Punjab National Bank joint venture to enter microfinance in Nepal

Kathmandu, Oct 7, 2010 (Calcutta Tube) Indian public sector Punjab National Bank’s joint venture in Nepal, Everest Bank Ltd (EBL), is now seeking to enter the microfinance segment in the Himalayan republic following the success of the industry inspired by Nobel peace prize laureate Prof Muhammad Yunus’ Grameen Bank in Bangladesh.

EBL is among 24 finance organisations that have applied to Nepal Rastra Bank, the republic’s banking regulator, to start microfinance companies in a bid to take banking to the rural areas of Nepal where, due to the harsh topography, climate and security conditions, banks are yet to reach thousands of villages.

‘We have applied for permission to the Nepal Rastra Bank (Nepal’s banking regulator),’ EBL’s assistant general manager Hum Nath Gurung told IANS. ‘It could be a fully owned subsidiary or be run in partnership with the public with a 30:70 percent ratio between shareholders and the promoters.’

The EBL microfinance company will have an initial capital of about NRS 100 million. Once the apex bank gives the green signal, it will start operations in the remote areas where law and order is not a cause of concern.

‘Microfinance companies are far cheaper than full-fledged bank branches,’ Gurung said. ‘The operational cost for a bank branch is immense in remote areas.’

Currently, EBL, in which PNB holds 20 percent share, has 37 branches spread over nearly 10 districts.

‘Microbanking’ started in Nepal in the 1980s when Dr Harihar Dev Pant, an official of NRB, visited Grameen Bank in Bangladesh and was inspired to start an NGO in Nepal, Nirdhan, the ‘microfinance programme for the poor.’

In 1999, it started functioning as a full-fledged bank, the Nirdhan Uththan Bank, providing loans, deposits, micro-insurance and remittance services based on the individual lending methodology of Grameen Bank.

The growing competition in Nepal’s banking industry is making banks look at new products and innovative ways of banking, keeping in mind the low income groups and the flux of the earning members from Nepal to abroad.

EBL also runs a unique mobile bank in eastern Nepal adjoining India.

The bank is a bus that provides online banking and caters to people in four border towns: Birtamod, Bhadrapur, Damak and Sanischare.

(Sudeshna Sarkar can be contacted at sudeshna.s@ians.in)

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