An Introduction To Banking In Nepal

An Introduction To Banking In NepalBank origin entirelyy derived from the word Banco meaning Bench is termed as a financial institution which atomic number 18 established in methodicalness to provide financial servicings to its customers while helping the investors at the same time. (De Alberquque, M., 1855) These be licensed by the government so as to help in the m atomic number 53tary chances of the country. In contrast to Nepal, generally Nepal Rastra Bank (NRB) the central Bank of Nepal has carve up into different groups and had licensed as per the limitations for the service. They be categorized as Commercial trust into sort out A, Development banks B and similarly finance companies and credit unions to Group CMachhapuchchhre Bank Limited An overviewMachhapuchchhre Bank Limited (MBL) is legally registered as commercial bank in 1998 in Nepal. It started its banking run from western region of Nepal with its well office in Pokhara, Nepal. Having a slogan Service with p ersonal touch, the bank now has expanded its work into dissimilar leaves of Nepal.Comp anys profileMission and incarnate dodgeMachhapuchchhre Bank Limited (MBL) believes on the provision of the best serve throughout different regions of Nepal to facilitate the customers with the extravagant banking operate to their homes. The bank is too one of the modern banks with mixed modern technologies which of course make banking a revolutionary interest and great help. With its smart set slogan, the beau mondes mission is to promote banking to different part of Nepal whether its rough region or Terai or verit open(a) mountains, MBL strives to facilitate the customers with fast, efficient and reliable service with personal touch as well as meeting the worldwide standards at the same time.MBL believes to provide its full fledged banking service and had started its full fledged branch in the Jomsom located high up in mountains too. It has its incarnate dodge of serving fast, effici ent and reliable service to promote banking either by providing credits, deposits and even safe and fastest remittance. The bank has tar formulateed to open 4 to a greater extent branches in the year 2009/10 so as to provide service with personal touch.Mission and Vision chartMission statement of an arrangement is a formal written statement which guides the objectives and actions to be fulfilled. The mission statement serves the kindwork or context within which strategies ar formulated (Hill Ch., Jones, G., 2008) The mission statement also gives guidelines of the actions and objectives to gain. G. Johnson, K. Scholes and R. Whittington defined mission as overriding purpose in line with values or expectation of stake holders.(Exploring corporate system, pp13) Vision statement of an organization is the future none where the order wants to be. G. Johnson, K. Scholes and R. Whittington defined vision as desired future state the aspiration of the organisation (Exploring corporate system, pp13)Mission StatementTo dispense customers with best, effective and efficient service in affordable rates and provide individually and e really service with personal touch.Vision StatementTo be the croak commercial bank with full fledged service all over Nepal and to be the No. 1 Bank of all year recognized by Nepal Rastra BankFig, 1 Mission and Vision chart of Machhapuchchhre Bank LimitedGoals and ObjectivesMBL possess a goal to be one of the popular and perfect service oriented bank rather than win oriented one. MBL even had issued various plans and objectives to help in the increment of the serve to its customers. In order to ease the banking service, MBL had aforethought(ip) to start telephone banking by which the clients washbowl stay in touch with their financial transactions just a step away from phone. They even had ready a goal to issue credit cards which some banks only fall in the service which outhouse be said as another grand goal and objectives to bear a cutting turn in to banking. In addition, to broaden the service, MBL will be opening its 4 more(prenominal) branches very soon. The objectives of the bank terminate be analyzed to provide maximum services to the people in apiece and every part of Nepal.Organizational Structure, Stakeholders and Man developmentMBL is operated and managed by death chair Mr. Surya Bahadur K.C., 6 board of directors and CEO Mr. Bhaikajee Shrestha (http//www.machbank.com) With approximate figure of 320 staffs all over the branches and head office, the caller-up follows Line organization but the decisions making authority be being granted to the branch managers for their designated branch. Various decisions, plans and policies are being decided by board members and final approval is done by the chairman merely day to day operational decisions are being approved by the CEO itself. Normally, the organization has all its delegation of power being centralized bar day to day operational decisio ns apart from head office to the branch managers for their designated branch. Most of the stakeholders are the board of directors and some political bodies too but mass of the investments are done by the board of directors. Also some staffs occupy some value of the stakes as well.Chairman/Board of DirectorsChief executive OfficerFig. 