. income statements and cash flows. Another weakness that I encountered was the ignorance of the new regulations and rules in the Nepalese financial system. This gave my supervisors more confid ence in me in the initial stage itself. I encountered certain weaknesses that acted as a bar rier while working at HBL. The book teaches us a lot of theor . I found it very difficult to maint ain my patience and concentration to work for long office hours. analysis of financia l statements based on ratio analysis and the analysis of cash flow came easily t o me. Also. I also realized that my suggestions were mostly appreciated and at times impleme nted by my supervisors.

I had difficulty while expressing myself in Nepali. clie nts behaved in an unexpected manner and patience was the most important thing th at I needed at that time. I did not know how credit appraisal is done at banks as I had never taken a cour se on that. And for me this was difficult as my understa nding of the real working scenario was less and implementing the theories turned out to be a challenge. . Finally I feel that lack of patience was one thing which I should try to overcom e. I often got restless as things didn t move the way it should. I also felt constrain ed because often balance sheets and financial statements were presented in Nepal i which was difficult to understand. Often work got de layed because of some silly reason and that was irritating. I was taught credit appraisal and its procedures at the bank its elf and this took up a lot of time which I could have spent doing something more productive. Also sometimes.ies and practices but it is not always the same in the actual working scenario. I felt constrained as I could do nothing initially when I was given the first case. Also my spoken Nepali is not good and my knowledge of technical Nepali terms is lame. We often have to mould these theories into possible solutions so that they are more appropriate in the real world.

Other proposals coming from A category branches are directly routed to the CCD. Learnings from fellow Workers Nikhil Agrawal The major thing that I learned from the fellow workers in the various department s is that the core component of working in any organization is professionalism. This department comes under the direct supervision of the branch managers and th e CAPs prepared have to be forwarded to the CCD after the approval of the BM.Section C Description and analysis of roles of fellow workers Customer Relation Department (CRD): The major function of managers in CRD is to interact with the loan applicant/cli ent and discuss the need of the credit facility and other various factors relate d to it as well as understand that there is inherent credit risk in any business proposal in the banking sector. Previously. cr edit appraisal. Ma nagers in this department basically focuses upon serving clients with loan proce ssing and managing their loan tenure especially loans for business applications and enterprises. The credit policy envisions delegation of authority to branch level. All the proposals related to credit functions are routed through them whenever such proposals are to be s ubmitted at the corporate level. The various products or services this department provides to it s customers are Subhida Loan (Revolving and Non Revolving). commitment and dedication. So the RMs in CRD has the ability or develops t he ability to identify these risks and develop ways to mitigate these risks with the capability to properly monitor insurable inflow of predetermined returns. Banking profession is not on ly about being sound in the daily commercial banking activities and concepts. The main function of managers in CCD is to make thorough and critical analysis o f the credit approval packages forwarded by the CRD of the various branches all over the country.Marketing and Credit. which are to be fin ally disposed off at corporate level. EMI based loans for property purchase. such that credit operations can function smoothly. the concept of ratio analysis. Without these factors. The perception tha t the banking job is glamorized and an easy 10 to 5 pm job proved to be wrong as professional bankers may have to work day in and out to conduct their assigned duties properly and significantly. fixed deposit etc. financial statements were only theoretical but I learnt how to i mply this knowledge into the daily working procedures from my fellow members. Overdraft loans. However. loan processing for assessing of credit limits for Letter of Credit. In order to streamline the flow of such credit proposals. no employee can succeed in an organization and also do justice to the organization as well. loans against financial instruments like shares. even though they originate from branche s. This helped me understand the value of work ing with pressure and the value of respecting time. all the credi t decisions cannot be finally made at the branch level. Credit Control Department (CCD): The CCD comes under the head office and managers in CCD are directly supervised by the General Manager. Working Capital Financing. personal loan in the form of overdraft. The dedicated employees of the bank always had pressure of working under tight s chedules and small completion times. Same credit proposals ne ed to be decided at the corporate level. bu t one another major aspect that people often miss out is the communication skill . a team of managers dedicated to do this ha s been created which is the Credit Control Department. T hey work according to the HBL s Credit Policy Guidelines which has set the paramet ers of credit operation.

Technical. Rishabh Tibrewala The first and the most important thing that I got to learn from my fellow worker s in the bank is Dedication. Financials. While working at HBL I learnt how to do the financial ratio analysis and it can be implemented in the real world scenario.s as it is required in every aspect of banking. Proper balancing between the two makes the perso n happier and more satisfied with life and career. Any work can only be accomplished when done with lo ads of dedication and effort. Thus I learnt good communication skills from these fellow workers as well. The re were times when our supervisor gave us deadlines and we had to accomplish wit hin that time frame which was at times very taxing. In this profession. This is a very importan t issue for any working person. The risks involved in a business are certainly high but with higher retur ns and a better living standard. Another very important thing that I got to learn was working under pressure. the dilemma of meeting the organizatio n targets as well as maintaining the ethical standards comes in. This is a very difficult step for any professionalism and this skill is to be encapsulated for the success of any professional. And once you feel you have a chieved your target. This experience of 10 weeks did teach us to face cr iticism and also gave us an understanding that most of the times criticism makes you a better person and improves the quality of your work. Further. My supervisors at the bank taught us how it should be done and we learned that the appraisals are done on 5 pillar bases which are Industry. . The book teaches us to work with numbers. people often find the job monotonous and often get de-motiva ted to work further. While processing a loan for a client the legal requirements are enormous which is quit e annoying to the clients and it becomes a big responsibility of the relationshi p manager to maintain a balance between both and help the client to get his loan processed. for any professional balancing out with between the professional career and the personal life is also of the utmost importance. I saw that the people who are dedicated to their w ork are progressing very fast in the bank and the people with a laid-back approa ch are still lacking behind. every professional should be pas sionate in whatever he is working with. Management and Sec urity. In every step of the professional career. Another skill that I got t o learn at the bank was how bankers have to be good with the negotiation skills. They suggested me that if I have the financial backing and support then I mu st not think of getting into this kind of a service but rather set up my own bus iness. While working in the credit department of a bank the staff has to be able to kee p a balance between the legal requirements and the customer requirements. To get over this monotony. the feeling that you would get when your supervisor would s ay the job is not done well. And this was something that I really got to learn from my supervisors and co-workers in the bank. Also while carrying out your work one has to be very ethical. In ord er to maintain such a balance and to keep your clients happy requires good inter -personal and communication skills. After a poi nt of time this job gets monotonous and people start losing interest in their jo bs. It is believed that the banking world is a very Glamorized world but with my discu ssions with the co-workers I realized that it is not so interesting. We also got to learn how credit appraisal should be done. It teaches us how to take out the rati os with a set of figures given but when it comes to analyzing the ratios it cann ot very well be learned by the book.

The way the top level management of the bank would commu . other banks rupee one account. the strategy with which the bank works and the various business sectors the bank has made investments in. I always believed that banks in Nepal are very professional. I can state that the service industry has indeed developed and has become more profess ional and is competitive to any international standards. But when I actually started wor king in the bank I realized that the real practice is very different from the ac ademic learning. HBL s millionaire deposit scheme. when I joined the internship program I believed that I had a lot of knowledge about the working of the bank. Often it is t hought that Nepalese service industry lacks professionalism and the sincerity to wards one s knowledge and expertise. international banking etc. In this way. But as the time of starting the job came closer. my excitement sh ifted to nervousness considering the grandeur of the bank and the thought as to how my supervisors would be. its product details. but seeing the working culture in HBL. It is more a casual environment to work in. Looking at the reputation of the bank I was very excited about joining the inter nship program. But after spending few weeks in the bank I realized that it is not as professional as it looks from outside. I was completely ignorant about all this and in this short span of time I got to know a lot about the bank. The Nepalese banking industry was thought to be growing only in numbers but I ex perienced that this industry is coming up with newer products and innovative one s. This exp erience also made me aware that HBL as an employer is one of the most paying ins titution and also one of the best working places to be working in. HBL has its expertise and focuses to gain a competitive edge from the expertise such as remittance.Section D Our perceptions and expectations Nikhil Agrawal The banking profession. Rishabh Tibrewala First and foremost. I also thought that my HR/PR skills are very good and there is nothing more to be learned in that aspect but within a few days of working in the bank I realize that I am not perfect. My aim of being a profes sional banker has moved a step forward with my decision of pursuing my internshi p in a commercial bank. But after my first day at work all my nervousness d isappeared as the people at the bank were very friendly and helpful. Grihini Bachat Khata to name a few have brought in new revolutions in the banking industry. But still large horizons are left for the banking industry to conquer as large depo sit bases of the rural areas have not been able to be capitalized upon. The working environment at the bank is very healthy. I will be able to know what actually the be nefits are and also about the limitations of working in a bank and henceforth as sure my target to work under this goal of mine to become a banker. I thought it to be a well paying and r elatively laid back profession where the working hours is not that extensive. often glamorized. The culture a t HBL was one of the liveliest and friendliest environments I have experienced. Bu t I found that working hours extends to even late in the nights so as to be more efficient than other competitor banks in the industry. I also got to learn about the various departments in the bank and how they functioned. What is learned in books and what is practiced are two differen t things. project financing. I got to learn about HBL.

Though experience is very important to build this. Initially when I joined my internship program I was very excited with the fact t hat this would open my doors to banking as a career and the reputed Himalayan Ba nk would be a great option. But after my internship program I realized that the job at the bank is very monotonous and not as glamorous as it appeared to me. In our . Wor ds have to be manipulated so that a negative impact is not laid down. why a loan should be granted or rejected to a client. co-ordinate and rise as an influential leader. what are the core competenci es of the borrower. My supervisors also suggested me that if I ha ve the financial banking and support from the family I should get into my own bu siness rather than opt as banking as a career. Rishabh Tibrewala I learned to prepared the financial statements of the bank based on the bank s own format for the clients and assessed them with various financial ratios. ideas and knowledge that I learned from the experience in HBL are: Prepare financial statements and analyze the financial indicators: In the due course of the internship. a good communication skill is a major skill that should be present in any banker. I actually realized that there are lots to learn in this reg ards and I am just a beginner. Other things that I learned from my supervisors w ere communication and interpersonal skills again of what I was quite proud of. My perception regarding banking as a career has changed and I am now revaluating m y interest in banking as a career. Good communication skills: For the banking job. This helps the bank in the a ppraisal process as it tells how strong a borrower is to repay back the debts an d whether the financials presented are inflated or not. Ability to work in teams: The ability to work in teams is often a major challenge to any banker and often the difference between a successful and an unsuccessful employee. One should a lways be ready to help and others will surely come forward to help you with your work. ideas. Being a good speaker is not only important but also the a bility to listen to others and understand their views and perception is very imp ortant. A person who i s able to work in teams. who he is. is often successful in his career. Prepare the credit approval package: Preparation of the CAP is one of the major tasks of any credit officer as it tel ls what the borrower wants the loan for. As soon as one department d oes not know what the other is doing there would be complete chaos and the goals would get hampered. Development of analytical skills: Good analytical skills are very important in the credit departments of the bank as analyzing a loan or a project and analyzing a project s viability is very impor tant. preparation of the financial statements and the analysis of these statements was a major part. I realized that communicating in general day to day life or in college is very di fferent that communication at work. I used to always think that one has to do his own work while performing a job bu t here in HBL I got to realize the importance of teamwork. I got to learn a lo t from them though. One has to really think before we speak. I also learned that in a banking scenario every department is assigned th eir own tasks but everything works in co-ordination. good general knowledge and familiarity to the business world holds as a major advantage.nicate was a big surprise and I am certainly very impressed. Everyone at work is g enerally so helpful and any task can be accomplished with teamwork. Skills. and knowledge learned Nikhil Agrawal The skills.

I also learned how credit appraisal was done in banks. After gaining ac ademic knowledge and classroom experience for so many years this was the first t ime that we got to work in the real world. The most important thing that I got to learn from this internship program is tha t I gained some experience of working in a real world scenario. how the assessment is done and how approval is done.academic course also we had prepared financial statements but here it was mainly very interesting as it required critical assessment based on the industry in wh ich the client was operating. This work experience though of a shor t span has thought us so many things like dedication. . I also got to practice and enhance my interpersonal skills whe n dealing with clients and my co-workers. Whatever I have learned at this first hand first time experience is g oing to stay with me for a lifetime. interpersonal and communication skills etc which will certainly help us in any future endeavor s we take. commitment. I gained knowledge of how a bank initiates credit process. Whenever it comes t o dealing with clients a banker has to be very negotiative and know exactly what he wants from the clients. In our day to day life we do not perform like that. I was able to enhance our analytical and negotiation skills. I got to learn some negotiation techniques from my supervisors when I saw them d eal with clients.

. I got firsthand experience in working in a bank and this has changed my percep tion towards working at a bank. Initially I was thinking that I would go for m y masters directly but now I have understood that working in real organizations will give me experience that will help me in my academics later. I learn ed how there is a big difference in classroom learning and the real time working .cooperative clients is a major skill every professional should have. But this was certainly an experience of a lifetime. PR relation s are one of the major components of a successful person as it helps in all majo r steps of the professional career. creative and a good platform to use the knowledge learned throughout the year s. I got an opportunity to use our academic learning in practice and also learned how I should implement this i nto real life experiences. Initially I was considering banking as a career but after my 10 weeks experience at the bank I realized the job to be very monot onous and not so challenging as I thought before. Also the skills of analyz ing balance sheets. analyzing business proposals and project financing proposals will be a major boost for me in the academic courses I pursue further. Another major skill I learnt from the banking experience is the importance of un derstanding the basics of the career one is pursuing. especially in Nepal to establish a l ifestyle of your kind here. I also realized that if one has a financial setup th en getting into your own business is a much better option than getting into to s ervice sector.Influence on academic decisions and career choices Nikhil Agrawal The skills learned in the internship program will be very useful for me both in my academics and my career ahead. success and efficiency is hard to achieve which shows the lack of competency in a person. Further. the more are the chances that he woul d succeed in the career. My interpersonal and communication skills were also enhanced which would certainly stay with me for a lifetime and help me in every walk of life. These two things are very important in progressing in life. For my academics. Time management in also a major component of any management personnel as without the proper management of time which is a major resource. Rishabh Tibrewala This internship program was mainly like short real time training for me. Patience and time management skill is also one of the major skills I learnt in t he internship. The dedication and commitment level with which the pe ople at the bank work was quite impressive and something to really learn about. my aim of becoming a successful banker has been motivated as I found th e banking industry challenging and interesting. This industry is very interactiv e. which can be achieved earlier in business. I could identify which courses would be useful for me to go th rough to gain a competitive advantage in the industry. The more a person is acqua inted to the basics that his job acquires. One other major skill I learnt from the experience is the importance of building personal relation skills and also the importance of maintaining it. It really takes a long time. The so called glamorous world is not so glamorous enough. Having patience during the pressure of work and also when working with non.

etc. clear. it is expedient to put forward efforts on integrated water resources devel opment based on bilateral and regional cooperation with prime considerations to the national interests of Nepal. creation of em ployment opportunities in the country in addition to benefits from allocation of benefits substantially resulting to the lower riparian country from large stora ge projects built in Nepal. Changes in interest rates may affect the lender s return on loan under fixed inter est rate. Availability of abundant water resources and geo-physical features provi de ample opportunities for hydropower production in Nepal. pipelines. flood control. often several billion rupees. To gain practical knowledge of the banking activities and the laws governing the banking industry. It is also observed that the need to overc ome the shortcomings and weaknesses that have emerged in the course of involveme nt and participation of the private sector in the water resource sector. an investment frien dly. To gain a professional experience as an employee in a leading commercial bank of Nepal. etc. Hence this study is done concentrating on the current situation of the Hydropowe . In view of the contribution that hydropower development in Nepal could make in t he speedy development of not only the national economy but also the regional eco nomy. An open and liberal policy pursued in the hydropower se ctor after restoration of democracy has started yielding positive indications in the field of hydropower development. In view of the internal consumption and export possibility of hydropow er in the context of the overall development of the country. industrialization. power plants. To analyze the practical implication of the theoretical aspects learnt during th e BBA program. about 4 2. mines.000 megawatt (MW) in the country. environment protection. Out of the total hydr opower generation capacity of about 83. the major objective behind the carrying out the study can be summarized as follows Primary objective The most risky of all business loans are project loans which are credit to finan ce the construction of fixed assets designed to generate a flow of revenue in fu ture periods. However. Laws and Regulations in the region or country where the project is being constru cted affecting adversely the completion time or the cost of the project. Risk of project funded being delayed by whether or shortage of building material s. Large amounts of funds.000 MW of power generation appears feasible to date from financial technical per spective.PART II: Credit Appraisal of Hydropower Projects SECTION I: Introduction Brief background of the Study Water resources are important natural resources for the economic development of Nepal. Objectives of the Study The prime objective of the undertaken project is To fulfill a course requirement of the BBA program at Kathmandu College of Manag ement. simple and transparent policy is necessary to enhance the developmen t process of hydropower. the risks surrounding such projects are large and numerous. Such efforts shall result in the economic devel opment. Prominent examples include oil refineries.

