2 nabil bank limited report 2014-15 (english...nabil bank overview in the initial years, banking...

2 Nabil Bank Limited

From the beginning till now...From now to days ahead!From the very day of its establishment in 1984, Nabil standsfirmly at the forefront of the banking industry in Nepal. Our modern bankingapproach has fostered a strong partnership with multitude of institutions andindividuals, adding values, enriching lives and reaping benefits for all.We complement each other’s progress. We value every relationship. The tradition continues to this day and will continue in the days ahead!

cover

All the pictures of birds were taken in Nepal by Mr. Mahesh Bajracharya.

Birds of Nepal: As diverse as Nepal itself!

From the resident birds that stay all year around

to the breeding ones that spend most of the

growing season in Nepal to raise their young;

From migrant birds who pass through Nepal with

the seasons, to birds that winter to escape colder

conditions up north...

Nepal is home to an impressive number

of species of birds.

1Annual Report 2014/15

PoNd HeroN

01. overview 5-241. AbOuT NAbil bANk2. VisiON, MissiON & VAlues sTATeMeNT3. FiNANciAl HigHligHTs4. MessAge FrOM cHAirMAN 5. bOArd OF direcTOrs6. ceO’s MessAge7. MAcrO-ecONOMic eNVirONMeNT

02. oPerAtiNg & FiNANciAl review 25-491. cOMMeNTAry ON key iTeMs OF

sTATeMeNT OF FiNANciAl POsiTiON OF PAsT 5 yeArs

1.1 sHAreHOlder’s FuNd1.2 dePOsiT MObilisATiON1.3 grOss leNdiNg POrTFOliO1.4 grOss iNVesTMeNT POrTFOliO1.5 disTribuTiON OF diVideNd

2. cOMMeNTAry ON key iTeMs OF iNcOMe sTATeMeNT OF PAsT 5 yeArs2.1 NeT iNTeresT iNcOMe2.2 Fees, cOMMissiON ANd OTHer

OPerATiNg iNcOMe2.3 FOreigN excHANge iNcOMe2.4 sTAFF exPeNse2.5 OTHer OFFice OPerATiNg exPeNses2.6 NeT PrOVisiON exPeNse2.7 PrOFiTAbiliTy

3. AcHieVeMeNTs OF curreNT yeAr3.1 equiTy3.2 dePOsiTs3.3 lOANs3.4 iNVesTMeNTs3.5 NeT iNTeresT iNcOMe3.6 Fees, cOMMissiON ANd OTHer

OPerATiNg iNcOMe

3.7 FOreigN excHANge iNcOMe3.8 sTAFF exPeNse3.9 OFFice OPerATiNg exPeNse3.10 PrOVisiON FOr POssible lOsses3.11 NON-OPerATiNg iNcOMe3. 12 iNcOMe/ (exPeNse) FrOM exTrA

OrdiNAry AcTiViTies3.13 sTAFF bONus, cOrPOrATe

TAx ANd NeT PrOFiT

4. VAlue geNerATiON ANd disTribuTiON4.1 VAlue geNerATiON4.2 APPlicATiON OF VAlue geNerATiON

5. segMeNTAl PerFOrMANce ANAlysis5.1 PriMAry segMeNT5.2 secONdAry segMeNT

6. iNTeriM POsiTiON ANd PerFOrMANce (uNAudiTed)

6.1 iNTeriM FiNANciAl POsiTiON6.2 iNTeriM FiNANciAl PerFOrMANce

7. NAbil iNVesTMeNT bANkiNg lTd.7.1 OVerVieW7.2 cOMMeNTAry ON key iTeMs OF

sTATeMeNT OF FiNANciAl POsiTiON OF PAsT 5 yeArs

7.3 cOMMeNTAry ON key iTeMs OF iNcOMe sTATeMeNT OF PAsT 5 yeArs

03. Products ANd services 50-591. cOrPOrATe bANkiNg sbu2. iNFrAsTrucTure ANd PrOjecT

FiNANciNg sbu3. sMe ANd MicrOFiNANce sbu4. reTAil leNdiNg sbu5. dePOsiT relATiONsHiP MANAgeMeNT

sbu

tABle oF coNteNts

6. cArds ANd elecTrONic bANkiNg sbu7. reMiTTANce busiNess ceNTer sbu8. bANcAsurrANce sbu9. TreAsury sbu10. OTHer serVices

04. goverNANce 60-761. THe bOArd OF direcTOrs1.1 sTrucTure OF THe bOArd1.2 iNFOrMATiON TO THe bOArd1.3 direcTOr’s APPOiNTMeNT ANd

iNducTiON1.4 cHANges iN THe bOArd1.5 relATiONs WiTH sHAreHOlders

2. bOArd cOMMiTTees2.1 AudiT cOMMiTTee (Ac)2.2 risk MANAgeMeNT cOMMiTTee (rMc)2.3 cOMMiTTee relATiNg TO sTAFF serVices

ANd FAciliTies

3. iNTerNAl cONTrOls3.1 AddressiNg OPerATiONs risk3.2 AddressiNg crediT risk3.3 AddressiNg excHANge risk3.4 AddressiNg dATA securiTy risk 3.5 sTATuTOry ANd regulATOry

cOMPliANces

4. eMPlOyees5. cOrPOrATe susTAiNAbiliTy6. cOrPOrATe sOciAl resPONsibiliTy

05. FiNANciAl stAtemeNts ANd otHer iNFormAtioN 77-1801. sTATeMeNT OF direcTOr’s

resPONsibiliTy2. disclOsure OF iNFOrMATiON uNder

secTiON 109(4) OF cOMPANies AcT 2006

3. disclOsure relATed TO sub rule (1) OF rule 22 OF securiTies regisTrATiON ANd issuANce regulATiON, 2065

4. iNdePeNdeNT AudiTOrs’ rePOrT-grOuP5. grOuP FiNANciAls6. iNdePeNdeNT AudiTOrs’ rePOrT

-NAbil bANk7. FiNANciAl sTATeMeNTs -NAbil bANk

06. sHAreHolder iNFormAtioN 181-1831. sTrucTure OF sHAre cAPiTAl2. rePreseNTATiON iN THe bOArd OF

direcTOrs3. sHAreHOlder’s PrOFile4. sTOck syMbOl

5. ANNuAl geNerAl MeeTiNg5.1 OrdiNAry resOluTiON5.2 sPeciAl resOluTiON

6. sHAreHOlder eNquiries ANd cOMMuNicATiON

6.1 cOMMuNicATiON6.2 eNquires6.3 TAxATiON ON diVideNds ANd bONus

sHAres6.3.1 TAxATiON ON diVideNds6.3.2 cAPiTAl gAiNs ON disPOsAl OF sHAres

07. NABil iNvestmeNt BANkiNg limited 184-214

7.1 direcTOr’s rePOrT7.2 iNFOrMATiON uNder secTiON 109(4) OF

cOMPANies AcT, 20637.3 iNdePeNdeNT AudiTOr rePOrT

-NAbil iNVesT7.4 FiNANciAls OF NAbil iNVesTMeNT

bANkiNg liMiTed


Perching firmly since 1984…Creating history in the modern

Nepalese banking industry.

orANge Billed tHrusH


ABout NABil BANk

overview

in the initial years, banking service was at its primitive stage in the country and was perceived as involving complicated paperwork, inefficient processes and ineffective delivery which used to dissuade the mass from approaching banks. Nabil invested in information technology, human resource development and effective delivery channels from the beginning and is rightly credited as being the pioneer in customer centric modern banking services in the country. To this date the bank continues to focus in technology, human resource and product innovation to ensure that the want and needs of the mass is delivered through efficient delivery channels. We innovate and thus reap the fruits of innovation through increasing trust and confidence of customers towards the banks. Today we lead the private banking sector of the country in terms of balance sheet size, customer base, geographic outreach, business portfolio and profitability.

At 16 july 2015 Nabil serves its expanding clientele base with a network of 52 branch offices, 89 ATM machines, 1450 Nabil remit agents, 969 point of sale terminals

and over 170 international correspondent banking relationships.

At 16 july 2015 Nabil has a balance sheet of Nrs.116 billion, net worth over Nrs.9 billion, customer deposits of Nrs.104 billion, gross customer lending of Nrs.67 billion and profit after tax of Nrs.2.1 billion. in usd terms these figures translate to balance sheet of usd 1,141 million, net worth over usd 93 million, customer deposits of usd 1,025 million, gross customer lending of usd 661 million and profit after tax of usd 21 million.

Nabil’s strong foundations, inexorable endeavors and clear vision have capacitated us to become resilient even at some of the most testing times in our nation’s history and scale the current heights.

Over the years the culture and values Nabil has inculcated, the human resource it has groomed, the systems it has implemented, and the continuous oversight from the board continue to provide strong support for the bank moving forth on an unparalleled path of success.

Nabil is the first private sector bank in Nepal established in 1984 A.d. the bank was set up in joint venture with foreign partner then dubai Bank ltd. and local partner institutions Nepal industrial development corporation, rastriya Beema sansthan ltd. and Nepal stock exchange ltd.

01


Spreading wings and Soaring into the air…as a first rate bank across all strata

of the nation

red Billed Blue mAgPie


visioN, missioN & vAlues stAtemeNtvisioN stAtemeNtAt Nabil, our Vision is to be a bank for all across all geopolitical zones and socioeconomic stratums of the nation that can provide myriads of financial solutions and create values for all our stakeholders, to stand in the community with our economic and civic roles. We look forward to emerging as a first rate bank across all stratums of the nation.

missioN stAtemeNt We at Nabil work together up to our vision and to bring it into reality. Our mission is ‘Therefore to prove that Nabil is driven by the spirit for realizing those visionary’ aspirations. With that end in view, we work in partnership with our stakeholders and the community at large. Our roadmap to reaching where we have set our mind on is by maneuvering our strategic action plans through a well-teamed and synergistic workforce into industrial end products – our customized services. Our approaches are to differentiate our products by reengineering them with the best technologies and management philosophy keeping in focus our customers’ satisfaction over and above everything else at all times. We have set our goals and objectives to hone the skills of inspired Hr force and tailor our products and services to that end. With an all-inclusive approach Nabil engages in customizing ranges of products catering to the entire gamut of society from financing megaprojects to underprivileged individuals and promoting enterprises across all segments of society by adding values to nation building endeavours. We are branching out on a national scale through our wide-ranging

points of representation representing different geographic and economic zones along with our broad global network as a 1st cHOice PrOVider OF cOMPleTe FiNANciAl sOluTiONs.

vAlues stAtemeNtWe surge to turn our services and products into economic values for our treasured customers, taking care of their financial needs. We know the world is changing and to keep pace with that we customize our services and re-engineer our products in sync with changing time and technology. We are always geared up for translating great aspirations of our stakeholders into economic and social values. We know our customers expect unparalleled service standards; our community looks forward to seeing the bank emerging as responsible corporate entities that cherish social and economic harmonies in the community. We go beyond just making profits. Our shareholders value financial returns together with the safety of their investments.

At Nabil, values for its employees are always well-defined, for it always knows that staffs are great movers, therefore recognizing their financial, corporate and social values get their spirits always going to the creative end.

Nabil fosters corporate governance, realizing the values our regulators always cherish through financial disciplines. besides, bank has set c.r.i.s.P. (customer Focused, result Oriented, innovative, synergistic and Professional) as its values, which it lives by in day to day operation of the bank’s business.


House sPArrow


customer Focused

cAriNg & serviNg…

deligHtiNg tHe customer witH our services, NABil

cAme uP witH tHe coNcePt oF customer cAre ANd

deligHt iN tHe BANkiNg iNdustry oF NePAl. tHis

PArAdigm sHiFt iN BANkiNg HelPed customers to

Ask tHe BANk For A sPeciFic Product oF tHeir Need

For tHe Fullest sAtisFActioN. NABil AccordiNgly

HAs BeeN ProvidiNg tHe services tHAt Best suit

customers’ Needs ANd tHAt HAs HelPed us keeP

our customers At tHe core oF our Activities .


FiNANciAlHigHligHtsAs of Mid July


loNg tAiled miNivet FemAle


result orieNted

sHAriNg sweet Fruits…

All our ActioNs ANd services Are iNteNded to

yield desired results- For All our stAkeHolders.

NABil AlwAys ArcHitects BusiNess ideAs, desigNs

Products ANd serve tHe customer witH All

tHe determiNAtioN tHAt BeArs sweet Fruits ANd

BriNgs desired results.


cHAirmAN’s messAgei feel privileged to share the results of the bank for the year 2014/15. The results are satisfactory considering the stressed environment in the country under political, business and economic fronts. After the second constitution Assembly election held on 19th November 2013 and formation of government by the two largest parties, the business sentiment improved which gave some respite and hope after fluid political situation during the last 7 years. This gave a much needed relief to the business community which was reflected in the securities market as well, even though the political mist was not fully lifted as there are still some loose ends to tie up regarding implementation of the federal framework of the country under the new constitution. With a positive move in the economy opening the year followed by a timely budget in the country, business activities went well till the 3rd quarter of the year. As the process for constitution writing went on, some political parties then started calling for strikes and closures which, however, did not do major damage. The country’s gdP growth remained at a moderate level of 4.58%. There was good credit growth and the bank was able to make good credit expansion and deposit growth.

However, the country was hit by the massive earthquake on April 25, 2015 and its powerful aftershocks continued to rock the nation afterwards. The loss of life, injuries and property damage were severe which left a deep wound in the economy. it pulled down the growth of the economy which is estimated to have slipped to 3.04% from the initial projection of 4.58%. Normal life including business activities of the entire country remained at a standstill for a longtime. The situation further worsened when the constitution drafting process was initiated after the consensus of the major political parties and some fringe parties which were against the process resorted to a strike. This brought about a disruption of supply of essential items including fuel and caused closure of businesses for a long time. The initiatives taken by the central bank like extension of time for payment of dues, etc. have been more than welcome and are bearing fruit which is further expected to support the system without any major dents.

With the growth that the bank achieved during the first nine months of the year, it was possible to post satisfactory results under the areas like expansion of clientele base, overall growth in the top line, profitability position and reward to all the stakeholders. We have equally taken account of changing environment and have adopted mechanisms whereby more control can be maintained for overall goodness of the bank. Taking the technological advancements in positive stride, our systems and processes were continuously updated to exercise effective internal control. being associated with the bank for about 30 years intermittently and being the longest serving member in the board, i also feel honored to be a part of this institution which heralded banking into a new era in the country.

The bank has embraced all the changes and is ready to meet the need of time including capital requirement as per the new standard. The institution that it is today is all because of the untiring efforts put in by the visionary board, dedicated staff, and continued guidance from the regulatory authority and the patronage of our diverse customers. induction of new services in the country like credit card, consumer Finance on a larger scale, infrastructure Project Financing under a dedicated unit, felicitating Public shareholder for their silent but

valuable contributions are some of the initiatives the bank takes pride in. The contribution of predecessors is unforgettable. The strong foundation of the bank is one of the facets that have been put in place by the Nabil cadre over the last 31 years. On this occasion i would like to take a few of those names whose invaluable contribution has driven the bank to present stature. They have been my companions who played key roles in the success story of Nabil bank. They are late sashi Narayan shah, the first chairman of the board, late kalyan bikram Adhikary, former governor of Nepal rastra bank, late g.s. srivastav and Mr. s. c. kabadkar, both former executive directors of the bank and my fellow board members and late supriya gupta, a veteran banker and former board member. They deserve deep respect and appreciation for their contribution to the success of this bank.

intending to keep the aspirations of our shareholders high, the bank has proposed one of the highest dividends of 36.84% to its shareholders including 6.84% in cash when the entire industry is having to deal with the challenge of injecting for fresh capital. The contribution towards business expansion, employment creation and significant tax contribution to the government are some of the feathers in our cap.

The bank has also made us proud by winning some awards this year. Nabil was conferred with the best Presented Accounts Award by the institute of chartered Accountants of Nepal for the sixth consecutive year which reflects the disclosure compliant culture of the bank. The south Asian Federation of Accountants has also awarded us with a Merit certificate which also gives us the encouragement to excel further. The bank has been awarded with highest tax payer under banking sector by inland revenue Office, Nepal for its contribution to government revenue.

Moving ahead in search of excellence, we are bound to come across challenging scenarios under business and operating conditions. We will hold ground and will move forward always striving to ensure safety and security of every ground we cover. We will maintain the best governance practices to earn trust from all business partners, regulators and other stakeholders. We will try our best to maintain the tempo and shall give our fullest for the overall betterment of the institution, stakeholders and the industry.

i should not shy away in recognizing the contribution of my fellow board members. The success of any institution is only possible when all members in the board work in unison which was amply evidenced for which they deserve a round of applause. i would also like to express my sincere gratitude towards our customers and business partners for their trust and cooperation that has enabled us to become their bank of first choice. similarly, standing on the verge of the 32nd year of operation, it would not have been possible without the continuous support and guidance from the regulators for which i would like to thank Nepal rastra bank, securities exchange board of Nepal and Office of company registrar. The position achieved by Nabil today is because of the concerted efforts from all it’s family members. so, on behalf of the board, i would like to express my appreciation to the employees and the management and thank them for all their efforts year after year and expect the same to continue in the years ahead.

sHAmBHu PrAsAd PoudyAl Chairman


mr. AsHisH sHArmA Board MemberRepresents Group “C” Shareholders

Mr. sharma, aged 37, has been in the board of directors since 2012 A.d. He holds an MbA degree from the Asian institute of Technology, Thailand. He is the chairman of united insurance company ltd., a general insurance company. He has been associated with different business and social organizations.

mr. dAyArAm goPAl AgrAwAl Board MemberRepresents Group “A” Shareholders

Mr. Agrawal, aged 51, has been in the board of directors since 2004 A.d. Prior to this also he has held directorship in the bank during 1994 A.d. -2003 A.d. Mr. Agrawal is an entrepreneur, a social activist and a media person. He has been in the business for the last three decades.

mr. NirvANA cHAudHAry Board Member Represents Group “A” Shareholders

Mr. chaudhary, aged 34, has been in the board of directors since 2010 A.d. Mr. chaudhary holds an MbA degree from kathmandu university, Nepal. He is the Managing director of chaudhary group, a Nepali business conglomerate. He also holds directorship in united insurance company ltd. He has previously held directorship in united Finance company ltd.

mr. sHAmBHu PrAsAd PoudyAl ChairmanRepresents Group “C” Shareholders

Mr. Poudyal, aged 71, has been in the board of directors since 2004 A.d. Prior to this also he has held directorship in the bank during 1986 A.d.-1994 A.d. He has a rich experience in the field of banking and insurance. He has worked at Nepal rastra bank, the central bank of Nepal for seventeen years. during 1999 A.d.-2002 A.d. he was the executive chairman of rastriya beema sansthan, a public sector corporation carrying out both life and general (non-life) insurance business and is one of the largest insurers in the country. He is also a former chairman of Nepal Housing and development Finance co. ltd. He was also actively engaged in social non-profit making institutions like Nepal Mountaineering Association in the capacity of Vice President, Nepal red cross society (kathmandu branch) and Nepal Family Planning Association (kathmandu branch) in the capacity of executive Member.

BoArd oF directors


mr. moHiuddiN AHmed Board Member Represents Group “A” Shareholders

Mr. Ahmed, aged 78, has been in the board of directors since 2011 A.d. in the past also he held directorship in the bank intermittently and has represented class ‘A’ shareholders. Mr. Ahmed holds Master’s degree in international relations and bachelor’s degree in economics from the university of dhaka. He is a former Ambassador of bangladesh to Nepal, senegal, sierra leone, ghana and gambia. He has also represented his country bangladesh while in foreign affairs service and has served in india, indonesia and the united kingdom in various capacities. He also held directorship in janata bank, bangladesh.

mr. vireNder PAul dANi Board Member Represents Group “A” Shareholders

Mr. dani, aged 67, has recently been appointed in the board of directors on 25th August 2015. He is a senior banking and insurance executive with an extensive knowledge in dealing with retail and corporate clients. during 2003 A.d. -2008 A.d. he was the Managing director and ceO of Nepal sbi bank ltd. He is a former senior Vice President of sbi life insurance co. ltd., Mumbai.

mr. PrAtAP kumAr PAtHAk board Member independent / Professional director

Mr. Pathak, aged 59, has recently been appointed in the board of directors on 25th August 2015. He holds a MPA degree with specialization in Managerial Finance. He has served in the government sector in different capacities and recently held the post of expert consultant of the Ministry of youth and sports. in the past he also served as the Financial comptroller general under the Ministry of Finance. He also held the post of chief district Officer of Nepal government in different intervals.


ceo’s messAgeNabil bank’s results in the financial year 2014-15 have been strong and ought to give satisfaction to all stakeholders considering that the country and its economy had to endure a virtual roller-coaster ride during the year. Firstly, the continuing political stalemate and unstable government, despite of a second attempt at drawing up a constitution, dampened economic activities and then the devastating earthquakes of 25 April and 12 May 2015 followed by continuous powerful aftershocks, that took almost 9000 lives, injured 22,000 people and destroyed or damaged 700,000 houses and affected millions of people, threw everything else out of gear. The damage to the nation’s psyche in the aftermath of the natural disaster was deep and unprecedented. The economy was in shambles with extensive business disruption, tourist inflow drying up, work on infrastructure projects and housing construction coming to a standstill and the government and private sector machinery incapacitated by a sense of shock by the enormity of the devastation and its aftereffects and their attention diverted towards search, rescue, relief and recovery efforts. The saving grace was the relative macro-economic stability, propped up by low government debt and strong foreign exchange reserves bolstered by a massive inflow of worker’s remittances and international aid and a healthy revenue growth.

Notwithstanding the shock from the aftermath of the earthquake, the bank was able to post a significant growth in its balance-sheet helped by the momentum picked up the earlier three quarters of the fiscal year. it’s pleasing to see that despite of the immense challenges, the bank continued to lead the league table by posting the highest profit among all private commercial banks at NPr 2,094 million, which, however, is a decline of 9.7% from the previous year. The decline in profit is partly attributable to conservative provisioning on some stressed assets and a drop in margins due to excess industry liquidity which had the effect of reducing yields on government securities and high level of idle investible surplus funds that had to be carried despite of the bank’s success in lowering interest cost and increasing low cost cAsA deposits.