2 Organization chart of Machhapuchchhre Bank LimitedBusiness ProfileProducts and ServicesMBL provides various ranges of services to the customers. It is the pioneer in introducing the latest engineering and to introduce the centralized banking software named GLOBUS BANKING SYSTEM real by Temenos NV, Switzerland. Furthermore, MBL also provides internet banking, mobile banking, any branch banking, Trade Finance, Credits, ATMs (Automated Teller Machines), Remittance and various sort of deposits. The company is very sooner going to launch MBL credit cards and telephone banking as well. Also, MBL is the first bank in Nepal to provide PSTN (Public Switched earpiece Network) to its valued customers.Operational PerformanceMBL overall has shown a good mathematical operation as per its unaudited financial reports of the year 2008/09. Over its past decades MBL has shown increment on make as well as increment on its branches which of course shows that the company is doing well so far. At the end of one-fourth quarter, MBL had a net attain of 92M which shows that the company had numerous transactions throughout the whole quarter.(Source Unaudited 4th quarter end (15/07/09) of the fiscal year 2008/09, http// www.machbank.com)Market Position and ShareMBL overall have a good marketplace value and goodwill at the same time. Currently the market value of the cover is NPR 310.00 per share which shows a green clean-living on the progress of the company. Also, the bank have got 31 branches till date and have its 10 upcoming branches to be opened which of course keister be assumed as the market position of the company is good and doing wel l so far.(http//www.nepalstock.com, Nepal Stock Ex castrate as of closing price of 6th declination 2009)Part 2An analysis of the external and privileged surround of the company examined above and competitive position of the company (1000 words)Every company is affected by its external and internal surroundings. These are the integral part of the companies itself. External environment usher out be described as a set of elements which are not the part of the organization but possess an influence upon the organization. The external environment may constitute of consumers, suppliers and competitors which have the direct effect on the organization whereas the confirming elements of external environment may be government, State of the economy, scientific and technical growth, socio-cultural events and laws and policies by the government. Hence, whatever is the spick-and-span external environment, the organization has to cope up themselves. Similarly, internal environment can be term ed as the environment within the organization itself. They may include employees, shareholders or stake holders etc.tera The internal environment can be modified or amended as the whole authority and rights are embedded on the organization itself apart from external one.Internal environment of the companyThe internal factors can be analyzed by various models however the internal environment can be analyzed by victimization Lewis six factors model which describes the in-depth analysis of internal environment in context of MBL. Also, these factors give a broad idea of involvement of various departments in order to describe the internal environment of the company.IT (Information Technology)MBL uses a very ripe technology for the banking services. A new advanced technology called GLOBUS is being integrated in the company which provides best services in the banking field. It is also considered as the effective and powerful software which provides related backup services. The company a lso have its centralized selective information technology department which regularly looks ahead into develop new softwares and are alert 24 hours for any problems to occur. Also, the company have introduced V-Sat network for the branches which are in mountain regions as Mustang, Damak etc. Overall, we can say that the companys IT sector is very ofttimes advanced and is much more effective in banking environment.Management CapabilitiesMBL have a team of capable employees working in various departments. They are well qualified and the bank also regularly conducts various training programmes so as to make their employees much more capable in any sort of situations. Also, the company organizes in house seminars so as to promote the employees noesis much more. Because of its talented employees, the company is increasing its branches and is earning much more profit at the same time. The management is much more effective which is hence enabling the company to exist till now in the fi erce competition of banking in Nepal.FinanceFinance is one of a very important aspect for any firm. Considering the financial status of MBL, it is growing day by day and earning much more profit. MBL earned around NPR 92 M at the fourth quarter end of year 2009 whereas corresponding earlier year of NPR 85M and is earning day by day. MBL have a good relation with the central bank even and can issue up more shares upon needed. Thus it can be analysed that the financial position of the bank is much more stable.Research and DevelopmentMBL focuses on to the research and development of new aspects of banking and services to its prospective clients. The company has its own research and development department which focuses on to research new activities and to promote their services in to peoples. Because of the fierce competition in banking sector in Nepal, this department plays a snappy aim in to develop new schemes and new services to the clients apart from other banks. Also, the compan y invests good sum of money in to research and development of new services towards future perspectives.MarketingMarketing can be defined as the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage. (Paliwoda, Stanley J, John K. Ryan, 2009). The company has its own merchandising department which co-ordinates with research and development department. They