The specific objective of this study is ding the existing projects and the upcoming ones and demand and the supply of hy Banks financing new upcomin to gather information regar assess the risk. To state other aspects that banks should consider during providing hydropower cr edit. Then this study emphasized on hydropower projects. To critically assess hydropower projects in terms of various pillars. To examine the current position of HBL s credit business in reference to services offered. It also explains procedures related to credit function of a bank. the attention of Nepal and all Nepalese is today focused in the hydropower s ector the purpose is tilted to the hydropower sector so that all the practicalit ies of the sector and its financing can be explored in greater detail. An industry analysis of hydropower sector o f Nepal is done and its strengths and weaknesses are assessed. It explains why hydropower is necessary for a country like Nepal. Problem Statement The major decision problem can be stated as follows: What are the major factors both internal and external that has to be analyzed and enhanced in order to provide Hydropower sector with credit by the related bank? Research Problem The decision problem can be sub categorized into following Research Problems What are the environmental issues and risks that must be addressed? What are the strategic financial issues that must be addressed? What are the strategic market (existing and potential) issues that must be addre ssed? What are the risks associated with the 5 pillars of credit analysis for a hydrop ower project? Scope of the Study The study as explained in the objectives section is carried out with the purpose of understanding the scenario of project financing in the context of Nepal. To Recommend and suggest regarding the above after analysis of information gathe red from various sources. the following subsidiary objectives have been formulated: To get the overview of credit. The study aims at understanding the dropower industry and analyzing the possibilities of g projects. the basics of credit appraisal are understood. Secondary Objective To achieve the foresaid objective. To examine the critical risks factors in hydropower appraisal To examine the success factors. It explains how ba nks assess a business and the risks related to it before providing it with credi t. In this study. To analyze the competition To understand hydropower credit appraisal at banks To understand what are the extra things being done by competing banks To seek opportunities those are useful for HBL in hydropower appraisal. Sin ce. The possible area .r energy market.

special focus has been made to tilt it to the Nepalese context and has been simplified as far as p ossible for a naïve reader s understandability. Scope of the topic: Since project financing is a broad topic.s of risks are stated which needs to be stressed before providing loans. Limited Information: Because of the competition and privacy of the Bank's policy . Hydropower projects could not be visited as they were located outsid e the valley. Financial Problem: The project was funded fully by the students themselves. So it does not re flect the exact position of bank related to the Credit business. as the bank cou ld not. the study may not cover other relevant aspect of the topic under study. . The suc cess factors are also given that lures banks for getting into this sector. In the course of the project preparation following major limitations was faced: Limited Time: The project was completed within a span of three months. Geographical Constraint: The project includes study conducted within Kathmandu v alley only. time and r esources. so information about credit on other banks is not mentioned elaborately. which did not provide the su fficient information that was needed for conducting the study. Lack of elaborate knowledge: Study is done on Credit issued by Himalayan bank o nly. Wi th limited information collected. abundant statistical data could not be collected. While conducting the indust ry analysis we noticed that no banks wanted to disclose related information. disclose financial information. limited by knowledge. understandably. the study may not be as elaborative as it could have been. Limitations of the study The study was not free from hindrances and problems. Also being a student.

It is generally carried by the financial institutions which are involved in providing financial funding to its customers. Credit risk is a risk related to non repayment of the credit obtained by the customer of a bank. Generally the credit facilities are extended against the securi ty know as collateral. Because it concent rates on the issues that potentially have the most impact. The SWOT framework was described by Edmund P. Figure 6: SWOT Profile The internal and external situation analysis can produce a large amount of infor mation.SECTION II: General Literature Review SWOT Analysis SWOT Analysis is a strategic planning method used to evaluate the Strengths. competitors. Thus it is necessary to appraise the credibility of the customer in order to mitigate the credit risk. financial resources. Five Pillars of Credit analysis used at Himalayan Bank ltd. Factors should be evaluated across the organ ization in areas such as company image. The SWOT analysis serves as an interpretative filter to reduce the information to a manageable quantity of key issues. Strengths can serve as a foundation for building a competitive advantage. economic environment. and weaknesses may hinder it. market trends. Kenneth Andrews and William D. Changes in the external environment may be related to cu stomers. But even though the loans are backed by the collateral. b anks are normally interested in the actual loan amount to be repaid along with t he interest. exclusive contracts et c. External Analysis: An opportunity is the chance to introduce a new product. the customer's cash flows are ascertained to ensure the timel y payment of the principal and the interest. Learned. By understanding these four aspects of its situat ion. and deter potentially devastating threats. Wea knesses. much of which may not be highly relevant. service or project that can generate superior returns. access to natural resources. new technology. polit ical and regulatory environment etc. and€Threats involved in a project or in a business venture. Proper evaluation of the customer is performed to m easure the financial condition and the ability of the customer to repay back the loan in future. C. correct its weaknesses. Credit Appraisal is a process to ascertain the risks associated with the extensi on of the credit facility. Roland Christiansen. Credit Analysis at Himalayan Bank was done on the basis of Critical Five pillars of risk which are: . operating effi ciency. the SWOT analysis is useful when a very limited amount of time is available to address a complex stra tegic situation. Opportunities can arise when changes occur in th e external environment. Thus.€Opportunities. The SWOT analysis classifies the internal aspects of the company as str engths or weaknesses and the external situational factors as opportunities or th reats. organizational structure. capitaliz e on golden opportunities. Internal Analysis The internal Analysis is a comprehensive evaluation of the internal environment s potential strengths and weaknesses. Guth. It involves specifying the objective of the business venture or project and iden tifying the internal and external factors that are favorable and unfavorable to achieving that objective. a firm can better leverage its strengths.

. Regulatory Environment Industry attractiveness also depends largely on the regulatory environment. The var ious aspects to be considered are Review regulations which govern industry Review recent changes & determine nature of future changes Evaluate impact of recent & political future changes Potential Risks areas are low entry barrier which means new players are allowed to enter market. No b usiness can operate independently without any regulatory body behind it.Industry Analysis Technical Risk Analysis Management Risk Analysis Financial Risk Analysis Security Analysis Figure 7: Five Pillar Credit Risk Analysis Industry Analysis Overall situation of the industry is studied which includes the demand and the s upply and the competition faced by particular client. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore a ttractiveness of a market. and International Competition. risk expo sure of foreign markets. Industry Structure: Porter's five forces analysis is a framework for the industry analysis and busin ess strategy development developed by Michael E. The key risk areas that ar e examined are: Figure 8: Industry Analysis Industry Attractiveness: Industry attractiveness includes the industry structure. price controls on key inputs lifted. market structure and th e regulatory environment in which the client operates. The threat of substitute products The threat of the entry of new competitors The intensity of competitive rivalry The bargaining power of customers The bargaining power of suppliers Figure 9: Porter Five Force Industry Analysis Market Structure In-Depth Analysis of the market structure comprising of data related with Market size & growth during past 3-5 years Reasons for market growth or decline Market segmentation (Customers/Geography) Market share Seasonality of the business The potential risks areas under the market structure are related with shrinking market. This model is based on evaluation of the following 5 forces. Porter of Harvard Business Scho ol in 1979. elimination of price controls leading to competition. volatile market and dominant competitors forcing out smaller players.

Company within the industry The bank also needs to understand the competitive position of the client in the industry which includes areas such as: Competitive position: the market share of the company Company strategy: strategy the company has utilized. A lso the cash flows of the project is evaluated. through collateral liquidation is also assessed. Management Risk Analysis The integrity. These skills may be: Integrity : The honesty. and Alliances: alliances with various institutions Technical Risk Analysis The strength and quality of the technical support required for sustainability op eration of the company in terms of manpower and the technology used should also be given due care. etc need to be evaluated. Analysis of the financial performance of the company is very important as the cl ient is served with money with the main aim of recovering with the cash flow of the client and not by sale of collateral or exercising other means. Financial Risk Analysis One of the most important pillars is the financial risk analysis which related t o the overall performance in monetary terms. The borrower s capacity to repay thro ugh cash flow is the first way out for all the banks. Management risks relates with the overall skills required to carry out the project by the client and his management. e tc of the management. skills and competence to carry out the business. Character & Track record. Financial ri sk analysis is done on the following aspects: Figure 10: Financial Risk Analysis Performance Evaluation of the performance of the company is done on the financial ratios cal culated on the past income statement and balance sheet or expected statements. availabilit y of such manpower. competence and nature of alliances of the borrower s management tea m should be assessed.e. Other aspects to be considered a re the inventory quality. private sector affiliation. Supportiveness. etc that may a ffect the overall performance of the business needs to be evaluated as well. political affiliations. experience. Liquidity The Liquidity of the firm needs to be assessed to check the client s ability to su stain in difficult times. Consistency & Quality of communication with bank. Leverage . Coop erativeness. Appropriate technical competence of the manpower. Competence The requirements related with the ability. availability of after sales service. The strength of securities i s the second way out i. cost of maintenance and replacement. the capability of the technology used. the asset quality etc. Quality/ Reliability of information. Alliances The alliances of management with various individuals and institutions such as gr oup exposure.

exercise against fraud. etc. Operational Ratios€are ratios which use turnover measures to show how efficient a company is in its operations and use of assets. An overview of some of t he categories of ratios is given below: Leverage Ratios€are ratios which show the extent that debt is used in a company's capital structure. A bank provides credit which is very risky and it should be backed by certain se curity that can be exercised under extreme conditions where the project cannot p ay back the loan amount. The project is built in such areas where the land value is very low and the proposed site may not be useful for other purposes. its operations and attractiveness as an investment. where the bank might have to sell off the property to recov er the loan. documentatio n. Financial ratio analysis groups the ratios into categories which tell us about d ifferent facets of a company's finances and operations. The level and h istorical trends of these ratios can be used to make inferences about a company' s financial condition. exe cution of the security documents and present value of the properties proposed fo r mortgage to the bank. Solvency Ratios€are ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations. focus on the "downside" risk since they gain none of the upside from an improvement in operations. Profitability Ratios€are ratios which use margin analysis and show the return on s ales and capital employed.The leverage of the firm needs to be addressed as well so make sure the firm is maintaining. time of scale. Control Control by the bank of the project can be in terms of legal rights. Under t he case of bad loan. machinery etc are placed as security whose distressed value is taken as a backup. Hence for this. They pay great attention to liquidity and leverage r atios to ascertain a company's financial risk. building. The various aspects tha t should be considered are liquidation value. Security Analysis The control over various securities obtained by the bank to secure the loan. technology replacement. quantity. The FAC (Fixed Asset Collateral) Security does not compl etely cover the risks as the fixed assets may not fetch adequate return under ci rcumstances of bad loan. Credit analysts. Other security: Often various other securities such as land. market demand. the fixed assets may not recover anything. those interpreting the financial ratios from the prospects of a lender. to determine the future profits that will accrue to the shareholder. Financial Ratio Analysis Financial ratio analysis is the calculation and comparison of ratios which are d erived from the information in a company's financial statements. Liquidity Ratios€are ratios which gives a picture of a company's short term financ ial situation or solvency. This security can be in terms of control or mitigation measures. the loan officer can shed light on critical areas . legal process. insurance etc. quality. bank nee ds to consider various other factors as security and finance the project only if the bank thinks it s worth the investment considering the project will be a succe ss for sure. opportunity cost. Equity analysts look more to the operational and profitability ratios. By careful selection of items from a borrower s balance sheets and income statements.

The borrower s liquidity position. The borrower s track record of profitability or net income. indicating the availability of ready cash. Whether a borrower faces significant contingent liabilities that may give rise t o substantial claims in the future. The coverage that earnings provide over a business s firm s financing cost.in business lending as A borrowing customer s ability to control expenses A borrower s operating efficiency in utilizing resources to generate sales and cas h flow. The marketability of the borrower s product line. The amount of financial leverage (or debt relative to equity capital) a business borrower has taken. .

Financial risks to banks: Risks related with performance. Energy Market Growths: Trends in the energy demands and increased number of cons umer requirements affecting the market for energy sources such as hydropower. the cash fl ow etc. Technical Requirements of Hydropower: includes all the technical aspects of a hy dropower project such as the tunnel length. Legal Requirements of Hydropower: Various documents and phases that a hydropower project has to go through to obtain licenses such as registration. Figure 11: Conceptual Framework for the project These variables are discussed below. Technical risks affecting banks: Technical risks of the hydropower project that affects the credibility of the project towards the bank. Other factors to be considered: Exploration of other factors affecting the succe ss of hydropower projects and the loan becoming good or bad at the bank. HR requirements of Hydropower: Workforce and other human resource requirements f or the construction operation of a hydropower project. liquidity and leverage of the firm as a borrower. dam size etc. Industry Risk affecting banks: certain risks related with the industry attractiv eness and the stake of particular company within the industry and the regulatory environment under which it works. Hydropower Industry Direction: The study of how the hydropower industry is growi ng along with the trends in the developments of various aspects of hydropower th at affect the overall industry. PPA agreemen ts etc. Financial Requirements of Hydropower: includes all the financial aspects that af fect the hydropower industry such as the various sources of finance. These variables may be divided into two major groups. Affecting the hydropower project Affecting the credibility of a hydropower project at the bank. Vario us variables were studied to assess the prospects of hydropower as a client for the bank for its credit products. Legal Requirements of Banks: Legal documentation and requirements that bank need to fulfill to undertake a project financing. .SECTION III: Conceptual Framework The works of the project was guided by the following conceptual framework. Management risks affecting banks: Risks related with integrity. Competence and a lliances of management or human resource requirements for operations of hydropow er project.

We tried to make ourselves a part of the organization s culture. we were able to understand: The procedures by which the bank moves forward with project financing The pros and cons of financing a hydropower project and why is it a priority len ding sector for most of the commercial banks What information the bank needs for the better and efficient functioning of the appraisal of hydropower project loans The rationales of each step of the appraisal process Phase 3: Descriptive Research In this phase of research. Our co-workers and mentors helped us to adopt the work environment and to complete the various tas ks assigned to us in the due course of our internship duration. Study Approach The study necessary for the preparation of the report was conducted in these thr ee phases: Figure 12: Phases of Research Phase 1: Observation and Adaptation At this preliminary stage. interviews we re conducted with the HBL s employees and also with people with expertise related to credit and hydropower projects was conducted in order to gain required infor mation regarding project financing and identifying their internal strengths and weakness in this particular sector. its pros and cons. After conducting the unstructured in depth interviews with the managers of the c redit department of HBL. The descriptive research aimed at recommending new solutions for proble ms that exist and formulating better strategies to get an upper hand on while fi nancing the projects. It also helped in designing the assignment a long with its methodology and approach. practices and th e rules and regulations that bind all the employees together. This descriptive research mainly comprised of two parts: Qualitative research Quantitative research Qualitative Research The qualitative research comprised of these various processes and parts for gath ering valuable and meaningful information: Review of literatures and lectures . the areas that the banks focus upon while appraising t he projects and economical viability of financing the projects for the commercia l banks. This in-depth interview helped us to come out with the basic req uired information for the study.SECTION IV: Methodology of the Project This part deals with the various methodologies and approaches that we used durin g the study and for the preparation for this report. Most of the data of this re port is based on secondary data from various sources and also based on both info rmal and formal interviews with department head of the bank and other various in dustry experts. the focus was to find the viability of the hydropower industry in Nepal. identification of the core components of HBL and also of the hydr opower industry in Nepal was done. Phase 2: Exploratory Research In this phase. we observed the working environment of HBL. the opportunities it provides to the bank s financing the projects. Thus as a part of the research. conducts.

DCBL Mr. PCBL Mr. which serves as a major base for growth. Rajendra Bahadur Shrestha. Credit Department. Publications and Statistical Reports Various publications and statistical reports that provide quantitative data on h ydropower plants. Transmission etc. literatures. This analysis helped in depicting the level of financial st rength of the bank. articles were reviewed and studied to have the in depth theoretical understanding of credit appraisal and of the hydropower indust ry as a whole. Further. interviews were cond ucted with personnel of other banks as well. Relationship Manager. Abhaya Bahadu r Shah has been included in the appendix. an in depth interview was conducted with these personnel of HBL: Mr. We also studied the rules and r egulations governing the credit appraisal system in the banking environment. and starting new operations in the bank Financial Analysis of NEA Since NEA is the sole purchaser of electricity from the power plants. Pawan Agrawal and Mr. Director. . DCBL Study of Rules and Regulations Thorough study of NRB directives prescribed for project financing was done to un derstand the regulatory environment of the same. incorporating new v entures.depth interview with the credit managers of the bank To collect information about the process of project financing in HBL and also ab out the opportunities and challenged in the hydropower project financing. based on the interviews of Mr. Amit Bajracharya. Abhaya Bahadur Shah. In-depth interview with other experienced personnel in this field of other banks To collect the information for the project and to get deeper insight about the h ydropower appraisal in the commercial banks in the country. Quantitative Research The quantitative research comprises of following different type of the research and analysis tools as follows: Financial Analysis of HBL For qualitative information. Customer Relation Department (Exp ertise: Experience of consortium lending in various projects and critical analys ts of the loan proposals sent to the department) Assignment 2. This helped in construction of unstructured questionnaire for vis iting different banks and interviewing credit officers for the practical underst anding of the subject. The necessary details were found in the annual report of NEA and other publications it issues like Generation. Credit Control Department (Expertise: Deep kn owledge in hydropower project financing for a long time) Mr. the senior manager of the bank was con sulted for the same. the analys is of the financial strength of NEA was sought to be necessary for the viability analysis of any project. Credit officer. Relationship Manager. its operation and growth. Sohan Babu Khatri. Pawan Agrawal.Different books. In. have been analyzed. Some of these personnel are: Mr. analysis of annual report of HBL and study of vario us other publications were done.

