Corporate Governance

The Bank has effectively controlled and managed credit risk, operational risk, liquidity risk, market risk, interest rate risk, foreign exchange risk and other risks that may occur in the course of business and has adopted the concept of balanced, continuous and sustainable growth in the expansion of the Bank’s business during FY 2022-23.

A. Share Capital and Capital Adequacy

Throughout the review period, the Bank’s paid-up capital increased to NPR 14.09 billion, marking an increment from NPR 12.52 billion. For the FY 2022-23, the Bank proposed distribution of a cash dividend (inclusive of taxes) amounting to NPR 593 million, equivalent to 4.21 percent, which has been presented in this annual general meeting for the approval. The Bank’s core capital and supplementary capital at the end of the review period stands at 9.37 percent and 3.10 percent, respectively, with an overall capital adequacy ratio of 12.47 percent.

B. Deposit

During the review period, the deposits escalated from NPR 196.48 billion to NPR 228.57 billion, reflecting a 16.33 percent increase compared to the previous year. Despite the overall economic system’s contraction in liquidity during this period, the Bank achieved a balanced 16.33 percent deposit growth. This success is attributed to the introduction of various attractive deposit schemes and the trust bestowed upon the Bank by its customers.

In the same timeframe, the Bank launched “Siddhartha PAY & SAVE” account, a savings account with a unique feature in Nepal for the first time. This account, openable with zero balance, deducts a fixed amount from the parent’s account and automatically deposits it into the children’s account when electronic transactions of more than NPR 100 are made through debit cards and mobile Banking. The Bank offers a free debit card and Bank-smart XP service for the first year as a special attraction to both parents and children’s accounts. Additionally, a cashback scheme was introduced for a limited period to encourage customers to open this account promptly. The Bank anticipates that this account will promote the use of the digital system by parents and facilitate small savings for their children. During the review period, responding to customer needs and demands, the Bank introduced ‘Siddhartha Sribriddhi Term Account,’ offering returns of two to ten times the principal amount after a specified period, although this service is currently suspended.

Similarly, the Bank launched the Siddhartha Srivriddhi Plus term account during the review period, aiming to provide long-term investment opportunities with the highest returns to customers seeking returns on long-term deposits. This account includes a life insurance facility equal to fifty thousand rupees, with twice the return on the principal amount.

Furthermore, the Bank introduced a short-term credit card facility during the review period, combining the features of Siddhartha Visa Credit Card and UNO Discount Card for existing and new term depositors. This credit card facility allows depositors to access funds at their convenience without prematurely closing fixed deposits. This credit card allows credit facilities up to 90% or NPR 200 thousand (whichever is less) to the customers. For this, the depositors do not need to pay any membership fees and prove their income.

Similarly, during the review period, the Bank introduced UNO credit card facility with discount on membership fee for the f irst year to existing and new customers of Siddhartha Jeevan Suraksha and Siddhartha Platinum Plus accounts. For this facility, customers can deposit a minimum of NPR twenty thousand rupees in Jeevan Suraksha Account and a minimum balance of NPR fifty thousand rupees should be maintained Platinum Plus account. The credit limit of Siddhartha Jeevan Suraksha Account will be “average account balance of the last one year or NPR twenty thousand rupees whichever is higher” while the credit limit of Siddhartha Platinum Plus account will be “average balance of the last one year or fifty thousand rupees whichever is higher”. This credit card facility will help the depositor to get credit facility as per requirement without using the balance in his account.

During the review period, the deposit account of the Bank has reached 1,710,123 which is an increase of 18.75 percent compared to last year. During the year under review, 270,058 new deposit accounts were opened in the Bank. In the same manner, savings account of the Bank has reached 1,485,056, which is an increase of 17.75 percent compared to last year. In the review year, 223,869 new savings accounts were opened in the Bank. Due to the tireless efforts of the employees, several campaigns launched by the Bank and high quality customer service, the Bank has been able to achieve such good results in terms of opening new accounts in the year under review.