twain have the same motive in order to generate much more potentiality and increase its overturn in best services to the customers. Also, the department regularly dissolves in market to gather new ideas and concepts which by the research and development department makes research and develops new strategies.HR (Human Resources)MBL have another department which looks around human resources and administration of the company. MBL welcomes new generation to employ in the company and believes on equal fortune for all. The department also administers and involves in to budgeting daily activities of the company. Also, HR department helps in to gather talented peoples and conducts various assessments among the employees in order to gain the best ending of it.The internal environment of the MBL focuses on to its core components as per Lewis 6 factors model. Analyzing the model, we can illustrate that the internal components of the company is very much effective and plays an important role in determining the internal perspectives of MBL.External Environment of the companyExternal environment for MBL are generally customers, competitors, central banks policies and socio-cultural aspects. The external environment plays a vital role in determining the external status of the company. Normally, the external environment is uncontrollable but directly affects on the functioning of the company. The external environment of MBL can be picterised by using PESTLE analysis. The PESTLE analysis determines the political, economic, soc io-cultural, technological, legal and environmental aspects which gives a clear picture of the external environment of the company.Political factorsNepal is a country where political factors play a vital role in each and every industry. Because of the regular strikes, riots in the country many more industries are very much affected. In context to MBL, because of the political factors, the company is suffering a lot as they cant operate efficiently during strikes, riots and because of the regular change of the government, various rules and regulations are modified which hence creates a various problems in to the banking of the company especially in MBL.Economic factorsThe economic situation of Nepal is always fluctuating. Because of it, the switch rates of various currencies are changing on rapid basis. Also, because of the development of various banks in Nepal, customers have a high bargaining power in between the banks. This has affected MBL severely as the customers who are only on MBL are now diverted on to the other companies. Even because of the economy in Nepal, most of the people dont wish to invest money in to any projects and the ratios of consumer loans are decreasing because of the interest rates and the economy.Socio-cultural factorsMBL possess certain social responsibilities and are maintaining good as they are much more into providing good services to the customers. Also, the company invests certain amounts in to education for childrens and various governmental and non governmental activities. It has been a trend in Nepalese banking sector of investing funds into various programs for child welfare, transportation and various educational activities. Also, the company has various schemes for different age groups and also contributes for their personal growth especially for children.Technological factorsThe banking sector of Nepal is following advanced technology in to serving new services to the customers. Various advanced programs are being organ ized in to gather new innovations in terms of banking of the company. MBL adopts advanced technology in to serve effective and accurate services to the customers. Also, the company even invests funds into its research and development department so as to launch new services in considering the needs of the current market. court-ordered factorsThe banking of Nepal is regulated by Central Bank of Nepal (i.e. Nepal Rastra Bank) The central bank regulates various rules and regulations in order to constitute the proper banking services to the customers. The central bank regularly changes rules and regulations which hence make a vast confusions and time in order to adopt the new rules and regulations. Also, the legal factors of Nepal affect the proper functioning of the banking services in Nepal. Not only in context of MBL but overall banks in Nepal.Environmental factorsThe environmental factors play a vital role in each and every organization. In terms of MBL, the environmental factors are generally attitudes of consumers, media and the government. Because of the reputation of MBL, various customers trust the company much more which is hence helping in to gain success in company. Also, media also helps the company in to promote their services towards the general public as by the investment towards the media sector as well as various other sectors too.Thus internal and external environment plays a vital role in determining the companys portfolio from inside and away(p) layer as well. In terms of MBL, we can demonstrate that the internal environment of the company is much more effective whereas the external environment is much more effected by various factors as these can hardly be controlled.Identification and evaluation of alternative strategies that would consist of corporate goals and objectives and select an book future new outline.Strategy is the mean by which objectives are achieved and pursued on time. According to Gavetti G and Jan Rivikin W Strategy is cho ice about what it chooses to do and not to do. MBL generally focuses into customer satisfaction and excellent service