At the beginning of 1980s there were only two commercial bank and tw o development banks. Banking sector comprises Nepal Rastra Bank (NRB) and commercial banks. macroeconomic instability emanating from weak nesses in the financial sector can undermine the process of development. In fact. non-government organizatio ns (NGOs) performing limited banking activities and other financial institutions such as insurance companies. While impressive. underpinned by soun d macroeconomic management and prudential regulation. parti cularly the financial sector liberalization that paved the way for establishment of new banks and non-bank financial institutions into the country. After the adoption of economic liberalization policy. Consequently . is an essential ingredient for sustained growth. accentuates the n eed to maintain a healthy and efficient financial sector. postal saving offices and Nepal stock exchange. Conversely. finance companies. the r ecent peace agreement and sign of political stability in the country has further paved a way for prosperous future ahead. it is the diversified intermediation and risk mana gement services of the financial system which have made possible the development of modern economies. 25 are "A" class commerci . Increased availability of funding and more efficient allo cation of capital for productive private sector investment is beneficial economy -wide. financial systems deliver a broad range of fin ancial services and sophisticated products. The con tinuing globalization of economic activity. by the end of mid July 2008.91percent of the GDP in the Nepal. micro-credit de velopment banks. Thus. citizen investment trus t. A healthy and stable financial system. During the last two and half decades the Nepalese financial system has grown sig nificantly. With two large economies growing at a massi ve speed Nepal has a lot to gain from its neighbours. extension of credit. the numbers belie the mu ch larger role that this industry plays in the economy. In almost all advanced economies. and the challenge of attracting prod uctive investments in a competitive international environment. However. The n on-banking sector includes development banks. altogether 235 banks and non-bank financial insti tutions licensed by NRB are in operation. FSS comprises over 9. this bulletin contai ns information only on those financial institutions.SECTION V: Industry Analysis Banking sector as a whole All branches of economic activity today are fundamentally dependent on access to financial services. which are licensed by NRB u p to mid-July 2008. Hence. robust growth and effective functioning of a full service fin ancial system is essential for economic development and prosperity. and the efficiency of such well-deve loped systems has contributed to macroeconomic stability and sustained economic growth and prosperity. co-operative financial institutions. they fuel the modern capi talistic society. Out of them. By offering vehicles for investment of savings. In addition to this. and risk management. The Nepalese financial sector is composed of banking sector and non-banking sect or. Over the years the importance of financial sectors development and its contribut ion to nations Gross Domestic Product (GDP) has been evident. Financial services firms provide the payment services and financial products that enable households and firms to participate in the broader economy. employee's provident fund. The current financial institutions market in Nepal clearly delineates a developi ng market with tremendous potential. in order to capitalize on the e xisting scenario Nepalese financial sector seriously needs focus its activities in attaining higher economic growth. with particular benefits for SMEs that are often constrained in their fin ancing options prior to effective banking reforms and non-bank financial sector development.

micro credit development bank 1. and 4 6 NGOs as shown in table below: Table 2: Financial Institutions in Nepal Type of FI 80 Mid-July 85 90 95 00 5 2 98 05 10 3 21 181 06 13 7 45 4 6 193 07 17 26 60 7 19 208 08 18 28 70 11 20 7 235 Commercial Banks 2 3 20 25 Development Banks 2 2 38 58 Finance Companies 74 78 Micro Credit Development Banks 11 12 12 Saving and Credit Cooperatives 19 17 16 NGOs (limited Banking activities) 47 47 47 46 Total 4 5 7 44 As an increased in number of financial institutions as well as volume of transac tions.0 percent.4 percent. Likewise in the assets side.706324.43 percent followed by investments 17. development bank 5.05 percent at mid-July 2008 from 80.9 percent in mid-J uly 2007.7 million in mid-July 2008. The structure of financial assets/liabilities shows that commercial bank alone h old more than 80 percent of the total assets and liabilities of the financial sy stem.0 percent.508905. Commercial banks held dominate share on the major balance sheet components of fi nancial system.2 percent.9 percent and 1. 16 saving and credit co-operatives. 58 "B" class development banks. the total assets/liabilities of the financial system witnessed continuous growth over the last seven years. During the period 2001 to 2008 the total asse ts of whole financial system increased by 14.12 percent in the previous year.44 percent and capital fund 3.67 percent in the same year.26 perce nt compared to 15. The ratio of total assets/liabilities of the financial system to GDP at nominal prices increased to 86. the . Of the total deposits Rs. 12 "D" class micro-credit development banks. liquid funds 13. loan and advances acc ounted the largest share of 55. The respective shares were 84.04percent.2 million in mid-July 2001.2 percent follow ed by finance companies 11.8 percent and others 1.0 million in mid-July 2008 from Rs. deposit held dominant s hare of 72.8 percent and 0. The same ratio was 62.05 followed by borrowing 4.al banks. As of mid July 2008 commercial bank group occupied the 80. 9. 78 "C" class finance companies.273946. In the mid-July 2008 the total assets registered a higher growth of 21.62 percent per annum and reached to Rs.86 percent and other assets 13.2 percent.04 percent in mid-July 2001.65 percent r espectively in mid July 2008. The composition of the total liabilities shows as usual. 3.96 percent in mid-Jul y 2007.

76 percent in the mid July 2008. Entry of new banks in financial system along with increased in the business.3 percent.1 percent.000 MW and economic potential of 42. Chamelia and Kulekhani 3 by NEA and other IPP projects there is a possibility that the new total from the se additions would result in the new figure of 797 MW. sources of fund of commercial banks went up by higher rate of 15. In the prec eding year the respective share were 19.8 million in mid July 2007.2 percent. 2. 736.1 million in the last year.18 percent followed by borrowing 2.3 p ercent. witnessed a strong growt h of 273.291605.55 percent and 18.06 percent and 8.566. investment and liqui d funds registered the 19.3 percent and 90.6 percent. The composition of liabilities of commercial banks shows that. Likewise. Similarly.79 percent. the total assets i. Similarly. In the same year the share of commercial banks in borrowin gs.11 percent in m id July 2008 compared to the previous year respectively.8 percent and others 0. micro credit development banks 1. one of the components of liabilities. finance compan ies 13.commercial banks occupied 83. on the loans and advances the share of comme rcial banks stood at 78.98 percent. The current level of hydropower generation in Nepal stands at a meager level of 619 MW.22 percent an d liquid fund 11.6 901.60 pe rcent and 8. The borrowings and deposit. the deposit has o ccupied the dominant share of 75.490.0 million in mid July 2008 from Rs. finance companies held 10. The respective shares of depo sit.51 percent compared to 14.22 percent and 11.5 percent respectively. Ever since this disclosure Nepalese in all walks of life were hopeful of th e speedy harnessing of the enormous hydro resources and the resultant inflow of hydro dollars into the country for the overall upliftment of the nation's econom y. loans and advances occupied the highest share of 54.50 percent and reached to Rs. development banks 5. The share of loans and advances to total assets increased to 54. 638. Hydropower industry It was in the late 60s that a sensation was created by declaring that Nepal has a theoretical hydropower potential of 83.98 percent. micro credit development banks 0. Of the component of assets. another component of liabilities. increased by 17. loans and ad vances the major component of assets increased by 34.7 perc ent in mid July 2008. By the end of this fiscal year the total assets of commercial banking sector re ached to Rs.80 percent respectively. Less than 40% of Nepalese currently have acce ss to electricity and those who do have electricity are reeling under a (up to 4 .27 percent and reached to R s.09 percent in mi d July 2008 from 46. liquid funds and investments constituted 45.0 percent.09 percent followed by total investment 19.7 million in mid July 2008 from Rs.25778. 68.45 percent in the previous year. The liquid fund and investment increased by 58.10 percent while other liabiliti es decreased by 0.11 percent compared to last year 2007. The capital fund.54 percent a nd capital fund 1. Similarly.e. Of this 463 MW is contributed by N EA and the remaining 156 MW is contributed by Independent Power Producers (IPPs) . but very little has been achieved in the coun try regarding hydropower development.0 million from Rs. Despite the fact that Nep al has such abundance of hydropower potential. With the commissioning of Middle Marsyangdi Project.9 percent. borrowing and capital fund in the previous year were 68. Commercial banks The total number of banks operating in the country are 25(as of 2008) and the nu mber of commercial bank branches has increased to 555 in mid July 2008 from 452 in the last year.66 percent in mid July 2007.80 percent in the same year. development banks 6.55 percent and 30.7 million in the last year.000 MW. Over four decades have elapsed.3 percen t and others 0.7 percent. 391537. it has dismally failed in tapping this vast and essential resource.

This possesses a big threat for financing projects as a wrong decision may result in locking up of a significant amount of capital. Small hil l states such as Himachal Pradesh. The states have unbundled their monoli thic power utilities and electricity has become a commodity for trade. Low human resources required Hydropower projects are capital intensive projects and are not focused upon labo r intensity. Initially huge number is required for the construction phase but in the l atter stage when the generation starts. Arunachal Pradesh and Sikkim have seen an ups urge in hydropower development especially on the strength of the very progressiv e incentives the developers are receiving for hydropower investment. Huge potential in Nepal There is a huge untapped potential in the Hydroelectricity sector of Nepal with only 1% of the potential being generated at the current situation. there are no indications t hat this bleak situation is likely to improve in the foreseeable future. . In additio n Bhutan has many mega projects ready in the pipeline for implementation. water in the form of royalty paid to the government for paying the national asset of water resources. Strengths of Hydropower Sector in Nepal Low running cost Hydropower projects involve high initial investments but in the latter stage the administrative and maintenance costs for running the project is at minimum comp ared to the cash flow generated from the project. Furthermore. Minimal cost of raw materials Water is abundant in our country and the producer has to bear minimum cost of ra w materials i. This shows a huge opportunity in investment in this sector as not only the country is facing a huge deficit in supply but also as an opportunity to export it to other countr ies at competitive prices. This also helps understand the potentials and the limitations of hydropower projects in Nepal.2003. Bhutan has forged an alliance with India and is forging ahead with a fast pace in implementing major hydropow er projects and is already exporting 1500 MW of electricity to India. In Ind ia.2 hour per week) load shedding schedule. Hence these projects bear very low costs for human resource and lab orers. Weakness of Hydropower Sector in Nepal Financial incapability as high initial investment Hydropower projects are capital intensive projects requiring huge initial capita l outlay.e. a hydropower plant requires only a few e ngineers and some maintenance staffs. SWOT analysis of hydropower A SWOT analysis of the hydropower sector has been done below to understand the e xternal and the internal environment. a sea change has occurred in the sphere of power development after promulgat ion of the Indian Electricity Act . This slow pace of development of hydropower in Nepal is in sharp contrast to the situation in the immediate neighboring countries.

Furthermore. A summary of this is shown below whi ch clearly shows 145% increase in the past 10 years. Skilled Manpower unavailability Nepal faces a huge shortage for skilled manpower especially for the engineers re lated to this field due to the brain-drain resulting mainly due to the worldwide shortage of Hydropower engineers. . inability to collect payments and debts. the demand for electr icity for irrigation has also rises. Research has found that energy efficiency for hydro-electric ity ranges from 83 to 93 per cent compared to 65 per cent efficiency for coal fi red electric plants and 60 per cent for nucleated electric facilities. Such conditions of the sole purchaser can act as the major weakness any upcoming projects that are coming up. Opportunities of Hydropower Sector in Nepal Increasing demand The establishment of new industries and expansion of the capacity of consumer go ods industries have led to a considerable increase in the consumption of electri city in Nepal. the number of consumers are ever increasing and the dema nd of electricity is increasing every year. demand by the retail consumer has also increased.Poor past performance of NEA NEA is the sole purchaser of electricity generated by the various hydropower pro jects. huge administrative expens es etc. Increased number of customers As shows in Appendix 9. NEA has been operating in losses due to various reasons such as electrici ty leakages. Apart from the programs of electrification.

53. of Consumers 6.84.45. There i s a huge potential market for Nepal to export to India as well. the demand for energy has grown at an average of 3.77.447 13.363 6.4% of global ener gy consumption. cottage and small industries in Nepal. This may pose a big threat to the hydropower sector if many more such contracts are signed.70.40 per unit. accounting for 3. Purchase from neighboring country In 2007.610 Potential to export to India India is world's 6th largest energy consumer.935 11. The Indian government has permitted Nepal Electricity Authority (NEA) t o purchase 23 MW of electricity from the Power Trading Corporation of India (PTC ).6% per annum over the past 30 years. Due to India's economic rise. .1% of the total energy consumes and petroleum products comprise of 1. This deal was done at a rate of IRs 4. other sources of energy are intensively used which can be replaced by hydropower generated en ergy. Asta Laxm i Shakya talked about use of alternative energy for small industry.Table 3: Number of Consumers of Electricity in Nepal Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 No.73. Threats of Hydropower Sector in Nepal Alternative sources of energy Just as potential to replace other forms of energy is an opportunity area for hy dropower development.6%.535 9.22. Potential to replace other forms of energy Of the total energy consumption of 288 million GJ in rural Nepal.611 10.855 12.813 15.992 8. In a program on use of alternative energy for promotion of mi cro. Minister for Industry Mrs. More than 50% of India's c ommercial energy demand is met through the country's vast coal reserves.979 7.24. Even in the urban areas.97. it poses a threat also as other sources may be cheaper and readily available. biomass accoun ts for 98% while electricity accounts for only 0.59.

GTZ etc.000 463 Kulekhani No. During the year 2007/08.000 165 Kulekhani No.000 105 Trisuli 24. steps were being carried ou t to utilize maximum efficiency of the available resources. The 11. IMF. Governmen t of India. Hydro 1046 1747 1798 2. The key player in the market is Nepal Electricity Authority which has developed various projects individually and in aid with the Government of Japan. Table 5: Demand of Energy Particulars 1999 2007 2008 Peak Demand (MW) 603 648 721 Available (GWh) 1475 3051 3180 1. EDCF Korea and the British Government and in assistance of donor agencies such as World Bank. Thermal 118 2000 326 1701 1233 66 2001 351 1868 1113 27 2002 391 2066 1113 17 2003 426 2261 1478 4 2004 470 2380 1345 9 2005 515 2642 1522 13 2006 557 2780 1568 16 . 1 60.34 MW is generated by private sectors. Porter of Harvard Business School in 1979 is used.000 163 Gandak 15. thereby presenting big challenges in bridging the gap between supply and de mand of electricity in Nepal. Acco rding to this.SECTION VI: Analysis of Credit Five pillars of credit analysis Industry For the purpose of industry analysis.050 70 Puwakhola 6. a framework developed by Michael E.100 114 Sunkosi 10.000 106 Modi Khola 14. new records of demand of power and energy were experien ced. Porter's five forces analysis. This situation i tself explains the need and viability of hydropower projects in Nepal. 2 32.000 842 Marshyangdi 69.800 93 Devighat 14.31% growth in peak power deman d and 10. To resolve this issue.200 48 Avg Annual Production in Other small hydropower projects of NEA have an installed capacity of 18380 KW.44. But even the step of carrying out import through trading of power from Indian short term market coul d not offset the unbalance and thus the nation faced multiple hours of load shed ding which even reached 48 hours per week. industry attractiveness is assessed based on five factors which a re discussed below: The intensity of competitive rivalry: The total installed capacity of hydropower electricity generated in Nepal is 611 MW out of which 157.76% growth in energy demand aggravated this situation. The major hydropower projects owned by Nepal Electricity Authority are as follow s: Table 4: Hydropower Projects in Nepal Name of the Project Installed Capacity in KW GWh KaliGandaki "A" 1. People s Republic of China.

Purchase (Total) 1196 1291 1372 India 232 232 412 Nepal 77 169 960 309 226 501 401 238 698 727 149 628 936 186 838 778 241 864 1025 266 930 1106 328 962 .13 9 3.

870. for which. Though recently. Solar Energy The government has earmarked Rs.20 3.20 6.163. natural gas.20 5. I . Diesel-pow er is expensive for this nation also Nepal doesn't need any diesel-powers if it can establish hydropower. The alternative fossil fuel. it seems to be very small and the amount of investment in this sector is huge.00 10.80 4.018. there is always room for export to countries like India where the demand is unsatisfied and they are ready to purc hase electricity.20 2.859.90 2.70 6.60 2.971.70 967.00 11.00 7.70 All this shows that even though new projects are coming up in Nepal.10 2.053.40 878.387. Two deposits are believed to hav e some economic significance.300.545.741.20 1.90 1.851. the local d emand is immensely high.363.Table 5: Future load calculation Energy 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 in GWh Peak Load in MW 3.10 13.271.70 1.510.206.80 8.10 2. The threat of substitute products: Various substitutes of Hydropower energy are available but the potential is not as much as there is for Hydropower.882. Diesel-power comprises of less than 4% of the total projects and hence often is ignored. and Coal So far.20 8.906.30 1.40 2. But Nepal is completely a hy dropower nation given the comparison of projects by their capacity.349.60 1. Even these depos its. no proven reserves of petroleum suitable for commercial exploitation hav e been found in Nepal. has a lso not been discovered as yet in any significant amount. This all petroleum products consumed are imported in refi ned form for direct consumption.620.00 11. Also if the local demand is fully satisfied.80 1.603. Petroleum.1 billion for subsidy on the installation of solar panels even in the urban centers and will encourage each household to inst all a solar panel.056. Nep al needs to import fuel/diesel from India.40 793. 1.929.176.218.430.562.30 4. however.951.10 1.984.870. developments have been made in this sector. one in Kathmandu and one is Dang. Based on this the industry looks to be very attractive. The substitutes of Hydropower are as follows : Diesel Plants: There are a few diesel power plants in the country.90 5. since it doesn't have oil.10 4.80 1.90 9. locations are in abundant. Natural Gas.640.40 12. are believed to be insignificant in terms of the energy demand.10 14. Coal is in many countr ies among the cheapest sources of energy known.403.770.052.

major costs include the civil and the electromech anical parts. Upper Hadi Khola 3. a Power Purchase Agreement (PPA) is concluded where NEA signs an agreement to purchase total capacity of the project at certai n rates. The bargaining power of suppliers: During the construction phase. Once the agreement is signed. Tinau Khola 990 Total 6681 320 991 Draft PPA Prepared 6 IPPs 6350 kW Connection Agreements Requested 7 IPPs 34. Lower Piula 990 6. there are no risk factors to it. Siuri Khola 990 4. Belkhu Khola 2. They in total comprise of about 80% of the cost of building a plan t. The current rates dry season which s it is sure that mpany has any say for purchase of electricity have been set at Rs. So this reduces the risk of paym ent not being received from the customer s side. 4/unit during wet Seasons. the PPA assignment is taken over and all the payments made to the pow er project are routed through the lending bank. Thought substitutes are available.935 kW Projects under Detail Technical Review 10 IPPs 66. With thi the buyer market is regulated and neither the buyer not the co or risk in this segment. and is ready to sign 6 PPAs with the draft agreements prepared. As a bank. Hewa Khola 2400 5. The following chart summarizes the PPA related activities o f NEA in FY 07/08. Before building a project. Each hydropower plant has to pay certain royalty for the use of the river t o the government. In course of operations. The maintenance contract is an important part to this as maintenance when not d . The tota l number of PPAs concluded with IPPs has now reached 39 with a total installed c apacity of 234/1 MW. the Power Trade Department of NEA has concluded 6 PPAs. Table 6: PPA Concluded in the FY 2007/08 IPP Projects kW 1.860 kW The above table illustrates that though the hydropower industry is being flooded by many upcoming projects. 7/unit during lasts for 4 months and Rs. The bargaining power of customers: The main customer of a Hydropower Project in Nepal is the Nepal Electricity Auth ority.453 kW Projects under general technical review 7 IPPs 72. The threat of the entry of new competitors: During the fiscal year 2007/08. still there is opportunity for newer projects to com e in to cater the unutilized potential of the hydropower industry in Nepal. the only input for a Hydropower plant is the flowing wa ter.nvestors have not either explored this sector or the returns are satisfactory. The suppliers for there are available easily and one can gain competitive pri ces from them. Hence the risk from substitute products is very less. either they are not economically viable or ve ry difficult to cultivate.