C. Loans

By the end of the FY 2021-22, the loan portfolio of Bank stood at NPR 186.09 billion. The total loan portfolio increased by 2.57 percent and reached to NPR 190.87 billion as of mid-July 2023. The Bank has cautiously increased its loans keeping in mind the overall economic scenario of the country. In this process, the Bank has been assisting more than 40,000 loan customers and more than 30,000 credit card customers to fulfill their financial needs. According to the directions issued by Nepal Rastra Bank, the Bank has continuously focused in priority sectors like agriculture, energy and MSME of less than NPR 10 million.

D. Investments

While diversifying its business, the Bank has been earning income by making use of investment opportunities from the beginning. During the period under review, the Bank’s investment increased from NPR 59.65 billion to NPR 69.66 billion, which is an increase of about 16.78 percent. The Bank has adopted a strategy to increase its investment by identifying more profitable areas for proper management of its deposits and investments. According to this strategy, it is believed that the scope of the Bank’s investment will be widened and the risk will be reduced leading to increment in the profit.

Strategically, with a view to long-term benefits, the Bank has invested in various sectors under investment diversification and has been investing as promoter as well as public shareholder. The Bank as founder shareholder in Sanima Reliance Life Insurance Company Limited with NPR 264 million investment, as a public shareholder in Siddhartha Premier Insurance Company Limited with NPR 87 million investment and NPR 30 million in Awasar Equity Limited has been invested. That investment is thus 6.31 percent, 7.54 percent and 10 percent respectively of the paid-up capital of the said organizations as of the end of 2023. Similarly, the Bank has 51 percent investment in Siddhartha Capital Limited, which is a subsidiary company of the Bank; the current paid up capital of the said company is NPR 200 million. Similarly, the Bank has also invested in commercial organizations like Nepal Electronic Payment System Limited, Karja Surakshan Kendra, Nepal Clearing House Limited and National Banking Institute. The Bank believes that the investment made in this way will increase the returns to the shareholders.

E. Total Assets

During the review period, the total assets of the Bank increased from NPR 264.33 billion to NPR 285.98 billion, which is an increase of about 8.19 percent compared to last year.

F. Net Interest Income

During the review period, the total interest income of the Bank was NPR 20.68 billion increased from NPR 27.37 billion, which is an increase of about 33.82 percent compared to last year. Similarly, during the review period, the Bank’s interest expense was NPR 14.08 billion increased to about NPR 19.49 billion. Thus, the net interest income during the review period was NPR 6.60 billion increased to NPR 8.18 billion, which is an increase of 24.07 percent compared to last year.

G. Operating Profit and Net Profit

The operating profit of the Bank during the review period was NPR 4.65 billion which is an increase of 9.06 percent compared to last year. Similarly, during the review period, the net profit of the Bank was NPR 3.17 billion which is an increase of 9.11 percent compared to last year.

H. Distributable profits

The Bank has earned NPR 3.17 billion rupees net profit in FY 2022-23. From the said net profit, NPR 1.46 billion has been appropriated to capital redemption reserve and further additional amounts have been appropriated to various statutory reserves and regulatory reserves after which the remaining distributable profit is NPR 663.61 million. Out of this, NPR 593.19 million i.e. 4.21 percent cash dividend (including tax purpose) has been proposed for distribution. The amount allocated for the debentures is ultimately distributed to the shareholders after the maturity of debentures. Therefore, considering the allocated amount NPR 1.46 billion, actual distributable profit of the Bank in 2022-23 is NPR 2.12 billion which shows dividend distributable capacity of 15.07 percent.

I. Net worth per share

During the period under review, the Bank’s net worth per share is NPR 179.61, which was NPR 172.45 in the last year. This is an increase of 4.15 percent compared to last year.

J. Earnings per share

During the review period, the Bank’s earnings per share was NPR 22.48, which was NPR 20.60 in the last FY. This is an increase of 9.11 percent compared to last year.