Against all the odds, the bank was able to maintain healthy profitability with a return on equity (rOe) of 22.7% and return on Asset (rOA) of 2.1% bolstered by good asset quality reflected in gross Non-Performing Assets (gross NPA) of only 1.82% and Net Non-Performing Assets (Net NPA) of only 0.38% and a strong capital base with a capital Adequacy ratio (cAPAd) of 11.57% which is well above the regulatory requirement of 10%. The high rOe of 22.7% in this challenging environment for a large, established bank like us, is an important measure of our effective use and deployment of shareholder capital which, i’m sure, all shareholders can take satisfaction from. despite the economic turmoil and continuing political fluidity, we believe that we have delivered strong and consistent results, which can be gauged from the fact that over the last decade, we have increased our balance-sheet size by 519%, revenue by 250% and Net Profit by 230%.

We achieved these results through well-balanced and well-diversified lines of business, viz., corporate banking, infrastructure and Project Financing, Mid-corporate & sMe banking, retail banking and Trade Finance.

during the year, the bank has expanded its customer base with a view to reaching untapped markets and reducing concentration risk on its liability book. The bank is also one of the pioneers in the country to introduce microchip embedded credit and debit cards which has significantly enhanced security and increased the acceptance of our cards in the international arena. The magnetic-stripe-based cards of all customers have been replaced with new secure cards. during the year, we also introduced new internet-based online services to our corporate customers which enabled large corporates to manage vendor payments without the need to issue physical cheques and also helped them in more efficient cash management from the comfort of their offices. Other new innovative products and services were also introduced during the year to enhance customer experience and ease.

The bank also had an extensive information system Audit carried out by international experts which not only provided us the much needed re-assurance of the robustness of our system but helped us in strengthening it further for ensuring a secure and friendly banking experience to our customers. service delivery efficiency has also been improved to a large extent with the adoption

of process automation with the added benefit of better cost management. We continuously worked towards upgrading our systems, processes and corporate practices to be in line with international standards. Our major work processes have now been centralized to enhance control, reduce duplication, reduce manual intervention and generally bring about work efficiency, thereby, reducing human-induced errors and costs and improving the standard of services. This is supplemented by continuous training and development of employees to better equip them with the required skills in performing their jobs more effectively and efficiently.

internal control measures have been further enhanced to keep pace with the ever-stringent and necessary Anti-Money laundering/countering Financing of Terrorism (AMl/cFT) compliance regulations. We continue to strengthen our risk management practices which ultimately help us reaffirm our position among the leaders in the banking industry.

The current year has been even more challenging due to political disturbances in the Terai/Madhesh region after the promulgation of the constitution, leading to disruption in the flow of goods at border points for months resulting in severe shortages of fuel and other daily necessities. The economy has taken a beating with the distinct posibility of gdP growth estimates being revised to well below 1% considering the on-going protest, supply disruptions, political uncertainty, lacklustre credit demand and poor capital spending by the government. inflation has shot up to more than 10% and the purchasing power of the common man reduced considerably. businesses have been affected badly and credit demand remains subdued. The constitutional issues that were the primary cause of the political disturbances remain unresolved and tangible improvement in the investment climate is yet to be seen. We can only hope that we will see better days ahead with the wise counsel of our political leadership and the government taking necessary steps to pave the way ahead for an inclusive, vibrant economic revival by learning from the past; and overcoming the binding constraints and evident hurdles.

Our success, like in any organization, requires more than a sound, executable business strategy. i’m personally committed to ensuring that good corporate governance and ethical values are embedded in our culture across the bank. Nabil bank has its foundation in the primary values we have held since we were established in july 1984. These include being customer-focused and always acting with respect and integrity, being result-oriented and ensuring satisfactory delivery, being innovative for better customer experience, bringing about synergy in everything we do and always being professional in our approach to doing business. They also encompass our core strengths, including prudent risk management, a strong balance-sheet and a focus on cost management with the ultimate aim of creating value for all our stakeholders.

Our success would not have been possible without the excellent support and continuous guidance provided by our chairman and board of directors comprising of a group of experienced professionals in diverse fields of expertise. They have not only helped build the right, and yet flexible, strategic architecture of the bank but also ensured that there is an appropriate degree of board oversight to guide Management in achieving its goals. i would like to record my thanks to them for their wise counsel and support; and for their commitment to the highest standards of corporate governance.

lastly, i would like to thank our wonderful team of Nabilians. Their sense of ownership, responsibility, dedication and commitment to hard work are the foundations of our success. i believe that we have a great team, a superb franchise, a great strategy, and a unique and robust platform as Nepal’s premier bank.

i look forward to delivering superior results with the support of all our stakeholders, including our customers, regulators, vendors, investors, the board of directors, employees and the community at large, with a view to adding sustained value to this enterprise.

sAsHiN JosHi Chief Executive Officer

20 Nabil Bank LimitedcrimsoN suNBird


iNNovAtive

BeiNg Active & iNNovAtive…

we ruN AHeAd iN iNdeNtiFyiNg tHe Need oF

customers ANd desigNiNg tHe most AdvANced

Products ANd services to meet tHe demANds oF

tHe time.


mAcro-ecoNomic eNviroNmeNtA. domestic ecoNomyNepal’s economic growth over the last decade has not been satisfactory. The country’s economic growth rate in the last decade averaged just 4.1 percent at basic prices. The country’s gross domestic Product for fiscal year 2014-15 missed the initial growth forecast of 4.6% at basic prices and is estimated to stagnate at 3.0%.The estimated growth rate for the current year is the lowest in eight years. The downward revision is primarily due the economic damage caused by the earthquake that struck the country in April 2015, coupled with the unfavorable climatic condition on agriculture sector. The country’s economy is estimated to have expanded by 5.1% in the previous fiscal year.

tHe eArtHquAke eFFectsThe earthquake brought about a severe setback in social and economic environment of the country. road infrastructures leading to the Nepal – china trading route were severely destroyed and major customs points remain completely shut down. in the kathmandu Valley, cultural heritage sites and old settlements were damaged. The country’s tourism industry was impacted immediately and the entire service sector retracted, with growth projections revised downwards to 3.9% from earlier forecast of 6.0% prior to the quake. The total economic loss from earthquake damage was estimated at usd 7.7 billion.

immediate outlook for the fiscal year 2015-16 will surely bear the impact of earthquake as infrastructures have been damaged and distribution networks have been disrupted. large arable fields in the central hilly region have been left barren amidst turbulent social scenario brought about by the quake.

Tourism business is likely to be missed this year as bookings for the major tourist arrival season, which runs through the next few months, have been cancelled amidst fear of continuous aftershocks and adverse media reports. revival of tourism sector is likely to take longer time.

tHe recoNstructioN PHAseWith the onset of the reconstruction phase, the financial sector is likely to benefit from both increased government expenditure and increased domestic borrowing by the government. international communities and development partner institutions have also shown great support to help Nepal, as was evident from the immediate relief aid provided after the earthquake and the reconstruction funding commitment of usd 4.4 billion announced at the conference hosted by the government in june 2015. There has also been a sudden upsurge in the remittance flowing into the country in the months following the earthquake.

iNFlAtioNAnnual average consumer price inflation increased by 7.2% in the fiscal year 2014-15, compared to 9.1% a year earlier. inflation remained lower than the projected 8.0% in the monetary policy mainly due to the decline in petroleum price, the control of monetary aggregates at the desired level through effective liquidity management and lower level of inflation in neighboring countries. inflation in the running fiscal year 2015-16 is likely to be higher than the previous year with expectations of higher government expenditure and increase in demand fuelled by the recent upsurge in inward remittances.

credit to PrivAte sectorcredit to the private sector from banks and Financial institutions increased by 19.8% in fiscal year 2014-15 compared to an increase of 18.7% a year earlier. likewise gross loans and advances of bFis increased by 17.5% this year compared to an increase of 14.4% a year earlier.

bFis credit exposure to the production, construction, wholesale and retail trade sectors recorded a remarkable growth in the review year, with corresponding increments of 14.8%, 27.9% and 21.8% respectively. Financial deepening increased remarkably this year as private sector credit to gdP reached 64.7% from 59.3% recorded a year earlier.

coNtriButioN to gdP growtH (%) sHAre oF gdP (%)

secTOr 2014-15 2013-14 2014-15 2013-14

Agriculture 1.9 2.9 31.7 32.5

services 3.9 6.3 53.2 52.4

industry 2.6 6.2 15.1 15.1

sector coNtriButioN to gdP

Source: Current Macro-Economic and Financial Situation of Nepal published by NRB.


iNterest rAtessurplus liquidity in the banking system continuously exerted pressure on interest rates across deposit and loan products, dragging down the rates throughout the year. Weighted average interest rate spread of commercial banks in local currency portfolio inched down to 4.61% in fiscal year 2014-15 from 5.21% a year earlier. likewise the average base rate of commercial banks also declined to 7.88% from 8.36% a year earlier due the reduction in deposit cost.

exterNAl sectorTotal trade deficit widened by 10.8% to Nrs.689 billion in the fiscal year 2014-15, down from 29.7% a year earlier. The trade deficit widened at a slower pace due to slow down in the import growth in the aftermath of the devastating earthquake in the last quarter of the review year. Merchandise exports decreased by 7.3% compared to an increase of 19.6% in the previous year. likewise merchandise imports increased by 8.4% compared to an increase of 28.3% in the previous year. The growth of imports remained low mainly due to the decrease in the price of petroleum products. exports-imports ratio also declined to 11.0 % down from 12.9% a year earlier.

ForeigN excHANge reserve PositioNThe gross foreign exchange reserves in usd terms increased by 17.4% to usd 8.15 billion at end of fiscal year 2014-2015, compared to an increase of 23.6% in the previous year. based on total imports of merchandise goods and services for the year, this level of foreign exchange reserves is sufficient for financing merchandise imports of 13.0 months, and merchandise and services imports of 11.2 months.

BANkiNgAs per the published provisional annual financial statements of commercial banks, their total deposit and gross loan have increased respectively by 21.5% and 22.3% in fiscal year 2014-15, up from previous year’s growth rate of 18.0% and 19.3%.The industry net profit also increased by 25%, on year-on-year comparison.

The central bank has directed all commercial banks to raise their paid up equity capital to Nrs.8 billion by mid july 2018. This is expected to increase banks risk bearing capacity and make them more resilient. banks are also expected to undergo merger to meet the paid up capital requirement as well as to increase their competitiveness. This is expected to drive competition in the banking industry in the coming years.

Overall macroeconomic situation in the fiscal year 2014-15 showed that there are some structural problems in the economy despite the sound macroeconomic fundamentals. The significant surplus in bOP, comfortable reserve position and single digit inflation; all indicate a stable macroeconomic situation despite of the continuing tensions among major political parties. However, the slump in economic activities is the matter of concern. The devastating earthquake that struck in the fourth quarter has severely affected the economic development of the country. under the current circumstances where political polarization has prevailed and some political parties have taken to streets voicing their demand, uncertainty still prevails over whether the functioning of national economy would be smooth or not.

The way forward hold both promise for better Nepal as well as challenges that could cramp the economic growth. under the given circumstances, the gdP growth rate will not be encouraging unless the political will and commitment of political parties reconcile to speed up the reconstruction of earthquake damage. The political stability in the course of promulgation of the new constitution of the country and the implementation of a federal structure will largely guide the nation’s economic development for the next few years.

B. gloBAl ecoNomyglobal growth remains moderate, with uneven prospects across the main countries and regions. global growth is projected at 3.3% in 2015, marginally lower than in 2014, with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies. in 2016, growth is expected to strengthen to 3.8 percent.

ProJectioNs

2013 % 2014 % 2015 % 2016 %

World Output 3.4 3.4 3.3 3.8

Advanced economies 1.4 1.8 2.1 2.4

united states 2.2 2.4 2.5 3.0

euro Area -0.4 0.8 1.5 1.7

japan 1.6 -0.1 0.8 1.2

united kingdom 1.7 2.9 2.4 2.2

emerging and developing Asia 7.0 6.8 6.6 6.4

china 7.7 7.4 6.8 6.3

india 6.9 7.3 7.5 7.5

world ecoNomic outlook

Source: IMF World Economic Outlook Update – July 2015


World economy witnessed a setback to activity in the first quarter of 2015, mostly around North America. consequently global growth forecast for 2015 has been revised down to 3.3% in july from 3.5% in April. economic activity in advanced economies is on the path of gradual acceleration backed by easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labor market conditions.

The outlook for advanced economies is better than last year, while emerging market and developing economies are projected to follow a slower path. Prospects for some large emerging market economies, including china, russia and brazil and major oil-exporting countries remain weaker. The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions –particularly in latin America and oil exporters, the rebalancing in china, and structural bottlenecks, as well as economic distress related to geopolitical factors–particularly in the commonwealth of independent states and some countries in the Middle east and North Africa.

AdvANced ecoNomiesgrowth in advanced economies is projected at 2.1% in 2015, up from 1.8% in 2014. growth is expected to follow a slower pace than was originally projected in April, after the us economy witnessed unexpected output contraction in the first quarter. However, the initial fall in activity is likely to prove a temporary setback and the key drivers of better consumption and investment in the us viz. easy financial condition, strengthening housing market, lower fuel prices and better labor market conditions continue to remain intact.

in the euro area, growth projections for a number of economies have been revised upwards with strong recovery in domestic demand and inflation starting to pick up. unfolding developments in greece indicate a much slower recovery in

activity that was expected earlier. in general the recovery in euro area seems on the right track with continuation of monetary easing.

japanese economy expanded better than earlier expectations in the first quarter of 2015. The growth is supported by a rise in capital investment but domestic demand still remains sluggish.economic growth in 2015 is expected remain more modest due to the weak momentum in real wages and consumption.

emergiNg mArkets ANd develoPiNg AsiAgrowth in these markets is projected to slow from 6.8% in 2014 to 6.6% in 2015 and 6.4% in 2016. The gradual slowdown is mostly on account of rebalancing in china, as the country is facing difficulties in its transition to new growth model, as witnessed in the recent financial market turbulence there.

growth in the chinese economy is expected to slow down to 6.8% in 2015 and 6.3% in 2016, down from 7.4% in 2014. Amidst weaker investment growth the economy continues to shift towards consumption and services economy from investment economy.

india and the rest of emerging Asian economies are generally projected to continue growing at a robust pace as they benefit from falling oil prices, even though some countries might suffer from china’s economic rebalancing and global manufacturing weakness. The indian economy is expected to post a better growth of 7.5% in both the years 2015 and 2016 from 7.3% in 2014. The growth will be backed by higher investments, lower fuel prices and increased domestic consumption.


commeNtAry oN key items oF stAtemeNt oF FiNANciAl PositioN oF PAst 5 yeArsin the last five years Nabil bank has continuously strengthened its financial position, expanded its customer base and diversified its business to different sectors of economy. These are the key variables that have scaled the bank to new heights over the years. information presented herein below highlight upon the growth in the bank’s financial position, and the bank’s market presence based on the fourth quarter provisional financial statements published by individual banks, unless specifically stated otherwise.

The bank’s balance sheet has expanded at a compounded Annual growth rate (cAgr) of 17.33% in the last five years, recording a point to point absolute growth of 122.40%, since mid july 2010. There has been remarkable growth in terms of shareholder’s fund, deposits, loans and investments which are the major elements in a bank’s balance sheet.

sHAreHolders FuNdTotal shareholder’s fund of the bank has increased at a cAgr of 19.85% in the past five years, and has reached Nrs.9.49 billion at mid july 2015. it was Nrs.3.84 billion at mid july 2010, and has since grown to 2.47 times that size. Across industry the bank is ranked second in terms of the size of its shareholders fund at mid july 2015.industry wide the total shareholders fund of private commercial banks has increased at a cAgr of 17.16% in this period. Total net worth of government owned banks was negative by Nrs.4.03 billion at mid july 2010 and have since increased to Nrs.25.60 billion at mid july 2015.

oPerAtiNg ANd FiNANciAl review

02

At mid July 2015 2014 2013 2012 2011 2010 cAgr

yeAr 5 yeAr 4 yeAr 3 yeAr 2 yeAr 1 BAse yeAr

cAPitAl & liABilities

1. share capital 4,755 3,657 3,046 2,436 2,030 2,029 18.6%

2. reserves & surplus 4,731 3,984 3,645 3,008 2,537 1,808 21.2%

3. debentures & bonds 300 300 300 300 300 300 0.0%

4. borrowings - - - 311 1,651 75 -100%

5. deposits 104,238 75,389 63,610 55,024 49,696 46,411 17.6%

6. bills Payable 243 214 530 179 416 425 -10.6%

7. Proposed dividend 250 1,371 975 812 609 435 -10.5%

8. income Tax liabilities 1 3 65 51 44 25 -47.8%

9. Other liabilities 1,468 2,357 1,071 1,072 859 644 17.9%

total 115,986 87,275 73,241 63,193 58,141 52,152 17.3%

Assets

1. cash balance 1,820 1,468 1,140 1,051 745 636 23.4%

2. balance with Nepal rastra bank 12,925 7,068 4,789 3,682 1,474 549 88.1%

3. balance with banks/Financial institutions 1,259 1,457 (47) (457) 218 215 42.4%

4. Money at call and short Notice 324 738 1,634 826 2,453 3,118 -36.4%

5. investment 30,972 18,277 16,332 14,049 13,081 13,703 17.7%

6. loans, Advances and bills Purchased 65,502 54,692 46,370 41,606 38,034 32,269 15.2%

7. Fixed Assets 812 843 872 888 935 780 0.8%

8. Non banking Assets - - - - - - 0.0%

9. Other Assets 2,372 2,732 2,150 1,549 1,202 882 21.9%

total 115,986 87,275 73,241 63,193 58,141 52,152 17.3%

(Nrs iN MilliON)


Of the bank’s total shareholder’s fund, paid up share capital and reserves have increased to Nrs.4.75 billion and Nrs.4.73 billion at mid july 2015 respectively from Nrs.2.02 billion and Nrs.1.81 billion at mid july 2010. The increments have been achieved entirely out of profit retention in form of stock dividends and various reserve headings. This is inclusive of the appropriation of profit of financial year 2014-15 into various reserve headings and the proposed distribution of stock dividend at 30% of paid up capital.

With the increments in shareholders fund and the changing business environment the bank’s return on equity (rOe) has come down to 22.73% for financial year 2014-15, from 30.27% for financial year 2009-2010. Across industry the bank is ranked second in terms of rOe at mid july 2015.

recent regulation from the central bank has instructed commercial banks to raise their paid up capital to minimum Nrs.8.00 billion by mid july 2017, and to publish their capital plan. The bank has formulated its capital to reach the stipulated paid up requirement through issuance of 30% stock dividend for each of the financial years 2015-16 and 2016-17.

dePosit moBilizAtioNin the last five years total deposit of the bank has increased at a cAgr of 17.57%, and has reached Nrs.104.24 billion at mid july 2015. it was Nrs.46.41 billion at mid july 2010, and has since grown to 2.25 times that size. Across industry the bank holds the highest deposit among private commercial banks, and overall ranked second at mid july 2015.


industry wide total deposit of commercial banks has expanded at a cAgr of 18.30% in this period. The bank’s market share has declined from 7.35% at mid july 2010 to 7.13% at mid july 2015.

Through this period the banks deposit mix has improved consistently, reflecting on the bank’s current and savings Accounts (cAsA) mobilization drive. cAsA has grown at a cAgr of 20.71% and its contribution in total deposit volume has increased from 48.27% at mid-july 2010 to 55.09% at mid-july 2015. Nabil’s cAsA ratio to total deposit is better than that of the industry, which stands at 48.74%.

gross leNdiNg PortFoliogross loans and advances of the bank have expanded at a cAgr of 15.25% in the last five years, and have reached Nrs.67.16 billion at mid july 2015. it was Nrs.33.03 billion at mid july 2010, and has since grown to 2.03 times that size. Across industry the bank holds the third largest lending portfolio at mid july 2015.

industry wide the gross loans and advances of commercial banks have expanded at a cAgr of 18.41% in this period. The bank’s market share has declined from 7.15% at mid july 2010 to 6.15% at mid july 2015.

in the past years the bank has expanded its exposures on the sMe and Mid-corporate business segments, which have been thriving amidst high consumption demand fuelled by heavy remittance inflow. besides, the bank has also increased its exposures on the retail lending segment, which are normally structured for repayments in equated monthly installments. These segments, while being diversified and entailing lower risk, have also supported our customer base and fee based income. in the corporate segment the bank has mostly encouraged organic growth from proven relationships, solicited selective new relationships, and forayed into financing the mega-infrastructure projects through consortiums. The bank’s strategic relationship approaches have aided its asset quality and also achieved the desired volume growth during the last five years.

The bank’s gross Non Performing loans (NPl) volume stand at Nrs.1.22 billion at mid july 2015 up from Nrs.0.49 billion at mid july 2010. This represented a NPl to gross loans ratio of 1.82% and 1.47% for these respective periods. The coverage of total loan loss provision to gross NPl has remained above 100% throughout and the bank’s NPl ratio is well within the manageable limit.

gross iNvestmeNt PortFoliogross investment portfolio of the bank has expanded at a cAgr of 17.76% in the last five years, and has reached Nrs.30.98 billion at mid july 2015. it was Nrs.13.68 billion at mid july 2010, and has since grown to 2.26 times that size. Across industry the bank holds the largest investment book among private commercial banks, and overall second rank across industry at mid july 2015.


industry wide the gross investment of commercial banks has expanded at a cAgr of 15.61% in this period. The bank’s market share has also increased from 10.07% at mid july 2010 to 11.04% at mid july 2015.