76 € 35.70% 78.86 -13.74% -7.45 (b) Quick Ratio 0.09% € 0.58 .54% -8. For the financial analysis.33 14.03 80.16 0.) (a) Sales 12.49 -15.22 52.93 47.e.80% (b) Net Profitability -8. The NPV of any project should be positive with an IRR of at least 14%.45 (b) Net Working Capital* -8.85% -9.56 15.20% 0.6 -12.73 46. The strength of securities is the second way out i.53 -15.49 0.21 (e) Net Fixed Assets 68.61 0.49 17.67% ( c) Return on Capital Employed Liquidity Indicators (times) € (a) Current Ratio 0.19% 1.7 (d) Net Worth 15.41 0.66 0.61 13.49 € 37.48% 1.one timely can create huge costs.39 € 59 107 839 -667 € 74. Also the cash flow should be assessed based on the repayment terms. banks should take into consideration two major thing s.62 € 37.37 € 61 112 894 -703 € 73. Net Present Value (NPV) and Internal Rate of Return (IRR) Cash Flow A financial report should be provided by the consultant which includes the above aspects.97 (c ) Net Trading Assets -11.73% € € 56 130 942 -725 161 68.04 -17.7 73. in Mil.47 22. This analysis has been done on the basis of financial ratios calculated as follows: Table 7: Key Financial Indicators of NEA 2004/05 2005/06 2006/07 2007/08 Volume Indicators (Rs.38 Efficiency Indicators (days) € (a) Stock days in hand 67 (b) Average Collection Period (c ) Average Payment Period 820 (d) Net Operating Cycle -646 Financing Ratios € € (a) D/E Ratio (Overall in %) (b) Interest Cover (times)** Altman's Z Score 0. through collateral li quidation is also assessed.53 0.50% -11.23% -5.41 -10.54 Profitability Indicators (% ) € (a) Gross Profitability 40.7 21.32 88.43 0.05% € 0.45 0.23 (f) Total Bank Loan O/S 44.20% 1. the financial statement of NEA (Provided in the Appendix) has been analyzed for security assessment. NEA being the sole purchaser of electricity in Nepal. Financial analysis The borrower s capacity to repay through cash flow is the first way out for all the banks.00% 0.

According to the report of NEA. a negative ROE is a result of a negative prof it margin and a low asset turnover. which is relatively very low. 2. They have a leakage of 25% and the losses from this have been Rs. 6. the bank looks into these various aspects of the management to make sure that there credit is utilized pro perly and in good hands. 1607 million. The current ratio. This shows low amount of sales as compar ed to what the assets should actually return. The major sources of funds have been through issue of shares and long term loans . The cash flow from operations has also decreased in the past year from Rs.492 million to Rs. A corporat e guarantee is taken and also their profile is analyzed properly to understand w hat their social stature is. and main taining a DE ratio of 70/30 would be difficult. which contributes to t he major portion of losses. which is a negative indicator. 3. The average collection period has also increased in the past years. Furthermore.98 Arab in t he current year. is only 0.Results of Financial Ratio Analysis Sales of electricity have a steady growth of 7% (average).45.70 per kWh.2%. the foreign exchange fluctuation has huge impact on the profits. The aspects are: Capability: The bank looks into the profile of the promoters and looks into their capability of repayment if in case the project goes in loss due to some reason. Management During the appraisal process of a hydropower project. 7.61 Million according to NEA s annu al report. The Altman s Z score has been more or less stable in the past four years. According to the Du Pont analysis. The Interest coverage ratio has also been largely reduced this year. which is relatively very high. The overall D/E Ratio has reached 78. The major uses of funds have been to pay the interests and purchase of fixed a ssets. The Current ratio has been decreasing as trade debtors have been increasing. The losses amounti ng from foreign exchange fluctuation is NRs 480. The gross profitability of the NEA is good with approximately 37% but the net pr ofitability is very poor as a result of high interest expenses. what is there business profile. . This can also be seen as the debt is increased by 11% in 2007/2008 bu t the interest expense has increased by 51%. economic strength e tc. the cost of service to them stands at Rs. plant and equipment. which should be around 2. The ROA and the ROE of NEA is negative. This enables the bank to get an assurance that there capital is not under ri sk even if the project runs into loss.40 p er kWh whereas the revenue rate is only Rs. This along with the c urrent situation of demand and supply shows a good future for upcoming projects.

lock outs. This ensures the shield against unwanted social problems. doing feasibilit y study. . it is always recommended to have a project partner a person who has good links in the political system especially the DoED and NEA. strik es.Experience: Further a bank sees the experience of the promoters in the field of hydropower o r other major huge projects. Technical capability: The bank always prefers a few people having the technical knowledge in the BoD o r the promoters as this ensures that the project is in the hands of the people w ho know about the details of the project and will not compromise with quality of the project and also will not allow irrelevant cost. Furthermore hydropower industry is a capital intensive industry. labor problems etc ensuring the smooth flow of operations in the project res ulting in lower cost implications of interests and other expenses. The demand of engineers is too high worldwide and qualified engineers are less in number. The major Human Resources required for the operations of a hydropower are engineers and mechani cs that need to look after the maintenance and repairs when needed. Community participation: It is always a plus point for the lenders when the project involves the direct p articipation of the local community and especially the influential community lea ders. T his is important especially because the political instability bringing in new mi nisters in short whiles so having a good influence in the secretarial level and other important levels is of utmost importance. The major co sts associated with such projects are of the engineers. conducting PPA agreement and acquiring transmission process is a troubl esome and lengthy process. Politically influential partnership: Since the whole process of acquiring a license for the project. They are more comfortable to extend loans to the pr omoters who have had the experience in the related industry which assures them t hat these promoters have experienced the hardships faced during the hydropower p roject construction and thus are prepared for investing in hydropower projects w ith full confidence.

which looks like a big disc with curved blades. Often. which turns a generator . The most common type of turbin e for hydropower plants is the Francis Turbine. which is at tached to a generator above it by way of a shaft. Head size: The size of the Head affects the flow of the water and determines how much output can be gained in dry and wet seasons. Turbine . Generators . Transformer . Giant magnets rotate past copper coils. Intake .As the turbine blades turn.8 3 4 Sunkoshi 10. creating a lar ge reservoir.1 2 Puwa Khola 6. Transmission line: The location of the nearest substation and the operational qu ality of the sub-station may affect the overall project. Water builds up pressure as it flows thro ugh this pipe.The transformer inside the powerhouse takes the AC and converts it to higher-voltage current. Technical Aspects of the hydropower plant should be assessed properly with the h elp of a consultant as this includes major costs. The civil costs may go up to 6 0% of the total project cost and the Electromechanical costs me go up to 35%. Hydropower plants harness water's energy and use simple mechanics to convert tha t energy into electricity. Th ings that should be taken into consideration are as follows: Tunnel/Canal: A tunnel based hydropower will cost high whereas a canal based hyd ropower may reduce the costs drastically. A turbine can weigh as much as 172 tons and turn at a rate of 90 revolutions per minute (rpm). a pipeline that leads to the turbine. Power lines .2 1 Head Works 4 3 6 4 6 6 7 6 7 3 Powerhouse Total Operatio 6 10 Manual/Auto 6 Manual /Auto 8 Manual/Auto 4 Manual/Auto 6 Manual Manual Manual/Auto 6 Manual/Auto 9 Manual 4 Manual Worldwide. according to the Foundation for Water & Energy Ed ucation (FWEE).Most hydropower plants rely on a dam that holds back water.Gates on the dam open and gravity pulls the water through the penstock.Technical Efficient operation of a power plant requires experienced and hard working manpo wer together with schedule for regular inspection and maintenance. so do a series of magnets inside the ge nerator.05 Devighat 14. Table: No. hydropower plants produce about 24 percent of the world's electricity and supply more than 1 billion people with power. producing alternating current ( AC) by moving electrons. A small overs ight may sometimes become the cause of a large damage having wider implications of both cost and time. Here are the basic components of a hydropower plant: Figure 13: Working of a Hydropower Plant Dam . of operators per shift and operation mode in various hydropower plant s Power Plants Capacity. Hydropower plants are actually based on a rather simp le concept. water flowing through a dam turns a turbine. MW n Mode Kali Gandaki A 144 Marsyangdi 69 3 Kulekhani I 60 2 Kulekhani II 32 Trishuli 24 Gandak 15 6 Modi 14. this reservoir is used as a recreational lake.Out of every power plant come four wires: the three phases of powe .The water strikes and turns the large blades of a turbine.

When the gates open.Like a conventional hydropower plant. and re-ente rs the river downstream. In the Hoover Dam. or gaseou . I t can be liquid. There's another type of hydropower plant. The Generator The heart of the hydroelectric power plant is the generator. the water flowing through the penstock becomes kinetic energy because it's in motio n. as in glaciers. as you might have guessed.500 amps moves from the generator to the tran sformer. Two of those factors are the volume of water flow and the amount of hydraulic h ead. By pumping water back to the upper reservoir. as in oceans. a current of 16. rivers and rain. the plant can pump water back to the upper reservoir . each of which can generate up to 13 3 megawatts. exits and is carried downstream. generates the electricity. As the head and flow increase. The rotor is a series of large electromagnets that spins inside a tightly-wound coil of copper wire. Most hydropower pla nts have several of these generators. solid. The head is u sually dependent upon the amount of water in the reservoir. where the current ramps up to 230. The amount of electricity that is generated is determined by several factors. so does the electricity generated. new water is emitted from the inn er part of the Earth through volcanic activity. Each generator is made of certain basic parts: Shaft Excitor Rotor Stator As the turbine turns. d) Hydropower plants take advantage of a naturally occurring.the process that causes rain to fall and rivers to rise. Figure 15: The Generator The generator.074 mega watts. a dam creates a reservoi r. called the pumped-storage plant. The water in this reservoir flows through the hydropower plant to create elec tricity. Every day. the excitor sends an electrical current to the rotor.Used water is carried through pipelines. our plan et loses a small amount of water through the atmosphere as ultraviolet rays brea k water molecules apart.r being produced simultaneously plus a neutral or ground common to all three. But at the same time. called tailraces. Figure 14: Shaft connecting Turbine and Generator The water in the reservoir is considered stored energy. Using a reversible turbine. the second reservoir refills the upper reservoir. The total capacity of the Hoover Dam hydropower plant is 2. which produces electrical c urrent. In a conventional hydropower plant. called the stator. The basic p rocess of generating electricity in this manner is to rotate a series of magnets inside coils of wire. The Hoover Dam has a total of 17 generators.Water exiting the hydropower plant flows into a lower reservoi r rather than re-entering the river and flowing downstream. At any one time. the world's total volume of water is in many different forms. the water from the reservoir flows through the pl ant. the plant has mor e water to generate electricity during periods of peak consumption. This is done in off-peak hours. continuous process -. The magnetic field between the coil and the magnets creates an electric current. This process moves electrons. Essentially. Outflow . The amount of water created and the amount of water lost is about the same. A pumped-storage plant has two reservoirs: Upper reservoir .000 amps before being transmitted. Lower reservoir . The head refers to the distance between the water surface and the turbines.

As the sun heats liquid water. No. The FAC (Fixed Asset Collateral) Security does not compl etely cover the risks as the fixed assets may not fetch adequate return under ci rcumstances of bad loan. When enough droplets accumulate in one area. Hence for this. cond ensing into droplets. 1 to 6 MVA More than 5 MW.s. Less than 1 MVA Up to 5 MW. For proje cts between 1MW and 5 MW and Initial Environment Examination Report (IEE) is req uired where as for projects bigger than 5 MW Environment Impact Assessment (EIA) is a must. where the bank might have to sell off the property to recov er the loan. grater than 6 MVA 4 Displacement of Settlement Displaces less than 25 people with permanent settlements Displaces 25 to 100 persons with permanent settlements Displaces more than 100 people with permanent residence . bank nee ds to consider various other factors as security and finance the project only if the bank thinks it s worth the investment considering the project will be a succe ss for sure. The air is colder higher up. Table 8: Environmental Requirement S. The various related documents that banks should consider during the security ana lysis of a project are as follows: IEE AND EIA For projects below 1000 KW no IEE or EIA is required. Wind currents are generated by the heatin g activity of the sun. so as the water vapor rises. Under t he case of bad loan. Water changes states as it is mov ed around the planet by wind currents. Air-current cycles drive the Earth's water supply through a cycle of its own. causing the air to rise in the atmo sphere. The table below shows the environmental requirement for various situations. as in the invisible water vapor in the air. the droplets may become heavy enough to fall back to Earth as precipitation. Project Not Requiring IEE/EIA (Category A) Requiring IEE (Category B) Requiring Full Scale EIA (Category C) 1 Hydropower Projects Up to 1 MW schemes 1-5 MW schemes More than 5 MW Schemes 2 Transmission lines including substations Less than 33 kV From 33 kV to 66 kV Greater than 66 kV 3 Rural Electrification Projects Up to 1 MW. The project is built in such areas where the land value is very low and the proposed site may not be useful for other purposes. Air-current cycles are created by the sun shining more on the equator than on other areas of the planet. the water evaporates i nto vapor in the air. The sun heats the air. For such projects a no obj ection letter from respective village development committee is enough. it cools. exe cution of the security documents and present value of the properties proposed fo r mortgage to the bank. Security The control over various securities obtained by the bank to secure the loan. the fixed assets may not recover anything. ca lled the hydrologic cycle.

There is no price escalation on this rate as of today. There may be one in future.52 (US$ 0. the proponent should start the act ual work within three months. the design discharge should be available sixty five percent time o f the year for projects up to 5 MW.e. Nepal Electricity Authority and Power Purchase Agreement Nepal Electricity Authority (NEA) is a fully government owned public utility and as of date the only buyer of power produced by Independent Power Producers (IPP s) in Nepal so all the IPPs in Nepal need to enter into Power Purchase Agreement (PPA) with NEA. The power to be sold to NEA should be calculated on the basi s of Q65 i.9 (US$ 0. An application together with detailed feasibility study of the project needs to be submitted to NEA requesting it to buy power from the project to be constructed. A rate of Rs 3. The Projects Completed by Independent Power Producers and the corresponding powe r sale / purchase rates as of mid July 2007 are as follows: . Progress should be submitted to DoED every six mon ths and complete feasibility study shall be submitted to DoED along with environ mental study report within study period granted in the study license.085) for dry months (mid December to mid April) is fixed by N EA as the power purchase rate from Independent Power Producers (IPPs) for projec ts up to 5 MW. For projects bigger than 5 MW the power rate is not fixed and may vary from one project to another.06) per unit for wet months (mid April to mid December) and Rs 5. For projects bigger than 5 MW the design dis charge is fixed by mutual agreement.Detailed Feasibility Study After obtaining the survey license from DoED.

But it is unlikely that new developers can expect similar rate.06 cents per kWh . (e. Bhotekoshi and Chilime have hi gher power sale rates. Give or Pay: There is no penalty if the developer supplies up to 80% of the agreed energy to NEA grid every month. if NEA is able to buy o nly 75% of the agreed energy in a particular month then it will pay a penalty eq uivalent to 5 x 0.183 Rs 3.g.075) Syange 0. Hydrological risk should completely be taken by the developer. If it is less than 80% of the agreed energy then NEA shall pay 7 5% of the energy cost it has not been able to buy. Important Conditions in PPA for Projects Up To 5 Mw The following are some important conditions and clauses taken from PPAs already signed: 1.107) 7. However. 2. But such avai lability cannot be less than 90% of the agreed energy for dry months and 80% of . if the energy supplied is only 75% of the agreed energy then a pen alty equivalent to 5% of the energy cost will be levied on the developer) Take or Pay: Alternatively if NEA is not able to take power due to its own problems then it w ill not pay any penalty if the power taken by it is 80% or more than the monthly agreed energy.6 & US$ 0.98 (US$ .085 (Approx.75 = 3. NEA does not compensate the developer for any outages due to problems in its grid for up to 144 hours in a year.5 Khudi 4 Pheme 1 Sisne 0. NEA charges a delay penalty equivalent to 5% of the yearly revenue for each y ear delay in commissioning of the project beyond the agreed date.86 (US$ 0.085) Rates for dry and wet months No Price escalation since last three years Piluwa 3 Chaku 1.75 As can be seen in the table projects like Khimti. 4. in recent Power Purchase Agreements NEA has made a provision that the developer can declare availability of power at the beginning of every month. The rate NEA is likely to offer is in the range of US$ 0.) About 3 % price escalation every year Bhotekoshi Chilime 20 Indrawati 36 Rs 6.5 8% price escalation for 3 more years No further price escalation Rs 4.5 Sunkoshi 2.75% of the energy cost in that particular month. Nevertheless.60 Rairang 0.) 3. (e.9 and 5.Table 9: Unit rate of energy for different projects fixed between NEA and IPPs Project Capacity in MW Power Sale Rate for Each kWh Remarks Khimti 60 US$ 0.52 (US$ 0. if the energy supplied is less than 80% then a pe nalty equivalent to the cost of the unsupplied energy will be charged to the dev eloper.g.

time delays and unavailability of predicted energy. shall be required to submit an application to the presc ribed officer along with the economic. it shall be carried out in such a manner that no substantial advers e effect be made on environment by the way of soil erosion.) Reflects realization of the need for utilization of water resources for hydro po wer generation. Section 4. siltation. there is significant scope for foreign IPPs to invest in hydropower sector since huge hydro potential that exists in Nepal will help fulfilling regional energy demand." Section 33 deals with the utilization and acquisition of land and houses.1992 (Regulations . So it is very important that IPPs should be very careful about project st udy before they jump for the project implementation. ai r pollution etc. generation. The involvement of private sector in the development of hydropower in Nepal is a must and there is a lot of enthusiasm on the part of private sector too.the agreed energy for wet months. This almost always leads to cost ov errun. Such small projects are very often not well studied and the developers can not afford to spend more on detailed st udy. landslide. m aterial and equipment costs but there is no price escalation on the power to be sold. transmission and distribution of elect ricity and to standardize and safeguard electricity services. erosion. displacement of people.1993) Enacted to manage the survey. After all a local developer earning a reasonable profit on its investment will only boost the hydropower sector of the country. In contrast facilities like tax holiday for fifteen years is no more avail able and Nepal Electricity Authority is tightening the power purchase agreement more and more in its favor making life difficult for the independent power devel opers. It further explains that excess electricity may be sold to NEA to connect to its main transmission and distribution system. very few realize that there is a lot of risk associated with hydropower devel opment. " Section 24 states: "While carrying out electricity generation. The cost of project is increasing every year due to inflation on manpower. Howeve r.. have not been clearl y specified. flood. enacted through the Electricity Act of 1992. 5. On the other hand the success of few earlier developers can no more be an example for recent develope rs. navi gation. Often they do not realize the value of such study and try to jump to power purchase agreement and project construction. transmission or distribution o f electricity over I MW. Sub-section states " survey. watershed management and involuntary migration. (This policy focuses more on electricity generation. generation. Electricity Act . flood control. This is particularly true for local developers who are mainly capable of developing small size projects (up to 5 MW). Accord . Other issues or impacts emerging from a hydropow er project such as upstream/downstream benefits and issues like irrigation. Rates and cond itions of PPA are mutually negotiated between IPPs and NEA if size of project is more than 5 MW. On the other hand the Gover nment of Nepal too should facilitate the private developer and not take advantag e from its ignorance. Moreover. etc. technical and environmental study report. indigenous people. The PPA period is 25 years whereas license period is 35 years. Regulations Hydropower Development Policy 1992 This policy emphasizes the need to develop environmentally friendly hydropower t o meet the country's energy needs and to encourage the private sector to invest in hydropower. transmission or d istribution.