to their business clients. To increase more customer satisfaction and performance, MBL always strive to improve the performance by various methods and latest technology. To be the best service provider, MBL aims to open additional branches so as the banking service can be available quickly anywhere any time. However, various alternative strategies can be discovered which will increase the customer satisfaction level and services at the same time.Ghemawat P. developed a model called AAA trigon which identifies three distinct types of strategy. They refer to edition, aggregation and arbitrage. Adaptation means to familiarize with new technology and environment and aims to maximize companys local relevance. This also boosts the revenues and market share by maximizing a firms local relevance by simply creating local units in each national market that do pretty good jo b carrying out all steps in the supply chain. (Ghemawat, P. 2007) This framework even focuses on to the company to develop its new image towards the new generation. Since, the world is changing day by day and is the new technology the adaptation into new environment is a must. The another one is aggregation where a company tries to achieve economies of scale by developing new products and services by creating both local and spheric operations. It also attempts to deliver economies of scale by creating regional or sometimes global operations and involves standardizing the product or service offering and grouping in concert the development and production process. The company also has to develop and introduce new products and services which reasonably have benefits upon everyone. Arbitrage means to locate and supply services in different parts. It is the exploitation of differences between national or regional markets, often by locating separate parts of the supply chain in different places. (Ghemawat, P. 2007) Thus as a future strategy, the company should now focus on to developing new products and services and enlarging its business.Fig 3.Ghemawats AAA triangle frameworkAnother Strategy is BCG matrix developed by Boston Consulting Group. According to Kotlar (1996) BCG approach helps to classify a companys all SBUs according to the growth share matrix. It identifies firms strategic business units relating to its market share and market growth rate. The growth share matrix can be divided into four types as follows marvel MarksStarHigh LowHighDogsCash cowsMarketGrowthLowMarket shareFig 4. Boston Consulting Groups BCG hyaloplasmThere are two axis which represents as Market Growth rate and Market Share. Each and every cell inside the matrix can be highlighted as followsStarsStars are high market growth in relation to high market share. These are the pillars for each and every business. The stars in MBL are the deposits and loans and advances by which the company i s able to make much more income. This requires much more investments as well and also increase in high market share and growth as well because if the company have more deposits and loans, the companys profit will increase subsequently.Cash CowsCash Cows are low growth in market but high market share. These require less investment but would affect in the market shares. In MBL, cash cows can be considered for Letter of Credits, guarantees which require less investment but would affect on the market shares. The cash cows dont inescapably effect the market growth as regards to stars.Question MarksQuestion marks are low share business units in high market growth. The question marks are some aspects which the management should think in order to overcome it and turn into stars or cows. In MBL, the question marks can be market for cards (debit and credit cards) etc. The company should have special consideration in question marks.DogsDogs are low growth in market with low share price. They may generate some amount of funds but doesnt make any guarantees on companys income. In MBL, Dogs are lockers departments etc.BCG Matrix gives a broad idea about the factors that are prevailing in a company which are giving much more profit or loss in terms of market group. This strategy could give the company an innovative idea about building or restructuring the business.Comparing both the strategies, MBL should adopt Ghemawats AAA triangle framework as this clearly matches to the organization goals and objectives to attain in future. The framework explains that to stabilize a product, there has to be an adaptation factors, aggregate it and arbitrage. MBLs target is to be the top commercial bank in Nepal and introduce new products and services which can only be possible if the company focuses on the framework. Also MBL should focus on the information flow to all the branches so as to properly stabilize the new services. Neilson, G., Martin K. and Powers E (2008) suggests that the enterprises fails at strategy execution because they go straight to structural reorganization and neglect the most powerful drivers of effectiveness-decision rights and information flow. Thus, before starting any new services or any new tasks, the company should gain its adaptation factor so that they could adopt in new environment comfortably. After adopting in the environment the company also needs to increase its market into local and national markets to attain much more productivity. Thus we can see that if MBL adopts Ghemawats AAA triangle framework, the company would be able to attain its mission and vision that has been projected by them. This would increase the companys effectiveness on any tasks and would help them to gain much more success at the same