Owing to limited options for maintaining a profitable investment portfolio in the domestic market, the growth in book is often guided by the position of surplus fund and the availability of instruments. domestic market almost entirely depends on securities floated by the central bank for their local currency book and on fixed term placement in foreign banks for their foreign currency book.

Nabil bank’s effort has been towards striking a profitable investment book, and competitive bidding below the cost of fund was mostly avoided. However, the surmounting pressure of sustained liquidity surplus in recent years has forced the bank to take its investment decisions from a cost compensating approach rather than a profit generating approach. it is evident from the sudden shot in the investment volume as of mid july 2015. However, there was a decline of 53 basis points in investment yield that year, evidencing of margin decline across industry.

distriButioN oF divideNdOne of the parameters of success for banks lies in its ability to create wealth and distribute fair and reasonable dividend. Nabil’s history shows that it has been able to provide an attractive return over the past years. Through the last four financial years from 2010-11 to 2013-14 the bank has distributed cash dividends at the rate of 30%, 40%, 40% and 45%. likewise, the bank has distributed stock dividends at the rate of 40%, 20%, 25% and 20% respectively for those years. For the financial year 2014-15 the bank has proposed for distribution of stock and cash dividends of 30% and 6.84% respectively.

The bank has distributed cumulative cash dividends of Nrs.4.02 billion out of profits generated in the last five years, inclusive of the 6.84% cash dividend proposed for financial year 2014-15.

APPROPRIATION OF EPS(IN NRS.)

2011 2012 2013 2014 2015

30

4040

45

7

2025

2030

2336

26

1120

PROFIT RETENTION STOCK DIVIDEND CASH DIVIDEND

(Mid July)


PERIOD ENDING MID JULY 2015 2014 2013 2012 2011 2010 CAGR

YEAR 5 YEAR 4 YEAR 3 YEAR 2 YEAR 1 BASE YEAR

1. Interest Income 5,762 5,636 5,702 6,127 5,254 4,048 7.32%

2. Interest Expense 2,236 1,940 2,186 3,155 2,955 1,960 2.67%

Net Interest Income 3,526 3,696 3,516 2,971 2,299 2,088 11.05%

3. Fee, Commission and Discount Income 721 732 603 567 471 385 13.36%

4. Exchange Income 512 530 489 447 276 291 11.95%

Total Operating Income 4,759 4,958 4,608 3,986 3,046 2,764 11.48%

5. Staff Expense 743 628 647 501 454 367 15.17%

6. Other Operating Expense 613 543 469 431 401 334 12.90%

Operating Profit before Provision for Possible Losses 3,403 3,787 3,492 3,054 2,191 2,063 10.53%

7. Provision for Possible Losses 167 238 27 414 109 356 -14.03%

Operating Profit 3,236 3,549 3,465 2,640 2,081 1,707 13.64%

8. Non Operating Income /(Expense) 44 35 13 14 7 6 47.04%

9. Provision for Possible Losses Write Back 2 15 25 0 7 40 -44.50%

Profit from Regular Activities 3,282 3,599 3,503 2,654 2,095 1,753 13.36%

10. Income/(Expense) from Extra-ordinary Activities (3) 34 -17 -3 3 34 -161.11%

Profit from All Activities 3,279 3,633 3,486 2,651 2,098 1,788 12.90%

11. Provision for Staff Bonus 298 330 316 242 191 163 12.90%

12. Provision for Income Tax 888 983 950 720 570 486 12.80%

Net Profit/(Loss) 2,094 2,320 2,219 1,689 1,338 1,139 12.95%

(NRS IN MILLION)

NET INTEREST INCOMEIn the last five years period the bank’s Net Interest Income (NII) has increased at a CAGR of 11.05% and has reached Nrs.3,526 million in financial year 2014-15. It was Nrs.2,088 million in the year 2009-10.

Industry wide, NII of commercial banks has increased at a CAGR of 13.21% in this period. The bank’s market share has declined marginally from 7.42% at mid July 2010 to 6.75% at mid July 2015. At mid July 2015 the bank is the highest NII generating private commercial bank and is ranked third overall behind two government owned banks.

Domestic financial market witnessed a downturn in interest rate curve in the last three years, as market mostly remained liquid throughout. Yield on lending and investment books faltered alike. Consequently, cost management gained priority

COMMENTARY ON KEY ITEMS OF INCOME STATEMENT OF PAST 5 YEARS

2088 2299

29713516 3696 3526

2010 2011 2012 2013 2014 2015

GROSS INTEREST INCOME NET INTEREST INCOME

4048

5254

61275702 5636 5762

(NR

s. in

Mill

ion)

(Mid July)

In the last five years the bank’s results has been remarkable in terms of profitability and market positioning. The bank has maintained its leadership position among private commercial banks and has strengthened its revenue lines as well as its cost management through this period. Information presented herein below highlight upon the growth in the bank’s financial results, and the bank’s market presence based on the fourth quarter provisional financial statements published by individual banks, unless specifically stated otherwise.


and played a key role in driving Nii growth of commercial banks. Nabil’s own focus on interest free deposits and low cost savings accounts further improved its deposit mix and hence supported better cost management. As a result, the five year cAgr of Nabil’s interest expense was maintained at 2.67%, while that of its deposit volume was 17.6%. likewise, the five year cAgr of Nabil’s interest income was 7.32%, while that of its gross loan volume was 15.25%.

The ratio of Nii to gross interest income over the past five financial years from 2010-11 to 2014-15 period is recorded at 44%, 48%, 62%, 66% and 61% respectively.

Fees, commissioN ANd otHer oPerAtiNg iNcomeThe bank’s fee based income has increased at a cAgr of 13.36% in the last five years and has reached Nrs.721 million in financial year 2014-15. it was Nrs.385 million in the year 2009-10.

The industry wide cAgr for the same period is recorded at 15.67%. At mid july 2015 the bank is ranked fifth in terms of fee based income, and has improved its market positioning over the period.

The bank has maintained strategic focus on increasing the contribution of fee based income in gross revenues and has been on continuous lookout for new revenue streams. The bank has also been working to develop competitive edges in major fee income generating segments. some of the major product lines the bank has launched in the recent years are bancassurance, bullion, merchant banking and e-banking. besides, the bank has developed its strengths in major segments such as trade finance transactions, consortium management, foreign study

loans, card and ATM / POs channels, inward remittance from south korea and increased offering of ancillary banking services through more branch offices.

ForeigN excHANge iNcomeThe bank’s foreign exchange income generation has increased at a cAgr of 11.95% in the last five year and has reached Nrs.512 million in financial year 2014-15. it was Nrs.291 million in the year 2009-10.

The industry wide cAgr for the same period is recorded at 18.62%. At mid july 2015 the bank is ranked second in terms of foreign exchange income, and the gap with market leader has reduced substantially in the last five years. Through this period the bank has significantly enhanced its transaction banking services by offering new products and soliciting more institutional clients.

stAFF exPeNsein the last five years period the bank’s staff expense has increased at a cAgr of 15.17% and has reached Nrs.743 million in financial year 2014-15. it was Nrs.367 million in the year 2009-10.

industry wide, staff expense of commercial banks has increased at a cAgr of 11.20% in this period. At mid july 2015 Nabil is ranked fifth highest overall and second highest among private commercial banks in terms of staff expense.

Nabil is perceived as the banking brand in terms of career development, pay and benefits in local labor market. consequently the bank has been able to attract and retain talents in developing a team has been able to spearhead its strategic execution amidst highly competitive market conditions. The bank has a policy to revise employee benefits every two

2010 2011 2012 2013 2014 2015

FEES AND COMMISSION INCOME

385471

567 603

732 721

(NR

s. in

Mill

ion)

(Mid July)

2010 2011 2012 2013 2014 2015

FOREIGN EXCHANGE INCOME

(NR

s. in

Mill

ion)

(Mid July)

291 276

447489

530 512


years and career development opportunities through regular promotions. besides, being the first private sector bank, the bank has substantial cost towards post retirement employee benefits. All these factors lead to a comparatively higher staff expenses for the bank.

Apart from staff expenses, the bank also distributes lucrative staff bonus, which is linked to annual profits. For the financial year 2014-15 the bank has distributed total staff bonus amounting to Nrs.298 million, and its cAgr in the past five years is recorded at 12.90%.

otHer oFFice oPerAtiNg exPeNsesin the last five years period the bank’s other office operating expenses has increased at a cAgr of 12.90% and has reached Nrs.613 million in financial year 2014-15. it was Nrs.334 million in the year 2009-10.

industry wide, other office operating expense of commercial banks has increased at a cAgr of 16.18% in this period. At mid july 2015 Nabil is ranked fifth highest overall and the

third highest among private commercial banks in terms of other operating expense. The bank has a strategic focus in upgrading its systems and work processes. consequently there have been substantial investments in upgrading its information technology infrastructures, and centralization / automation of work processes. This has supported the bank’s operational cost management and enhanced effectiveness of its control system. Apart from these, unavoidable cost items generally followed the growth path in alignment with inflation and increased consumption demand of rising business operations.

Net ProvisioN exPeNseFive year cAgr of the banks net provision expenses remained negative by 12.19%. it is because the net expense was Nrs.316 million for financial year 2009-10 which is the base year, and has remained mostly below that level in the following years, except for the year 2011-12, when it shot up to Nrs.414 million. For the most recent financial year 2014-15, the net provision expense stood Nrs.165 million.

However, the bank’s NPl volume has increased from Nrs.487 million at mid july 2010 to Nrs.1,221 million at mid july 2015, representing the NPl to gross loans ratio of 1.47% and

1.82% for the respective periods. The coverage of total loan loss provision to gross NPl has remained above 100% throughout and the bank’s NPl ratio is well within the manageable limit.

ProFitABilityAs per the provisional financial statements for the final quarter of financial year 2014-15 published by all commercial banks, Nabil is ranked as the market leader in terms of operating profit. Nabil has been ranked second to a government bank in terms of net profit, where the government bank’s net profit has shot up

163 191242

316 330 298

2010 2011 2012 2013 2014 2015

STAFF EXPENSE PROVISION FOR STAFF BONUS

367

454501

647 628

743

(NR

s. in

Mill

ion)

(Mid July)

2010 2011 2012 2013 2014 2015

OFFICE OPERATING EXPENSE

(NR

s. in

Mill

ion)

(Mid July)

334401

431469

543

613

2010 2011 2012 2013 2014 2015

316

102

414

3

223

165

(NR

s. in

Mill

ion)

(Mid July)

NET PROVISION EXPENSE FOR POSSIBLE LOSSES


due to a major investment disposal transaction that constitutes its non-operating income.

Net Profit and Operating Profit before provision of Nabil increased at a cAgr of 12.95% and 10.53% respectively in the last five years and stands at Nrs.2,094 million and Nrs.3,403 million for the financial year 2014-15. These were Nrs.1,139 million and Nrs.2,063 million respectively for the financial year 2009-10.

The five year industry cAgr of net profit is recorded at 13.05%, but asymmetries exists due to contributions of huge one off profit recognitions out of investment disposals and NPl recoveries at government owned banks. A better reference can be taken of the industry cAgr of operating profit before loss provisioning which is recorded at 14.62% as compared to Nabil’s 10.53%. The industry growth rate indicates a highly competitive market wherein mid-sized banks are coming up strongly and posting impressive profit growth.Throughout the last five financial years, from 2010-11 to 2014-15, Nabil has maintained its market leader positioning in terms of highest operating profit before provision. likewise, for the same period Nabil has remained the highest net profit generating bank among private commercial banks. in between, government banks have taken over the leading position in terms of net profit, chiefly out of their non-operating income from recovery of loan loss provisioning and investment disposals. Nabil continues to lead the industry as the highest profit generating private sector bank in the country.

in the latter years, economic growth of the country has not paced up as was expected after the end of a decade long insurgency, competitive environment has built up within

the banking industry, and banking regulations have posed significant impacts on interest margins. due to the adverse external environment, banks have not been able to engage as catalyst of economic development up to their potential. This has hampered the growth of domestic banking industry, both in terms of business volumes and revenue generation. despite of adversities, the performance recorded by Nabil through the five years has been satisfactory.

AcHievemeNts oF tHe curreNt yeAr This section presents management’s review of the bank’s financial performance for financial year 2014-15 “the review year” compared against that of the previous year. This review highlights changes in the bank’s equity position, major sources and uses of funds, and performance across broad operating lines for the review year.

The domestic economic climate and investor’s sentiment both were not very encouraging during the review year. it was yet another year in the constitution drafting process and political contentions over certain constitutional issues, including the federal restructuring of the country, supported fluid politics.Furthermore, the massive earthquake that struck the nation in April left the country’s socio-economic climate completely devastated for the rest of the review year.Nabil bank’s performance in the review year, amidst adverse external environment, is noted satisfactory. The bank has been able to expand its balance sheet size by a remarkable 32.9% in the review year, led mostly by growth in deposits. Profitability has declined in the review year, as margins got squeezed amidst serious liquidity surplus in the domestic financial market.

equityThe bank’s equity, comprising of paid up capital and reserves, has increased by 24.1% and reached Nrs.9,486 million at end of the review year. it was Nrs.7,641million at previous year end. The growth has been entirely out of profit retention.Out of the net profits

11391338

1689

2219 23202094

2010 2011 2012 2013 2014 2015

OPERATING PROFIT BEFORE PROVISION NET PROFIT

2063 2191

3054

34923787

3403

(NR

s. in

Mill

ion)

(Mid July)

cAPitAl mid July growtH

2015 2014 volume %

Paid up equity 4,755 3,657 1,098 30.0%

reserve Fund 4,731 3,984 746 18.7%

total 9,486 7,641 1,845 24.1%

(iN Nrs. iN MilliON)


for review year, only 11.95% amounting to Nrs.250 million has been proposed for distribution as cash dividend, whereas the remaining 88.05% amounting to Nrs.1,844 million has been retained in equity, with appropriations into proposed bonus shares, various statutory reserve headings, and retained earnings.

dePositsThe bank’s deposit liabilities has increased by a remarkable 38.3% and has reached Nrs.104,238 million at end of the review year. The bank’s deposits has increased by Nrs.28,849 million in the review year from Nrs.75,389 million at previous year end. The growth rate in bank’s deposits has been better than that of the industry, recorded at 21.5%, and the bank’s market share has also increased to 7.13% from previous year’s 6.26%. The bank is ranked second in terms of total deposit

volume at end of the review year.

deposits comprised of 83.94% in local currency and remaining 16.06% in foreign currency. in the review year deposits has increased across all boards. current and savings accounts (cAsA), fixed accounts, and call accounts have all increased by 31.0%, 34% and 57%

respectively. With a higher rise in call deposit volume, cAsA contribution in total deposits has reduced to 55.1% from 58.16% a year earlier.

in the review year deposit cost declined marginally to 2.54% from 2.66% a year earlier. This was mainly on account of maturity of high coupon fixed deposits and re-pricing of call deposits. Table at the bottom depicts the position of average deposit volume and corresponding cost for the review year.

loANsgross loans and advances of the bank has increased by 19.50% and has reached Nrs.67,162 million at end of the review year. There has been an absolute growth of Nrs.10,959 million in the review year from Nrs.56,203 million at previous year end. The growth rate in bank’s lending portfolio has been slightly lower than that of the industry, recorded at 22.33%, and the bank’s market share has also declined marginally to 6.15% from previous year’s 6.30%. The bank is ranked third in terms of total lending volume at the end of the review year.

Amidst not so encouraging external environments, the bank maintained its approach towards consolidation, asset quality and organic expansion during the review year as well. book expansion mostly remained selective and the focus was towards sMe and retail segments, which assures of a better risk profile, lower capital charge, and effective market penetration.in the review year loan yield declined substantially to 8.42% from 10.05% a year earlier. The decline of 163 basis points in loan yield indicated of the effects of acute price competition amidst surplus liquidity scenario.

dePosit mid July growtH

2015 2014 volume %

local currency 87,496 63,942 23,554 36.8%

Foreign currency 16,742 11,447 5,295 46.3%

total 104,238 75,389 28,849 38.3%

(Nrs. iN MilliON)

Period eNdiNg mid July 2015 2014

volume iNterest cost volume iNterest cost

local currency

- current and savings accounts 44,570 1,079 2.4% 33,784 762 2.3%

- Fixed and call accounts 28,029 1,074 3.8% 25,464 1,100 4.3%

total 72,599 2,153 3.0% 59,249 1,862 3.1%

Foreign currency

- current and savings accounts 5,362 12 0.2% 4,984 11 0.2%

- Fixed and call accounts 9,040 46 0.5% 7,611 42 0.5%

total 14,402 57 0.4% 12,596 52 0.4%

total deposits 87,000 2,211 2.5% 71,844 1,914 2.7%

(Nrs. iN MilliON)dePosits


loANs mid July growtH

2015 2014 volume %

local currency 63,099 54,074 9,025 16.7%


total 67,162 56,203 10,959 19.5%

(Nrs. iN MilliON)



business loan 49,077 3,990 8.1% 40,217 3,944 9.8%

retail loan 14,124 1,398 9.9% 11,766 1,239 10.5%

total 63,202 5,387 8.5% 51,983 5,182 10.0%

(Nrs. iN MilliON)loANs



Nepal government bond 2,217 150 6.8% 3,069 205 6.7%

Nepal government Treasury bills 7,713 37 0.5% 4,251 49 1.1%

deposits and Placements in Foreign banks 13,707 134 1.0% 13,392 144 1.1%

equity instruments 375 42 11.1% 333 31 9.3%

Other investments 665 21 3.2% 301 16 5.3%

total 24,676 384 1.6% 21,346 445 2.1%

(iN Nrs. iN MilliON)iNvestmeNts

iNvestmeNts mid July growtH

2015 2014 volume %

local currency 15,340 8,656 6,684 77.2%


total 30,979 19,017 11,962 62.9%

(iN Nrs. iN MilliON)

iNvestmeNtsgross investments of the bank recorded remarkable growth of 69.48% and reached Nrs.30,979 million at end of the review year. There has been an absolute growth of Nrs.12,700 million in the review year from Nrs.18,279 million at previous year end. The growth rate in bank’s investment portfolio has been much higher than that of the industry, recorded at 24.00%, and the bank’s market share has also increased to 11.04% from previous year’s 8.08%. The bank is ranked second in terms of gross investment volume at end of the review year.

growth under local currency books was recorded at 77.21% or Nrs. 6,684million.The bank had no option than to bid for short term government securities and liquidity mopping instruments

at depressing low yields. The bank’s position with regards to additional investments in short term instrument was mostly on a cost compensation standing rather than an income generation standing.

growth under foreign currency books was recorded at 62.52% or Nrs.6,016 million. Foreign currency book expanded in alignment with the growth in foreign currency deposits. A profitable book expansion is very challenging in this segment as almost entire funds are parked in foreign bank deposits, while the interest rates in global markets have generally been low.in the review year the bank continued its focus to expand placement destinations in Asia, and strike a risk-return balance in its foreign currency investment portfolio.


in the review year investment yield declined substantially to 1.41% from 1.94% a year earlier. The decline of 53 basis points in overall investment yield is mostly on account of lower yield in treasury bills and liquidity mopping instruments. Almost the entire volume gain has also been in this segment alone.

Net iNterest iNcomeAmidst surplus liquidity scenario that prevailed throughout the year, deposit increments mostly ate up on bank’s Nii, because these could not be utilized to fund credit expansion. The bank faced acute price competition and had to lower its lending rates, which put a dent on its interest income. The impact remained visible as the Nii growth recorded negative despite a healthy volume growth under both lending and investment books.

The bank’s Net interest income (Nii) declined by 4.60% and stood at Nrs.3,527 million at end of the review year. There was an absolute decline of Nrs.170 million from previous years total Nii of Nrs.3,696 million. The decline was underpinned by a fall in yield of loans and investments by 163 basis points and 53 basis points respectively. While, there was a fall in deposit cost as well by 12 basis points, it was not enough to compensate for the adverse impact of yield reduction. As shown in the table, the gross interest income increased by Nrs.126 million while the gross interest expense increased by Nrs.296 million, netting a Nii decline of Nrs.170 million for the review year.

Period eNdiNg mid July cHANges

2015 2014 AmouNt %

interest income 5,762 5,636 126 2.2%

interest expense 2,236 1,940 296 15.3%

Net interest income 3,526 3,696 (170) -4.6%

(Nrs. iN MilliON)Net iNterest iNcome

Period eNdiNg mid July 2015 2014 cHANges

Aggregate Volume of interest earning assets 88,665 72,995 21.5%

- average loan and advances (including staff loan) 64,364 51,983 23.8%

- average investments* 24,301 21,013 15.6%

interest income on earning assets 5,762 5,596 3.0%

- on loans and advances 5,420 5,182 4.6%

- on investments* 343 414 -17.3%

Weighted Average yield 6.5% 7.7% -1.2%

- yield on loans and advances 8.4% 10.0% -1.5%

- yield on investments* 1.4% 2.0% -0.6%

(Nrs. iN MilliON)yield oN eArNiNg Assets

* excluding investments in equity instruments


Aggregate yield on interest earning assets declined by 119 basis points and stood at 6.50% for the review year. it was 7.69% for the previous year. yield on loans, which occupy 72.59% of the total earning assets base, declined by 163 basis points in the review year. likewise, yield on investments, which occupy 27.41% of the total earning assets base, declined by 53 basis points, excluding equities.

Aggregate cost of interest bearing liabilities declined marginally by 13 basis points,and stood at 2.56% for the review year. it was 2.69% for the previous year. cost of deposit liabilities, the single major component in the banks interest bearing liabilities book, declined by 12 basis points in the review year. Towards cost management the bank focused more on cAsA mobilization and revised interest rates where necessary.

Fees, commissioN ANd otHer oPerAtiNg iNcomeFee based income declined by 1.49% and stood at Nrs.721 million at the end of the review year. There was an absolute decline of Nrs.11 million from previous years total fee based income of Nrs.732 million. Major fee based revenue streams such as loan management, remittance transactions, foreign trade transactions and card services did not perform as per expectations. There were two major factors behind it. First and the major factor was the April earthquake and the impacts in had on the real economy. Transaction volume in foreign trade and credit cards declined sharply in the fourth quarter, as imports almost came to a standstill and tourists arrival dropped. Fresh demand for loans was negligible. besides, the public life in general and the scale of economic activities also fell sharply in the fourth quarter, resulting is very low generation of fee income even from ancillary banking services such as instruments handling, balance certificates, good for payments, etc.