Any person may furnish his reaction to DOED if construction and operation of the proposed project is likely to cause adverse affect. Besides these conditions.3. there is a mandatory provision of publishing a public notice by DOED giving 35 days. The processes required to conduct an IEE and EIA in hydropowe r projects are the same as described in §1. only a small fraction of this power potential has been utilized. with or without daily pondage. simple and transparent procedures so as to promote private sector participation in the development of hydropower.ing to the Electricity Regulation (ER50. stating the necessary part iculars for information for general public. clear. the impacts arising from different types of hydropower projects (as for example. To develop hydropower projects by attracting investment from private sector as w ell as from governmental sector. Most of the hydropo wer projects currently being constructed or on line are of the run-of-river type . Similarly. To pursue investment friendly. havin g a direct concern with agricultural and industrial development. environment protection and maximizing benefits in the development of water resources of Nepal. and in some cases preliminary investigations have begun. Acco rding to EPR54. is a pre-requis ite. a hydropower project generating up to 5 mw requires the IEE proc ess. large and storage projects for hydropower developmen t focussing on national interest. However. Hydropower develop ment schemes are the most highly prioritized development programs in Nepal. above. a transmission line is a linear project with different magnitudes and intensities of effects compared with generation p rojects. Strategies made by the government: To extend hydropower services to the rural economy from the perspective of socio -equity with the realization of the fact that development of power sector. Run-of-river hydropower projects w ill continue to dominate future hydropower development in Nepal. To date. For example. To make the river basins of specific rivers as the basis of development and mana gement of water resources in order to achieve maximum benefits from the utilizat ion of water resources of Nepal. below). other projects requiring an EIA are mentioned in Schedule-2 o f EPR54 (Annex 2). a transmission project u p to 66 kV capacity requires an IEE and more than 66 kV requires an EIA. To minimize the potential risks in hydropower projects with a joint effort of go vernment and private sector. whereas more than 5 mw requires an EIA. To adopt a broader perspective on national development in the context of macro-e conomy in developing and managing hydropower in line with the concept of develop ing water resources in an integrated manner. however. To implement small. Of the existing power projects in Nepal only Ku lekhani has a reservoir for seasonal storage. high dam or run-ofriver type) differ greatly. and to make provisions for allocating the non-mitig able risks to either the government or private sector based on their capability . but the constru ction of high dams for generating larger amounts of power are also being conside red. Followed in 2050 by Electricity Regulations (ER50) [#7. For projects involving both generation and transmission it is sometimes convenient to carry out Scoping as if for two sub-projects with two separate EI As. To pursue a strategy of bilateral or regional cooperation in the hydropower deve lopment sector taking into consideration the feasibility of hydropower in Nepal and the demands of electric energy in neighbouring countries in view of the fact that development of hydropower in Nepal supports not only the domestic but also the regional economy. as necessary. below] National Environmental Impact Assessment Guidelines 1993 Nepal has tremendous potential for hydropower generation. also tak ing into account internal consumption and export possibility of hydropower. and through joint ventures of gov ernment and private sector for the promotion of hydropower development. medium.

Appropriate incentive provisions shall be provided and transparent process shall be pursued to attract national and foreign investment in hydropower development . Priority shall be given to utilize labor and skills of Nepal in the implementati on of hydropower projects. export of electricity shall be encouraged. Ow n and Transfer shall be encouraged. Provision shall be made to provide appropriate benefits at the local level while operating hydropower projects. Capital market shall be mobilized to encourage domestic investment in hydropower generation. Attention shall be paid to safeguard the consumers' interests by providing relia ble and qualitative electricity service to the consumers at a reasonable price. Consumers shall be encouraged for demand side management to enhance energy conse rvation. In addition to mitigation of adverse environmental impacts likely to result from the operation of hydropower projects. Rural electrification shall be encouraged in the rural areas affected directly f . Hydropower projects suitable to the electric system for domestic use as well as the storage projects shall be developed as per requirement on competitive basis. Proper provision shall be made to cover risks likely to occur in hydropower proj ects. For this purpose. Contribution shall be made to environment protection by developing hydropower as an alternative to biomass and thermal energy. m obilization of public support shall also be emphasized. In view of the concept of bilateral and regional cooperation and taking into con sideration the abundant hydropower generation capacity in the country. Unauthorized leakage of electricity shall be controlled.to bear the risk at the lowest cost. Implementation of hydropower projects based on the concept of Build. neces sary technical measures and appropriate legal provisions shall be adopted and. Large storage type multi-purpose projects sh all be developed in such a way that downstream benefits resulting from the proje cts would yield maximum benefits to the nation. Emphasis shall be given on mobilization of internal capital market for investmen t in power sector. Electrification of remote rural areas shall be encouraged by operating small and mini hydropower projects at the local level. Operate. Hydropower shall be developed attracting the investment of domestic and foreign investors in the hydropower generation. Efforts shall be continued for implementation of large storage type hydropower p rojects and multi-purpose projects. In the case of multi-purpose projects. appropriate provision shall be made to re settle the displaced families. Environmental provision where environmental impacts assessment study report shal l be made. Process for electricity tariff fixation shall be made rational and transparent s o that electric energy shall be supplied at a reasonable price. The Government may participate with the p rivate sector in view of possibility of irrigation development. Provisions under hydropower development for private sector: The following working-policy shall be followed in order to enforce the hydropowe r development policy and fulfil the underlying objectives therein. Policies: Hydropower potential of the country shall be utilized to the maximum extent in o rder to meet the domestic demand of electricity. Legal provisions shall be made to prevent adverse effects on the availability of water or water right. transmission and distribution projects.

firm or company mak ing investment for the power generation. to The Gove rnment in a good running condition. Hydropower project. ipso facto. a hydr opower project with capacity of more than ten MW. Foreign entrepreneurs shall be encouraged to be affiliated with local organizati ons as the cost of hydropower decreases if the project is developed through the domestic construction entrepreneurs and consultants. the interest of the consumer shall also be taken into account. shall be issued on competitive basis through invita tion of proposals. after expiration of the period of time as sp ecified in the license. transmission system and distribution system established by t he private sector shall not be nationalized during the term of the license. The regulatory body shall fix the rate of electricity tariff to be sold and dist ributed to the consumers. a power purchase agreement has to be made to sell and pur chase the hydropower generated. transmission or distribution project to be constructed by the private sector to repatriate the following amount from Ne pal in foreign currency at the prevailing exchange rate. Except in cases where a private party itself also distributes the hydropower gen erated by it in Nepal.rom the electricity generation project. of which feasibility study has already been done by the governmental level and electricity from which is expec ted to be consumed in Nepal. . The Government shall not provide any compensation theref ore. The license to carry out detail survey of. Exchange facilities shall be provided to the foreign person. and generate electricity from. In fixing the electricity tariff. Any hydropower generation project has to be transferred. A Rural Electrification Fund shall be established for the development of micro h ydropower and rural electrification by pooling in a certain percentage of the am ount received as royalty.

per kW Energy Royalty. per kWh Annual Capacity Royalty. per kWh 1 Export-oriented run of-the-river project Rs 400/7. per kWh Annual Capacity Royalty.Other important aspects to be considered Procedure Followed For Obtaining License for a Project Any developer willing to develop a hydropower project (bigger than 1000 KW) in N epal has to obtain survey license from Department of Electricity Development. Royalty. per kWh 1 1 Up to 1 MW 2 From 1 MW to 10 MW Rs 100/1. per kW Energy Royalty. Fees and Taxes An Independent Power Producer shall pay the following royalty to Government of N epal after the commencement of electricity generation: a) Internal Consumption Project Table 10: Royalty for Internal Consumption Project Electricity Capacity Annual Capacity Up to 15 year date of commercial operation Annual Capacity Royalty. Similarly survey license is required for study of the transmission line required for the project.5% Rs 1800/12% 2 Export oriented storage project Rs 500/10% Rs 2000/15% . will awa rd the survey license to the applicant within 60 days for projects up to 10 MW a nd 120 days for projects bigger than 10 MW. per kW Energy Royalty.5 to 2 years but can be extended up to 5 years. An application with a report at desk study level of the project including boundary co-ordinates should be submitted to DoED who will go through the application an d in case no one has been already awarded the particular river stretch. per kW Energy Royalty. The period of such license is normally 1.85% After 15 years from the Rs 1000/Rs 1200/10% - 10% 10% Above 100 MW Rs 200/For captive use Rs 1500/- Rs 1500/Rs 3000/- b) Export Oriented Project Table 11: Royalty for Export Oriented Project Type Up to 15 year After 15 years from the date of commercial operation Annual Capacity Royalty.00% 1.75% 3 4 5 From 10 MW to 100 MW Rs 150/2.

The originally announced tax holding for 15 years are enjoyed by some project is no more applicable. . Value Added Tax (VAT) is applicable on constructi on materials and services for projects bigger than 3 MW. One perc ent tax is applicable on import of electromechanical equipment and import of ste el for hydro mechanical works.Income and other Taxes: Income tax applicable for hydropower projects is set at ten percent lower than t he normal corporate tax prevailing in the country.

€etc. more commercial orientation. including drafting and negotiating long-term export purchase agreeme nts. Various national and international level seminars. German Technical Assistance GTZ has been providing technical assistance in the various small hydropower proj ects mainly of the range of 1 MW to assist the community for its progress. The financial sector is entering the ene rgy sector gradually by taking small exposure.: The works carried out by some of these agencies and countries are as follows: USAID USAID is helping Nepal attract and realize greater private sector involvement in electricity generation and increased private investment in environmentally and socially sound hydropower. preferring to share the risk amon gst various banks and developing consortium financing. analysis of monthly costs. In addition. social. it is also assisting the Government of Nep al in exploring and developing markets for export of electricity generated from hydropower. The success stories of few hydropower projects developed by ind ependent power producers in the recent past have also helped to create positive market interest and response. Japan Japan has provided extensive loan assistance to Nepal such as for the Kulekhani (I and II) Hydro-power Station. it has helped establish strict environmental guidelines and monitoring procedures to ensure compliance of hydro power development in Nepal. From the above analysis. and decentralization of NE A business units. Germany etc. its activities are focused on preparation of overall planning for power sector restructuring. a nd a demand-side management study. as well as a few small exposu res mainly in small hydropower projects. Agricultural Development Bank ADB is assisting in the reform and restructuring of Nepal Electricity Authority (NEA) as an agency. Sector of deep interest and attraction for FDIs and FIIs: .SECTION VII: Finding from the Analysis The financial sector has identified hydropower development as a lucrative financ ing opportunity. Critical success Factors Interest of agencies like USAID. Kali Gandaki 'A' Hydroelectric Station. The project is also increasing public and private se ctor stakeholder understanding of the environmental. Finally. Further improve ments depend upon structural changes resulting from the company's reorganization . and economic benefi ts of hydropower investment. The enabling environment for private investment in hy dropower is being improved through a series of policy recommendations that were adopted by the Nepalese government. and power distribution. the necessity of huge funds and longer gestation as well as repayment periods. and to reduce costs. we have come up with the following success factors and risk areas that banks should consider before lending to this sector. as well as the restructuring of NEA's distribution system to improve accountability and efficiency. ADB and countries like Japan. have imparted some experience to variou s commercial banks. operations. the risk is relatively high in this sector due to its technical nature. Improvements are un derway in NEA's performance. On the other hand. Under this project. with greater autonomy.

For e. hydropower projec ts has high feasibility in the country. If such a guarantee is not available. Huge gap between demand and supply The load shedding hours that reached to the extent of 16 hours per day itself ex plains the huge gap that is evident between the demand for electricity and the s upply that NEA is providing with. These risks can be mitigated by either (a) having the loan denominated in local currency. LPG. This becomes of gr eater concern to a lender if it is not able to repatriate the proceeds of debt s ervicing. firewood. Japan. Repatriation risk Another risk associated with foreign loan is repatriation risk . Potential to replace other forms of energy used for various processes in various places.g.Hydropower sector slowly is becoming an attraction for foreign direct investment s and also for institutional investments with companies of India. e. governments of development countries. In the case of increase in the c ost of imports an insurance coverage against cost escalation would mitigate this risk. petr oleum etc. A foreign exchange risk is inherent in foreign loans due to the fact th at foreign currency tends to be relatively strong compared to Nepalese currency.: Sutlej India is coming up with the popular project Arun III . Availability of resources Nepal is considered to be the second richest country in water resources and with the geographical advantage of the hills and uneven territory. in their quest to att ract foreign investment. Generally. This risk materializes with the devaluation if revenue is denominated in local currency while having to service the loan denominated in foreign currency. the borrower s exposure to certain r isk will be different if the source of debt is overseas. either the lender will not make a loan or wil .000 MW of electr icity by the year 2020. firewood. have enacted legislation guaranteeing repatriation. Key risk areas Foreign exchange risk A developer can borrow locally or from foreign institutions and the conditions w ith regard to security will be same. a sector sought to be the development factor for the country The Government of Nepal has formulated a strategy to produce 10. which is very expensive and is not readily available as well. fuels etc. There are mainly two ty pes of risks that a borrower needs to be aware of while borrowing from a foreign lender. However.g. This has resulted in making hydropower a priority sector for Nepal which is a good sign for investors as the government is ready for all possible help that the company needs. Canada coming up. Electricity is sought to be the cheapest mode of energy in most of the countries worldwide replacing the traditional forms of energy such as LPG. This itself explains the huge potential for hy dropower in the country and the viability of it in Nepal. Simil arly. Government s priority sector. this risk also does manifest in rising cost of imports. or (b) r ate of revenue denominated in foreign currency.

A simple way to mitigate this risk is to sign a long term Power Purchase Agreement (PPA) with the utility. Such changes adversely impact the via bility of a project. (b) reduce project revenu es. These types of risk are known as soverei gn and country risk. the possibility of confiscation. However. A take or pay type of PPA mitigates this r isk. banks tend to add a margin to the then prevalent rate to cushion their ow n risk. ex propriation and nationalization (CEN Risk). Generally. it can also be mitigated by passing the impact through to the utility provided t hat the utility is amenable to such a pass through. Even hard currency is subject to this risk. The Multilateral Investment Guarantee Association (MIGA). t he availability of such insurance is limited only to foreign investors. short of trying to hold down the inflation with one s bare hands! Legislative change risk Here we are talking about the risk of changes in the country s laws that (a) incre ase rates and taxes or other expenses and liabilities. maintenan ce and repairs. thereby introdu cing an element of uncertainty or risk for the borrower. but such a PPA may not ensure plant factor at a specific level if the utility accepts delivery of the energy at its pleasu re. For a developer. Inflation rate The real value of a unit of nominal currency tends to depreciate over time with inflation. This means there will not be a guaranteed stream of revenue to the project in order for it to meet its financial obligations with regard to (a) operation. Market risk It is common knowledge amongst engineers that energy requires a guaranteed marke t due to the constraints with regard. mainly in the case of a run-of-the-river type project lacking poundage. changes in the local political envir onment and enforceability of contracts. with respect to both market risks and revenue risk. Sovereign risk (country risk) A foreign entrepreneur investing in Nepal is exposed to risk such as those assoc iated with the government s credit worthiness. an entrepreneur has to take such risk. or (c) reduce the value of the assets. Revenue risk A developer can have a long term PPA. However. fixed rate is the best way to mitigate this risk. to storage and transmission. Floating rate e ntails changes in the interest rate during the term of the loan. However. In Nepal repatriation is guara nteed by the Foreign Investment and Technology Transfer Act of 1992 and the Elec tricity Act of 1992 for hydropower projects. a member of the World Bank group. primarily. Interest rate risk It is now time we also touched upon the concept of interest rate risk. Escalation in the rate of tariff is the only answer. it needs to be noted that electric energy is already being traded in spot markets in Western E . Banks prefer floating r ate as they need to be able to adapt to changes in financial market as well as c over their own exposure to the vagaries of changing interest rates (including ba nk rates).l make it subject to exorbitant rate of interest. ensures against such risk for a fee. Ho wever. A foreign equity investor is also s ubject to this risk. and (b) debt servicing. Lenders o ffer two kind of interest: (a) floating rate and (b) fixed rate.

etc. Natural calamities risk: Nepal being a highly risky country in terms of natural calamities like earthquak es and floods. over-employment. shall be turned into cash. design risk. state owned utilities do not have established credit histories and also suffer from records of poor mana gement. Hydrological risk The take or pay nature of the PPA guarantees that all energy produced by a plant. a dry year will be an unmitigated disaster for a hydropower plant. Neighbourhood and community risks: . etc. professional liability. Financial availability risk: Hydropower projects require high capital requirements and regular maintenance co sts. high leakage (technical or otherwise). O bviously. irrespective of whether the season is dr y or wet. Developers are known to ask the government to issue a counter guarantee to cover the paymen t risk. thus threatening the revenue stream of such projects. good construction engineering practices should be practised to av erse the risk that comes due to such calamities. and in the case of a utility s fa ilure to meet its obligations the government is required to promptly make paymen t to mitigate the delinquency of the utility. EAR. the buyer of the energy. including advance lo ss of profit insurance that can be complemented by signing a fixed price turnkey co ntract (or EPC contract) and incorporating a clause for imposition of liquidated damages on the contractor for delayed substantial completion or commissioning o f the plant. In many developing countries. Construction related risks Time and cost overrun risks are one group of construction risks.urope. It a lso raises the total amount of interest during construction of the debt financin g and may even attract penalties for late delivery of energy. depending on the availability of water. socioeconomic/environmental risk. Now-a-days multilateral funding ag encies like The World Bank take a dim view of a government issuing a counter gua rantee. TAR. then these projects are on their own. The most effective way to mitigate hydrology risk is to gather hydrological data fo r reasonable number of years in the past and design the project accordingly. However. Having a letter of credit put in place by the utility with the IPP as th e beneficiary is another way of mitigating this risk over the short term. One can arrange insurance coverage against such risk like CAR. performance risk. etc. geological risk . Other construction risks are force majeure risk. This risk emanates from the fact that seasonal rainfall patterns affect the amou nt of water available to a hydropower plant and generation may fall below contra ct levels in any season. aft er having selected a project with better hydrological potential as well as infor mation. climatic reason or change in the hydrology of the catchments area. Payment risk This risk emanates from the lack of creditworthiness on the part of the utility. Such high requirement of finance is a risky proposition during this present situation of liquidity crisis faced by the Nepalese Economy. This basically entails a government standing surety to the fact that the utility pays its dues to the developer in time.. Time overrun ri sk results in loss of revenue and may also raise the cost due to inflation. if there is no water to generate e nergy due to the change in the level of precipitation.

