The Nepal Bankers’ Association (NBA), in partnership with the Asian Bankers Association (ABA), conducted a webinar on “Nepal Banking: Current Status and Opportunities” on March 8, 2023. With more than 420 registered participants from 27 countries from Asia and beyond, the webinar session featured Mr. Sunil K.C., President of NBA and moderated by Dilshan Rodrigo, Executive Director and COO of Hatton National Bank.
(1) Summary
NBA President Mr. Sunil K.C. started his presentation with an overview of Nepal’s demographic and geographical conditions. Two areas of particular interest about Nepal cited by Mr. Sunil KC are its very young population and its potential to drive regional energy demand due to its hydraulic environment.
On Nepalese macroeconomic data, Mr. Sunil described an economy enduring an inflation rate of 7.26%. However, given a foreign exchange to import ratio of 10.4 months, the Nepalese national economy is considered stable, enjoying the 3rd most favorable business climate in South Asia.
Mr. Sunil indicated that the Covid-19 pandemic caused a sharp recession in 2020. Fortunately, Nepal rapidly returned to positive GDP growth at 4.25% in 2021 and 5.84% in 2022.
The Nepalese economy is buttressed by two factors. One factor is the significant contribution of foreign remittances mainly from overseas Nepalese workers to the national economy; and the second factor is the low foreign external Debt/GDP ratio currently at 21%, which is quite low compared to developed nations.
In terms of the Nepalese banking sector, there are currently 21 top commercial banks across the national territory. Their progress in providing banking access has been remarkable since the last decade, surpassing that of other South Asia countries.
Common financial ratios such as ROE (Return on Equity), Earning per Share (EPS), and Capital Adequacy Ratio (CAR) are returning to 2019 level while Non Performing Loans (NPL) ratio is presently at 2.49%. Although the ratio is in a raising path, it is just reaching pre-pandemic levels.
Mr. Sunil also explained that there are many reasons to invest in Nepal. He mentioned the large pool of capable workers, 100% foreign ownership allowed in majority sectors, lowest tax burden amongst countries in South Asia, and bilateral agreements preventing double taxation to high ROI.
Furthermore, Nepal presents a series of attractive investment areas such as mining, IT, health, energy and tourism among some others.
President Sunil explained that investing in Nepal benefits from the fact that securities can be issued in foreign capital markets to facilitate foreign capital flows and the investment in shares of a new or existing industry can be made in foreign currency.
Furthermore, President Sunil described many points related to the repatriation of profits. For instance, repatriation is allowed on the amount received from the sale of shares of foreign investment as well as on the amount of profits or dividends received from foreign investments.
Such positive conditions for foreign investments must be analyzed within the framework of two counterbalancing forces: present challenges and opportunities,
The present challenges for Nepal are limited financial gap, poor infrastructure, and out-migration among other negative factors. However, on the positive side, Nepal enjoys many opportunities for growth in the areas of green markets, population dynamics, tourism, and regional energy demands, among others.
To conclude, President Sunil highlighted areas for collaboration that the Nepalese Bankers’ Association is interested in pursuing such as capacity building, AML & Compliance, Technology and Research, Sustainable financing, and finally, Corporate Governance.
President Sunil’s presentation was followed by an extended Q&A session. The audience’s active participation and insightful questioning, together with President Sunil’s candid answers made this webinar a successful event.
(2) Webinar’s Presentation & Video recording
A PDF copy of the presentation can be downloaded HERE.
The webinar’s video recording at the ABA YouTube channel.
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