Aggregate volume of interest bearing liabilities 87,300 72,144 21.0%

- average deposits 87,000 71,844 21.1%

- average borrowings 300 300 0.0%

interest expense on liabilities 2,236 1,940 15.3%

- on deposits 2,211 1,914 15.5%

- on borrowings 26 26 -0.3%

Weighted Average cost 2.56% 2.69% -0.13%

- cost of deposit 2.5% 2.7% -0.1%

- cost of borrowing 8.5% 8.5% 0.0%

(Nrs. iN MilliON)

cost oF resources


2015 2014 AmouNt %

Total Fee income 721 732 (11) -1.49%

Major areas: - -

loan Management 164 167 (3) -1.63%

cards & e-banking services 149 136 13 9.63%

letter of credit 96 95 1 0.93%

remittance 90 90 0 0.31%

bank guarantees 80 73 7 9.28%

communication 24 19 5 24.11%

cards issuance & renewal 20 36 (16) -45.09%

Agency services 10 14 (4) -25.36%

Other services 87 102 (14) -14.00%

(Nrs. iN MilliON)Fees, commissioN ANd otHer oPerAtiNg iNcome


The second factor, was the regulatory changes that came into effect in the review year, which among other things, changed the existing structure of fees and charges levied by bank on various services relating to deposit account operations, anywhere branch banking services, loan management fees, card services, instrument handling, etc. Among these, the impact of changes to anywhere branch banking services and loan management fees were significant in Nabil’s fee based revenues.

ForeigN excHANge iNcomeForex income declined by 3.31% and stood at Nrs.512 million at end of the review year. There was an absolute decline of Nrs.18 million from previous years Nrs.530 million. The earthquake effect was also seen in the bank’s forex income generation, as lower volume of foreign trade transactions and lower card transactions from tourists impacted the volume, and hence income, from foreign exchange trading. There also

remained tough competition for high value customers / deals through offering rebate on exchange rates, which the bank also had to respond accordingly and hence trading margins were hit.

stAFF exPeNsestaff expense increased by 18.47% and stood Nrs.743 million at end of the review year. There was an absolute growth of Nrs.116 million from previous years Nrs.627 million. The major growth driver was the revisions in pay and benefits across all corporate level effected in the review year. The bank has a policy of revising employee pay and benefits once every two years and the review year was the year of revision. similarly, staff uniform allowance which was previously being provided once every two years has been restructured into annual allowance, on a proportionate need basis. The growth in overall staff expense is normal and the increments were justified in order to cover for inflation and to develop and retain a team that has been successfully executing the banks strategies.


2015 2014 AmouNt %

Total exchange income 512 530 (18) -3.3%

- revaluation 182 108 73 67.7%

- Trading 331 422 (91) -21.6%

(Nrs. iN MilliON)ForeigN excHANge iNcome


2015 2014 AmouNt %

Total staff expense 743 628 116 18.5%

Major areas: - -

salary 222 208 14 6.7%

Allowances 270 238 32 13.3%

Pension and gratuity 99 68 31 45.9%

leave 63 40 23 56.7%

dashain 34 33 1 1.6%

Providend Fund 21 19 2 9.6%

Training 11 7 4 56.0%

uniform 10 0 10 9857.6%

Others 13 13 (0) -0.3%

(Nrs. iN MilliON)stAFF exPeNse


oFFice oPerAtiNg exPeNseOffice operating expense increased by 12.86% and stood Nrs.613 million at end of the review year. There was an absolute growth of Nrs.70 million from previous years Nrs.543 million. significant growth was observed across headings like rent, stationery, contract service, consultancy service, deposit insurance, etc.

The bank added four new branches and four new ATMs in the review year, which attracted rental charge and other associated operating costs. The bank also replaced its entire magnetic striped cards in circulation and those held in inventory with chip based cards, which incurred significant expenses under the stationery heading. This was required as part of the up-gradation of the bank’s card services into a more advanced and more secured platform.The bank also donated Nrs.20 million into the Prime Ministers

disaster relief Fund as part of its corporate social responsibility to support the reconstruction of earthquake damages. Other expense items generally followed a normal trend in line with the prevailing inflation and consumption demand. expense management has been a focus area and the bank has been managing its expenses by adopting better technologies for streamlining and automating its work processes.

ProvisioN For PossiBle lossesin the review year the bank incurred Nrs.165 million net additional expenses towards provisioning of possible losses. There was an absolute decline of Nrs.58 million from previous years Nrs.223 million. The bank’s focus on organic expansion of its lending book, together with selective growth into sMe and retail segments, supported a better risk profile and hence lowered the loan loss provisioning expenses for the review year.


2015 2014 AmouNt %

Total operating expense 613 543 70 12.9%

Major areas:

Amortization & depreciation 113 118 (5) -3.8%

rent charges 86 72 14 20.1%

security service 50 50 0 0.2%

stationery & supplies 47 23 24 104.6%

contract service 41 38 3 7.2%

consultancy service 38 32 5 16.7%

Fuel & lubricants 32 36 (3) -9.7%

communication 31 31 0 0.5%

deposit insurance 21 17 4 23.6%

donations 20 0 20 35117.0%

electricity & Water 17 18 (0) -0.9%

Fixed Assets repair 20 19 1 5.6%

Assets insurance 12 14 (3) -20.4%

Advertisements 13 15 (2) -16.2%

janitorial services 11 10 0 4.6%

Other expenses 61 50 11 22.0%

(Nrs. iN MilliON)oFFice oPerAtiNg exPeNse


2015 2014 AmouNt %

Total provision expense (Net) 165 223 (58) -26.1%

- on loan impairment 148 236 (87) -37.1%

- on investment impairment 4 (14) 18 -131.6%

- on other assets 12 1 11 971.2%

(Nrs. iN MilliON)ProvisioN For PossiBle losses


NoN-oPerAtiNg iNcomeNon-operating income of the bank is generated almost entirely from dividends received from its investments in equity instruments. in the review year, dividend income increased by 37.69%, recording an absolute growth of Nrs.12 million from previous years Nrs.32 million. The loss on disposal of fixed assets represents normal transactions wherein the bank disposes old asset items and writes off the carrying value.

iNcome / (exPeNse) From extrA ordiNAry Activitiesextra ordinary activities for the bank generally relate to write off of chronic NPls from its book.during the review year the bank had written off Nrs.10 million of chronic NPls and also recovered Nrs.8 million from previous written off loan accounts. Although written off, the bank normally retains its right to recourse for recovery of the written off loan.

stAFF BoNus, corPorAte tAx ANd Net ProFitProvisions for staff bonus and corporate tax liability declined by 9.73% and 9.71% respectively, and stood at Nrs.298 million and Nrs.888 million for the review year. This is an absolute decline of Nrs.32 million and Nrs.95 million from previous years level of Nrs.330 million and Nrs.983 million respectively.

The bank’s net profit and operating profit before provisions declined by 9.73% and 10.15% respectively, and stood at Nrs.2,094 million and Nrs.3,403 million for the review year. This is an absolute decline of Nrs.226 million and Nrs.384 million from previous years level of Nrs.2,320 million and Nrs.3,787 million respectively. As discussed in the preceding paragraphs in this section of the annual report, the bank’s financial performance for the review year was largely guided by adverse external environment arising out of the earthquake and the surplus liquidity. The bank’s management rather maintained focus on re-aligning its risk portfolio and liquidity management, which under the circumstances can be considered satisfactory.


2015 2014 AmouNt %

Total non operating income / (loss) 44 35 10 27.6%

- on sale of fixed assets 1 3 (2) -80.5%

- dividend income 44 32 12 37.7%

(Nrs. iN MilliON)NoN oPerAtiNg iNcome


2015 2014 AmouNt %

Net income/ (expense) (3) 34 (37) 108.6%

recovery from written off loan 8 37 (29) -79.4%

loan written off expense (10) (2) (8) 356.7%

Others (0) (1) 0 -40.2%

(Nrs. iN MilliON)iNcome/ (exPeNse) From extrA ordiNAry Activities


vAlue geNerAtioN ANd distriButioNvAlue geNerAtioNThe bank created total value of Nrs. 4,327 million. The value generated by the bank has declined by 6.5% or Nrs. 300 Million as compared to the corresponding period last year. Financial intermediation which is the core business of the bank contributed 71.5% in the total value generation. similarly, financial services which comprise of providing various auxiliary services not directly relating to financial intermediation, contributed 28.5%.

Value generation from financial intermediation has declined by 8.1% in the review year. in the same period the bank’s total interest earning assets base has increased by Nrs.14.51 billion or 19.9%. The growth rate in value generation out of financial intermediation is thus low because of the decrease in net interest margin. The bank’s net interest margin reduced to 4.0% in the review year down from 5.0% of previous year.

Value generation from financial services has also declined by 2.3% in the review year. This typically reflects the position of decline in fee, commission, other operating and foreign exchange income.

APPlicAtioN oF vAlue geNerAtioNThe bank has been consistent in applying the value generated from its operations towards the interest of all the stakeholders. distribution of value generation has been just, equitable and in support of running a sustainable business into the far future.

in line with the Nrb directive to increase the capital of the bank to Nrs. 8 billion, most of the value generated has been

retained by the bank in the form of capital and reserves. To comply with the regulator’s direction and the capital plan subsequently put forward by the bank, 30% stock dividend was distributed which resulted in an increase in capital. since only a small fraction of the earnings were distributed as cash dividend, it can be observed that the share of the shareholder investors in the value application has come down by almost 82%. in totality, the shareholders’ share comes to Nrs. 1,347.56 million including both cash and stock dividend. The bank understands that sustainability and continuity of the business is equally important to the investors as is getting a reasonable return and it believes it has been able to address the expectations of the shareholders amply.

There are no significant deviations in the value application towards other stakeholder groups as compared against previous year. Nabil believes in the philosophy that investment in staff is a prudent investment that will provide them more satisfaction and yield better returns in the immediate future. employees can be seen receiving a 21.1% share of the value generated in the form of employee benefits and statutory bonus. by providing a fair share to its employees, the bank has surely become the 1st choice employer for the country’s aspiring youth who want to pursue a career in the country’s financial services sector.

in the review year, the bank was recognized as the highest tax payer in the banking industry and the bank takes pride in such recognition from the government. Accordingly, a significant share i.e. 20.7% of the value generated can be seen being allocated towards government exchequer in the form of corporate tax payments. The bank believes that such contribution will be helpful in taking the nation to developed heights.


2015 2014 AmouNt %

interest income 5,762 5,636 126 2.2%

interest expense (2,211) (1,914) (296) 15.5%

Operating cost (510) (425) (84) 19.9%

Other income from financial intermediation 51 69 (17) -25.1%

Value addition from financial intermediation 3,094 3,365 (272) -8.1%

income from financial services 1,233 1,262 (28) -2.3%

Total Value Addition 4,327 4,627 (300) -6.5%

(Nrs. iN MilliON)totAl vAlue AdditioN


segmeNtAl PerFormANce ANAlysisFor the purpose of assessing segmental performance, the bank has identified business segment as its primary segment and geographical segment as its secondary segment.

The different businesses operated by the bank can be grouped into distinct business segments based on the nature of products and services. The nature of product offerings in each segment is distinct from others, and they also vary in terms of the involved risk and reward. As such, business segmentation has significant influence on the bank’s business risks and its pricing strategies.

branches and business units can also be grouped into distinct geographic segments based on their location. However, this factor does not have significant influence on the bank’s business risks and its pricing strategies. The bank takes account of social, economic and political factors while assessing the impact of geographic location in its businesses.

PrimAry segmeNtThe bank has identified four primary segments based on the nature of business operations. These are banking, Treasury, cards and Other businesses. Their shared contribution ratio to the net profit of the bank for the review year was recorded at

73.0%, 20.2%, 3.0% and 3.8% respectively. interest earnings and foreign exchange gains/losses generated while conducting businesses under different segments are reported under the respective segment.

The bank’s business is mainly concentrated in “banking” segment that contributes close to three quarters in the bank’s gross earnings and net profit. The core business of deposit mobilization and lending activities, along with other auxiliary banking services that fall outside of card operations, treasury operations and other businesses are reported under the banking segment.

Treasury segment contributes about one fifth to the bank’s gross earnings and hence net profit. The bank’s entire investment book and a majority of the foreign currency transactions are reported under treasury segment. The bank operates its treasury segment as a profit center that is responsible for overall liquidity management, open market operations and investment portfolio management. card segment comprise of all card related operations including debit and credit card issuance, merchant relationships, e-banking, m-banking and ATM management. The bank is among the pioneers in this segment and has recognized this as a major growth segment for fee based income. The bank has been investing substantially in upgrading its cards and electronic channels, particularly with regards to enhancing transaction security, expanding payment network, adding new services, and increasing client base.


AmouNt sHAre % AmouNt sHAre % AmouNt %

To employee 1,042 24.1% 958 20.7% 84 8.7%

To governments 897 20.7% 981 21.2% (85) -8.6%

To long term Financier 26 0.6% 26 0.6% (0) -0.3%

To investor 250 5.8% 1,371 29.6% (1,121) -81.7%

To Provide for maintenance and expansion 2,112 48.8% 1,291 27.9% 821 63.6%

- depreciation and Amortisation 113 2.6% 118 2.5% (5) -3.8%

- Provision for loan and investment loss 165 3.8% 223 4.8% (58) -26.1%

- deferred Tax (9) -0.2% 2 0.0% (11) -691.1%

- capital / retained earning / reserves 1,844 42.6% 948 20.5% 895 94.4%

total value Addition 4,327 100.0% 4,627 100.0% (300) -6.5%

(Nrs. iN MilliON)APPlicAtioN oF vAlue AdditioN


Others segment comprise of agency nature businesses like insurance, remittance and bullion operations. The bank recognizes these as growth segments that can contribute towards achieving a higher proportion of fee based revenues in the overall revenue mix.

secoNdAry segmeNtThe bank has identified five secondary segments based on the geographic locations of its offices. These are eastern, central, Western, Mid-Western and Far-Western. Their shared contribution ratio to the net profit of the bank for the review year was recorded at 9.8%, 77.6%, 7.9%, 2.8% and 1.9% respectively. interest earnings and foreign exchange gains/losses generated while conducting businesses under different segments are reported under the respective segment.

This regional segmentation follows the name of five development regions of the county. For segmentation purpose, all business transactions of offices and business units located in a particular development region are grouped together. central region has the largest contribution in overall profitability of the bank. All strategic business units are located in the central region and it has the highest number of branch offices in comparison to other geographic regions. country’s capital being located in central region, this hosts the highest economic activities and demand for both loan and deposit products are concentrated in this region.

Period eNdiNg mid July BANkiNg treAsury cArds otHers totAl

revenue

interest income (including Transfer Pricing) 7,507 2,414 19 - 9,940

Fee income 530 4 357 142 1,033

Forex income 136 346 15 15 512

Non Operating income 8 44 - - 51

total revenue 8,181 2,807 391 158 11,537

expense

interest expense (including Transfer Pricing) 4,278 2,132 3 - 6,414

staff expense 733 5 22 11 770

Operating expense 606 4 267 20 898

Provision for possible loss / (write back) 159 4 2 - 165

Non Operating expense / (income) 10 0 0 - 10

total expense 5,786 2,146 294 32 8,257

segment result 2,395 661 97 126 3,279

staff bonus - - - - 330

income Tax - - - - 983

Net Profit for the year - - - - 2,094

% share 73.0% 20.2% 3.0% 3.8% 100.0%

% growth over last year -9% -5% -34% -25% -10%

(Nrs. iN MilliON)PrimAry- BusiNess segmeNt


Period eNdiNg mid July eAsterN ceNtrAl westerN mid westerN FAr westerN totAl

revenue

interest income (including Transfer Pricing) 763 8,368 507 190 112 9,940

Fee income 51 915 44 13 9 1,033

Forex income 12 487 11 1 1 512

Non Operating income - 51 - - - 51

total revenue 827 9,821 563 204 122 11,537

expense

interest expense (including Transfer Pricing) 369 5,743 183 79 40 6,414

staff expense 56 635 54 16 9 770

Operating expense 51 766 54 18 10 898

Provision for possible loss 28 122 15 (1) 1 165

Non Operating expense - 10 - - - 10

total expense 504 7,275 306 111 61 8,257

segment result 323 2,545 258 93 61 3,279

staff bonus - - - - - 298

income Tax - - - - - 888

Net Profit for the year - - - - - 2,094

% share 9.8% 77.6% 7.9% 2.8% 1.9% 100.0%

% growth over last year -14% -11% 3% -1% -11% -10%

(Nrs. iN MilliON)secoNdAry- geogrAPHic segmeNt

iNterim PositioN ANd PerFormANce (uNAudited)iNterim FiNANciAl PositioNThe growth in the bank’s balance sheet during financial year 2014-15 was largely guided by the movement in deposit mobilization. starting from the first quarter and moving on to the fourth quarter, the bank’s total assets increased by 5%, 8%, 3% and 12% respectively over that in the immediately preceding quarter. These corresponded to absolute volume increments of Nrs.4.8 billion, Nrs.7.7 billion, Nrs.2.8 billion and Nrs.14.2 billion in the respective quarters.

quarterly deposit growth was recorded at 7%, 10%, 3% and 14% respectively over that in the immediately preceding quarter. These corresponded to an absolute volume increment of Nrs.5.2 billion, Nrs.8.2 billion, Nrs.2.5 billion and Nrs.12.9 billion in the respective quarters.

quarterly growth under gross loans and advances was recorded at 10%, 5%, 2% and 1% respectively over that in the immediately preceding quarter.These corresponded to an absolute volume increment of Nrs.5.6 billion, Nrs.2.9 billion, Nrs.1.6 billion and Nrs.855 million in the respective quarters.

gross investment volume recorded a decline of 16% or Nrs.2.95 billion in q1, followed by a growth of 56% or Nrs.8.6 billion in q2. likewise, the investment volume declined by 7% or Nrs.1.7 billion in q3, before bouncing back with a growth of 39% or Nrs.8.7 billion in q4.


iNterim FiNANciAl PerFormANce business performance in the financial year 2014-15 in general was largely affected by the fluid domestic politics. Performance was further hampered by the huge earthquake that hit the nation on April 25, 2015. besides, persistent liquidity surplus in the financial system, coupled with some changes in the banking regulations, significantly impacted the revenue generation for the year, which ultimately remained below the original expectations. quarterly growth in profitability remained flat as is evident from the tabulated data. in absolute terms, the net profit declined by 26% in q1, increased by 20% in q2 and thereafter declined by 16% and 6% respectively in q3 and q4, based on comparison with that of immediately preceding quarter.

Net interest income, which makes up almost three quarters of the total operating income, has in fact posted a declining quarterly trend line. in absolute terms the Nii has declined by 4% in q1, by 3% in q2 and by 5% in q3 before finally recording a marginal growth of 1% in q4, based on comparison with that of immediately preceding quarter. A sluggish growth rate of lending book, coupled with a downward yield curve amidst highly liquid market, has had its impact in net interest income generation during the year. besides, the need to maintain local currency interest spread within the regulatory cap of 5% also forced the bank to lower its margin. likewise, the total operating income also followed the declining quarterly trend line of Nii. in absolute terms it declined by 4% in q1,

For quArter eNdiNg mid oct 14 mid JAN 15 mid APr 15 mid Jul 15

q1 q2 q3 q4

capital and liabilities

Paid up capital 3,657 3,658 3,658 3,658

reserve and surplus 5,861 5,096 5,604 6,083

debenture and bond 300 300 300 300

borrowings - - - -

deposits 80,608 88,772 91,293 104,238

- domestic currency 68,300 75,645 74,230 87,707

- foreign currency 12,308 13,127 17,063 16,531

income tax liability 203 75 33 1

Other liabilities 4,050 4,476 4,277 3,373

total 94,678 102,377 105,165 117,652

Assets

cash and bank balance 12,295 9,245 12,158 16,004

Money at call and short notice 1,402 1,004 868 324

investments (gross) 15,327 23,914 22,219 30,979

loans and advances (gross) 61,798 64,698 66,307 67,162

- real estate loan 4,927 4,674 4,792 4,910

- Home loan (upto 100 Million) 5,437 5,468 5,725 5,851

- Margin loan - - - -

- Term loan 8,814 8,976 9,676 10,556

- Working capital loan 36,486 38,843 39,165 38,870

- Others loan 6,135 6,736 6,949 6,975

Fixed assets 823 806 803 812

Non banking assets - - - -

Other assets 3,033 2,711 2,811 2,372

total 94,678 102,377 105,165 117,652

(Nrs. iN MilliON)

Note: Annual financial results per interim financial statements (un-audited) differ from that of the year-end financial statements (audited) and the differences are explained for in “Schedule 4A” of Financial Statements.


by 4% in q2 and by 5% in q3 before finally recording a marginal growth of 5% in q4, based on comparison with that of immediately preceding quarter. Apart from the effects of declining Nii, changes in banking regulations also curtailed fee based revenue generation from some of the major fee income avenues. besides, the general economic activities and operations of bank’s branches remained at a subdued level immediately after the earthquake in the fourth quarter, which resulted in loss of fee and forex revenue for the bank.Operating expenses, including staff expenses followed a normal growth pattern in line with the average price inflation and the increased consumption of good and services required for business growth. both the staff expense and other operating expenses shot up in the fourth quarter recording an absolute growth of 57% and 38% respectively over that of the third quarter. in the fourth quarter the bank revised pay and benefits

across all corporate levels, as part of its regular policy exercise, leading to a sharp rise in staff expenses for the quarter. The bank incurred substantial stationery expenses towards replacement of the entire debit and credit cards in circulation with more secured chip based cards in the final quarter. The bank also donated Nrs.20 million into the Prime Minister’s disaster relief Fund in support of the earthquake recovery.

loan loss provision expense, a major item impacting profitability, was mostly contained to a minimum level in the last three quarters. However, adverse provisioning in a couple of accounts in the first quarter itself resulted in substantial provision expense, which then stayed on till year end in our profit and loss account, dragging down the final bottom line result for the year.