time.Kim C W and Mauborgne R, Blue Ocean Strategy argues that companys performance is not necessarily determined by industries competitive environment. It argues that strategy can shape the structure and it is called reconst ructions. They even add that instead of letting the environment define your strategy, craft a strategy that defines your environment. This highlights that rather than creating a strategy limited only in papers you will require to adopt to the environment, aggregate them towards the near future group and develop them in local or global market which is very much similar to what Ghemawat had proposed in his framework.Identify and develop outline time table and resources requirement to implement new strategy.Its very much obvious that to make each and every strategy successful, various resources and time tables are required. Proper dedication and knowledge will only be able to make a project successful. The strategy developed by Ghemawat as AAA triangle framework is something which I suggest to be adopted. The strategy Equal opportunities to every people financing in their needs and motivate into a new track would certainly help to start up banking into a new style and lead to a success ful pathway. This strategy would develop an awareness and usage of the services to the maximum. Basically, new guidelines should be created for to make this strategy fruitful. A system where people can get financing easier should be initialized so as new business entrepreneurs could be able to start up their business with the banks help at the same time. Various job opportunities should be require generating up not specifically full time as initialization of part time or hourly job basis could be done so that maximum number of fresh graduates or unemployed people could get employment and in return the organization will be benefited by different ideas, opinions and new way of working.As Ghemawats AAA framework suggests Adaptation, Arbitrage and Aggregation, various resources should be deald and new services to be launched asLaunching various deposits schemes targeting to students, old age peoples and children. Inauguration of old age cards, student card etc. which can be used in shop ping centre, transportations etc.Launching online bill payments from their accounts via mobile.Use of Credit cards system elsewhere.Cash Deposits in any cash points or ATMs.Collaboration with educational institutions for banking services.Promotion of various NGOs, INGOs or programs to advertise them free of cost.More job opportunities to account holders, insurance benefits or easily loan availability facility.The time frame for this strategy entirely depends upon how fast the authority decides to start it up however if this new style of business could be adopted, major changes will occur and the profit will sky rocket like never happened so. Generally, the top level managers should require understanding the benefit of this strategy and how it could be implemented in short span of time. New concepts, ideas should be promoted which could cover the usual old style of banking as with the new age of development. Meanwhile, the get under ones skin of old peoples which new ideas and worki ng style of modern age could be more helpful to boom the business and to have a look on to the business with different perspective. Meanwhile, the company could employ 30% of experienced old people and the rest with new and energetic peoples. This would certainly create up a milestone between old peoples experience and new peoples working efficiency. Furthermore, invitation or equal opportunities should be started so that the people who belong to lower community or of different age group could certainly use their efficiency to attain the same goal.Major functional departments should also be considered while discussing the time frame and the resources required adopting AAA triangle framework strategy asHR (Human Resources)/Administration This department should recruit new employees and should start up giving tolerable trainings to its exisiting employees. The administration should also allocate various resources required for to start up new services. The time frame for this sFinance The finance department should allocate budget required for the resources and new projects.IT (Information Technology) This is a primary essence as without new technology new services cant be launched in todays data processor generation.Marketing/Research and Development Various researches should be conducted prior making decisions and hence publicity of services should be done at the same time.Therefore, summarizing the all we can analyze that the materials that are required for to implement the new strategy are time consideration, additional opportunities in various field, change of working system, focalise on to new peoples or modern age groups and also consideration in the new technology. These sort of materials could certainly help in to implement the new strategy successfully and to start up the new perfection on to the business however new understanding and far sightedness upon these should be developed at the beginning before proceeding ahead with these materials. Also the time factor should be considered as well so that the strategy could be implemented on the right time. Furthermore, it can also be said that success entirely depends upon opportunities and hard work, hence to be more successful, an individual should be able to do hard work and the company should be able to create new opportunities. Then only the strategies could really show up some change on the development and growth of the company.