Report on Rastriya Banijya Bank

*Based on AGM and Financial Reports

Introduction to RBB
Rastriya Banijya Bank Limited (RBBL) has a history of serving its customers far and wide across the
nation for more than half a century. The bank then fully owned by Government of Nepal, was established
on 10 Magh 2022 (23 January 1966) under the special statute "Rastriya Banijya Bank Act, 2021" and had
operated under "Commercial Bank Act,2031” until it was re-registered as public limited company on 6
Baishak 2063 (19 May 2006). At present, the Bank operates as "A" class financial institution licensed by
Nepal Rastra Bank and carries out commercial banking activities as per the provisions of the "Bank and
Financial institutions Act 2073," (2017)

Major Highlights- AGM 2079/80

1. Publication of Financial Statements of FY 2079/80
Rastriya Banijya Bank was given qualified opinion on FY 2079/80. Basis for such qualified opinion were
disclosed as follows:

 Net balance of un-reconciled inter-branch transactions, amounting to NPR 467.22 million (Credit
NPR 1,171.54 million and Debit NPR 704.32 million).
 Unidentified and unreconciled balances of NPR 398.59 million in credit (Debit NPR 286.32
million and Credit NPR 684.91 million) have been carried forward for several years due to which
probable recovery and obligation could not be identified. These balances are unclaimed liabilities,
unidentified deposits and overdue/matured fixed deposits, bills payable, cash in transit,
prepayments and advances, debit/credit card transactions etc.
 Bank’s fixed asset consists of lands (Head Office-Singha Durbar Plaza and Lahan) whose title
deeds are not in bank’s name [total market value NPR 4,237.65 million as per independent
engineer’s valuation in Ashad 2080], however possession and use of such land (including
building constructed over it) is with the bank.
 Pension and Gratuity Fund of NPR 17.03 billion has been made till 31 Ashad, 2080 including
current year contribution of NPR 3.28 billion, with the fair value of plan assets amounting to
NPR 15.23 billion. The factors, input and assumptions provided by the bank and used in the
valuation are not compatible with historical trends of the bank/industry like salary and pension
increment rate, discount, and withdrawal rate etc. The fund provision requires technical expertise
of actuary to reflect the future benefit changes and to ascertain the impact and gap in the pension
fund considering the bank’s best estimate of the variables/assumptions

2. Distribution of Dividends
Bank had distributed dividends (Cash Dividend 7.50% and Bonus Shares 5%) on its 17th AGM held on
2079 Poush 28. Further Cash Dividend of 5.50% is to be distributed of Profits of FY 2079/80.

3. Key Focus Areas/ Future Plans

1. Formulation of Capital Growth and Restructuring Plan
2. Works according to IT Enhancement Roadmap
3. Brand Guideline to increase bank's brand image
4. Business Process Re-engineering Project
5. Management Succession Plan for future successors
 6. Better Compliance to AML/CFT (Anti-Money Laundering/ Counter-Terrorism Financing)
7. Opening of new Branches, ATM counters and Digital Services to Customers
8. Removal of factors building up Qualified Opinion in FY 2079/80.
9. Loan Automation System
10. SME Loans for Rural Areas.
11. Repair and Maintenance of Bank's Building Infrastructures as well as utilization of space in
Durbarmarg Area.
12. Issuance of Debentures amounting to NPR. 2,500,000,000.
13. Implementation of Treasury Deal Automation System, Legal Case Management Software, Audit
Management Software, Human Resource Management Software.

Financial Information
1. Comparative-Financial Statements
*Figures in '0,000,000 NPR

Particulars Q3 80/81 79/80 78/79

Cash and cash equivalents 1385 979 788
Balance in Nepal Rastra Bank 2199 2268 1642
Short term investments in banks and financial institutions 0 0 0
Derivatives Financial Instruments 312 0 0
Loans granted to banks and financial institutions 1268 1563 1653
Loans Provided to Customers 24671 22731 21018
Investment securities 7657 7609 6217
Current tax assets 545 482 364
Investment in subsidiaries 40 40 20
Investment in associate company 81 81 46
Investment Properties 20 20 18
Property, Plant & Equipment 3034 3036 317
Goodwill and intangible assets 4 5 5
Deferred tax assets 0 0 56
Other Assets 3371 589 640
Total assets 44587 39403 32785

Amount payable to banks and financial institutions 124 133 475

Amount payable to Nepal Rastra Bank 0 0 2406
Derivative Financial Instruments 312
Customer deposits 36828 32165 25814
Borrowings 6 6 6
Provisions 32 32 38
Deferred Tax Liability 782 745 0
Other Liability 917 996 725
Debt Securities Issued 255 250 261
Total liability 39256 34328 29724
 Share Capital 1564 1564 1494
Retained Earnings (Loss) 25 92 185
Reserves and Funds 3741 3418 1382
Total Shareholder Funds 5330 5074 3061
Total capital and liabilities 44587 39403 32785
Shareholder funds per share 341 324 212

2. Major Highlights - Financial Statements

i. Total Assets
Fiscal Year Amount Yearly Increase (%)
FY 77/78 30999 16.20
FY 78/79 32786 5.76
FY 79/80 39403 20.18
FY 80/81 Q3 44587 13.16

Total Assets
50000

45000

40000

35000

30000

25000

20000

15000

10000

5000

0
FY 77/78 FY 78/79 FY 79/80 FY 80/81 Q3

Total Assets have been increasing continuously in the recent years. Quarterly Report of FY 2080/81 also
indicates positive increase in total assets of Bank.