For quArter eNdiNg mid oct 14 mid JAN 15 mid APr 15 mid Jul 15 totAl

q1 q2 q3 q4

interest income 1,375 1,440 1,463 1,484 5,762

interest expense 450 547 614 626 2,236

Net interest income 925 893 849 858 3,526

Fees,commission and discount & Other 127 125 110 119 480

Other Operating income 78 68 49 45 240

Foreign exchange gain 118 108 122 165 512

total operating income 1,248 1,195 1,130 1,187 4,759

staff expenses 180 159 158 247 743

Other Operating expenses 135 120 149 205 608

operating Profit Before Provision 933 916 824 735 3,408

Provision for Possible losses 149 (12) 36 (6) 167

operating Profit 784 929 788 741 3,241

Non Operating income / (expenses) 15 17 9 3 44

Write back of Provision for Possible loss 1 (1) 0 2 2

Profit from regular Activities 800 945 797 746 3,288

extra Ordinary income / (expenses) (7) (0) (2) 6 (3)

Profit before Bonus and taxes 793 945 795 752 3,285

Provision for staff bonus 72 86 72 68 299

Provision for Tax 216 252 214 205 887

Net Profit 505 606 509 479 2,099

Nrs. iN MilliONiNterim FiNANciAl PerFormANce


NABil iNvestmeNt BANkiNg ltd.overviewNabil bank has established Nabil investment banking ltd. (“Nabil invest” in short) as its subsidiary as per the companies Act, 2006 on 07th of February 2010. it is a Merchant banker licensed by securities board of Nepal under the securities businessperson (Merchant banker) rules, 2064. Nabil bank as at the balance sheet date holds 74.29% controlling interest in the total paid up capital of Nabil invest. The other institutional shareholder cg Finco Private limited holds the rest 25.71% of the capital. The financial year of the subsidiary has a common financial year with that of Nabil bank (parent company) that ended on july 16, 2015.

The principal activities of Nabil invest are to provide merchant banking and investment banking services that include management of public offerings, portfolio management, underwriting of securities, administration and record keeping of securities of its clients (rTs), management of mutual fund, depository participants, and corporate advisory.

The subsidiary has entered into Management service Agreement and service level Agreement with the bank. under the Management service Agreement, the staff deputed by the bank has been working as the ceO of the subsidiary company. likewise, under the service level Agreement, the bank has been providing various administrative services necessary for service operations of the subsidiary. such administrative services include general administration, accounting, finance and planning, information technology, cheque clearing, human resource administration, legal advisory and fund management service.

The transactions between bank and its subsidiary during the review year 2014-15 have been presented in point 13.3 of schedule 33 “Notes to Accounts” of financial statements annexed herewith.

commeNtAry oN key items oF stAtemeNt oF FiNANciAl PositioN oF PAst 5 yeArsAt the end of the review year, the total balance sheet size has slightly come down mostly due to a 15.2% reduction in the profits of the subsidiary. The balance sheet of subsidiary has inflated due to outstanding payable amount Nrs.2.90 billion, that has to be refunded to applicants after allotment of securities under public offerings.

commeNtAry oN key items oF iNcome stAtemeNt oF PAst 5 yeArsincome from merchant banking activities and that from mutual fund operations have posted a growth of 37% and 15% respectively. The only decrease in the income book is observed under other income which comprises of incomes such as gain on sale of securities, dividend income etc. With a decrease of 3% in the gross income, the net profit of the subsidiary declined by a total 15.2%. under the merchant banking activities of the company, a new income stream has been added in the review year from auction of shares management. both commission and auction management fees are received in such an arrangement.

The company has also started providing depository participant services from the review year which has created a new revenue stream for the company. Major revenue streams in merchant banking are securities issue management, portfolio management services, registrar to shares service and auction of shares management, all of which are growth segments. The company has proposed distribution of 20% cash dividend from the review year’s profit.

At mid July 2015 2014 2013 2012 2011 2010


capital and liabilities

share capital 105 105 105 105 105 70

reserves & surplus 46 41 24 13 7 (1)

Other liabilities and Provisions 2,918 2,986 162 135 9 3

total 3,069 3,132 291 253 121 72

Assets

cash and bank balance 2,921 2,980 118 128 26 70

investments 92 93 98 107 83 -

Net Fixed Assets 15 17 6 7 6 2

Other assets 41 42 69 11 6 0

total 3,069 3,132 291 253 121 72

(Nrs. iN MilliON)BAlANce sHeet


Period eNdiNg mid July 2015 2014 2013 2012 2011 2010


income from Merchant banking Activity 21 15 12 4 - -

income from Mutual Fund operations 28 24 4 - - -

interest income 18 18 22 15 13 -

Other income 6 18 13 10 6 -

gross income 74 75 52 29 19 -

Personnel expenses (11) (10) (6) (4) (2) -

Office Operating expenses (23) (18) (11) (8) (6) -

interest expenses - (1) (4) - - -

gross expenses (34) (29) (21) (13) (8) (1)

Operating Profit 39 46 31 16 12 (1)

Provision for staff bonus (4) (4) (3) (1) (1) -

Profit before tax 36 42 28 14 11 (1)

Tax expense (9) (11) (7) (4) (3) -

Profit after tax 27 32 21 11 8 (1)

Opening retained earning 39 23 13 7 (1) -

dividend Payout (21) (16) (11) (5) - -

deferred Tax reserve (1) - - - - -

closing retained earning 45 39 23 13 7 (1)

(Nrs. iN MilliON)iNcome stAtemeNt


commoN teAl


syNergistic

workiNg togetHer, creAtiNg syNergy

our culture is All ABout workiNg togetHer For

Better ANd FAster result From tHe Activities,

creAtiNg HArmoNy AmoNg All stAkeHolders.

iN our drive to tAke tHe BANk AtoP coHeres

All iN togetHerNess For commoN good oF tHe

stAkeHolders.


Nabil has structured its delivery platform by constituting specific strategic business units (sbus) to ensure single window customer dealing in specific product segments. Most of the bank’s product and service offerings are channeled through these sbus for effective and efficient delivery. All sbus are equipped with the resources and expertise required for driving business in their respective markets. Within respective markets the sbus undertake market research, product enhancement, delivery channel optimization, relationship marketing, and relationship management. The bank’s product and services are being offered through the following sbus.

corPorAte BANkiNg sBucorporate banking (cb) is a one window banking designed for catering the entire gamut of financial services to large corporates. cb offers entire banking services required for corporate establishments such as manufacturing and processing industries, export and import trading, real estate development, hotels, agro production, service industries, and others.

cb offers capital investment in form of multi-year term loan; working capital in form of overdraft and structured time loans; trade transactions in form of letter of credit, bank guarantees, import loans, pre-shipment / post-shipment loans, bills and documentary negotiation / collection / advising; and open account arrangements. Having been banker to most of the large corporate houses in the country for over three decades, Nabil has developed the expertise to foresee requirements of businesses and tailor products that meet those requirements.

iNFrAstructure ANd ProJect FiNANciNg sBuinfrastructural and Project Financing (iPF) is a one window banking designed for catering to large capital intensive development projects such as hydropower generation, power transmission lines, telecommunication infrastructures, cement manufacturing, civil aviation, cable cars, and others. While iPF offers all the products on offer at cb sbu, it additionally caters to specific requirements of mega-projects development such as loan syndication and banking consortium; high value import lc and multi-year import bills discounting for machinery import on consortium risk sharing basis; and loans denominated in foreign currency against imported machinery, airplanes, etc. Nabil is a pioneer infra funding bank and is a major bank chosen by foreign joint-ventures operating in infrastructure development in Nepal.

Products ANd services

deePAk sHrestHA Head-corporate banking and infrastructure

THe bANk belieVes iN cONTribuTiNg TO NATiON buildiNg THrOugH VAlue

creATiON by HelPiNg busiNesses grOW ANd suPPOrTiNg NeW

iNiTiATiVes

03


sme ANd microFiNANce sBusMe is a one window banking designed for catering the entire gamut of financial services to smaller and mid-sized businesses which largely occupies the middle level of the supply chain. These are mostly entrepreneurs engaged in small scale imports / exports, trading in FMcg and construction materials, cottage and small scale industries, agro-production and processing, other trading and service businesses, etc. While sMe offers all the products on offer at cb sbu, it additionally caters to specific requirements of small businesses such as easy working capital financing against business inventory and trade receivables, business funding against mortgage of properties, equity mortgage loans, etc. Nabil’s large branch network is strategically located to support sMe businesses across the country and entrepreneurs can reach any of the bank’s branches for their funding requirements.

Microfinance product line is specially designed to extend financing to income generating initiatives of the socially disadvantaged population; most of those residing in rural areas where commercial bank’s branches are rare. To reach out to this segment the bank has partnered with selected Micro-Finance institutions that are licensed by the central bank to operate as financial intermediary. The bank provides wholesale credit to these MFis in form of loan refinancing, thus creates credit cycle for the target population. The bank has also injected equity in

some of the major MFis since their inception and has been on their board to support capacity development. On a smaller scale the bank also supports individual projects such as micro-hydro through direct lending within the microfinance definition.

retAil leNdiNg sBuretail lending is a one window banking designed to extend easy financing to fulfill social requirements of a larger population mass, such as those requiring to purchase a house or a vehicle and those requiring funds for abroad studies or for immediate social obligations. Major features of this segment include competitive interest rates, standardized documentation, fast processing, flexible tenor and structured repayment options backed by regular cash flow. retail lending products are offered across all branch offices and customers can visit any branch to place their funding requirements. Within the retail lending segment the bank offers a range of products and regularly introduces various schemes within those products, to make our offerings attractive for the larger mass.

NABil HousiNgThis product is for financing of home, an ideal home dreamt of by our clients. Financing is available for purchase of land, building construction, furnishing, refurbishment, and purchase of individual homes and apartments.

NABil ProPertiesThis product offers clients with a simple option to obtain credit against mortgage of properties. clients have the access to credit towards funding their social obligations like marriages, travelling, education, equity infusion in businesses, etc.

NABil AutoThis product is for financing of motor vehicles, both for private and commercial use. clients can avail easy financing for purchase of cars, van, jeeps, taxi, trucks, bus, etc. either for personal use or use by offices such as schools, hotels, hospitals, transport operators, small businesses, among others. The bank has also entered into agreement with major automobile dealers to support low interest offerings and fast processing to clients.

NABil siksHyAThis product is for financing of higher education to aspiring Nepali students choosing foreign universities and colleges as their next study destinations. specially packaged study loans cover funding for tuition, accommodation, travel and insurance required for the full course period. Nabil has promoted its

gyANesHwAr AcHAryA Head-sMe, Mid corporate and Microfinance

sMAll ANd MediuM eNTerPrises PlAy A cATAlyTic rOle iN THe OVerAll ecONOMic grOWTH ANd sOciAl Well-

beiNg OF THe cOuNTry THrOugH eNTrePreNeursHiP ANd jOb creATiON. THe bANk is cOMMiTTed TO suPPOrTiNg eNTrePreNeurs by PrOVidiNg iNNOVATiVe FiNANciAl

sOluTiONs


education loan as a social initiative within a financially feasible framework. Nabil is the largest caterer of education loan in Nepal and is among the two banks authorized by the Australian High commission to extend funding for students from Nepal who apply at Australian institutions for higher education.

PersoNAl overdrAFtThis product offers overdraft limit to clients against mortgage of land and building, within the threshold of regulatory framework. This is a quick solution to our customers’ immediate and contingent funding requirements. loan processes are simplified and expedited and includes features of convenient payback facilities together with revolving credit line.

dePosit relAtioNsHiP mANAgemeNt sBudeposit relationship management has been structured into a centrally developed and locally delivered gamut of liability products. The central core of this sbu is continuously engaged in product development and innovation in delivery channels. The bank offers a range of deposit products and regularly introduces various schemes and value offers within those products, to make the offerings alluring for the larger mass. These are often marketed through mass media and delivered across branch offices and web based platforms. customers can visit any branch office and select a suitable deposit product from a range of products, which are broadly grouped into current, savings and fixed accounts.

curreNt AccouNt This is a non interest bearing account that can be opened by individuals, corporates, not-for profit institutions, multilateral agencies and other institutions offices in Nepali rupee and other convertible Foreign currencies. This is a business purpose account where fund deposits and withdrawals are unlimited. Account holders are provided with check book to conduct transactions. Overdraft limits are also assigned to current accounts for borrowing customers.

cAll dePosit AccouNt This is an interest bearing account targeted to high value institutional clients for maintaining deposit in Nepali rupee and other convertible Foreign currencies. clients can park high volume of fund into this account for any time period without term fixation. interest rates on these deposits are generally fixed on negotiation basis under prevailing market conditions. Account holders are provided with check book to conduct transactions. Account should inform the bank in advance for deposits and withdrawals in bulk volume.

geNerAl sAviNgs AccouNtThis is an interest bearing savings account that can be opened across any of the branch offices in Nepali rupee and other convertible Foreign currencies. Account holders can obtain check book, internet banking and mobile banking accessibility, bank statements, debit cards, etc. as required. deposit and withdrawal of funds can be performed at any of the branch offices.

lok BAcHAt AccouNt This is an interest bearing savings account that can be opened across any of the branch offices in Nepali rupee. customers are required to avail a Visa electron debit card under this product that will provide account accessibility through a large network of ATMs and POs terminals across Nepal and india. Account holders can obtain entire services and facilities from bank counters as per their requirements.

BAcHAt yoJANA AccouNt This is a premium savings deposit product that yields a better coupon rate. This account is targeted to clients having relatively large sums of money and would want a better coupon rate. This account offers exciting freebies and waiver on charges for various other banking services such as debit card, anywhere branch banking services, stop payments, good for payments, safe deposit lockers, etc.

rAmesH PrAsAd loHANiHead-drM unit

A key secreT TO Our success is Our cusTOMers’ TrusT ANd cONFideNce We HAVe gAiNed OVer MANy yeArs by

MeeTiNg THeir exPecTATiONs THrOugH THe use OF MOderN TecHNOlOgy ANd by eNsuriNg securiTy, sAFeTy ANd

eFFicieNcy


studeNt sAviNgs AccouNt This is an interest bearing savings account designed for students who seek a modern approach to availing baking services and support in their quest for obtaining education loans. This product offers students with host of exciting benefits like better coupon rate, instant access to internet and mobile banking, discounts on foreign fund transfer requests, privileges in processing of their education loan requests, online payments of foreign examination fees, etc.

BAl BAcHAt AccouNt This is an interest bearing savings account designed for parents to open a bank account in the name of their minor children and start saving now to support their child’s future. initiating a regular savings habit earlier on their parenthood is worthwhile so as to enable them to support their children’s future funding requirement for higher education, marriages, travelling, medical treatment, etc. There is a standing instruction option that can execute a monthly transfer of specified amount from parent’s account to the child’s account automatically. This product is equally aimed at introducing banking amongst children from their early ages.

JestHA BAcHAt AccouNt This is an interest bearing savings account designed for the senior citizens who belong to the age group of 50 years and above. The scheme offers attractive interest on daily balance. under this scheme, interest is paid every month which helps the senior citizens to manage their monthly expenses more conveniently. Account holders can also avail various freebies and discounts on other banking services.

NAri BAcHAt AccouNt This is an interest bearing savings account designed for female customers. This account celebrates womanhood and offers alluring freebies, including a exclusively customized debit card and discounts on shopping across numerous merchant outlets. Account holders can also avail various benefits and discounts on other banking services.

time dePosit AccouNt This is an interest bearing fixed term account that can be opened by individuals and institutions alike in Nepali rupee and other convertible Foreign currencies. Funds are locked for specified time period until maturity and coupon rate is higher than savings account. Time deposit accounts can be opened for a period ranging from two weeks to more than a year. The bank also provides credit against pledge of time deposits.

JestHA muddAti AccouNt This is an interest bearing fixed term account specially designed for senior citizens who belong to the age group of 50 years and above. Payment of interest on deposit is structured on monthly basis to support the regular expense requirement of senior citizens.

smArt Fixed dePosit AccouNtThis is an interest bearing fixed term account specially designed for busy and tech-savvy individuals who can open a fixed deposit account through web based platform, without having to visit bank’s branch. This is a paperless fixed deposit product and offer exciting features for account holders.

besides, the bank also offers various savings product targeted to specific segments such as remittance savings, corporate staff savings, salary savings, bachat yojana, super savings, and employee savings. customers can also fill up online account opening form and upload a recent photo id and other required documents for opening a bank account. Account holders of the bank are assured of safety and competitive returns, while also having accessibility to a wide payment network involving branch offices, ATMs, POs machines, and internet and mobile banking platforms across Nepal and india can also requests for executing worldwide fund transfer.

cArds ANd electroNic BANkiNg sBucard processing of the bank has been centralized into a profit center sbu that enables development and delivery of card related services across branch network and electronic platforms. Nabil bank being a pioneer in introducing credit cards in Nepalese market has been one of the principal members of Visa inc. and Mastercard international since early 1990s. The bank also has association with unionPay international co. ltd. and smart choice Technologies (P) ltd.

For enhanced transaction security the bank replaced entire cards in circulation with chip cards based on eMV technology in the financial year 2014-15. This technology upgrade has replaced data storage from magnetic stripe to electronic chip embedded in the card, and hence has enhanced data security by manifolds. The bank has also upgraded and replaced its entire non-eMV compliant POs terminals with eMV compliant POs terminals at its merchant locations for safety of our merchants and security of every card transactions.


in the domestic banking industry the bank offers the widest range of services in cards and electronic banking. in credit card segment the bank issues co-branded cards with Visa for NPr currency and with Mastercard for NPr and usd currency. similarly, in debit card segment the bank issues co-branded NPr denominated cards with both Visa and scT. The bank also issues pre-paid debit cards for both NPr and usd currency under co-branding with Visa. under acquiring services, the bank accepts transactions from network of Mastercard, Visa, union Pay and scT.

co-BrANdiNg witH visAThe bank issues usd denominated pre-paid cards and NPr denominated debit cards, pre-paid cards and credit cards under co-branding with Visa inc. such NPr denominated cards are accepted across a wide network of ATMs and POs terminals located in Nepal and india. usd denominated pre-paid cards are accepted globally across the Visa payment network (except for NPr and iNr payments) and have grown popular for convenience and security of payment transactions.

co-BrANdiNg witH mAster cArdThe bank issues both NPr and usd denominated credit cards under co-branding with Mastercard international. While NPr credit cards are accepted across Nepal and india for payments in NPr and iNr currency, the usd cards are accepted globally across the Mastercard payment network for payments in foreign currencies other than iNr.

co-BrANdiNg witH sctThe bank issues NPr debit cards under co-branding with smartchoice Technologies (P) ltd. These cards are accepted across scT payment networks in Nepal and offer additional benefit of withdrawal across all connected ATMs of various institutions for a nominal withdrawal fee.

NABil iNstAllmeNtThis is a unique product bundling offer, wherein credit card customers can purchase products such as travel package, electronic goods, home furniture, smart phones, jewelry, etc. offered by selected partner merchants and make the payment in equated monthly installments. This service package is available to all NPr credit card holders without any additional interest charges. Only the installment amount is billed to credit card at each monthly billing date, and the card holder can continue using the available credit limit. repayment period extend up to eighteen months and thus adds value to our card holders.

NABil m-BANk This is a mobile banking solution under both the menu based and application based systems. This solution allows clients to access various banking services using their mobile phones and without having to visit a branch office. clients can make balance enquiry, obtain account statements, place requisition for check books, and execute limited third party fund transfer within Nabil bank accounts. clients can make use of mobile platforms for payment of mobile bills, top up talk time, telephone bills, internet bills, esewa balance, cable television bills, etc. This service is available both from NTc and Ncell mobile networks.

NABil NetThis is a internet based banking platform offered by the bank. customers can make use of this service for various purpose ranging from fund transfers, balance inquiry, account statements, credit card payment, mobile bills payment, internet bill payment, etc. The bank has enhanced its security features on NabilNet transactions with the implementation of two factor authentication (2FA) process called “Mobitoken”. Two factor authentication involves verification of user id and password in the first stage and thereafter, in the second stage, the entry and verification of a One Time Password (OTP) that is generated by the system and delivered to the account holders registered mobile number or email address. clients are required to complete both stages of transaction authentication for every transaction requests to be successful.

NABil esecureThis is a secured mode of payment for transactions that originate in the internet platform and are paid using the cards issued by Nabil under both Visa and Mastercard brands. Nabil esecure mode is“Verified by Visa” and “Mastercard securecode” under 3d verification technology, which makes online transaction secured. cardholders are required to register their card for Nabil esecure once, and then can execute transactions at merchant websites. Transactions processed through Nabil esecure are protected by card member chosen passwords. cardholders are requested to visit only trusted merchant websites for online payment of goods and services. cardholders can purchase railway tickets, airlines tickets, hotel reservations, tour packages and many more by making use of hassle free Nabil esecure mode of payment.


AtmsNabil has a large domestic network of 90 ATMs in the kathmandu and outside valley. These ATMs serve customers 365 days a year. Nabil ATMs accept debit, credit and pre-paid cards of Visa, Visa electron, Plus, Mastercard, Maestro, cirrus, union Pay international and scT. Further extension of ATMs in various locations inside and outside valley is in the bank’s ongoing business plan.

remittANce BusiNess ceNter sBuremittance business segment has been structured into a centrally developed and locally delivered range of remittance products. The central core of this sbu is continuously engaged in product development, network enhancement and innovation in delivery channels. remittance business is catered from across the branch offices and also through the extensive network of payout agents deployed across the nation.

westerN uNioNNabil bank is the only Principal bank Agent of Western union international for Nepal. Western union provides fast, reliable and convenient ways to transfer money. Through Western union, the customers can receive the fund through more than 500,000 Western union Agent locations in more than 200 countries and territories. One does not need to have an account with Nabil bank to receive funds. The bank has built up extensive agent network throughout the country for effective payout of Western union remittance.