K. Quality of Assets

During the review period, the Bank’s non-performing loan ratio was 2.01 percent, which was 1.07 percent in the last fiscal year. Despite the adverse market conditions, the Bank has managed to contain NPA within 2.01%. In the coming days, the Bank has prioritized for recovery of interest and non-performing loans and believes that the ratio of non-performing loans will further improve.

L. Loan write-off

Last year, the Bank written off loans of NPR 1,200,005 whereas during the review period, a total of NPR 1,174,376 loans has been written off. The Bank has continued the recovery process of such written off loans.

M. Share structure

51 percent of the total paid-up capital of the Bank is the share of the promoter shareholders and 49 percent is the share of public shareholders. By the end of the review period, the number of promoter shareholders of the Bank was 278 people and the ANNUAL REPORT 2022-23 131 number of public shareholders was 69,151. By the end of October of the current year, the number of promoter shareholders of the Bank was 275 and the number of public shareholders was 56,633.

N. Card and technology based services

The Bank has been providing various types of service facilities to the customers through cards and other electronic alternatives. There has been a significant increase in the transaction of service facilities provided by Banks, and the transaction of service facilities provided by electronic payment. During the review period, there has been a significant increase in transactions through electronic alternative means to 79 percent, while transactions through traditional means have reduced to 21 percent. In FY 2021-22, this ratio was 67:33. Keeping in view the increasing electronic transactions, the increasing use of information technology and the control of financial fraud, the Bank has been suggesting protective measures to customers through various means. Likewise, the Bank has been successful in controlling financial fraud, information technology and data security management, upgrading and proper management of hardware, network and system software.

During the review period, the Bank has tied up with various QR merchants associated with MOCO by linking debit, credit and prepaid cards to FOCUSONE’s MOCO App and using MOCO App from the same platform. During the review period, the Bank has provided the service of loading/unloading cash by linking customer accounts to E-SEWA digital wallet. In the same way, the Bank has started the payment service by integrating the Billing System in the POS itself, which will help various small merchants to transact easily without separate hardware and software arrangements for the Billing System.

Similarly, with the aim of making mobile Banking services more sophisticated and providing secure online services, Bank has upgraded Bank Smart XP which will provide Omni-Channel experience to customers. Also, along with the migration of the Bank’s Core Banking System, various electronic payment services have also been migrated to the Bank’s new CBS-Finacle, through which the Bank believes that more sophisticated Banking service facilities will be available to the customers safely.

With the aim of providing round the clock Banking services to the customers, the Bank has put the Cash Deposit Machine Check Deposit Kiosk into operation. Similarly, the Bank has launched VISA P2P and VISA Remittance services to transfer funds through cards.

The Bank conducted cash back offers throughout the year to encourage customers to transact through electronic means and to encourage passive cardholders to transact not only through ATM but also through POS and online transactions. Similarly, the Bank successfully conducted various campaigns like New Year Campaign, Siddhartha Foundation Day Campaign, Bank Smart Activation Campaign, QR Merchant Enrollment and Activation Campaign.

In order to encourage digital payment, the Bank is also conducting various programs related to financial literacy while further modifying and refining the means of digital payment.

O. Digital Transformation and Information Technology

Due to the changing preferences of customers, the Banking sector is being transformed by the latest innovations in technology. In the current situation, with the rapid development of information technology, its security is becoming more and more challenging. In order to minimize the risk that may be caused by information technology, the Bank is aware of the fact that a successful information technology strategy, policy and procedure is necessary and has adopted an action strategy accordingly.

The Bank is using a high-level information technology security system for customer privacy, security and reliability of data. Auditing of information technology as per the directions of Nepal Rastra Bank has been continued even in the year under review after finding the deficiencies in the Bank’s system.

