Banks now need to focus on raising the quality of their service

After serving two terms as the CEO of Sanima Bank from 2014-2022 and spending three decades in the Nepali banking sector, Bhuvan Dahal retired as a banker earlier this year. Starting as a teacher of English at a private school in Kathmandu in 1989, he went on to become a government employee before joining Nabil Bank Limited (then Nepal Arab Bank Limited) at an assistant level. Prior to joining Sanima Bank as the Deputy CEO in 2013, he worked as the Chief Operating Officer (COO) of Nabil. 

Dahal is credited for the transformation of Sanima Bank, the youngest commercial bank in the country, into one of Nepal’s leading financial institutions. Six months after retiring from the banking job, Dahal has authored a book titled ‘Retirement at 50’. the HRM caught up with Dahal to talk about his banking career, post-retirement life, and his book. Excerpts: 

Six months after retiring as a banker, you came up with the book ‘Retirement at 50’. What is the story behind writing this book?
Even before Nepal Rastra Bank (NRB) decided to fix two terms for CEOs of banks and financial institutions (BFIs), I used to say that nobody should be repeated in the same position. I did what I could in 8 years at Sanima Bank. In a relatively short period, with the efforts of the wonderful and hardworking team, Sanima became the number one bank in terms of return on equity (RoE) in FY2020/21.

In banking, individual deposits are considered stable deposits. In individual deposits, Sanima, which ranked 16th in Ashadh, 2070, became the number 2 bank in Ashadh, 2078 BS. When overall deposit growth in the banking sector was at 2 percentage points, Sanima’s deposit grew by 22 percentage points.
Similarly, the rise in CASA (current account savings account) deposits is considered extremely good for the overall industry. From 2070 BS to 2078 BS, CASA deposits in the overall banking system fell by 1 percent, while Sanima’s CASA deposits grew by 18 percent. Similarly, when the RoE of the overall industry fell by 10 percent, Sanima’s grew by 4 percent.

Many people asked me how we achieved this remarkable progress in providing attractive returns to shareholders, maintaining low NPA levels, good CASA deposits, and RoE. Hence, I decided to write a book reflecting on how Sanima made it possible.

As someone who has over decades of experience in banking, what changes have you observed in the Nepali banking sector from the time you joined to the time you retired? 
In the past, the banking system was traditional and banking operation was largely manual. 4-5 people used to involve while encashing a cheque.
Even functions such as transferring funds and issuing Letter of Credit (LC) used to be herculean tasks.

When I joined Nabil Bank in 1991, the bank had already a computerized system in place. It was Nabil that introduced modern banking practices in Nepal. However, government-owned banks were far behind in providing services to customers. Because of their poor performance, the government had to avail assistance from the World Bank to bail out Nepal Bank and Rastriya Banijya Bank. At the same time, Nabil Bank, Indosuez Bank (now Nepal Investment Bank), and Grindlays Bank (now Standard Chartered Bank Nepal) were doing exceedingly well.

With automation, the Nepali banking system has transformed in the last two decades. Banks have introduced new technologies and services such as digital and mobile banking, making their services easier and faster for customers. People don’t have to visit banks physically for simpler tasks like fund transfers, among others. The overall banking system has become more secure with the introduction of modern technologies. However, as we rely more on technology, IT-related risks have also risen.

While Nabil was one of the top banks when you joined it, Sanima was the youngest commercial bank. How did you find working in two different kinds of commercial banks?
Starting as the Nepal Arab Bank, Nabil is the first private sector bank in the country, which was set up as a joint venture bank with Emirates Bank International Ltd, and management of the Emirates was handled by the US-based Chase Manhattan Bank (now JPMorgan Chase Bank). Hence, at Nabil, we got to learn how the American banking system works.

Both banks are of two different natures. When I joined Sanima, the profit of Nabil was 7 times more than that of Sanima. In case of Sanima, it was upgraded into a commercial bank from a development bank when I joined it as the Deputy CEO. While the fundamentals of the bank were good, many things needed to be done. With the vibrant team in Sanima, I was confident that we could do better. Initially, I focused on team building which paid off later.

What factors contributed to the remarkable growth that Sanima Bank achieved in the past decade?
Sanima Bank never compromised on corporate governance. When it comes to new hiring, we never allowed ourselves to be influenced by others, meaning powerful people. There was no space for nepotism and favoritism. The hirings and promotions were made based on merits.

We also linked staff’s salary increments and promotions with their performances. When our staff understood that decisions were made based on merits and performances, that encouraged them to give their best. This contributed to the overall growth of the bank. It is the combination of hard work, teamwork, and honesty of Sanima’s staff that propelled the bank to achieve new heights.

When you took charge of the Sanima, the country had 32 commercial banks that were aggressive in their expansion. How difficult it was in terms of human resource acquisition and management, for the bank?
As I had worked at Nabil, I knew about talented people in the market. Hence, it was not difficult to find the right people for the right positions for Sanima. Initially, for the senior position, we hired bankers working at Nabil.

We did a strong screening while hiring people for senior positions. And, when the reputation of the bank grew, those working in other banks also showed their interest to join Sanima.

How do you view the availability of human resources for banks at present? 
As pay scale is lucrative in the banking sector, it is not difficult to find people. But finding quality human resources for branches in rural areas is still a challenge. In rural parts of the country, banks try to find the best minds available locally.

Where is Nepali banking when compared with international banking?
When we talk about banking products, Nepali banks are not inferior to international banks. While I was in Sanima, the bank’s senior management team used to visit international banks every year to know new practices taking place in international banking.

I think, much needs to be done to raise the quality of service of banks.

Banks have to focus more on human resources management and learning and development. This will improve the productivity of both employees and employers.

The number of commercial banks is decreasing given the central bank’s push for mergers and acquisitions. How do you see the overall banking industry moving through this phase of consolidation?
The mergers and acquisitions (M&As) of BFIs should create a synergy effect. Since the return on equity of many banks is not good, there is a compulsion for them to go for consolidation.

As the number of BFIs has come down drastically from 200 to 60, I think the central bank now should not aggressively push banks for M&As. By strengthening its capacity, the central bank can efficiently regulate and supervise these 60 BFIs. The BFIs that comply with the rules and regulations will continue to grow. The central bank can force those not complying with the rules to go for consolidation.

The future of banking is automation and digitization. People should get services from their homes. People should visit banks less often. In foreign countries, people have to pay if they visit banks as the government and the banking system have been promoting digital banking. In a few years, the number of branches of banks will decline as the central bank and the government will push for digital banking.

Finally, what is next for Bhuvan Kumar Dahal? Have you retired? 
No! It is not like I have already retired. At 50 years of age, you just can’t rest at home. We have established an organization called the ‘University of Three Generations’, which has retired professionals as its members. The members of the organization transfer their knowledge to the young generation. As a part of my work at the organization, I wrote the book ‘Retirement at 50’. I will be sharing the knowledge and my experiences with the young generation.

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