31 Jan 2010 Current scenario The banking industry of Nepal doesn’t seem to be going in right track. The ongoing interest war and expansion of banking network unprecedentedly has further aggravated the problem. Till date there are already 26 commercial banks, 75 development banks & 84 Finance Companies in the country. Further few are in pipeline. Alone in pokhara there are more than 100 players and more are trying their luck in stiffly competitive market of Pokhara. Opening of branches and the installation of ATM machines has led to more idle cash lying around at branches and machines. With the liquidity crunch banks are having a run for deposit. Banking and financial institutions are facing tough time to honour customer’s obligations. Liquidation of Nepal Development Bank Ltd., liquidity crunch of last September and recent charge sheet filed against top honcho of two of the development bank still haunts the depositors. They would rather feel safe to keep money in their home than to put in bank. The banks/FIs are luring depositors with higher interest rate. Further the involvement of businessmen in banking industry (in pokhara almost all businessman has investment in local banks/FI) has helped in flowing of their and their relative’s deposits in their own banks/FIs. This is why there is a rush of deposit in those banks/FIs. Most of locally promoted banks and financial institution have investment of almost 50 -100 prominent business men of Pokhara. NRB recent staunch stand on real estate sector in order to protect the economy as whole has further pushed bank note away from bank. Buying and selling of land has started taking place in personal capacity of an individual. Decline growth of inflow of remittance in country, decreasing foreign reserves, trade deficit, rise in import of Gold, dwindling political atmosphere of country in terms of substance and mean, capital flight and etc., are contributing factors of economic slowdown. People with abundance disposable income was left with choice of either kept the money in bank or investment in some fixed assets (lack of invest opportunity). People resorted to second; as a result we have witness whooping growth in real estate sector. The focus of banks/finance companies on loan against collateral & PG has helped mushrooming of co-operatives. As these organizations are not bound by the policy of NRB, the customers do not require presenting KYC. So anyone can be their client and do anything with their money. Hence it is believe the money transacted between co- operatives is probably half or one-third of the total inter-bank transactions. SWOT analysis The SWOT analysis has been done from view point of Pokhara Branch Strength Weakness The bank being promoted by NRN has built a No promoters from Pokhara good reputation/goodwill among general public. Majority staffs from outside Pokhara The announcement of bank going commercial has Late branch expansion in major cities. build trust among general public. Focus on push marketing rather than pull. The bank has better lending rate among Lacking employee training. competitors. Continuous 5 years profit. Mobilization and development of human resources in gradual manner Opportunity Threat Almost 60% of total population Nepal are still Current NRB policy (Cap on HL/Real estate loan) is away from banking mainstream a recent headache of banks/FI Changed Political environment of the country Liquidity Crunch remittance is ever growing Unhealthy interest competition Banking literacy rate is in increasing trend New Deposit scheme of Competitors International & Regional airport in Pokhara More than 100 banks/FI in market of Pokhara and Population Explosion and rapid urbanization more in pipeline Tourist Hub New entrants & rapid expansion of branch by banks/FI. Deposit concentrated on local banks/FI. Current unfavorable political condition. Competitor Analysis We have analyzed our competitors under following grounds in which they yield competitive advantage. 1. Interest rate It is apparent to all that interest rate in both lending and deposits are increasing in all banks/FI and Local banks/FI seems to be leader in this context. With as high as 9% in daily balance in saving and 12%+ in FD has ruin the market of other banks/FIs 2. Innovative product/service Those banks which don’t want to get in interest war are coming up with new innovative products & service. Like, Everest bank doing Ghar-Dailo Banking Sewa & Bank on Wheel service whereby it can provide banking facilities to nearby village. Nabil bank’s Miss Players Nabil Nari Bachat whereby it provides a discount card and a gift voucher of NPR 500 on the opening of account. Kist bank’s Tax Free Savings Scheme where bank itself pays a tax of depositors & Peace Savings & FD where bank contributes certain amount on Mr. Pushkar Shah's "Peace Expedition Fund" account on behalf of customer. Laxmi bank’s Green saving & Online Trading through Mercantile Exchange Nepal Nepal SBI bank’s Saral Bachat Khata whereby it provides free UTL sim to every account holder. Nepal Bangladesh Bank’s Griheni Bachat whereby it provides free medical insurance worth Rs. 10,000 to its account holders. Sunrise Bank’s Sunrise Pink Deposit Account whereby it provides free dinner coupon and discount card. 3. Service with extra package In addition to providing better interest rate some banks are providing services with extra packages like, Free ABBS, ATM, SMS, iBanking etc. Discount on processing fee on loan. Accidental insurance, discount on life insurance Discount cards e-ticketing service, paying telephone, GSM mobile bill, Insurance premium etc Recharge pin of Nepal Telecom Evening counter, 365 day banking etc. 4. New entrants There are still few upcoming banks/FIs like Janata Bank Nepal, Megha Bank, Century Bank, Consumer Development Bank etc. With the entry of these new banks competition is going to be stiffer & it is obvious that they are going to share the same market. 