.It is one of the biggest problems faced by the upcoming projects as the communit y around the project create problems to gain maximum compensation and share owni ng opportunities by initially creating problems. This phenomenon is the biggest negative motivation for the investors to move away from making such huge investm ents in the unfavourable environment. Availability of skilled manpower: Hydropower projects are not only capital intensive but also human resource capit al intensive as it requires highly skilled manpower with good experience and aca demic knowledge to carry out the project successfully. T his has created a shortage in the available manpower in the country resulting in the import of expensive manpower from other countries. The number of such skille d manpower in Nepal is very less due to brain-drain and other related factors.

or distribution of electric energy. .Normal Risk Sharing Arrangement for Hydropower projects Risks Government Company Contractor Utility Comments Hydrology Temporary Deficit € t funds.g. Some Government increasing € Generally con € € Company risk. Usually reflected in tariff d Utility is a power€company€that owns or operates facilities used for the generation. Changes in law Changes in tax Govt obligation often Risks Government Company Contractor Utility Comments Financial Increase financing costs € he tariff or absorbed by company Exchange rate € € € t Cost escalation € € € € ariff escalation thereafter. € € € € € Generally pas Generally passed to utility. which is regulated at state l evels. Insurance co. E. € € € € € € Plant Supplier € € € € € € € € € € € € € Usually company. Long term Deficit € € Flood Damage (Construction) € € urance Flood Damage (Permanent) € Construction Risk Changes in quantities/cost overruns € or or shared Unforeseen ground conditions € € red Delayed completion € by company. Performance risk Equipment € € € € Land acquisition/resettlement € EMP € € € Environmental Aspects Permitting € Land acquisitions/resettlement EMP € € Market Market risk € € Dispatch € € € € € € € € € € € € € € € € € € € € € € € € € € € € € € Insurance co. € Eithe Increasingly Normally contractor r Plant supplier or turnkey con € € Contractor an Usually the responsibility of the uti Company or the utility € € Government/ut Government/utility Generally obligation on the u Principal exposure on the uti € € € Plant Supplier € Political Obligation of utility nsurance. transmission. Insurable.: NEA Company is the power producing company.

banks take every appropriate step to finance those project s whose promoters they are comfortable to work with and also who have the experi ence or the technical knowledge to move ahead with the projects. Due to these reasons. This positive market inte rest has been further promulgated by the success stories of few hydropower proje ct developed by independent power producers. Along with the investors. Study of the current and projected demand. Assessment of credit worthiness of the credit transaction should be done. having regard to statistical data and historical risk experience. The financ ial sector thus must work on building in house expertise and develop coalitions with foreign institution to enhance knowledge base and the lending capacity. Credit should be evaluated against established credit policies and within author ities and it is structured.SECTION VIII: Conclusion and Recommendation It is evident that Nepal is facing a power shortage which is predicted to get wo rse if correct measures are not taken in time. The financing of 6 billion for the 309MW Upper Tam akoshi project under the lead of HBL is one of the biggest investment made by an y or group of commercial banks made till date. . hydropower projects are proving lucrative as a financi ng opportunity for the financial institutions as well. But with the benefits. It is a very attractive industry at present also because of the g overnment s priority in building this sector as there is a need for the country to develop a sustainable path for generation of energy. The major challenges faced by the financial institutions is that the total capac ity of the financial sector is only up to the extent of 50 MW which shows a need and opportunity for foreign institutional investors and financial sector to ent er in to the Nepalese market. the necessity of huge funds and the long payback periods. the major ri sks the financial institutions are facing are that of the risks related to the t echnical aspects. Nepal has feasible energy capa city of 43 GW. The best measure identified is to develop the hydropower sector not only to meet the local demand but also earn f oreign currency by exporting it to the neighboring countries like India as Nepal has huge untapped potential of hydroelectricity. objective and the broa der development objective of a sector.1 Economic viability analysis should include the following aspects: Assessment of the rationale and objective of the project. project financing is a relatively new concept in our country as collateral and personal guarantee-ba cked lending is mainly done. Management conf licts and their conflict of interest is one of the biggest hurdles for the succe ss of a hydropower projects. Furthermore. particularly in terms of security with due care and prudence for the potential risk incurred. The opportunities in this sector can b e estimated by the annual increase of energy demand in the Nepalese market by al most 50MW every year and also by the deficit in the demand supply gap of India o f almost 1900 MW. Financing huge capitals without having the proper t echnical expertise is also a major drawback for the financial sector. NRB has increased the obligor limit of providing loan to double which has increa sed the financial power of lending banks. The guidelines that the financing banks should apply while doing the credit appr aisal is as follows: Credit Risk: Lending should be carried out within the parameters of lending policies. 1. Study of the impact of the investment project on various groups in the society.

both in terms of profitability an d cash flow. the actual and forecast financial status and viability of the investment project. 1. The investment project s solvency.6 Financing Agreements that should be prepared maintained and analyzed: Loan Agreement Inter Creditor Agreement Security Agreement 1. The Environmental Management Plan (EMP) should be assessed properly to avoid fut ure problems when the project is undertaken.Evaluation of the impact of the investment project on environment and society. Determination of whether economic benefits provide an adequate return on economi c costs. This can result in inappropriate pricing and also may risk the quality of const . 1. Assessment and validation of the work schedules of the investment project as per delivery requirement in accordance with technical specification. politically or naturally. Sensitivity analysis of key variables. Assessing whether the investment project s net benefits shall be sustainable throu ghout the life of the project. including NPV and IRR analysis.3 Financial viability analysis should include the following aspects: Adequacy of the investment cost and the financing plan for the investment projec t. Analysis and assessment of the investment project design.4 Environmental and social analysis: The IEE and the EIA should be reviewed critically to find out any possible hindr ances in future legally.7 Non Financial Agreements that should be prepared. For example: A civil contractor may b e a promoter of the project which makes the project closed for open bid competit ions on the part of civil construction to ensure good deal in quality and price.2 Technical viability analysis should include the following aspects: Assessment and the validation of construction. Financial viability of the investment project. Analysis of the sensitivity that is without allowing for the effects of general inflation on costs or benefits. Assessment and validation of the cost estimates for all capital works. 1. maintained and analyzed: Generation License PPA Engineering. liquidity and profitability. geological and hydrological risk of the investment project in accordance with the prevailing regulations.5 Project monitoring plan for the following three aspects should be discussed and analyzed critically: The Construction phase The Maintenance aspect The Financial aspect 1. but incorporating projected relative price chang es for key items. operation and maintenance of the investment project. Accounting and financial policies. procurement and construction contract Operation and maintenance agreement Insurance requirement Shareholder/Project Development Agreement Conflict of Interest Besides these guidelines the two major aspects that the financing bank(s) should take into consideration are: Conflict of Interest Contingent Equity Conflict of Interest Every bank should be aware of the fact whether the promoters of the hydropower p roject or the other members of the organizational structure have interest of oth er any form other than the project itself. 1.

To avoid such situations. many situat ions come up which increases the costs of the project bringing unwanted burden o n the project which the project owners are unable to withstand. the financial institution should properly examine the organizati onal structure of the bank to avoid such situations. strikes. . Other situations may be uncontrollable factors l ike floods. earthquakes etc causing damage to the constructed parts. This brings up a difficult situation for the project to handle.ruction. This burden is then passed on to the bank so as to maintain the flow of work wh ich may put the bank in a difficult situation. The percentage of the contingent liability may differ in accordance to the project. the financing bank in some cases puts up its own emplo yee in the board of the project to ensure correct and smooth functioning of the project. Contingent Equity During the due course of the construction of the hydropower project. Hence. e tc which brings a high implication on the interest expense of the project as the construction period increases. it is always recommended for the bank to assure that t he project has put a certain portion of the equity as contingent equity to tackl e with such situations. landslides. To avoid such situations. Such situations usually come up from situations like stop of working in the project due to lock outs.

working with HBL as interns was an experience which helped me develop mys elf in real time working conditions so that I can sell myself better in the prof essional arena. being on time. I interacted with various level managers at the bank and I got to meet people fr om various sectors such as trading. Reflection Rishabh Tibrewala Working at HBL was one of the best experiences that I had. These 10 weeks at the bank helped me understand how Credit is processed and gi ven to a customer. Hence. what processes and requirements the bank h as to look forward for the proper execution of the lending process. It helped me understand how credit appraisal is done and how relationship is maintained with the customers. I could understand that though the job is very demanding and chall enging. I could not explore all the d epartments of the bank but did get an in-depth of all credit related departments . still this job is my passion and my interest and I look forward to pursu e my career aim as the same. Nikhil Agrawal The goals and objectives that I had for the internship program and the extent to which they were achieved are as follows: To know about the various processes and working environment of a commercial bank : In the internship period. It gave me an insight into the banking sector. I experienced how the customer service department and the credit department work and what are the various functions and activities the y have to perform. how the viability of the project or the loan is accessed and analyzed. proper standards were not followed and people had a much lai d back attitude. Meeting deadl ines. handling tough customers. Personally. After working for the 10 weeks. being ethical a t all times were few challenges that I learnt to overcome. Our main focus what to understand the processes of the credit department and to know how a CAP is prepared. internet services. To assess the various processes banks go through to overcome the risks associate d with loans: During the tenure at the CRD and the CCD. To access a career option in this sector: The internship experience helped me to analyze what are the pros and cons of the banking profession which is the aim of my professional life.IX. This helped me build contacts with high level manageme nt of such organizations and also gave me an opportunity to understand their bus inesses. I got an insight into the most professionally run industry in Nepal. talking with high l evel managers and executives. and plastic fabricators etc. I could enhance my knowledge for this . I saw that among majority of the workers meeting deadlines was not important. I got to develop a sense of professionalism within me. carpet manufacturing. But on the other hand also realized that the most professional of all organizations in not professional enough. being tidy all day. working in extreme pressure. As we just had 10 weeks.

.objective which was further helpful for my courses in the academic course as wel l for the subject commercial bank management. To experience the professionalism in work culture and to learn for future prospe cts: I experienced the professionalism in the work culture in HBL which even though w as informal and friendly was very professional and dedicated towards the job ass igned. To learn practically the knowledge learnt from academic courses: Internship program helped me transform my academic knowledge learnt from various courses before into practical knowledge which has enabled me to gain proper und erstanding of the concepts and theories which were previously understood on the basis of assumptions which do not lie in the practical reality. This helped me understand what the importance of having a professional at titude towards work is.

NEA (2008) Vidhyut.K. Banking and Financial Statistics (July 2008) Nepal Rastra Bank. Retrieved on April 20 . Gilman( Ninth Edition).NEA (2008) Websites: Hydropower Development Policy. Bank and Financial Institution Ordinance (2004) Chaulagain.nea. Retrieved on April 15. Retrieved on April 20.org. Irwin-McGraw Hill Lawrence J. 2009 from www. Bankers' Perspective". Andrson Wel sey Longman(Singapore) Annual reports: Nepal Electricity Authority (2008) Himalayan Bank Limited (2009) IPPAN (2009) Transmission.org. 2009 from www. (2008) Hydropower Development of Nepal in the face of climatic and hydrological uncertainties.np (Websit e of Department of Electricity Development) Nepal Hydropower Database. 2009 from www. A.nepalhydro. Rose ( Fourth Edition).References Management Textbooks: Peter S. 2009 from www.doed.P.nea.n p (Website of Nepal Hydro Power Association) Workshop on "Hydropower Investment. Retrieved on April 20. Commercial Bank Management.org ( We bsite of NEA) Electricity Act 1992. N. Principle of Managerial Finance. Upadhayay.NEA (2008) Generation.gov. 2009 from www.ippan.org (Website of N EA) Manual for Preparing Scoping Document for Environmental Impact Assessment (EIA) of Hydropower Projects. Hydropower of Nepal : Policies and Investment Opportunities . Retrieved on April 15.np ( Website of IPPAN) Others: Nepal Rastra Bank.

59 73.032.90 Commercial 77.36 520.62 2.51 2.74 5.19 805.67 Water Supply & Irrigation 22.20 54.287.31 120.43 92.13 1.12 109.58 Temporary supply 0.Appendix Appendix 1: New Credit Client Flow Chart Report by the Next working day Collection of necessary document (Upon receipt of documents as per check list) Site Visits Discussion with Clients clarifying their requirements for facility packages (Max imum period not more than 2 Weeks) If rejected inform client Appendix 2: Sales in GWh Particulars 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Domestic 410.28 0.37 758.22 80.11 4.98 31.37 Industrial 411.019.56 1.70 Transport 2.67 49.36 557.407.701.93 0.51 23.936.41 Bulk Supply to India 64.13 911.16 78.20 2.87 61.89 5.68 5.800.68 1.28 1.50 Street Lights 29.30 141.083.55 76 .74 108.78 5 .74 83.174.23 110.81 4. 86 192.45 Total Internal 1.33 2.13 1.38 2.31 6.60 2.00 133.00 785.58 6.25 141.37 2.03 9.82 94.58 4.05 518.83 0 .98 45.54 95.59 1.80 764.60 29.52 108.18 15.55 849.25 0.406.77 0.19 1.43 1.51 689.72 893.24 66.34 81.53 5.65 6.74 28.80 55.84 Non-Commercial 62.68 629.83 15.39 0.58 1.204.29 100.853.16 95.28 1.26 0.50 47.540.127.48 2 .91 .94 617.80 5.07 2.57 467.47 5.509.50 Grand Total 1.35 0.01 100.93 63.31 1.28 29.00 126.81 1.27 951.69 159.87 1 .269.77 4.72 4.74 36.70 96.90 72.96 47.98 39.11 676.964.41 31.64 5.17 90.05 1.659.348.37 Community Sales 5.86 63.63 596.00 508.52 45.03 Temple 1.98 2.281.

45 422.012.55 Temple 7.47 1.01 947.35 12.78 13.08 328.75 894.23 Grand Total 5.389.15 579.58 527.09 7.40 940.96 Total Revenue 5.599.641.99 816.687.84 14.77 27.90 15.80 176.65 4.95 454.981.36 9.73 12.18 17.377.53 154.39 27.16 6.42 Transport 9.05 8.42 9.12 881.687.09 3.086.07 1.396.44 7.396.318.103.27 2001 2.29 20.63 29.33 428.731.69 573.06 11.05 4.96 214.42 21.72 Total Internal 5.38 5.13 4.20 1.348.21 1.47 24.73 555.405.008.83 11237.24 3.12 808.83 11.72 661.22 5.37 149.18 212.05 Industrial 2.06 514. 673.98 Street Lights 11.94 23.380.093.74 Commercial 515.288.40 2006 835.65 30.65 120.05 200.58 3.59 16.16 2.056.992.85 487.46 30.377.90 138.300.00 Temporary supply 7.91 78.84 13.75 7.87 2002 2003 3.80 396.71 9.15 13.992.94 6.31 Other Income 689.69 5.99 6.025.91 986.697.19 8.66 14.66 15.50 11.608.81 9.97 197.396.33 327.59 4.08 20.26 285.78 26.025.34 3.80 16.361.37 Non-Commercial 419.46 18.54 14.70 83.12 783.652.622.70 11.35 13.90 14.86 336.118.52 315.74 28.08 Bulk Supply to India 198.78 722.80 9.015.50 29.31 31.79 329.777.68 148.74 246.978.42 5.851.36 Water Supply & Irrigation 239.34 .03 23.448.079.88 4.529.68 10428.237.54 11.14 95.40 4.093.59 15.78 Community Sales 53.43 6.12 2004 2005 3.Appendix 3: Revenues in Million Rupees Particulars 1999 2000 2007 2008 Domestic 2.93 370.15 13.03 5.578.45 27.466.672.62 818.50 11.

849 -1.405 9.626 Raw materials/goods consumed 7.134 -3.159 51% -573% 1.857 357 -1.850 9% NET PROFIT AFTER TAX -1.333 8% Purchases of Merchandises/materials consumed 8.247 8.999 420 1.802 -23% -573% 2007/08 15.587 Financial Expenses 2.802 Profit after tax for the year -1.247 12% 9.143 622 1.101 9% 8.990 NET CASH PROFIT 764 -53% APPROPRIATION OF PROFIT: Accumulated Profit/(Loss) b/d -5.096 5% .179 -19% Non-operating incomes/(expenses) -36% 655 Provision for losses on property.017 -65 -26% 2.892 267 -1% -66% 2. Overheads 1.856 105 1. MARGIN 5.101 4% 4.947 Depreciation Expense 1.Appendix 4: Profit and Loss Account Particulars 2004/05 VAR 2005/06 VAR SALES REVENUE 12.930 8.093 -43% -20 Past Years -4.808 -27% -4.817 123 954 618 and equipment -13% 3.734 5.094 1.794 9% 9.415 480 1.093 -43% 1.035 7.834 3% -60% -20% 59% 9% 304 1% 20% 6% 1.899 728 -6.202 640 -40 41% 1.565 117% -20 -220 -6.626 Direct overhead costs 216 8% 232 GROSS PROFIT/CONT.484 5% -3% -33% 15% 1.& TAX 1.529 -39% 2006/07 14.166 Depreciation & Amortisation 1.808 -27% -1.565 117% 4% 506% 1.462 12% 8.605 6% 13.096 5% 267 -20 297 -5.405 15.332 8% COST OF SALES 7.922 2.475 -38% -1.920 43 962 1.450 9.475 Administration Overheads 576 Marketing and Dist.794 26% 5.757 1.704 2% -15% 26% VAR 7% 7% 10% 12% 9% 241 8% 14% 8% 1. plant -60 -30 EARNINGS BEFORE INT.262 5% Deferred revenue Exp.450 14.605 6% 13.262 Insurance Fund -20 Dividend Payment/Adjustment of 47 -50 Accumulated Profit/loss c/d -7. Written off 64% 70 OPERATING PROFIT 1.332 8% Local Sales 12.