Western union (Wu), Nabil bank ltd. & esewa Pvt. ltd. has also launched Mobile Money Transfer (MMT) service to Wu customers in Nepal. sender can send money directly to their beneficiary’s mobile in Nepal or beneficiary can load money in his/her mobile wallet by submitting MTcN no., sender’s name, expected amount etc. beneficiaries can transfer their amount in different member banks of esewaPvt. ltd or can use it in payments of utilities. For this, he or she needs to be registered withe esewa.

NABil remitThis is a proprietary brand the bank has developed in order to provide domestic remittance services for money transfers within Nepal. NAbilreMiT is a web-based online money transfer system introduced by Nabil bank ltd. to ease the fund transfer from one place of the country to the other. NAbilreMiT has one of the largest networks of over 1,400 Nabilremit agents located across the nation. Over the year Nabilremit has become one of the largest and most popular local remittance brands in the country.

drAFt drAFts ANd swiFt trANsFers The bank issues demand drafts and executes fund transfer instructions for transfer of funds across the globe using the platform provided by sWiFT. The bank has wide correspondent banking arrangement with international banks in order to execute fund transfer requests from clients so as to facilitate individual fund transfer requirements, international trade transactions and treasury operation of bi-lateral and multilateral agencies.

BANcAsurrANce sBubancassurance is one of the new concept products which the bank has focused with the sbu concept. centralized business development and support team is continuously engaged in business development and process innovation in close co-ordination with the insurers and the clients. insurance policies on the other hand are available across all branches and lending sbus so as to facilitate clients with choice and effective selection. The sbu coordinates with insurers for expeditious settlement of claims in compliance with the standard procedures.The bank offers insurance services to clients for coverage of both property and life under agency relationships with major insurers in Nepal. credit clients can conveniently choose a policy for risk coverage on properties pledged to bank. likewise all clients can choose to select from a range of different life insurance policies as per their requirement and investment

suNil PokHArelHead-retail banking

We dO NOT sTriVe Merely TO eNsure cusTOMer sATisFAcTiON buT TO exceed exPecTATiONs

56 Nabil bank limited

plans. This arrangement between the bank and insurance companies to sell insurance products to the bank’s customers brings mutual benefits to insurer, bank and the clients at the same time.

treAsury sBuThe bank’s treasury offers complete solution for foreign currency transaction requirement of its customers. The bank is well equipped with real time transaction window for transacting in global financial markets. extensive network of correspondent banking arrangements worldwide support clients requirement of transactions with foreign counterparties, be it for individual requirements, trade transactions or for treasury operations of bi-lateral and multi-lateral foreign agencies. The bank undertakes all forex transactions as permitted by the regulation, competitive spot and forward currency exchange rates, and non deliverable forward contracts for licensed financial institutions.

otHer servicesANywHere BrANcH BANkiNg services (ABBs)The bank has capitalized on its technology resources to offer uninterrupted transactions across a wide network of its branch offices, ATM network, and POs machine network. The objective is to ensure that Nabil’s products and services are easily accessible to its customers no matter where they are located. clients can benefit from hassle free transaction banking services from each and every branch offices, irrespective of the branch where they opened an account.

exteNded BANkiNg HoursNabil has offered “365 days banking services” and “extended counter services” from select branches to cater to the banking needs of customers who do not have time to visit a branch during regular banking hours. Teendhara and lalitpur branches in kathmandu valley provides 365 days banking services and extended counter services, while many more branches across the country provides extended counter services.

BullioN oPerAtioNsNabil is a wholesale importer of gold on consignment basis and has developed a credible name in the domestic bullion supply chain.The bank offers bullion import services to merchants as well as licensed financial institutions.

krisHNA duttA BHAttArAichief Financial Officer

iN THe PursuiT OF gOOd gOVerNANce ANd iNTerNATiONAl besT PrAcTice We belieVe iN PrOVidiNg THe HigHesT leVel

OF disclOsure POssible TO Our iNVesTOrs ANd OTHer sTAkeHOlders


commoN teAl


ProFessioNAl

Home to iNsisteNt ProFessioNAlism

& PerFect PrActices

our uNreleNtiNg ProFessioNAlism ANd PerFect

BANk PrActices iN tHe BANkiNg services HAs

HelPed us gAiN ANd mAiNtAiN AccurAcy wHile

serviNg customers. it HAs AlwAys Fostered

PArtNersHiPs tHAt give tHe cHANces oF wiN-

wiN to BotH PArties wHicH tHereBy HAve led

to ProliFerAtioN oF BusiNess Activities iN tHe

couNtry.

Bod meetiNg sessioN At NABil BANk

61Annual report 2014/15

tHe BoArd oF directorsstructure oF tHe BoArdNabil bank ltd. has a unitary board structure with seven members. The board is headed by the chairman and comprises of six other member directors. All the board members are non– executive directors. individual directors exercise their authority in the board meetings and the board acts in the collective interests of the shareholders. The core objective of the board has always been to form policies and guide Management for long term sustainability of the bank with reasonable returns to shareholders and enhance shareholders’ value. The board decides on corporate strategies, approves capital and operational plan and consistently reviews the Management’s performance ensuring that corporate objectives are always kept in focus.

The directors are from diverse business and service backgrounds with varieties of knowledge, experience and expertise. The entire board comprises of non-executive directors who, jointly or severally, do not take part in day to day management of the bank’s business operations. The board members bring about an external perspective on company affairs and provide constructive suggestions to the ceO. The board sets strategic path for the organization, identifies business objectives, reviews Management’s performance and provides guidance to the Management towards achieving the targeted goals and objectives.

The board is collectively responsible for long term sustainability of the bank. To this end, the board exercises its authority within the framework of regulatory provisions, companies Act, bank and Financial institutions Act, Memorandum and Articles of Association and other relevant laws and regulations. The board delegates executive responsibility for running the bank’s business to the chief executive Officer. The ceO heads the executive management team and is empowered to further delegate authority and assign responsibility through the organizational structure.

The board, considering the job requirement and in compliance to regulatory provisions, can constitute committees of the board ascribing specific responsibilities and delegating any of its authorities and powers to such committees. However, the board keeps certain approving authority to itself including, but not limited to, the approval of strategic plans, performance targets, policy documents, annual budgets, annual financial statements and the authority or the delegation of authority to approve credit and market risk limits. A total of 18 board Meetings were held during the year. The following table shows attendance of individual directors at the meetings.

iNFormAtioN to tHe BoArdNabil has a culture of open and relevant communication between the board of directors and the bank’s executive Management. The board receives reports and presentations from conveners of board committees and the ceO. such reports include key issues related to credit exposures, risk portfolio, liquidity, financial performance, business expansion, audit and compliance. The board regularly reviews management performance against approved budget targets and goals.All board committees have a Member secretary from senior management team who is engaged in the concerned area of business within the bank. For effective discussions of the items in agenda, other members from the bank’s management, whose responsibilities relate to the matter in agenda, are also invited as required.

individual directors are provided with the agenda and accompanying reports and documents well in advance of the

goverNANce

AtteNdANce sittiNg Fees

k.b. Manandhar 13/18 160,000

s.P. Poudyal 18/18 203,000

d.g. Agrawal 17/18 180,000

N. chaudhary 11/18 120,000

Ashish sharma 15/18 152,000

shanker Pandey 10/18 96,000

j.P. kanoria 12/18 124,000

lal Mani joshi 2/18 24,000

Total 1,059,000

04


board and committee meetings. board members have timely access to adequate information so as to enable them to conduct appropriate review of the agenda and actively participate in discussions during the meetings. They may seek independent professional advice wherever they feel so is needed. directors can also make offsite visits to branches to obtain a better understanding of local business conditions, participate in business promotion and corporate social responsibility related activities and interact with customers and employees.

director’s APPoiNtmeNt ANd iNductioNAppointment, retirement and re-election of directors are conducted as per the provisions laid out in prevailing companies Act, bank and Financial institutions Act, Articles of Association of the bank and other relevant laws and regulations. One professional director is appointed from the roaster of professional experts published by the central bank. None of the directors have a service contract with the bank. upon appointment, the directors are administered Oath of secrecy and Fidelity. Newly appointed directors are inducted on the board as per provisions and procedures laid out in the companies Act, bank and Financial institutions Act and other relevant laws and regulations. Throughout their directorship, the directors have access to adequate information and opportunities of interaction with other directors and senior executives to obtain an understanding of the bank’s business, strategies, operations and risk culture.

cHANges iN tHe BoArdThe board has always balanced a reasonable mix of professional expertise, experience and vision in its composition. in the context of change in local and global business environment, our businesses are exposed to new kinds of risks. The evolution and emergence of risks calls for immaculate planning and thorough understanding of the risks and the challenges in risk management. it also necessitates the board to step ahead judiciously and prudently, for which the board needs to keep itself well equipped with the required set of skills and acumen at all times. The board has consistently demonstrated adequate knowledge and expertise in its decisions. Mr. k.b. Manandhar, Mr. shankar Prasad Pandey and Mr. lal Mani joshi have stepped down from the board. Mr. Pratap kumar Pathak has joined as independent/Professional director and Mr. Virender Paul dani also joined as a member of the board on 25th August 2015.

relAtioN witH tHe sHAreHoldersThe board has always encouraged active participation of shareholders in every Annual general Meeting. The meeting has always been a very important platform for the board to interact with many shareholders, both individual and institutional, communicating the objectives and strategic plans, clarifying on shareholders’ concerns and sharing the collective vision.directors, most of whom represent institutional shareholders, engage in regular dialogues with institutional shareholders, continuously conveying on business strategies and apprising them of the bank’s performance based on mutual understanding of organizational objectives.

BoArd committeesregulatory provisions stated in Nrb unified directive No.6, section 5 has allowed licensed banks and financial institutions to constitute board committees relating to Audit, risk Management, and Human resource Management. each committee can include minimum three members and a maximum five members. committees relating to areas other than these three can only be formed for a specific purpose and for a specified period of time.The bank had following board committees during the year:1. Audit committee2. risk Management committee3. committee relating to staff services and Facilities

Audit committeeThe committee is formed and functions in compliance to the regulatory provisions of Nrb unified directives and the provisions of sections 164 and 165 of company Act 2063. The coordinator and other members of the committee are non-executive directors. The role of committee secretary is performed by the Head of internal Audit department. internal Auditors and statutory Auditors have direct access to the Audit committee.

The committee constituted of directors Mr. s.P. Poudyal, Mr. Nirvana chaudhary, Mr. s.P. Pandey and Mr. Ashish sharma until it was reconstituted on 24th june 2015. As of 16thjuly 2015, the composition of the committee is as follows: 1. director Mr. Nirvana chaudhary, coordinator2. director Mr. d.g. Agrawal, Member


3. director Mr. Ashish sharma, Member 4. director Mr. Mohiuddin Ahmed, Member (Alternate director Mr. j.P. kanoria has been nominated to attend bAc meetings in absence of Mr. M Ahmed)

committee role ANd resPoNsiBilityThe committee’s role is extensive and strongly supports the board in dealing with aspects of good corporate governance, internal control, risks management, financial reporting, legal and regulatory compliance and ethical conduct of business.

major responsibility of the committee includes:1. reviewing the banks’ overall system of internal controls.2. reviewing observations and recommendations made in audit

reports issued by internal auditors, statutory auditors and regulators.

3. reviewing the bank’s financial statements, ensuring its accuracy and the required level of compliance in relation to financial reporting standards.

4. reviewing compliance in relation to the bank’s internal policy and prevailing regulatory and legal provisions.

5. reviewing risk management systems and security position of the bank in respect of exposure to credit risk, operations risk and market risk.

6. Advising and recommending the board on management actions required for achieving the desired level of effectiveness and compliance in response to above reviews.

7. recommending the board on appointing statutory auditor, auditor’s remuneration and reviewing that the auditor’s actions in course of bank’s audit, do not contravene with applicable laws and provisions.

committee AtteNdANce recordTotal ten committee meetings were conducted during the year.

Note: Director Mr. D. G Agrawal was member of the committee after its

reconstitution on 24th June 2015 whereas Director Mr. Shanker Pandey was

member prior to that date. Committee Secretary attended all ten meetings

(except one meeting which was attended by Officiating H – IA) held during

the year.

committee Activitiescommittee meeting reviews and discusses a number of internal audit reports, statutory audit report and regulator’s inspection report. The committee updates the board of its actions by sending copies of its minutes, which are discussed in board meetings. committee issues recommendations for strengthening bank’s system of internal controls and its effectiveness in practice.

A number of agenda items were discussed in audit committee meetings and numerous recommendations were issued towards strengthening the bank’s overall risk management systems. For effective discussions on specific agenda, members from senior management team of the bank were also invited to committee meetings on need basis.

Agenda discussed in Audit committee meetings1. Monthly report on Past dues corporate loans & retail

lending. 2. Monthly status report on Nostro Accounts.3. Audit report of central Processing center.4. Audit report of remittance business center. 5. Audit report of Treasury unit. 6. Audit report of reconciliation of Nostro Accounts. 7. Audit report of card division & e- banking.8. Audit report of Plu unit.9. Audit report of compliance Position of the bank.10. Audit report of Operations of branches - 47 reports.11. Audit report of corporate & sMe banking of branches - 42

reports.12. Audit report on Plu of branches - 46 reports.13. Audit report of import l/c at cTO. 14. Audit report on export l/c at cTO. 15. Audit report of guarantee business at cTO.16. Audit report of bancassurance unit.17. Audit report of Nabil investment banking18. Audit report of sMe & Micro lending unit.19. Audit report of Hr – department.20. semi-Annual verification of cash and cash Value items of

all branches. 21. investigation & inspections/ special Assignments. 22. Other Agendas:

• Review of Compliances and Branch/ Unit Responses on Audit reports - 139 reports.

• Memorandum on adoption of policies for selection of statutory Auditors and short listing of Auditors

directors AtteNdANce sittiNg Fees

d.g. Agrawal 1/1 12,000

Ashish sharma 9/10 92,000

s.P. Poudyal 9/10 115,000

N. chaudhary 10/10 107,000

shanker Pandey 8/9 80,000

totAl 406,000


• Memorandum on submission of Annual Financial statements and Preliminary statutory Audit reports (with Management response) of the bank for Fy 2070/71 (2013-14).

• Memorandum on Disclosure of information, (in regard to Audit committee) in line with stipulation of the company Act 2063, in directors’ report of the bank for Fy 2070-71

• Memorandum on NRB Inspection Report (Preliminary) 2071.

• Quarterly certification of Unaudited Financial Results of the bank.

• Monthly certification of Capital Adequacy Ratio and risk Weighted Assets of the bank.

• Half yearly review of Investment Portfolio of the Bank.• Memorandum on Annual Audit Plan for FY 2071/72.• Memorandum on Quarterly Audit Programme of FY

2071/72.• Memorandum on Budget for FY 2072/73 (2015/16).• Memorandum on Payment of Arrear Interest to Saving

Account Holders.• Memorandum on Information System (IS) Audit of the

bank conducted by Paladion Networks Pvt. ltd.

recommeNdAtioNs issued to mANAgemeNt1. Monthly review of past due loan accounts and appropriate measures were advised to the Management to deal with and keep a watch on overdue loan accounts.

2. Monthly review on status on old and un-reconciled items in the nostro accounts of the bank and appropriate directions were given to the Management for timely reconciliation and to keep the un-reconciled items under control.

3. review the compliance of the branches/units in regard to Nrb directives, bank’s credit policy, internal rules & guidelines and compliance of prevailing laws of the country. issue necessary instructions/directions for addressal of the non compliances/irregularities.

4. review and discussions made on the Nrb inspection report of the bank and advised appropriate measures to be taken by the Management for full compliance of the irregularities pointed out in the report.

5. review and discussions made on the preliminary statutory audit report along with the Management response and annual financial statements of the bank and suggested appropriate

measures to be taken by the Management for compliance and recommended the board for adoption of annual accounts of the bank.

6. review and discussions made on the risk mitigation (such as business, operations, market, regulatory, external etc.), internal check and control and security position in respect of all operations /activities conducted by the bank such as : corporate/infrastructure & Project Financing, branch Operations, Plu business, cTO, sMe & Micro lending, Treasury and correspondent banking, cash and cVd verification, Nabil investment banking, remittance business unit, Hr department, central Accounts and Administration, reconciliation of Nostro Accounts of the bank, compliance Position of the bank.

2.2 risk mANAgemeNt committeerisk Management committee is constituted in line with the spirit of risk Management guidelines (rMg) of Nepal rastra bank and the Nrb unified directives. The rMg highlights on risk governance and identifies the need of a strong risk management framework, well defined risk management processes and effective risk assessment and measurement mechanism.

The committee constituted of directors Mr. s.P. Pandey and Mr. Ashish sharma until it was reconstituted on 8th April 2015. As on 16 july 2015, the constitution of the committee is as follows:1. director Mr. Ashish sharma, convener2. director Mr. d.g. Agrawal, Member3. convener-Audit committee, Member4. chief Operating Officer (cOO), Member bank’s chief risk Officer is the committee secretary.

committee roles ANd resPoNsiBilitiesThe committee oversees overall risk governance framework of the bank. it ensures that proper risk management policy and procedures are in place and effectively practiced at all levels within the bank. in doing so it ensures that internal Audit reviews the overall business operations to assess whether or not the bank’s policies and procedures are adequate and implemented. it reviews the effectiveness of Management information system and internal control systems of the bank. The committee, on an ongoing basis, defines and reviews risk appetite of the bank in relation to overall business risk with specific focus on credit risk, market risk, operation risk, liquidity risk and price risk. The committee advises the board


on the overall risk tolerance levels of the bank throughout the strategic implementation process. risk appetite of the bank is determined based on the following:

• strength of capital base• quality and growth of earning assets base• brand reputation and• perceived customer value• balanced approach to business risks and returns• risks diversification

A major role of the committee is to assess business and profit risks of all lines of businesses of the bank. The committee ensures that managerial and operational level officials of the bank, responsible in risk management and decision making processes, possess adequate knowledge of their specific job area and of the corporate risk culture.

The activities of AlcO like portfolio assessment, returns from the business, asset quality, growth in overall business vis-à-vis market growth (competitor’s position) are also reviewed by the committee and necessary instructions are issued to the management and necessary recommendations are made to the board as deemed appropriate. quarterly stress report and monthly report comprising overall position of the bank, changes in the market condition are reviewed and necessary instructions are issued to the management. if the need is felt for any recommendation to the board, the same is also appropriately done. The committee also reviews trends in portfolio quality and the adequacy of provisioning for possible credit losses.

risk goverNANcebank practices risk governance applying the principles of good governance to the identification, assessment, management and communication of risk. The bank equally takes account of participation, transparency, and accountability within the procedures and structures by which risk related decisions are made and implemented.

Within the bank, risk management committee is responsible for overseeing the risk governance structure and monitoring the effectiveness of risk management and internal control systems. As advised by the committee, the management ensures presence of strong risk governance culture in the bank which guides its risk strategies. chief risk Officer, member secretary of the committee, ensures that emerging risks and changing behavior of key risks are brought forward for discussions in the committee meetings. invitees who head major functional and

business areas participate in committee meetings and highlight the key risks faced in their specific areas. This helps the board, together with the committee, to ensure that a strong risk management frame work is maintained.

AgeNdA discussed iN risk mANAgemeNt committee meetiNgsthe committee discussed on the following agenda in its meeting.1. review of risk management practices implemented in the

bank including regulatory compliance.2. review of lending authority & delegation of authority for

specific credit issues 2004.3. review of performance and business risk.4. stress testing reports of the bank.5. status of non-performing loan accounts and recovery

strategies pursued.6. Minutes of Asset liability committee (AlcO) meetings.7. status of implementation of AMl & combating Financing

Terrorism Framework.8. credit concentration reports, including top exposures at

borrower, group and sector level.

recommendation issued to managementThe committee took note of the following and issued appropriate instructions to the management.1. budget achievements and capital strength of the bank.2. development in market conditions and likely impact on the

bank’s earning.3. recovery efforts and strategy pursued to regularize in large

non-performing loan accounts.4. requirement of regular reporting mechanism on risk

Management to the rMc.5. stress testing scenarios and satisfactory liquidity and capital

position of the bank.6. Need to analyze concentration risk in deposit portfolio.


d.g. Agrawal 1/4 12,000

s. P. Pandey 3/4 35,000

A. sharma 3/4 35,000

s.P. Poudyal1 3/4 28,000

total 110,000

Committee Secretary attended all four meetings held during the year.

1 The convener of Audit committee should be a member of risk management

committee as per regulatory requirement. Accordingly, Mr. s.P. Poudyal

attended the meetings held during the year.


7. satisfactory conduct of AlcO.8. scheduling rMc meetings before board meetings, to the

extent practical, such that rMc can apprise the board of its feedback on various risks related reports.

9. Need to cover review of specific risks which otherwise may not be routinely covered in AlcO meetings or in standard performance reviews.

After the conclusion of each meeting, the committee communicates necessary actions to be taken to the management and also reports its decisions to the board.

committee relAtiNg to stAFF services ANd FAcilitiesThe board constituted this committee in March 2014 in line with the unified directives of Nepal rastra bank. The committee consisted of following members as on 16 july 2015:• Director Mr. Nirvana Chaudhary, Coordinator• Director Mr. Dayaram Gopal Agrawal, Member• Chief Financial Officer Mr. Krishna Dutta Bhattarai, Member• Head – Human Resource Mr. Roshan Koirala, Member secretary

role ANd resPoNsiBilitiesa. To assist board of the bank to formulate “remuneration

Policy”.b. To study and analyze market salary structure and submit

report to the board in regard to possible consequences in the bank due to change in remuneration structure of the market.

c. To recommend the board, as per remuneration policy, with the justification for increasing remuneration of ceO and employees of the bank within prevailing rules, guidelines.

d. To develop job description, goal and kPis and review Performance Appraisal system accordingly.

e. To formulate guidelines, rules relating to Hr functions such as recruitment & selection, placement, transfer, performance appraisal, reward and punishment and labor relations.

f. To review employees by-laws, employee composition, and prepare succession planning and recommend the same to the board.