5. Branch expansion There are some banks which are moving aggressively in the race of branch expansion. There are more than 100 branches (including HO) of different commercial banks, development banks & Finance Companies in and around Pokhara valley and many more are in pipeline. Kist bank is a leader in this field with 44 branches (2 in pokhara) and 43 ATM outlets all over Nepal. Further 3 more branch & 6 ATM outlets are on pipeline. Machhapuchhere bank has 32 branches (4 in Pokhara) & 36 ATM outlets. Further 10 upcoming branches. Sangrila Development Bank’s 13 branches (7 alone in Pokhara). Fewa Finance 4 branches including HO (2 in Pokhara). Further 2 upcoming branches & both in Pokhara. Kamana Bikas Bank 4 Branches (2 in Pokhara) Kaski Finance 2 braches both in Pokhara Global bank’s 23 branches and 4 in pipeline. 35 branches of Everest (32 ATM). 29 branches of HBL & 7 upcoming. 27 branches Sunrise bank, 37 of Nabil bank etc. 6. Strategic alliance Few banks have come up with strategic alliance with other organizations (including competitors) to cope up with current stiff competition and can be a driver of superior growth. Everest Bank Tie Up With Morang Auto Works For Yamaha Bike Finance. The bank will finance upto 70% of quotation price or maximum Rs 2.00 Lac at 10.00% interest rate for tenure of 3 years. HBL, BOK and Laxmi Bank’s Alliance Partnership for Extended Services whereby customers of any one of the banks will be able to deposit / withdraw / transfer their money from any branch to other branches of all three banks. Nabil’s Co-branding arrangement with Miss Players. The account holders receives a gift voucher from Surya Nepal Pvt. Ltd. further gets special discounts/offers from various organizations/outlets/shops/restaurants/hotels within the valley. 7. Relationship marketing The marketing strategy in banking industry is focused more on relationship marketing. Every businessman has some investment in some banks & finance companies (this is even more in Pokhara). Hence the deposit of those businessmen’s and their relative’s flow towards their own banks/FIs. Recommendation to SANIMA There is no doubt that the tag of NRN is sellable in the market. However there are still some places where other external factors rules and diminish this goodwill. Hence we have to come up with some innovative new ideas that can dramatically attract the customers. Some recommendations have been placed below. 1. Medical insurance The focus of sanima always seems towards push strategy for selling our deposit products. New innovative products should be launched which the customer give high preference. Like, adding medical insurance package in some of our product. 2. 365 banking/ Free ABBS There is no doubt that due to high competition more and more financial institutions are going on 365 days banking & free ABBS. We can also think for the same for all/some of our branches. 3. Mobile/Home Banking Due to the busy schedule or branch being far from the residence, the individual depositors may not be willing to deposit their money. Or if they deposit, there is always a problem of withdrawing small amount of money. This problem can be solved if we provide weekly collection/payment for some special areas. However, payment shall be done only upto Rs. 10,000/- if call is made before 12:00. Possibility of the mobile/home banking can be seen in Pokhara. 4. Satellite counter In order to provide banking facilities to large and well spread nearby villages, satellite counters can be established in prominent location from where we can perform limited deposit/withdrawal transactions. These counters can also entertain the queries & collect data of credit customers. 5. Discount card A product can be launched whereby we can offer special discount in monthly fee or admission fee of colleges/schools to our depositors or their family members. To increase our customer base we can also apply this for existing students. 6. 3 in1 Saving deposit Scheme: We can enter in to agreement with any of hydro power company, where Sanima will be lead bank. An individual can open an account with us with minimum deposit of NPR 25000.00 This will attract interest rate of 7% p.a. Every account holder under this scheme will directly qualify to be share holder (10-20% of total capital) of any of the Hydro Power Project, where Sanima will be involved. Saving, Investment and earning will be the major highlights of this scheme. 7. Strategic Alliance We can go for strategic alliance with other banks for sharing ATM machines whereby customers of both the banks can use ATM machine without paying any additional service charge.