ii. Shareholders Funds

Fiscal Year Amount Yearly Increase (%)
FY 77/78 2867 24.51
 FY 78/79 3061 6.77
FY 79/80 5074 65.76
FY 80/81 Q3 5330 5.05

Shareholders Fund
6000

5000

4000

3000

2000

1000

0
FY 77/78 FY 78/79 FY 79/80 FY 80/81 Q3

Paid-Up share Capital has increased in FY 2079/80 , and increase of 65.76% of Shareholders Fund is
attributable to similar increase in Reserve and Surplus of the Bank, indicating positive financial
performance of the Bank.

iii. Loans And Advances

Fiscal Year Amount Yearly Increase (%)
FY 77/78 19597 24.51
FY 78/79 22672 15.69
FY 79/80 24294 7.15
FY 80/81 Q3 25939 6.77
 Loans And Advances
30000

25000

20000

15000

10000

5000

0
FY 77/78 FY 78/79 FY 79/80 FY 80/81 Q3

Loans and Advance have been increasing at a steady rate over the years. Quarterly Report of FY 2080/81
has indicated decrease in Loans provided to banks and financial institutions (about 19%), suggesting
repayments of such loans by the institutions.

iv. Non-Performing Loans

Fiscal Year Percentage
FY 77/78 3.23
FY 78/79 2.09
FY 79/80 3.77
FY 80/81 Q3 4.30
 Non-Performing Loan
5.00

4.50

4.00

3.50

3.00
Percentage

2.50

2.00

1.50

1.00

0.50

-
FY 77/78 FY 78/79 FY 79/80 FY 80/81 Q3

Statistics indicates increased Non-Performing Loans of Bank with the NPL ratio climbing up to 4.30% ,
suggesting increased credit risk for Bank and decrease in quality of outstanding loans.

v. Major Ratios at Quarter 3 Fiscal Year 2080/81

Percentag
Particulars e
Capital Adequacy Ratio 12.32%
Non-Performing Loan to Total
Loan 4.30%
Total LLP to Total NPL 99.99%
Cost of Funds 5.29%
Credit to Deposit Ratio 70.53%
Base Rate 7.31%
Base Rate (Quarterly Average) 7.42%
Interest Rate Spread 3.82%

 11% is the minimum requirement for Capital Adequacy Ratio. RBB has maintained sufficient
Adequacy Ratio as of quarter 3.
 RBB has maintained Loan Loss Provision equal to its Non-Performing Loans.
 70.53% of Credit to Deposit Ratio indicates RBB has well utilized its deposit resources and is not
highly reliant on deposits for lending as well.
3. Comparative- Profit and Loss Statements
Particulars Q3 80 81 79/80 78/79
Interest income 2244 3,027 2,069
interest expense 1447 1,846 1,139
Net interest income 797 1,182 930
Fee and commission income 90 109 102
Fees and commission expenses 32 43 35
Net fee and commission income 58 66 67
Net interest, fee and commission income 855 1,248 997
Net Trading Income 4 0 3
Other operating income 35 79 99
Total Operating Income 894 1,327 1,099
Provision for loss of loans and other assets 81 261 36
Net Operating Income 812 1,066 1063

Operating Expenses:
Personnel Expenses 346 397 320
Other operating expenses 86 117 106
Depreciation and amortization 42 56 56
Operating Profit 338 496 582
Non-operating income 2 12 43
Non-operating expenses 1 0 12
PBT 339 508 613
Income tax expense
Current Year 109 99 150
Deferred tax -8 49 33
Net Profit 238 360 429

1. Net Profit
Fiscal Year Amount Yearly Increase(%)
FY 77/78 342 24.51
FY 78/79 429 25.44
FY 79/80 360 (16.08)
FY 80/81 Q3 238 (33.89)
 Net Profit
500

450

400

350

300

250

200

150

100

50

-
FY 77/78 FY 78/79 FY 79/80 FY 80/81 Q3

Net Profit of RBB has been declining, however we can see a steady performance in total operating
income. Personnel Expenses have increased with the addition of new branches and new staffs.
Net Profit is likely to decrease in FY 2080/81 as shown in the data till Quarter 3 of FY 2080/81.

Non-Financial Information and Its Impacts

1. IT Enhancement Roadmap
Bank is in process of change of Core Banking Software (CBS) with Enhanced Core Banking
System in accord with the IT Enhancement Roadmap.
Impacts:
 Change in core software might bring out errors in recording information as well as possible
loss in data.
Mitigation:
 Auditors might need to use Test of Controls such as IT audit for the new software when
implemented for completeness, accuracy as well reliability of data.

2. Business Process Re-Engineering Project

Indicators:
 Reduced Process/Cycle Time
 Reduced Average Cost per unit of time
Impacts:
 Faster Processing Cycles may indicate a lapse of compliance required for the processes.
Mitigation:
 Sample testing for processes under BPR Project
3. Increased HR with the implementation of New Employee Admission Process
Impacts:
 Increased Personnel Costs, Training Costs.
 Might Induce Risk Management Issues with increased Management Complexity
 Potential for Internal Conflict

4. Establishment of RBB Securities Ltd.

RBB has established RBB Securities Ltd. for activities related to Security Broker.

5. Reclassification of Branches
Branches have been reclassified as of recent.
Impacts:
 Changes in Branch Performance Allowances due to Reclassification.

6. Loan Automation System

Loan Automation System has been introduced to digitalize Bank's Loan Processing, Management and
Documentation.
Impacts:
 Digitalization of Loan Services might increase the risk of fake documents, as well as
increased risk in collateral security.