The committee met six times during the review year and following is attendance of the same.

iNterNAl coNtrols board of directors of the bank is overseeing effective implementation and monitoring internal control system in line with prudent banking norms and best business practices. bank’s Audit committee reviews the reports from internal auditors, statutory auditors and Nrb inspection Team and provides the board with independent assurance on the effectiveness of control environment. similarly the review of processes and procedures is being done in timely manner for appropriate arrangement of control measures.

banking is a risk business where it deals with different types of risks. The importance of risk management in later days has even increased as the quantum of risk and time saw a paradigm shift. risk and reward are inherently linked and each of our decisions involve a trade-off between these two elements. While we accept the need to take risk for achieving business objectives, we are also aware of the fact that we need to mitigate adverse consequences of taking risks. For this we have implemented key procedures designed to provide effective internal controls across the organization. We have centralized most of the activities so that these get performed by experts in the center and are done under the supervision of competent persons. similarly a mechanism has been put in place to generate daily, monthly and quarterly report and review of same for any deviation.

AddressiNg oPerAtioNs riskThe board has delegated the authority to ceO for regular operation of bank’s business activities. The ceO is empowered to further delegate the authority and assign responsibility including specific business targets to individual or unit level officials. The functional responsibility line is clearly defined in the organization structure. The primary responsibility for effective practice of internal control procedures rests on branches, business units, support units and operational managers. internal Auditors, as per their approved annual work plan, conduct detail inspection and verification on effectiveness of internal control procedures at all branches and units at least once each year. internal audit not only points out the deficiency in the control mechanism it equally recommends measures that reduces the risk and enhances the operational efficiencies.


N. chaudhary 6/6 85,000

d.g. Agrawal 6/6 68,000

s.P. Poudyal 5/6 56,000

total 209,000


The management depending on the appropriateness of the recommendations ensures that internal Auditor’s recommendations are implemented within an appropriate and reasonable time frame. bank’s Policy specifies 60 days period for closure of each audit report from the date of its issue. This involves review of audit report and the response of branch / unit audited thereon, at the levels of concerned functional / business heads, internal Audit department and Audit committee. closure of audit report is approved by the ceO upon full satisfaction that the audit irregularities have been duly addressed and complied with, which also gets reported to the internal Audit department for necessary review subsequently.

bank has an executive committee (xcom) headed by ceO, comprising of sbu heads and heads of other functional departments. Weekly xcom meeting reviews the bank’s performance and the developments in operating environment at length. it also discusses measures to be taken for improvement of operating system and procedures. sustainability and contingency plan for continuity of business and operation of bank under any circumstances are discussed and measures to be put in place are considered following the discussion and decision of xcom as well as at the recommendation of concerned units. The bank has continuity of business Plan (cObP) guidelines in place to ensure that the concerned staffs are prepared to defy the risks arising from internal or external factors such as natural, man-made or technical disasters, and continue the normal business operations at the earliest with minimum loss of any kind. The issues related to Asset and liability management including risks are discussed at AlcO (Assets and liabilities committee) meeting that takes place every month.

The bank has in place the standard instruction Manuals (siM) for every function in the bank which, in essence, is standardized detailed procedural guidelines for specific areas of banking business. Activities at all level conform to the procedures in siM. budgeting and variance reporting mechanism is also in place with regard to bank’s performance review on monthly basis. Finance department and xcom members under one’s area review the variances and progress against budgets. A Monthly business letter is prepared for information and perusal of the board which discusses business developments on all activities of the bank basically on four facets viz. financials; product/service; process/control and human resource activities. The report among other includes market developments, overall economic issues that may have impact on the business and other miscellaneous issues. Financial Administration bylaws specifies

centralized functional control over all expenses of the bank. All expenses within the budget are approved by different officials as per the delegated authority. expenses beyond their authority are approved by the ceO upon recommendation of management level Financial directive committee or concerned division head.

AddressiNg credit riskcredit risk arising out of lending portfolio is major risk in the bank and that too is main earning avenue in the bank. business generation unit and credit risk units are independent. credit marketing unit conducts marketing activities and forwards credit proposal for approval. Then onwards credit risk unit independently analyzes each credit proposal in light of inherent and external risks involved in the business and approves each credit proposal within their authority, if the unit is satisfied with the risk associated with the business and safety/security aspects mentioned in the proposal.

besides, the bank has credit Administration and support unit (cAs) and exposure accounting unit (central loan Administration department - clAd) which are independent to credit Marketing and credit risk. cAs directly reports to crO (chief risk Officer) and clAd reports to cOO (chief Operating Officer). These are independent from credit marketing and credit risk functions and are assigned with specific responsibilities of conducting periodic onsite inspection of credit customers, examining credit documentation and ensuring all the terms of credit approvals are complied with throughout the life of a credit account.

BiNAy kumAr regmichief Operating Officer

We Are cOMMiTTed TO PrOVidiNg eFFicieNT serVices THrOugH iNNOVATiON, AuTOMATiON ANd sTATe-OF-THe-ArT TecHNOlOgy

ANil kHANAlchief risk Officer

We belieVe THAT deVelOPiNg A risk culTure WHicH crOss-cuTs THrOugH THe eNTire OrgANizATiON is key TO successFul

risk MANAgeMeNT


AddressiNg excHANge riskThe board has delegated foreign currency dealing and investment decision limits to ceO. The ceO has further delegated the authority it to line managers. in order to have independent reporting for dealing and exposure accounting in compliance with internal control mechanism, treasury function has been segregated into Treasury Front Office (TFO) and Treasury back Office (TbO). TFO reports to cFO. Treasury back office, having reporting line to cOO, is responsible to ensure that treasury front office operates within the authorized limits and is in compliance to the bank’s investment policy. All the transactions under each deal done by TFO and their exposure accounting, maturity profile, follow up and record keeping is done by TbO.

AddressiNg dAtA security riskiT Policy specifies centralized functional control over all iT operations including defining access authority in core banking software, Mis and hardware facilities including data center. Access authority to any staff is given at the request of department head and approval from cOO. similarly, the bank has disaster recovery site (drs) located at different seismic and geographic zone and is outsourced, which gets tested in a periodical interval. data in the drs are replicated on online real time basis. similarly, decisions on procuring iT equipment and services are reviewed by iT department for technical conformity beforehand. The bank publishes notices, keeps the same in website, periodically for public awareness in order to safeguard from probable fraudulent activities through our internet banking platform. similar instructions are regularly issued to all the employees as well.

stAtutory ANd regulAtory comPliANcesAnti-Money laundering (AMl) unit, under Head – legal, Operational risk and AMl, who is also the compliance Officer of the bank, ensures the proper compliance of know your customer (kyc), AMl and combating Financing in Terrorism (cFT) Framework of the bank. The implementations status of the kyc and AMl/cFT Framework of the bank is reported quarterly to the board through the crO and the ceO, and to Financial information unit (Fiu) on a semi-annual basis. The bank also has a high level AMl/kyc committee to develop and

implement the related strategies as required. kyc and AMl/cFT Policy of Nabil bank limited, 2015, developed in line with the statutory and regulatory requirements, is in place to safeguard the bank from the potential risks of money laundering and financing in terrorism. Mechanisms are in place to detect, monitor, report and discourage suspicious and potentially risky transactions and accounts. The related statutory reporting requirements like Threshold Transaction report (TTr), suspicious Transaction report (sTr) and other reporting to concerned authorities, as required, are properly practiced in the bank. The process of report generation and monitoring of accounts and transactions are in progressive automation.

Mechanisms are in place to comply with all regulatory reporting requirements. such requirements, among other things, include periodic reporting on capital adequacy (as per basel ii & iii), balance of payment, cash reserve requirement, credit portfolio, foreign currency assets, deposit portfolio, gap reporting (AlM), statutory liquidity ratio and monthly provisional statements of financial position and income statements. Functional managers are accountable for complying with the reporting requirements. The Audit committee ensures that required disclosures are made properly in the financial statements. The committee obtains reasonable assurance from statutory auditors on the reliability of financial information presented in the annual financial statements and recommends the board for its adoption. cFO ensures that quarterly interim financial statements of the bank are filed with the regulatory authority, the security exchange board of Nepal and published in national daily newspaper for public information within the prescribed time periods.

centralized functional control is exercised over all transactions involving tax deductions at source. All such transactions are administered and authorized directly under cOO. Payroll tax is administered by Human resource department. Tax deducted at source is timely deposited with large Tax Payers’ Office. responsibilities are clearly defined and distributed to cOO, cFO and H-Hr as appropriate. The Audit committee has been reviewing the effectiveness of internal control systems and has been reporting to the board on a regular basis.


emPloyees Management of human capital strength of any organization is gaining paramount importance for effective implementation of business strategies to achieve the corporate goals. For this, guidance and careful attention from the supervisors has become indispensable. in our organizational set up, all senior staff members enjoin to act as Hr managers in their areas of operations by implementing policies and guidelines of the bank. They ensure that strong ethical practices while conducting bank’s businesses are put in place by nurturing talent and sharing knowledge. On the other hand, the Hr department is responsible for monitoring and ensuring that bank’s Hr policies are interpreted consistently across the bank.

employee bylaws acts as a framework that guides Human resource Management practices within the bank. This document is approved by the board and also by the regulatory authority. Principles of ethical work culture, open communication, objective career development, transparency in remuneration and pay - performance correlation support Hr practices employed within the bank.

As at 16th july 2015 the bank has a total of 705 permanent and 598 contract employees in its employment. contract employees include 595 outsourced staff (clerical staff - 127 and support staff - 468) and 3 staff under direct contract with the bank (security consultant -1, support staff - 1 and ceO). The increasing Hr strength has been smoothly incorporated into the organizational structure which has enabled the bank to maintain the good practices that has been adopted consistently over time. A high performance culture that has evolved within Team-Nabil has been shaped by the drive of the employees to deliver. Our managers are also always encouraged to promote open communication at all levels, both vertical and lateral.

Our core corporate values crisP – customer Focused, result Oriented, innovative, synergistic and Professional are embedded in our daily work culture. being a service provider, we believe every action of ours should create some value to our customers. For us to align our actions with our belief, communication within is the key. communication strengthens sharing of knowledge, ideas and viewpoints. issues affecting individual job areas and the overall financial performance of the bank are regularly communicated to our staff.

The bank has implemented a staff code of conduct which follows this very essential theme and is abided by all staff in action. The strength of our Hr rests in its diversity and fair

treatment. Our culture respects individual differences and learning aptitudes. We do not allow discrimination on any grounds, be it social, religious, hierarchical or gender. Any kind of discrimination or any form of harassment is dealt with as per disciplinary provisions in the employee bylaws.

At Nabil, employees perceive that their views are heard, their concerns are attended and their career progression is based on objective performance assessment. Towards this end, the bank has implemented point scoring based appraisal rating system that endeavors objective assessment of employees’ performance through 12 dimensions. Moreover, appraisal allows appraisee staff to put their comment on appraisal.

We have a recognized staff union in the bank. The management and the union execute a collective bargaining exercise once every two years. collective bargaining exercises have been harmonious throughout and has never resulted disruption in normal banking operations and customer service.

recruitmeNt ANd develoPmeNtThe bank employs a fair recruitment policy. All new appointments and promotions are planned and approved as part of the annual Hr budget. Fresh appointments are made at support, assistant and management trainee levels. However, the board has the authority to make appointments at other levels in order to bring in appropriate set of skills in existing or new areas of businesses. based on the requirements of business expansion the bank may outsource its staff requirement to external party. All appointed staff, whether permanent or contracted, will adhere to employment standards as stipulated by the employees bylaws of the bank.staff placements are assigned as best suited for one’s abilities and growth potential. Performance appraisal system is fair and career progression is based on objective assessment of one’s performance and team work. besides Training and development activities, Placement, transfer, job rotation, job enrichment, job enlargement, succession planning and cross functional teams are some of the tools we employ for employee development.individual training and development needs form an important component of annual performance appraisal of all staff. stAFF cAtegory mAle FemAle totAl

senior Manager* 4 - 4

Middle Manager 36 7 43

Officers 139 38 177

Assistants 221 153 374

support staff 92 15 107

total 705

*Employees bearing corporate title AGM and above excluding CEO


remuNerAtioN ANd BeNeFitsThe quality of our Human capital defines the scale of our business success. Our business stands on trust, relationships and ethical conduct. Our strategy is in being proactive to attract, recruit, develop and retain the best people. We need to constantly ensure that we have the required set of skills, knowledge and expertise in our Human Pool. We believe staff commitment and motivation towards the job is achieved over time, which is affected by multiple factors among which financial benefits is a very important one.

Market forces constantly pose a challenge to our Hr strategy and retaining the best brains is not easy. remuneration is one of the major factors affecting one’s decision about joining, continuing or leaving an organization and we appreciate this fact. However, our experiences over the years suggest that other important factors do affect in making the choice of employment. Accordingly we attract the best people who wish to work in an organization having solid corporate values, ethical work culture, reputed brand performance and the one offering excellent work experience and career development opportunities. Our remuneration policy covers the following:

- salary structure comprises of fixed basic pay and variable incremental pay. salary structure is maintained based on documented position grades of individual employee as per his her annual performance appraisal ratings. The grade earned in annual performance appraisal ratings has an incremental impact in the basic pay.- salary structure is reviewed every two years with reference to national economic scenario, bank’s business performance and market practice. Any one or both of the basic and variable components may be revised as appropriate.- The bonus element of annual pay is tied up to the overall performance of the bank at the end of each financial year. This instills a winning spirit in our employees, drives business performance and coincide their own interests with the interest of our shareholders.- bank’s contribution to employees gratuity Fund and Provident Fund is proportionately linked to the number of years in employment and the last drawn salary at the time of making such contribution.- besides, our employees receive the benefit of housing loan, vehicle loan and personal loan facilities at concessional rates as per their individual eligibility in line with the integrated staff loan Policy approved by the board.

tAx oN remuNerAtioN iNcomeAll pay and benefits paid to the employees are taxed at source as per the provisions of income Tax Act 2002.Payment to employees in the form of salary, allowances, leave encashment, overtime payment, incentives, commission, bonus, gifts, retirement benefits etc. constitute their taxable income from employment. in line with the provisions in income Tax Act (amended by Finance Ordinance 2014), employees’ taxable income is taxed applying the tax rates presented in the table below:

The Act allows certain deductions from taxable income, the most relevant in case of our employees being contribution to approved retirement fund up to Nrs.300, 000 or 1/3rd of total assessable income whichever is lower and life insurance premium expenses of self and spouse uptoNrs.20, 000. Additionally, donation up to Nrs.100, 000 or 5% of total assessable income, whichever is lower, is also available for deduction.

The Act offers female employees (unmarried) the benefit of 10% tax rebate on their total tax liability for a given year. similarly, in case of physically disabled employees the base slab for 1% taxation is raised by additional 50% to Nrs.375, 000 for single and Nrs.450, 000 for couple.

tAxAtioN oN retiremeNt BeNeFits (grAtuity ANd ProvideNt FuNd) income Tax Act 2002 applies the following tax rates in payment of post-retirement benefits i.e. when the gratuity and Pension Fund is paid to the employee upon his / her retirement from the employment.

tAx rAte ANNuAl iNcome slAB

siNgle couPle

1%# 250,000.00 300,000.00

15% 250,001-350,000 300,001-400,000

25% 350,001-2,500,000 400,001-2,500,000

35%* Above 2,500,000 Above 2,500,000

# Social Security Tax.

* The Act provisions 40% surcharge on tax calculated on taxable income

above NRs.2,500,000 applying tax rate of 25% resulting effective tax

rate of 35% for that slab.

tAx rAte AccumulAted FuNd Nrs.

Tax Free Higher of 500000 or

50% of Total Fund

5% balance Amount


Prior to pronouncement of income Tax Act 2002, the fund accumulated in gratuity and provident fund was tax free. All such amount held in gratuity and provident fund and contributed by employer before the Act came into effect will not be taxed at the time of making payment to concerned employees.

coNtriButioN to NAtioNAl level welFAre FuNdThe prevailing bonus Act 1974 (2030 b.s.) requires the bank to deposit 30% of the residuary amount, after distribution of bonus from the allocated amount for staff bonus, at National level Welfare Fund (NlWF) operated by the government of Nepal. remaining 70% is to be deposited at Welfare Fund established in accordance with section 37 of the labour Act 1992 (2048 b.s.).

The bank has deposited a total of Nrs.389.45 million with NlWF in respect of staff bonus allocated for up to Financial year 2013/14. in respect of undistributed staff bonus for current financial year (2014/15), the bank will be depositing Nrs.51.155 million at NlWF.

corPorAte sustAiNABility The review year has been full of challenges, some natural, some man-made. Powerful earthquakes of 25 April 2015 and 12 May 2015 took lives of about 9 thousand and more than 22 thousand were left behind with different types of injuries. More than half a million of houses have been damaged and direct property damage is estimated to be about usd 7.7 billion. This is huge amount for the economy size of about usd 21 billion. similarly uneven rain and poor crop production also impacted economy to a remarkable extent. strike and closure, disturbances at political front were some of the man-made challenges. As the country adopted new constitution the changes in structural frame work and their implications are likely to derail the regular process impacting economy. similarly some of the parties, out of the constitution drafting process, resorted to further strike closure, causing disruption of supply of goods and obstruction in main customs points at Terai boarders with india. These actions are likely to give more trouble to the country.

under such a chaotic environment it has been felt a challenge for sustainable business. during the trying times of the

aftermath of the earthquakes, the need to have a strong corporate foothold was felt as the operations of the bank too were impacted largely. With overwhelming support from all the communities including neighbors country struggled to get back on track. This however compelled political parties to forge an alliance for handing out constitution which was taking time and was in limbo for more than a half decade. The pace of handing out constitution took momentum and about 90% representatives in the house agreed to bring it out. As the process took moment and likelihood of bringing out constitution got increased, political parties most of them having their bases at Terai went into streets opposing the process which despite of their resentment, constitution was passed by the overwhelming majority of nearly 90% votes in the house. This further fueled the anger of opposing parties and they declared total closure of customs points for indefinite period bordering with india which not impacted import from india it impacted third country import as well and the country went into serious trouble as supply of essential goods including fuel, medicines and foods got affected very badly.

These all are likely to impact the business of banks and we too despite our standing ahead in these 32 years of operation will also be bear the brunt of this. Nonetheless bank has adopted a go-slow approach till the situation returns to normal. Having stronghold in the industry for more than 32 years it has given us numerous lessons to adopt sustainable business practices as journeys in the past too were not easy. We adopted business strategy that gives comfort to the bank balancing between risk and return. it is impertinent that all encompassing business strategies are adopted on our way ahead to ensure that we remain the 1st choice provider of complete financial solutions. We believe that we have been benefited from the positive perception that the public holds in our regards and our sustainable business branding. Our employees are more than responsible for the times we were able to hold the boat even though they were experiencing the same turbulence that shook the nation. giving back to the people, inside or outside the organization and protecting and nurturing the society and the environment where we operate in, thus has been sculpted in our values which act as the strong pillars for our business sustainability. The bank has identified following areas through which it has fulfilled the responsibilities of a good corporate citizen which in turn has helped the bank to ensure its sustainability.


trANsPAreNcy ANd good corPorAte goverNANce Nabil conducts all its transactions and businesses in a transparent way. The bank has duly complied with and has consistently applied at all times all the disclosure requirements provisioned by various regulatory bodies and national regulations such as Nepal rastra bank, companies Act, securities exchange Act and rules, banks and Financial institutions Act, and Nepal Accounting standards. in addition, all the necessary information is provided to the statutory auditors, bank’s internal auditors and other appropriate monitoring agencies so as to enable them to make a fair assessment of our operation and to form an independent opinion in respect of bank’s financial position and performance.similarly the bank has disclosed all the pertinent information to all its stakeholders.

it is for our efforts towards adequate disclosures and good corporate governance that we have been awarded the “certificate of merit” for best Presented annual report awards for corporate governance disclosures provided by south Asian Federation of Accountants under the private sector banks category for last five years. similarly, institute of chartered Accountants of Nepal has awarded us the “best Presented Accounts Award 2014” for the best presentation and proper

disclosures in financial statements of the bank.We have been bestowed with such award continuously for last six years. eNviroNmeNtAl sustAiNABilityAt Nabil, we are committed to protect our environmental resources by optimizing its consumption. Moreover, whenever possible we have tried to use the environmental friendly products with the aim of reducing the emission of hazards to the environment. We believe that the total effect of efforts put forward by each individual or corporate can be significant to conserve the nature and natural resources. Therefore, at Nabil, every effort possible is done to reduce paper, energy, fossil fuel and water consumption and much more so as to protect environment.

We are quite aware of the fact that a better working environment within an organization for an indeterminate period can be guaranteed only by the greener and healthy earth. it means that the sustainability of the organization is closely tied with the health of the environment that we operate in. Thus in addition to reducing the direct consumption of resources, Nabil has also prioritized the development of renewable energy projects. As such Nabil has committed Nrs.6.8 billion rupees for investment in hydropower and renewable energy development.it has been there in the forefront and has set up a separate division in the bank that takes up the financing under cleaner energy power projects.

similarly the bank is expanding it’s credit exposure in the agriculture and forest related sectors. As a small effort to promote environmental sustainability, Nabil has made tree plantation and preservation a major part of its anniversary celebrations also.

BPA Award 2014

Staff and distinguished guests joining hands for a cleaner Bagmati


lABor PrActices ANd deceNt workHuman resources play a key role in the achievements of the short terms, medium terms and long terms goals of the organization. Therefore, Nabil has placed utmost priority in selection, development and retention of high quality human resources. Aligning with its principle of prioritizing people first followed by systems and processes, Nabil has invested its considerable resources in fulfilling its human resource needs for the growth and sustainability of the business. bank provides various kinds of trainings to the employees each year that help them to develop their job competency.