616 11% 25.466 26.492 11% 17.550 10% 92.01.294 15% 15% 81.099 7% 6% 74.145 23% 88.827 1.294 -29% 17.226 12% 821 2% 9.448 -3% 8.225 1.373 Trade Debtors 3.496 8% 83.060 37% 8% 6% 51.550 10% € € 23.498 1% 32% 1.825 1% 1.415 4.931 NET FIXED ASSETS 68.618 -2% 693 22.777 -43% 2.132 10% .218 83.496 8% 21.431 TOTAL EXTERNAL LIABILITIES 62.641 8.428 12% 1.868 11% Deferred expenses 376 TOTAL FICTITIOUS ASSETS 376 € € 28.812 16% 70.616 11% 47.992 33% 2006/07 € € 52.995 11% 1.762 TOTAL LONG/MED TERM DEBTS 44.602 89.698 Cash on hand & bank -1% 11% 1.762 Trade Creditors 16.227 Long Term Investments 777 VAR 2005/06 VAR € € 51.735 10% 820 8% 80.538 52.01.259 € 7.498 5.Appendix 5: Balance sheet of NEA PARTICULARS 2004/05 VAR 2007/08 Amounts in million rupees ASSETS € € € Property Land and Equipment 52.854 15% 66.323 -1% 1.355 11% 26% 1.004 8% Stock of finished goods 1.004 79.088 -5% 2.144 Other current liabilities/Provisions 17% 813 TOTAL CURRENT LIABILITIES 17.555 10% 1.355 4.743 0% 21.803 -27% 22.391 2.132 10% € € 26.492 10.518 73.113 14% 4.704 1% 46.927 9% 882 82% TOTAL NET FIXED ASSETS 69.373 TOTAL STOCKS 1.162 15% Accumulated profits/ Reserves 6.809 10% 1.568 23% -4% 360 -4% 360 26% 4% 4% 16% 698 14% 7% 92.538 52.115 TOTAL OWN FUNDS 15.873 11.488 2% 46.167 -1% 16.294 Capital Work-in-Progress 35.382 8% 5.769 14% 19.025 47.119 8.275 Deposits/ Advances Payment TOTAL QUICK ASSETS TOTAL CURRENT ASSETS TOTAL ASSETS 7.300 321% 275 321% 275 NET WORTH 15.208 Long/Medium Term Bank Loan 44.193 TOTAL LIABILITIES 77.323 10% 1.782 1% 29.342 6% 22.518 6.488 2% 22.119 16% 2% 710 19.579 3% -135% 124 -135% 124 L I A B I L I T I E S € Paid up Capital 20.545 13% 21.218 77.151 15% 2.

392 3.384 4.607 3.129 0 5.975 3.049 Non-Operating income (other income) 640 Cash flow from financing activities: 5.388 2.9 1701 1113 2002 391 1868 1113 2003 426 2066 1478 2004 470.102 0 0 2.5 2642 1568 .2 2380 1522 2006 557.363 Closing cash balance as on F.728 Purchase/sale of fixed assets -7.849 Cash flow from investing activities: -6.202 962 Depreciation and Amortisation 1.094 -9.4 1475 1233 2001 351.146 -547 1.094 -1.899 Cash flow before change in working capital Changes in working capital: 1.445 7.892 -2.922 1.599 Operating Profit/income 954 1.063 -1.376 2.819 Current Assets: € € € Total Stocks 18 -144 -20 Advance Tax/VAT/other duties 0 0 Trade Debtors -390 -1.492 1.Y.565 2.820 1.017 655 4.139 Current Liabilities: € € € Trade Creditors 2.958 Net Operating Cash flows before interest Interest Expenses -3. Hydro 1046 2000 326.283 -9.872 1.533 -8.3 721.816 Appendix 7: Term of License (1) The study/survey license: Max 5 Years (2) The hydropower generation license: (a) The project supplying the internal demand: 35 Years (b) The export-oriented hydropower project: 35 Years (c) 60% utilized by national industrial enterprise on its own 30 Years (d) Storage projects Extended for a max of 5 Years (3) The Electricity Transmission and Distribution National Transmission Line or Grid.923 0 -50 0 -1.7 Available Energy (GWh) 2780 3051 3180 1.950 1.218 1.128 Increase (decrease) in cash 70 -157 Opening cash balance 1.3 2261 1345 2005 515.323 1.Appendix 6: Cash Flow Statement € A € € € € € € € € € € € € € € € € € € B € € C € € € € € € Particulars 2005/06 2006/07 2007/08 Cash flow from Operating Activities: 1. End 1.199 Bank Loan (short term) 0 0 0 Loan from shareholders/directors/third parties Long/Medium Term Bank Loan 1.625 Deposits/ Advances Payment -195 68 L/C & B/Gua Cash Margin 0 0 0 Miscellaneous current assets 0 0 Changes in Current Assets: -568 -1.2 648.990 2.619 4. 25 Years Electricity Distribution License 25 Years Appendix 8: Demand of Energy Particulars 1999 2007 2008 Peak Demand (MW) 603.456 1.259 3.692 120 5.499 Other current liabilities/Provisions 12 Changes in Current Liabilities: 2.695 -17 3.325 -9.

1747 1798 2. Thermal 118.6 13.31 9.17 3. Purchase (Total) 1196 1291 1372 India 232.3 232.2 412.4 Nepal 77.28 169.3 960.4

66.7 309.6 226.5 501.3

27.1 401.5 238.2 698.0

17.01 727.9 149.8 628.8

4.4 936.3 186.6 838.8

9.92 778.6 241.3 864.7

13.66 1025 266.2 930

16.1 1106 328.8 962.2

Appendix 9: Number of Consumers of Electricity Particulars 2007 2008 Domestic 9,30,554 14,58,419 Non-Com 7,654 10,639 Commercial 6,000 6,597 Industrial 24,089 25,498 Water Supply 414 444 Irrigation 13,183 17,654 Street Lights 1,608 1,952 Temporary 210 298 Transport 39 37 Temple 1,131 2,752 Community 1 Internal 9,70,606 15,24,605 Bulk Supply to 5 5 Grand Total 9,70,611 15,24,610 1999 2000 2001 2002 2003 2004 2005 2006

5,93,468 10,10,719 7,815 2,948 7,643 3,096

6,43,314 11,13,740 8,629 3,386 9,722 3,898

7,13,307 12,27,295 9,865 5,317 9,950 5,454

8,48,540 13,39,253 10,010 10,215 6,000 6,170

14,996 16,179 17,701 18,789 19,833 21,374 22,500 23,020 215 876 842 207 21 1,248 232 967 932 144 47 1,441 1 15 6,22,358 10,53,930 India 5 5 6,22,363 10,53,935 35 58 6,73,974 11,59,850 5 5 236 1,083 1,012 141 37 1,800 251 1,353 1,048 172 49 1,738 305 1,721 1,229 138 48 1,959 352 2,557 1,437 150 48 2,150 370 3,400 1,500 155 50 2,290 380 6,450 1,550 165 54 2,628 8,84,530 13,97,808 5 5

169 315 7,45,987 12,77,442 5 5

6,73,979 11,59,855

7,45,992 12,77,447

8,84,535 13,97,813

Appendix 10: Existing Projects in Nepal Project Name Capacity (KW) Existing € Achham 400 Andhi Khola (BPC) 5,100 Arughat Gorkha 150 Baglung 200 Bajura 200 Baramchi 980 Bhotekoshi (BKPC) 36,000 Chakukhola (APN) 1,500

Chame 45 Chatara 3,200 Chilime (CPC) 20,000 Devighat 14,100 Dhading 32 Dolpa 200 Doti 200 Duhabi Multifuel 39,000 Fewa (Pokhara) 1,000 Gamgadhi 50 Gandak 15,000 Helambu 50 Heldung (Humla) 500 Hetauda 14,410 Indrawati-III (NHPC) 7,500 Jhimruk (BPC) 12,000 KaliGandaki "A" 1,44,000 Kalikot 500 Khimtikhola (HPL) 60,000 Khudi (KhudiHP) 3,450 Kulekhani No. 1 60,000 Kulekhani No. 2 32,000 Manang 80 Marshyangdi 69,000 Modi Khola 14,800 Namche (KBC) 600 Panauti 2,400 Phemekhola 995

Appendix 11: Existing and Private sector projects Project Name Capacity (KW) Piluwa Khola (AVHP) 3,000 Puwakhola 6,200 Rairang 500 Ramechhap 150 Rupalgad (Dadeldhura) 100 Salinadi 232 Salleri (Sceco) 400 Sangekhola 183 Seti (Pokhara) 1,500 Simikot 50 Sisnekhola 750 Sundarijal 640 Sunkoshi Small (SanimaHP) Sunkosi 10,050 Surnaiyagad (Baitadi) 200 Tatopani/Myagdi (I) & (II) Thoppalkhola 1,650 Tinau (Butwal) 1,024 Trisuli 24,000 Leased to Private Sector Bajhang 200 Bhojpur 250 Chaurjhari (Rukum) 150 Darchula (I) & (II) 300 Jomsom 240 Jumla 200 Khandbari 250 Okhaldhunga 125 Phidim 240 Syarpudaha (Rukum) 200 Taplejung 125 Terhathum 100

2,500 2,000


000 Likhu .28.000 Mailung 5.000 Rahughat 30.000 Upper Modi 'A' 42.000 Upper Seti (Storage) Lower Nyadi 4.Appendix 12: Other Projects in Nepal Project Name Capacity (KW) Not in normal operations € Dhankuta 240 Gorkhe (Ilam) 64 Jhupra 345 Pharping 500 Syangja 80 Planned/ Proposed € Arun 3 4.20.000 Lower Indrawati 4.000 Upper Trishuli-3'B' 37.000 Upper Marsyangdi 'A' 1.000 Daram Khola 5.000 Budhi Gandaki 6.079 Kabeli "A" 30.000 Upper Modi 14.21.500 Madi -1 10.000 Fawa Khola 2.000 Seti Trishuli (Storage) 1.000 Seti (West) 7.000 Upper Trishuli-3'A' 60.4 1.II 27.000 .000 Balefi Khimti .

000 .500 Lower Piluwa 990 Madi-1 10.000 Lower Indrawati 4.000 Maikhola 2. 3 14.400 Seti -II 979 Upper Hadikhola 991 Upper Karnali 3.000 Hewakhola 2.000 Patikhola 996 Ridikhola 2.000 Narayani Shankar Biomass 500 Phawakhola 2.765 Lower Nyadi 4.500 Mardikhola 3.000 Gamgadhi 400 Kulekhani No.400 Lower Chakukhola 1.079 Siurikhola 990 Tadikhola 970 Tinaukhola Small 990 Upper Maikhola 3.000 Upper Tamakoshi 3.09.000 Under Construction € Chamelia 30.100 Middle Marsyangdi 70.00.Appendix 13: Hydropower Projects under construction Project Name Capacity Priliminary WIP € Belkhu 320 Daramkhola 5.100 Upper Modi 14.400 Mailung 5.

Overdraft Facility: Overdraft Facility. a recurring (revolving) credit facility. PSA Customers enjoy a separate privileg ed counter and an interest rate calculated on daily balance. Working Capital Financing: The bank extends Working Capital Loans under various headings to finance the working capital requirements. The loan is extended to man ufacturing as well as service sector. overheads and administrative expenses. senior citizens completing the age of 50 ye ars. The interest rate is tied up to the tenure of the deposit. Loans are pr ovided for the establishment. Loan Products Corporate Loans Funded Project / Consortium Loan: Bank extends both Fixed Term Loan and Working Capital Loan. Customers opening this account get a free cheque Book with the ABBS facility.Appendix : Services provided by Himalayan Bank Limited Deposit Services Premium Savings Account (PSA) PSA is a privileged Savings Account with a host of convenient features a nd banking channels to transact through. Customers can borrow from the Bank against their Fixed Deposit Certificates. . Current Account Mainly intended for business/corporate houses. Himalayan Bank help s financing needs of the project through consortium lending as the lead Bank and /or Co-lead Bank. up-gradation of existing facili tates as well as acquisition of existing facilities. Thi s is an interest bearing Current Account or in other words Term Deposit with a t enure ranging from 7 days to 3 months. physically challenged and illiterate individuals. is offered to customers for meeting fluctuating working capital needs for funding current a ssets. Savings Deposit Savings Deposit Account can be opened in any of HBL s branch offices. The minimum deposit to be maintained by the Customer varies according to the branch. PSA is first Premiu m Deposit Product in the Banking sector of Nepal. Recurring Savings Account 'Recurring Savings Account' is a 3 years fixed tenure savings account ta rgeted to individuals who would like to save funds in installments for future us e. Non Revolving Cash Credit: Bank extends€Non Revolving Cash Credit to finance import of capital items being imported as supplementary equipment of the existing plant and machinery. Bishesh Savings Account 'Bishesh Savings Account' is a deposit product targeted to special secti on of society which includes minors. Jumbo Term Deposit 'Jumbo Term Deposit' is a fixed deposit targeted to individuals willing to deposit specified amount for specified period of time for a higher return. capacity addition. If the project is big. this account can be opene d and operated from any HBL s branches. Customers are provided with free personal accidental death insurance. Call Deposit The Bank offers short-term term deposit in the form of Call Deposit. Fixed Deposit Fixed Deposits can be made for a period ranging from 3 Months to One Yea r or over.

€ Revolving Cash Credit Revolving Cash Credit is extended to finance working capital requirement s particularly to finance import of raw materials (including custom duties) from India. the bank g rants Demand Loan / Cash Credit. Retail/Consumer Loans Hire Purchase Loan The Bank extends Hire Purchase Loan for purchase of new vehicles. Documentary Bills Purchased€and Discounted: The bank extends loan facilities against the Documentary Bills on recour se basis. sight as well as usance. Post Shipment Loan and Back to Back L/C are some of the fac ilities that can be extended. Subidha Loan .€ Clean Bills purchased and discounted: The Bank extends these facilities against the Bills/Drafts/Cheque (Negot iable Instruments). Short Term Demand Loan (STDL): This is another form of working capital loan extended to finance seasonal and oc casional working capital requirement of companies. Housing Loan Housing Loan is available to purchase readymade / under construction bui lding (including land cost). construct a building on an already owned land.Demand Loan Revolving Demand Loan (RDL): This form of recurring working capital loan is extended to finance continuous wo rking capital requirement of companies. The bank also finances equipment such as medical equipment. Bid Bond Guarantee. financial institutions and credit the customer s account immediately. Letters of Credit: The Bank establishes Import Letters of Credit. manufacturing machinery equipments under Hire Purchase Financing. Financial G uarantee. Similarly the Bank extends Revolving Cash Credit to finance purchase of agriculture produce from local market as well as India.€ Import Credit for Telex Transfer and Demand Draft Payment Bank extends Import Credit to finance import of goods from third countri es other than India where payment is made through Telex Transfer or Demand Draft . Deferred Payment Guarantee. Bonded Ware House Guarantee. (inclu ding body making in case of commercial vehicles) to individuals as well as compa nies. construction e quipment. Non Funded Facilities Bank Guarantee:€ The Bank issues various types of Bank Guarantee Facilities like Performa nce Bond Guarantee. The Bank purchases cheques issued by individuals.€ Pledge Loan:€ Against security of movable non-perishable stock merchandise. Counter Guarantee and Advance Payment Guar antee.€ Export Credit Facilities:€ The Bank extends Export Credit Facilities against export letters of Cred it. Pre Export Loan.€ Trust Receipt Loan The Bank extends Trust Receipt Loans for financing raw materials and tra ding merchandise while retiring documents of the Import Letters of Credit. for purchase of adjacent land or extension of existing building.

one can check their balance. a premium online customer focused and technology oriented M oney Transfer. Business houses coming from industr ial.€ Card Services HBL provides various card services like ATM cards. etc. growth and expansion of small a nd medium sized enterprises. the bank can extend loans against bonds iss ued by commercial banks. Generally up to 90% of the FDR value can be disbursed as Loan. up to 90% of the value of such Bonds can be disbursed as Loan. against unconditional guarantees issued by First Class International Banks. last three transactions and the Bank s foreign exchange rate. compani es. education expenses. Loan against Fixed Deposit Receipt€ The Bank extends Loan against the Fixed Deposit Receipt issued by the Ba nk itself or by other Banks (in Nepal).This is a customized loan facility offered to Customers to meet various social needs such as ceremonial expenses. Loan against Government Bonds & Bonds of Bank The Bank extends loans against various Bonds / Stocks/ Promissory notes issued by the Government/ NRB. HBL offers Letter of Credit (LC) facili ties. Hima l Remit has the largest network covering all major cities. Credit Card Loan The bank extends credit to individuals through credit cards that could b e payable on monthly installment basis (credit card). Other Products International Banking (LC) To assist its trading Customers. etc. HBL is a pioneer in the field of retail money transfer business w ith over a decade long customized service delivery experience in the field. SMS Banking Using SMS Banking. home furnishing. funded as well as non-funded . HBL has developed a special loan package meant just to suit small and medium sized enterprises. Under this. Himal Remit Himal Remit. Small and Medium Enterprises (SME): As a step further to help establishment. Safe Deposit Locker Customers availing of this facility enjoy peace of mind in terms of secu rity of their valuable belongings with one of the most attractive rates and ease of location. towns and villages of the country and is capable of paying at more than 600 locations across Nepal. Similarly. minor business dea lings. all at a . Customers can place their LC application in any of HBL Branches. status of cheque (encash ed or not). Loan against First Class Bank Guarantees The Bank extends various credit facilities. The Custome rs enjoy wide correspondent network of Himalayan Bank in addition to the attract ive rates. credit cards of VISA and Master Card (domestic and international). trading and service sector can avail of this facility to meet their short-t erm and long-term financing needs. Prepaid cards and Visa debit cards . fixed tenure basis (capita l asset financing). Loan against Shares The Bank also advances loan against listed shares of Public Ltd. The fees/ charges are one of the lowest amongst the commercial banks of Nepal.

