NIDC to offer dividend for the first time in 15 years

KATHMANDU, JUN 16 -

NIDC Development Bank has said it will provide dividend to its shareholders—for the first time in 15 years.

The bank’s plan follows the recovery of all of its accumulated losses this year. The state-owned bank had last offered dividend in 1997, the same year its financial health started to deteriorate.

The government holds 68.78 percent stake in the development bank, while the general public hold the rest. The bank has been making remarkable progress in its financial status over the last few years and it estimates a net profit of Rs 300 million this fiscal year.

“As we have recovered all our cumulative losses—as high as Rs 1.41 billion as of 2005-06—and are making profits for the last five years, we are now in a position to provide dividend to the government and public shareholders,” said NIDC chief executive Shivjee Roy Yadav.

Once suggested for liquidation by a study conducted by the Asian Development Bank (ADB), NIDC emerged from the ashes to make the significant progress in its financial status. The Price Water and Cooper (PWC) of Thailand had studied NIDC for two years until 2003 and had seen no revival potential with over 95 percent non-performing assets. It had suggested winding up the bank.

NIDC’s net worth is positive by Rs 1 billion as of the third quarter of the current fiscal year. The figure was negative by Rs 804 million in 2005-06. The bank has also reduced its non-performing loans (NPL) over the last three years to 60.80 percent. It had 97.26 percent NPL two and half years ago when it started normal banking activities as a development bank.

According to Yadav, NPL was as high as 2.28 billion a few years ago, which has now come down to Rs 890 million. “The present NPL amount is of the period before NIDC was converted into a development bank,” said Yadav. “The NPL figure is virtually zero after NIDC started functioning as development bank.” The aims to bring down the NPL level to 50 percent within this fiscal year.

According to Yadav, NIDC is facing difficulties in recovering bad loans—consortium loans lent by banks including Nepal Bank and Rastriya Banijya Bank. “We recovered most of loans we lent, but we are facing difficulties in recovering consortium loans that account for 90 percent of our bad loans,” said Yadav. “Once our two big consortium loans that went to Phulbari Hotel and Bhrikuti Pulp and Paper Factory are recovered, we will be in a comfortable NPL position.

After the ADB study, the government in February 2004 had barred NIDC to make further lending and told it to focus on loan recovery. Going against the PWC report, the government had decided to restructure NIDC for possible privatisation and had also decided to liquidate it if could not be privatised.

As the government failed to privatise NIDC, it opted for operating the bank under the Bank and Financial Institution Act (BAFIA) as per a cabinet decision on March 9, 2009.

NIDC last year completed auditing of its financial transactions of previous nine years (2001-01 to 2009-10) and auditing for 2010-11 has also been completed.

With improving financial health, NIDC has remained silent on the government’s plan to merge it with Rastriya Banijya Bank. “As NIDC can function well without a merger, it has remained quiet on the merger issue,” said NIDC Chairman Shanta Bahadur Shrestha. “The merger is possible only if the government decides as it owns a majority stake in the bank.

Source: The Kathmandu Post