Likewise, the Bank has fully implemented the existing Core Banking System (CBS), Customer Relationship Management (CRM) and Loan Origination System (LOS) projects for high-tech and reliable services. Similarly, Mobile Banking (Bank Smart XP) has been upgraded with the aim of providing convenient and safe online service for customers. Various Business Process Automation projects have been formulated for internal and external digital transformation work.

Similarly, management of historical data storage is started to manage, communicate and analyze data obtained through various means. Web Application Firewall (WAF) has been used to increase the security of various Web Applications of the Bank and to control the security of Cyber Threats. SWIFT CSP Assessment has been completed in accordance with cyber-attacks and cyber security policies related to international payments.

In the like manner, the Bank has continued to establish a Customer Care Center to make the relationship between the Bank and the customer effective and manage the services provided by the Bank in an integrated manner. Under this, it has been arranged that the customer can file inquiries, complaints, feedback and suggestions and service requests through the Bank’s website, phone, chat, and social networks, and the customer can avail Banking services directly without physically being present at the Bank. From this, it is believed that the experience of customers with the Bank will increase positively and increase customer delight.

P. Remittance Service (SBL Remit Service)

The Bank launched its own online remittance payment service “SBL Remit” from Qatar in the year 2008 with the aim of providing fast, efficient and reliable remittance service to Nepalese who 132 SIDDHARTHA BANK LIMITED are employed abroad in line with the strategy of expanding its services and diversifying financial services. Currently, SBL Remit has expanded its services to Japan, Malaysia, Oman, UAE, South Korea, Kuwait and America. In order to make remittances more effective, the Bank has taken a strategy of increasing its remit presence in foreign countries and increasing the number of payment representatives locally, as it has been providing services through more than 7,000 payment center representatives and sub-representatives from major European countries and Australia as well. The Bank is constantly trying to increase its reach by providing online remittance services to Nepalese expatriates worldwide. The Bank has helped to make the remittance business more quality, reliable and easily payable by establishing the Remittance Business Unit (RBU). In the near future, the Bank has planned to increase its remittance services and its presence in India, Canada and Jordan by increasing the remittance business.

Likewise, for immigrant Nepalese brothers and sisters, the Bank is operating ‘Siddhartha Remit Account’ and ‘SBL Premium Remit Savings Account’ with attractive interest rates and can open an account with zero balance. Also, opening these savings account will come with many benefits of Bank Smart, Internet Banking, ATM, Demat and C-ASWA facilities.

Q. Right to Information and Grievance Management

As Bank has been established as a public limited company, it gives high priority to the right of information to stakeholders. The Bank has taken accountability, transparency and responsibility as the main and important factors of the right to information for good governance. The Bank shall publicly disseminate relevant information and information to inform the stakeholders. The Bank has fully complied with the provisions of the Right to Information Act, 2064 and has appointed a Chief Information Officer as per Section 6 of the Act.

The Bank is inspired by the motto of “Relationship Forever”. Accordingly, the needs and complaints of the customers have been properly addressed. The Bank has proceeded by addressing the complaints received from customers and stakeholders with high priority. The Bank has created a favorable and convenient environment to timely communicate customers’ grievances to concerned departments.

The Bank has established a Central Information and Grievance Handling Desk (CIGHD) at the central office to streamline the hearing of complaints received from the network spread across the country and to provide necessary information to the customers. CIGHD collects all information, complaints and suggestions and coordinates with various departments to provide necessary information and resolve customer complaints. CIGHD collects information through website, telephone, email, Facebook, Viber, Instagram, etc. and resolves issues as quickly as possible. The Bank has developed a system for customers to send complaints directly through the complaint portal on the website. The Bank has appointed a Grievance Management Officer to efficiently address and resolve customer complaints with high priority.

R. Trade Finance

The Bank has been providing various trade finance related services to ease the banking and financial needs of customers involved in national and international trade. The Bank is also one of the member among other banks under the Global Trade Finance Program of the International Finance Corporation. Under trade finance, the Bank issues letter of credit (LC), promissory notes, approved drafts, bills of exchange, securities, tender bonds, performance bonds and advance payment guarantees.