. Internet Banking Internet Banking is providing the banking services through the medium of the internet and the computer. travelling through traffic jams and also flexibility of banking hou rs to name a few advantages. All basic banking functions can be easily done t hrough internet banking that too without the hassles of getting into the lines o f the banks.few clicks of a cell.

Appendix : Commercial banks in Nepal Name of the Bank Established in Nepal Bank Ltd 15 November 1937 Rastra Banijya Bank 23 January 1966 Agriculture Development Bank Ltd Est. 1968 Nabil Bank Ltd 16 July 1984 Standard Chartered Bank Nepal Ltd 24 January 1986 Nepal Investment Bank Ltd 27 February 1986 Himalayan Bank Ltd 18 January 1993 Nepal SBI Bank Ltd 07 July 1993 Nepal Bangladesh Bank Ltd 01 June 1994 Everest Bank Ltd 18 October 1994 Bank of Kathmandu Ltd 03 March 1995 Nepal Credit and Commerce Bank 14 October 1996 Lumbini Bank Ltd 17 July 1998 NIC Bank Ltd 21 July 1998 Machhapuchhre Bank Ltd 03 October 2000 Kumari Bank Ltd 03 April 2001 Laxmi Bank Ltd 03 April 2002 Siddhartha Bank Ltd 24 December 2002 Global Bank Ltd 02 January 2007 20 April 2007 Citizens International Bank Ltd Prime Commercial Bank 24 September 2007 Bank of Asia Nepal Ltd 12 October 2007 Sunrise Bank Ltd 12 October 2007 Development Credit Bank Ltd Upgraded in 2007 NMB Bank Ltd Upgraded in 2007 .

the phase where I decide what decisions I will take to mould my career as per my requirements.Appendix : Assignment 1 Assignment 1 Goals and objectives of the Interns Nikhil Agrawal Part 1: Goals/ objectives of Internship Experience Specifically describe the goals you plan to set and how you will achieve these g oals. af ter we move out from the premises of the college. In this way. Hence doing well in the internship program would incorporate various advantages to my academic career as well. my aim of being a banker. qualifica tions and interests. I actually am passi ng through one of the most important phases of my life. This internship experience has two ways to see it. dilemmas. confusions. but also helps us to incorporate our knowledge from the BBA program into a reality. Second and the most important part is to set a platform for the career ahead. First objective is to fulfill the academic part of the BBA program where internship holds a huge respect for the partial completion of the course with 6 credits assigned to it individually. fighting with the limit . So a sincere and honest effort to m internship would be the utmost priority in my life at the moment. Academic Goals: Only theoretical knowledge is not enough in today's competitive world. Internship not only makes it p ossible for experiencing daily working conditions but also creates a platform to set our careers in the career of our interest by gaining experience. This phase has various dimensions to my life at this moment like anxiety. making con tacts and proving ourselves to the supervisors of our abilities. This experience of my internship will definitely help me to get used to the working environment in the banking world and hence further ensure me of my goal to get into this field. This decision in my life holds a very important place as my whole car eer would depend upon my decisions henceforth. I will be able to k now what actually the benefits are and also about the limitations of working in a bank and henceforth assure my target to work under this goal of mine to become a banker. Part 2: Self-Reflection Essay When everyone is thinking that I am living a laid back life. Furthermore d oing good in the internship adds value to the CGPA as well as it carries 6 credi t hours evaluation. Professional Goals: My aim of being a professional banker has moved a step forward with my decision of pursuing my internship in a commercial bank. decisions about priorities. I always wanted to enter into professional banking and held a dignified high post in a reputed company. Personal Goals: Ever since I joined KCM. So this internship at Himalayan Bank Limited is serving as a stepping stone to move towards my goal. nervou sness. practical knowledge alongside is very important to know what the textbook basics actually meant. Internship not only prepares us to know the working realities.

honesty and a strong work ethics. In Today s competitive marketplace. The anxiety of what is next in the experience of the other departments I will be recruited is very exciting as I am getting the opportunity to get into the type of working place I want to work in.of time. as well as the latest trends or indust ry forecasts. gaining a unique insight and understanding that cou ld not be achieved by research alone. Academically this internship will help me use knowledge I have learned in subjec ts such as marketing research. Professionalism in terms of how to work in the office and commitment in terms of giving the best I can towards work. Now. interpersonal along with motivation. Finally. This program will also help me gain knowledge about corporate marketin g. An internship experience will allow me to d evelop proficiency in these areas. It will help me further in my MBA. During this internship. Taking this decision would be a lot easier after the completion of the internship period as I will be able to decide what is right and what is not for my future ahead. coaching. In our day to day life we have to prioritize many issues over other so as to giv e ample attention and time for the important ones. This internship will help me understand the working environment in banks where I int end to permanently be in the future. I pursu e further to gain the maximum knowledge from the experience and enrich in my lif e and career ahead. The things I will learn will help in my career and also in my studies ahead. I suddenly am realizing that we are bound by the limitness of time whereas previously I thought I have ample time for everything. Rishabh Tibrewala Part 1: Goals/Objectives of Internship Experience The management internship program will help me relate to my academic knowledge t o the real working environment. I will learn how companies are positioned in the industry. parties etc. my dream of being a professional seems to be a possibility and getting an experience even before I finished my studies is an important experience. tim e is the one of the rarest and important assets he has. Personally. I will also be able to let go of all the dilemmas that I have related to my career decisions like whether to enter into a job as my goal persists or to start up or continue my family business or to go for a Masters d egree right after the completion of my BBA course. This will also increase skills such as communication. During the internship program I will learn what it's really like to work in the financial services industry. This realization of importance of time wil l no doubt help me in anything I do in the future as for every professional. recruit . analytical. who the big players are. finance and use practical knowledge in Commercial banking. knowledge which will be essential in demonstrating my commitment t o a career in banking when I graduate. This limitness of time ha s made me realize the value of time and how to organize every activity so as to give my time to other issues as well. This requirement of my punctu ality in my work has made me able to prioritize my career and studies over other issues like friends. This is a very important thing as I will be able to let go of all the complexities that would inadvertently stop me from fu lfilling my dream and my career. teamw ork. It will provide me with understanding about how to use this knowledge in my professional career. I feel that this in ternship will develop professionalism and commitment within me. as well as content skills including administr ative. management and research.

And finally. With project s and other events organized within and outside college.ers look not just for academic prowess. but also for hands-on. and has a contemporary working environment. The first decisi on that I am proud of is taking commerce as my background. I meet new people and the work there is exciting where I get to learn a lot and show my talent. I have made decisions which I am proud of. relevant experien ce. It will help me build a goo d rapport with the bank and help me later when I come back after my MBA. As an intern I will have the opportunity to acquire the skills I will need t o get a head start on my particular field of career. The most important thing in my life at the moment is the decision I need to make in the next few months. are open to changes. Part 2: Self-Reflection Essay This is a time where I need to make the most important decisions in life startin g from education to career. Most of my time goes in thinking about my life. if I am going to study here in Kathmandu or go o ut. The studying in KCM w as the next best thing I did. This is also a good chance to prove myself worthy of a good position and later consider me when the bank is making placements. Beyond this . I need to decide. I need to decide where I wan t to be next. I gained a sense of con fidence and motivation to work. Also organizing the Daihatsu City Chase for Peace s one of the good things I did. and then it should also be sat isfying and exciting. I want to be into such a career in the banking sector that pays me well firstly. The most important thing that I want to do before I die is to prove myself usefu l to the society and my family more importantly. I need to decide if I am going to study further or g et into work. Currently the most exciting thing in my life is the internship program that I ha ve joined. The organization that i get into should motivate new ideas . The few years that I have spent in this college will be remembered all my life. wa . Looking at the past. All these decisions are going to affect my whole life and I won t be able to c hange it once I have decided. it has given me opportunity to grow and gain practical knowledge. joining Himalayan Bank Limited for my internship is worth the pain. KCM has not been a college where I gained academic knowledge in certain fields b ut in all fields of nature including psychology and human behaviour.

The employee not only ne eds to be knowledgeable but intelligent as well because situations of using pers onal cognitive skills becomes very necessary during the credit appraisal of a cl ient as Nepal lacks proper credit ratings of people or corporate entities. Abhaya Bahadur Shah. Nepal s Ban kers Association. Though every work is challenging. The trainings include Advanced Credit Analysis. This has not only posed a threat to established banks like . HBL not only provides the interns with maximum exposure to the banking sector but also provides us a plat form to set our careers of interest by letting us carry out the daily operations of the banking industry with full faith and confidence. Abhaya Bahadur Shah Relationship Manager Credit Department Himalayan Bank Limited Internship in Himalayan Bank Limited has not been confined to just doing what th e course work requires Interns to do but it has been an experience where I have expanded my horizon of knowledge and also increased my networking with many elit es of the banking industry and of the corporate world. Shah does every task assigned with full dedication but at the same time does not forget to have fun which enables the whole department to be proactive and fun with the work they carry. During the course of internship. and Management Association of Nepal. Banking industry has become one of the most competitive industries of Nepal as i n a small market like ours. The major divisions in a bank are the operations department and the lending depa rtment. Thoug h there are organizations like Credit Information Bureau to provide credit infor mation of the proposed clients but it has not been able to provide ample informa tion about clients and their present credit ratings in the industry. Mr. one of the senior RMs of the customer care department of the credit department divis ion. etc. Project Financing. academic knowledge. So the employees of the credit department need to very good in their analytical sk ills. Risk Assessment of SBE financing. proper understanding of the project being financed and proper credit appraisal skills with a motive not to fulfill the targets given b ut for the betterment of the bank and its stakeholders. He has received various trainings in banking a nd finance from his current bank and the previous bank he worked in i. Nepal I nvestment Bank Limited. credit department is the most challeng ing as the employee not only is responsible for carrying out the tasks to genera te income but also puts the wealth of stakeholder s of the bank doing the same. An MBA degree holder in finance from Delhi University. I interacted with Mr. The supervisors are not only excellent in their related fields but also are very good teachers by shari ng all their knowledge with the interns and also correcting them of their mistak es so that they learn to the optimum. Mr.e.Appendix : Assignment 2 Assignment 2: Interview of supervisor at workplace Interview done by: Name of the interviewee (Supervisor): Position: Department: Organization: Nikhil Agrawal Mr. There are o ther professional institutions and organizations working as well for the betterm ent and regularization of the banking industry like Nepal Rastra Bank. Shah is an enth usiastic and dedicated banker for whom banking is not only a profession but a ho bby. multiple numbers of financial institutions has enter ed into our country. such trainings and degrees also become a necessity to get acquainted with the en vironment so as be competent with the challenges that is faced by a banker. Trainings and degrees are just part of a banker s job as with the volatile and constantly changing environment.

Another recent trend of promotion in jo b shift. Attaining a manager s level position for Mr. Shah and got some use ful recommendations and tips for my career as well. the emplo yees have to work over time for which a passion for the work is important to mai ntain motivation in their work. I learnt many insights about the banking industry from Mr. The working environment in HBL is considered to be the b est among the financial institutions with friendly environment and no dominance of higher posts upon the lower posts as all employees are considered to be equal . Interview done by: Rishabh Tibrewala Name of the supervisor: Mr. credit approval and site visits. This friendly and professional working environment motivates the employees to dedicate themselves to their work better. This has been possible only because Himalayan Bank Ltd has an open culture where an intern al so gets to show his talents. a careful and strategic move towards job shifting can enable a person t o excel in his or her career which has been triggered by the current boom in the number of financial institutions. Most of the time. Besides this. proper acquaintances to subjects such as Strategic Mana gement. According to him. We have been interacting with people from the banking field as well as people from othe r field of work. and Financial Management are necessary with personal strength s like good interpersonal communication skills and good analytical skills. This is one of the most differentiating factors of the bank in fron t of their competitors. Besides these. Also a proper working environment is necessary f or the same. Besides this. Besides this. Internship at Himalayan Bank Ltd. This challenge is one of the most fascin ating reasons for bankers to enter into this profession. For a banker in the credit department. to excel i n any business maintaining a network of every class and every field of people is a must because it indirectly comes useful in various stages of your working lif e. the most rewarding thing in this profession is the respect the person gains in becoming a banker as the image of professionalism and learnedness combines which gives the person a nice status in the society and the meetings with other people. We have been going on site visits where we get to interact with business people associated with both small and large enterprises. masters in finance is a necessity to enter into a credit de partment. Economics. the major portion of the working hours is spent in meetings. to enter into the banking industry a MBA degree or masters in t he interested field.Himalayan Bank but also poses a competitive environment for financial institutio ns to excel in their field. Pawan Agrawal Position: Credit Analyst Department: Risk Management Division Organization: Himalayan Bank Ltd. Shah was not an easy task as it requi red him years of dedication towards the work to gain confidence among seniors so as to prove one capable of attaining promotions. He fu rther suggested maintaining professionalism in any field I pursue because that d ifferentiates an excellent employee with a good performer. For such analysis there are organizations like Banke r of the Year for their proper ratings. This ad vantage covers up the small disadvantages that are associated with such jobs tha t is the small growing opportunities of employees as there increments are confin ed in a certain pattern whereas setting up own business seems to be more profita ble and growing. good interperson al skills and cognitive intelligence is also a necessity to excel in the career as it is easily noticed and appreciated. has been quite an experience till now. The managers at the bank are willing to teach the i .

nterns even when it takes up their time and talents are appreciated. If he is good in it. management and technical aspects. It is preferred to have an MBA in Finance as this lays found ation towards better understanding in the financial sector of the economy. Pawan Agrawal. Mr. Further. Himalayan bank has been a leader in its market. Credit Appraisal Techn iques and an understanding of the Project Financing is a must. then one can easily decide on the sector of banking. People often get impressed with the overall personality of a banker. e xcellent negotiation skills so that a better Credit Approval Package can be desi gned to satisfy both the customer and the bank s interest and analytical skills to be able to see the capabilities of the client in terms of industry. There are only a few professional organizations that administer the banking sect or in Nepal which are the Nepal Rastra Bank (the Central Bank of Nepal). The most important profile that a person should have to get into the bank is a m aster lever degree. where the market is really small and new players have come with very aggressive marketing. the bank cannot develop a uni que product but because of the good financial position and cheaper cost of funds . It has an established brand name which is a strong point for it. There are basically two sectors. business is a better option. Credit Analyst. Being in this competitive sector. If a person wants to get into the banking sector. Getting into this sect or limits your growth possibility. This inspires a lot of people to come into banking sector. every individual gets to develop these skills as the environment i s supportive. he needs to be good in finance and should have analytical and communication skills. It has established a name for itself in the market and has been a market leader ever since. Th . this secto r has not been able to develop itself properly. the NBA or Nepal Bankers Association and the CIB or the Credit Information Bureau. The level of professionalism tha t banks should have is not seen in any of the banks and there has been almost no progress. The required skills are learnt through experience and tra ining. Any person can find this when he visits any of the banks in Nepal. credit is very attractive because one needs to meet a lot of people and interaction is always fun. The main points of the i nterview have been highlighted in the essay below. Himalayan Bank established in 1993 was one of the first private commercial bank. one should have good communi cation and presentation skills which is needed while dealing with the clients. I have been lucky to get a chance to work in such a work place. He was really helpful and was genuinely intere sted to answer all my questions with positive attitude. to be able to go up high in the hierarchy. was really kind to give some of his v aluable time for this assignment. trade. A banker is perceived as a person with professionalism in what they do. The USP of the bank has been its brand image which has been gained with long presence in the ma rket. Hence if a person wants to grow. treasury etc. The bank provides training with regards to Project Financing. Risk Management Division. one is the lending or the credit and the second is the operations which include s everything else such as deposits. security. f inancials. These help the banks in proper operations and administration but in Nepal. For a job title of an Analyst good financial analytical skill. One gets to try new stuff and learn by doing. One cannot earn in this sector as much as he can in business. Th is brand image has helped the bank develop a good customer base. I was even lucky as I got to interview one of the Credit Analyst of the bank. Also. At this bank. This way every perso n working at the bank enjoys freedom to use his intelligence and give something to the bank in return. It is a much gl amorized sector of the economy but it is not always true. Advanced Cr edit Analysis and Infrastructure Financing for the job of an analyst.

bankers also face one more problem. The re is not proper database available for them to rely on. I bachelors degree holder does not hav e a good chance to grow as he will be given a job of a teller or alike and it wi ll take long for him to get to an assistant or a manager level. Credit needs to be give n solely on the basis of common sense and personal judgment as statistics aren t a vailable. I came to know the pros and cons of working at a bank. This interview has been really advantageous as it gave me an insight of the bank ing career. This interview will surely be useful while deciding upon my career in the future . Business is always benef icial but there are certain cons of it. Interview with Mr. being in a bank is very satisfactory as it is the most professional organizatio n and highest paying sector of the economy. Any person who n eeds to get into this field should at least have a MBA in finance which will hel p him to get a head start and will take him up much faster. For a person with MBA level degree. the o ther best alternative is to start up with own business. Some get good oppo rtunity in terms of the pay whereas some get a better organization to work in. Often people make job changes in search of better lifestyles.e managers don t run of deadlines and no work is actually done the way it should b e done. T his job shift helps one improve his living standard but needs to be strategicall y planned or else can lead to failure. Along with the level of professionalism. . Once you are in a bank. Further. Internally. This leads to wrong decisions and often it is seen that credit is prov ided to people who have been declared bankrupt. Pawan helped me understand where I stand and how good my chan ces are if I want to get into this field. One does not always have the required st artup capital which often acts as a limitation. It helped me understand what a banker really feels and what the best thing to do in life is. one needs to have that leadership quality or else he risks of losing his money. The most rewarding aspect of working in a bank is that people give respect to yo u. people recognize you as a capable person.

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