S. Treasury and Correspondent Banking

The Bank operates with Treasury and Correspondent Banking Departments to cater to the various needs of the customers and has helped to increase the profit of the Bank. This department has been equipped with advanced software that can directly view the changes in the rates of international Banks. The Bank has been actively dealing in local and international currency market, capital market, foreign exchange market and bullion market. While conducting its regular work, this department works within the guidelines issued by Nepal Rastra Bank and the internal policy of the Bank.

To expand business beyond the country’s geographical boundaries, the Treasury and Correspondent Banking Department has opened Nostro and Vostro accounts in international banks and established relationships with financial institutions connected to the Relationship Management Application (RMA) service promoted by SWIFT. The correspondent Banking network has helped the Bank to effectively manage trade finance transactions, treasury payments, inward and outward payments.

Under the agreement between Siddhartha Bank and the International Finance Corporation (IFC) under the World Bank Group to invest in the business of micro, small and medium enterprises (MSME) in Nepal and in climate financing, IFC has loaned the Bank 55 million US dollars. The loan amount provided to the Bank is the highest loan amount provided by IFC to any Nepali Bank so far. The approved loan amount to Siddhartha Bank from internationally renowned financial institutions confirms the good governance existing within the Bank and the sound financial condition of the Bank. With this collaboration, the Bank will invest in projects like clean energy projects, electric vehicles, climate friendly agriculture. This agreement will help to establish, operate and promote micro, small and medium businesses and also help to strengthen the economy by helping to some extent in solving the problem of lack of liquidity in the Banking system of Nepal. Adopting the Digital First practice, the Bank has always prioritized sustainable development and is committed to create a sustainable impact for future generations by keeping the overall business strategy of the Bank in mind to be environment-friendly, society-oriented and good governance aspects.

T. Increase in Branch Network

The Bank continues to expand its scope. The Bank has also expanded its branch network in rural areas to provide banking services to all Nepalese. In addition, the Bank has been providing banking services to the customers by expanding its reach and services even in the major areas of the country. In the last fiscal year, the Bank is actively providing banking services from a total of 196 branches (including 5 extension counters) by establishing new branches at New Road Gate, Thankot and Mulpani in Kathmandu, Bhaisepati and Lubhu in Lalitpur and new extension counters at Geta in Kailali. At present, the Bank has been providing expanded services to its customers through 226 ATMs, 123 branchless Banking service centers, internet Banking, mobile Banking showing its presence in 54 districts of Nepal.

U. Service Extension

The Bank has been providing the latest, modified, reliable and quality services to the customers according to the wishes and demands of the customers. For this purpose, the Bank has adopted the continuation of research and development as a specific aspect of the organization in order to provide timely services to the customers by evaluating the development of technology, the needs of the customers, the needs created in accordance with the changes in business, etc.

V. Bank’s Credit Rating

Credit rating agency ICRA Nepal Limited on December 19, 2022 has given the Bank a moderately safe rating of “[ICRANPIR] BBB+ and [ICRANP] LBBB+ (Pronounced as ICRA NP Issuer Rating Triple B Plus)”. Organizations that receive this rating are considered safe in meeting their financial obligations on time.

W. Bank Awarded for Best Annual Financial Report 2022

In FY 2021-22, the Bank was awarded for the ‘Best Annual Financial Report 2022’ organized by Nepal Institute of Chartered Accountants (ICAN) for financial transparency, accountability and governance based on the annual financial report. Also, the Bank’s financial report was selected in competition for the title of ‘Best Annual Report’ organized by the South Asian Federation of Accountants (SAFA). The Bank was also honored by ICAN and SAFA in 2020-21 as well with best annual financial report under banking category by ICAN and with certificate of merit by SAFA. Such titles have encouraged the Bank to publish more sophisticated financial statements in the coming days.