Nabil has employees byelaws which ensures fairer and equal treatment to all the employees. This is a guiding document which guides the Hr policies and practices of the bank. Through implementation of Hr byelaws Nabil has ensured that the fair labour practices are adopted and decent working conditions are maintained.

during the review period, Nabil incurred remuneration of Nrs.743 million towards its employees while it also set aside Nrs.298 million as bonus.

PArtNersHiP witH tHe goverNmeNtcontribution to government in any form is extremely essential to build the nation. We recognize this responsibility towards the nation in addition to our own satisfaction and longevity. being a banking institution, Nabil aligns its operations with the directions of the central bank. Other legislations requiring us to follow are also properly complied with. For example it helps in preventing money laundering activities by putting know your customer and Anti Money laundering Policies in place. Moreover, the recognition we hold from the national treasury as one of the highest contributors in the form of payments in taxes gives us a great satisfaction. The proliferation of commercial activities we have facilitated through extending credit and arranging foreign trade also generate significant tax revenues to the government. in the review year alone, we have deposited Nrs. 917 million in the government’s coffer in the form of income tax. With all our efforts and contributions, Nabil strives to operate as a great multiplier to the national economy.

giviNg BAck to tHe societyNepal still being in the developing phase, reach of the financial services has not been to all levels of the society and all areas of the country as required. Moreover, it is a well accredited fact

that middle and low income group constitute major portion of our communities but only a small portion of this group has access to the financial services market. As one of the leading commercial banks, we acknowledge that we have a role in bringing this segment into the formal banking ambit. Furthermore, in order to cater to the specific financial requirements of budding entrepreneurs and growth aspirants, a separate sMe and Microfinance division has also been established. The branch network and ATM network has also been expanded to serve the areas requiring banking facilities. Our sMe project is implemented through all our branch offices. With our focused approach, relationship managers in the branches share best business practices and management skills with the customers and motivate them for achieving better and higher growth in order to ensure success of such entrepreneurial ventures.

As a financing partner, our contribution has expanded economic activities at local level, fostered investment, generated employment, and increased consumptions. Our Microfinance project is operated through selected partner organizations viz. microfinance institutions (MFis), cooperatives and non-governmental organizations working as financial intermediaries. We have also invested in promoter equity in selected MFis and extended our managerial expertise through representation on their board. We have also extended credit to youth self employment Project of the government. Our target end users are economically disadvantaged population and they receive micro credit through our partner organizations to which we extend credit in bulk. These initiatives are intended for self-employed income generating activities or small businesses with which the aspirants having skills and energy are not deprived of financial resources and upgrade their living standard.

Honorable Finance Minister Mr. Bishnu Poudel handing over the Highest Tax Payer Award to the Bank’s CEO Mr. Sashin Joshi


Personal lending unit in the bank is well equipped to take care of the funding requirement against personal needs like home, vehicle, and education etc. since financing these activities makes the lives of common people easier, it gives satisfaction to the organization also. Through the advertisement, the bank aims to encourage more people to use banking channels for their financial transactions under its financial literacy promoting program. customers are properly communicated about the benefits of using formal banking channels, associated risks and ways to mitigate them to enhance their banking experience. Through numerous remittance agents located within and outside the country, the bank seeks to provide access to the financial services in previously un-served areas.

Nabil believes that all these efforts have brought a larger number of people into the banking net and hopes to increase the accessibility of its services by people from all walks of life.

corPorAte sociAl resPoNsiBility Nabil has served the interests of its stakeholders through immeasurable ways. The varieties of needs and demands of the customers have been fulfilled by the different tailor made products. similarly, the best working conditions have been provided to fulfill the organizational responsibility towards its employees. likewise, we provide the best possible returns to the shareholders in form of dividends and disclose all our accounts in a transparent way. Thus, it reflects that the bank is responsible in sharing the value it has created to all those involved in the value creation process and to the community where the bank is allowed to operate.

As a part of its csr initiatives, several programs were organized throughout the nation at different branches of the bank. These activities included charities to local institutions, old age homes, orphanages, betterment of differently abled children, donation of school bags and educational materials, tree plantation etc. some of the major csr events in the year are highlighted below.

At oNe witH tHe eArtHThe bank has given continuity to the agreement entered into with the kathmandu Metropolitan city for the maintenance of trees planted and preservation of greenery along the roadside of Tudikhel West.

Furthermore,an agreement has also been entered into with “Adhikar sampanna bagmati savyata yikekrit bikash samiti”, guheshwari for the maintenance and protection of the trees for conservation of environment along the river side at bagmati belt, Minbhawan in the area of 2,750 sq. feet. A program for cleaning and maintenance of the area was also organized during the year.

At oNe witH tHe PeoPleWe provided financial assistance of Nrs. 275,000 to self Help group for cerebral Palsy (sgcP) for commencing Outreach program in Parsa district to provide medical service, counseling and training programs for children suffering from cerebral Palsy and to their parents. sgcP was established 28 years ago with the objective to provide proper care, comfort and relief to the children and adults suffering from cerebral Palsy.cerebral palsy is considered a neurological disorder caused by a non progressive brain injury or malformation that occurs while the child’s brain is under development. cerebral palsy primarily affects body movement and muscle coordination.

sgcP runs rehabilitation center, special education program and Outreach program to children with neurological disorders and their parents. Outreach program is a home based program for cerebral palsy afflicted children which have no access

Mr. Ramesh Prasad Lohani, Assistant General Manager of Nabil bank and Mr. Bimal Lal Shrestha, Chief Executive Officer of Self Help Group Cerebral Palsy signing an MoU in an event organized at SGCP to properly manage the fund for conducting outreach program for CP children in Parsa District.


to rehabilitative services. The trained home visitor provides door-to-door service to the cP children and also teaches basic therapy skills and stimulation techniques to the parents.

We celebrated New year 2015 with the children afflicted with cerebral palsy at self Help group for cerebral Palsy (sgcP). Nabil bank’s team along with Himalaya Television team jointly celebrated New year with the special children. The children performed various activities including games, musical program, dance, etc.

Nabil bank has provided financial assistance of rs. 120,000 to shree gargi kanya gurukul Pratisthan for second year in a row for girl’s education. The support is aimed for helping the school which is committed to develop future woman leaders of the nation and is committed to serve the country better in the days to come by educating/empowering women.

The school aims to make girls not only proficient in sanskrit literature including Vedas, upanisads, smrities, Puranas,etc but also proficient in english language, science, computers, Fine arts, dance, Music, yoga, Meditation, etc. Through a combination of ancient wisdom with modern vision, the gurukul is dedicated to producing future scholars who can play a leadership role in society. The school teaches the girls from all sections of society from all over Nepal like dalits, Tharus, sherpas, Newars, Magars, chhettris, brahmins, gurungs, Tamangs, rais, Madhesis, etc. without any discrimination of caste and creed.

The bank partnered with district Public Health Office, kathmandu to support a Medical Health camp jointly organized by kantipur general Hospital, kathmandu dental college Teaching Hospital and research centre and kantipur school of dentistry. dental, gynecological, general medical check-up services along with physiotherapy and pharmacological services were provided at jitpurPhedi Health Post. Oral health and reproductive health orientation programme for the female community health volunteers was also organized on the occasion. Furthermore, Nabil bank also conducted financial literacy program by distributing banking awareness pamphlets to create awareness to the people in the locality.

At oNe witH tHe NAtioNThe powerful earthquake that rocked the nation and its numerous aftershocks had far reaching impact in all our lives. in order to provide some relief to the victims of the earthquake, the whole staff of the bank united and contributed to provide relief materials. The staff made an effort to distribute galvanized corrugated sheets,

Nabil Bank and Himalayan Television team celebrating New Year 2015 at Self Help Group for Cerebral Palsy, Dhapakhel

Mr. Ramesh Prasad Lohani, Assistant General Manager of the bank handing over the cheque to Prof Mana Kafle, Senior Social Worker and Vice President and Prof Dr. Kamala Subedi, Secretary of the academy.

Free Oral Health Camp at Jitpur Phedi


mosquito nets and solar torch lights in sunakhani Vdc, Ward No. 3, dolakha which was one of the worst affected areas. To meet the urgent shelter demands, Nabil bank staff provided the said construction material to build 205 temporary homes for the people who lost their homes in the earthquake. They have also distributed galvanized corrugated sheets, mosquito nets and solar torch lights to the earthquake victims of bhimtar Vdc, Ward No. 9, sindhupalchowk for 112 families.

The bank also contributed Nrs 20.10 million to the Prime Minister’s disaster relief Fund to aid in providing relief and support in the reconstruction/rehabilitation of the earthquake victims.

Apart from this, the bank continues to contribute to the government’s coffer in the form of various taxes. Nabil was recognized as the highest tax payer in the banking industry in the review year and is proud of its contribution in the nation building process. besides direct contribution in the form of taxes, it is among leading institutions that arranges finance to national priority projects like those in renewable energy sector, hydropower plants and cement industries etc. which form the basic building blocks of the nation.

Chairman Mr. Shambhu Prasad Poudyal, Director Mr. Dayaram Gopal Agrawal, Officiating Chief Executive Officer Mr. Anil Kumar Khanal, Assistant General Manager Mr. Ramesh Prasad Lohani along with other Bank staff from Kathmandu distributed the relief matter.

Bank’s Chairman Mr. Shambhu Prasad Poudyal, Director Mr. Nirvana Chaudhary along with Officiating CEO Mr. Anil Kumar Khanal jointly handing over the cheque of Rs 20.10 million to Honorable Prime Minister Sushil Koirala at PM’s residence, Baluwatar Kathmandu.


stAtemeNt oF director’s resPoNsiBilityThe statement of directors’ responsibilities which should be read in conjunction with the Auditor’s report addressed to the shareholders of the bank is introduced in order to distinguish the respective responsibilities of the board from that of auditors in relation to the preparation and presentation of financial statements of the bank. The board of directors are responsible for preparing the Annual report, the separate financial statements of the bank and the consolidated financial statements of the bank and its subsidiary(ies) in accordance to the prevailing laws and regulations of Nepal.

section 108 read together with section 109 of the companies Act 2006 of Nepal prescribes the ultimate responsibilities of the board of directors to prepare the financial statements of the company to its shareholders for presentation in AgM. Further, section 2(4) of directive 20 of Nrb unified directive 2072 prescribes preparation and presentation of consolidated financial statements of the bank and its subsidiary (ies) in addition to the preparation of separate financial statements in line with directive No. 4.

Though the accounting standard for consolidation of financial statements has not been implemented yet in Nepal, the bank takes the guidance of iFrs 10 “consolidated Financial statements” for its preparation. NAs 1 ‘Presentation and Preparation of Financial statements’ and section 109(2) of companies Act 2006 require companies to prepare financial statements that reflect a fair presentation of its financial position, financial performance and cash flows of the relevant period.

in preparing the consolidated and separate financial statements, the directors are required to:-select suitable accounting policies and then apply them consistently;

-make judgments and estimates that are reasonable and prudent; and-state whether they have been prepared in accordance with NAs.

The directors are required to prepare the financial statements on going concern basis unless it is not appropriate. since the directors are satisfied that the group and the bank have the resources to continue the business for the foreseeable future and there are no indicators that casts doubt on the bank’s and its subsidiary’s going concern assumption, the financial statements are continued to be prepared on going concern basis. The directors are also entrusted with the fundamental responsibility of keeping adequate accounting records that are sufficient to show and explain the bank’s transactions and disclose with reasonable accuracy at any time, the financial position of the bank which also enables them to ensure that its financial statement comply with the applicable NAs. section 1(6) of directive 6 of Nrb unified directives 2072 also specifies the requirement of maintaining records of transactions up-to-date and intact at all times. Moreover, it also restricts the directors to add/modify official accounting records in their personal capacity. Further, the directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. As such, the bank and its subsidiary have implemented policies, procedures and mechanisms that are intended to mitigate the risks that may arise due to control lapses. Any fraud detected during the relevant financial period is reported in Notes to Accounts along with the impact of such frauds in the financial statements. The bank has constituted Audit committee that comprises of four non-executive directors and the Head-internal Audit, who is the secretary of the committee. The Audit committee functions independently and reports directly to the board of directors.

chairmanOn behalf of the Board

FiNANciAl stAtemeNts ANd otHer iNFormAtioN

05


disclosure oF iNFormAtioN uNder sectioN 109(4) oF comPANies Act 2006a. Business review of last year - This has been disclosed under sections “Achievements of current year” under “Operating and Financial review” of the director’s report.

b. Any impact caused to the business of the company due to national and international condition–The situation of excess liquidity along with shrinking avenues of investment and credit growth still remains a major challenge to the banking industry as well as the Nepalese economy. The massive earthquake that hit the nation during the year has been major setback to the economy with its effects estimated at Nrs. 706 billion. exports have shrunk even more so due to the unrest in the Terai region where important customs points were blocked by the agitating parties. As a result, the already expanding trade deficit has increased by 10.76% to reach Nrs. 689.37 billion. less than adequate gdP growth and intense competition have also been some of the impediments in the growth of the business. Prolonged power crisis, rising cost of petroleum products due to depreciation of NPr and effects of rising inflation all have contributed to increase in cost of operations.

c. current year’s (2015/16) achievement until the date of preparation of report from the directors and Board of directors’ view on future activities of the company: The government has come up with an initial estimate of the effects of the destructive earthquake on April 2015 on the national economy. yet the actual effect on the various sectors of the economy is still to be seen. looking at it from the banking perspective, impact on the sectors like tourism, hydropower, building and construction along with it’s effect on the business in the affected areas are likely to have a bearing on the risks and rewards of the banking industry as a whole. Nonetheless, the eagerness shown by the government towards reconstruction and rehabilitation in light of the commitment for help shown by the neighboring nations as well as various donor organizations will have a significant impact on the whole economy along with the banking industry as well.

The bank has received the highest tax payer award for providing the highest tax contribution among the commercial banks of the country. The bank believes that it’s stakeholders are proud of such an important contribution to the nation building process.

Another more important fact is that the year 2015/16 has become the year of the new constitution and the various factors inbuilt in the constitution are likely to have a direct as well as an indirect impact on the banking business as a whole.

banking sector has been facing the challenges of surplus liquidity coupled with limited investment opportunities in the current fiscal year as well which is not unlike the situation that prevailed in the review year. The interest rates are likely to be further affected which will make business operation as well as expansion more competitive and more challenging. As a strong and active bank operating amidst stringent policy changes, it expects to come across more opportunities than challenges. in this sense, the year 2015/16 is likely to be year full of challenges and possibilities for the banking industry.

in the first three months of Fy 2015/16, the bank’s performance has been reasonable despite the challenging political, social and environmental conditions. The bank’s net profit at the end of first quarter stands at Nrs. 653.5 million which posted an increase of 29.44% from same duration last year. Operating profit (before loss provision) in the first quarter is Nrs. 860.6 million, which has declined by 7.8% in comparison to the profit during the same period of review year 2014/15. Total deposits of the bank increased by 5.51% to reach Nrs. 109,860 million and loans and advances increased by 0.40% to reach Nrs.67,430 million in the first quarter of the current year. decreasing interest rates in the current scenario of surplus liquidity is likely to create further pressure on operating profit generation in the current year. Moreover, due to the impact of the devastating earthquake and the unrest in the Terai area, the bank’s asset quality also might be affected. Major challenges the bank expects to face during the current year is improvement in asset quality, managing liquidity, achieving organic credit growth and adding more revenue streams.

d. industrial and professional relations of the company –The bank maintains cordial relationships with all its stakeholders including the staff members. The bank has been imparting a feeling of belongingness by maintaining harmony amongst employees of all hierarchy. it has always encouraged the management and the employees’ union to interact for improvement of bank’s systems and processes. such an open culture where every individual employee senses his/her role on attaining bank’s common objective is believed to be an essential ingredient for corporate success. The bank has put in all efforts


to drive all employees to work together in the unison with common mission to make the Bank as “1st Choice Provider of Complete Financial Solutions”.

e. Changes in the Board of Directors and the reason thereof –Disclosed in “Changes in the Board’ under“Governance” section of the Director’s Report.

f. Main factors that affect business activities:1. Increased Competition2. Adverse political environment that affects stability in the business3. Low interest rates on investments

g. Any remarks and observation stated in the Independent Auditors’ Report and Board of Directors’ response thereon –No material remarks.

h. Amount recommended for distribution of dividend– NRs.6.84 per share cash dividend and NRs.30 per share stock dividend (i.e. 3 per 10 shares held).

i. Details of shares forfeited (number of share, face value, amount received by the Company prior to forfeiture, amount received by the Company after putting such forfeited shares into subscription and amount refunded on account of forfeited shares) - The bank has not forfeited any shares.

j. Review of the progresses made by the Company and its subsidiary(s) in the current fiscal year 2014/15 and the

position of the same at the end of fiscal year – Disclosed in “Achievement of Current Year” and “Financial position of Nabil Invest” and “Financial performance of Nabil Invest” under “Operating and Financial Review”.

k. Main activities carried out by the Company and its subsidiary(s) in last fiscal year and any significantchanges in the business activities of the Company and its subsidiary during the same period:Nabil Bank – Commercial banking activities like credit disbursement, investment, deposit mobilization,remittance, card and other financial services. Subsidiary company – Investment banking activities like portfolio management service, corporate advisory service and mutual fund scheme management along with merchant banking activities like issue management, underwriting, registrar to shares and depository participant’s service of CDS and Clearing Ltd.

l. Any information given to the Company by its principal shareholder (who holds 1% or more shares of the Company) during the financial year – No such information provided by the principal shareholders.

m. Shares held by the directors and officials of the Company and information received by the Company on their involvement in trading of shares: Shares held by the directors and officials of the company and their involvement in trading:

DESIGNATION SHAREHOLDER NO. DIRECTORS AND OFFICIALS OWNERSHIP

Director 2663 Mr. Shambhu Prasad Poudyal 5,896 Director 90 Mr. Dayaram Gopal Agrawal 3,515 Director 5975 Mr. Nirvana Chaudhary 325,761 Director 17089 Mr. Ashish Sharma 63 CEO 4845, 7069 Mr. Sashin Joshi 5,764 Manager 5076 Mr. Rajeshwor Lal Shrestha 288 Manager 5761 Mr. Yagya Prasad Sharma 370 Manager 4852 Mr. Yugesh Lal Bijukchhe 736 Senior Manager 2174 Ms. Neena Thapa 994 Assistant General Manager 4866 Mr. Deepak Shrestha 1,114 Senior Manager 4733 Mr. Rajendra Bahadur Malla 6,117 Manager 4821 Mr. Iswar Man Shrestha 6,828 Manager 4773 Mr. Babu Ratna Bajracharya 894 Manager 8898 and 11391 Mr. Jaya Krishna Shrestha 2,632 SHARES ACQUIRED DURING 2014/15 Officer 4817 Mr. Ilesh Upadhyaya 415 Officer 19573 Mr. Rajesh Kumar Shrestha 150 Officer 21934 Mr. Mohan Raj Joshi 19 Officer 22066 Mr. Khagendra Poudel 141

SHARES DISPOSED DURING 2014/15 Officer 5367 Mr. Kamal Prasad Lacaul 1,122 Officer 5817 Mr. Manoj Aryal 530 Officer 17521 Mr. Prakash Basukala 399


n. information provided on personal interest of Board of directors and their relatives (nearest kin) regarding contract or agreement done with the company during the year – There is no record of such event/transaction.

o. Buyback of share by the company, reason thereof for buyback, number of shares bought back, face value of share and amount paid during the buyback– The bank has not bought back any share.

p. information on existence of internal control system and if there is, its detail –disclosed in point “internal control” under “governance”.

q. details of management expenses incurred during the year – disclosed in schedule 23 “staff expense” and schedule 24 “Other Operating expense” of financial statement.

r. Name list of members in the audit committee, remuneration, allowance and benefits they have received, the details of activities of the committee and the details of any recommendation by them:As of 16th july 2015, the committee constituted of the following: (to be confirmed)• Director Nirvana Chaudhary, Coordinator• Director Dayaram Gopal Agrawal, Member• Director Ashish Sharma, Member• Director Mohiuddin Ahmed, Member• Director J.P. Kanoria, Member (in absence of Dir. M. Ahmed)

The bank provided sitting fees as follows for the audit committee meetings organized during the year:coordinator- Nrs. 15,000Member- Nrs. 12,000

Apart from sitting fees and per diem for outstation visit of foreign directors, all directors receive Nrs.15, 000 (net of Tds) on monthly basis for newspaper/communication allowance which was approved by 25th AgM held on 22nd september 2009.

details of committee activities and the recommendation are presented in “board committees” under“governance”.

s. dues payable to the company by any director, md, ceo, principal shareholders (holding share more than 1%) or their relatives or firms orinstitutions in which they have their involvement (interest) – disclosed in schedule 29 of the financial statements.

t. remuneration, allowances and benefits paid to director, md, ceo and officials – disclosed in Point 13 “related Parties disclosures” of schedule 33 “Notes to Accounts” of the financial statement.

u. uncollected dividend by the shareholder – rs.110,141,802.

v. information on asset bought or sold as per section 141 – N/A

w. details of related party transaction as per section 175 (transactions between associated companies)– disclosed in Point 13 “related Parties disclosures” of schedule 33 “Notes to Accounts” of the financialstatement.

x. Any other details to be disclosed in the report from the directors in accordance with companies Act, 2006 or other prevailing laws – disclosed in appropriate part of this report and financial statements.

y. Any other pertinent details – disclosed in appropriate part of this report and financial statements.


disclosurerelAted to suB rule (1) oF rule 22 oF securities registrAtioN ANd issuANce regulAtioN, 20651. report of the Board of directors- disclosed in the “director’s report” part of this report.

2. Auditor’s report- disclosed in appropriate part of this report and financial statements.

3. Audited Financial reports- disclosed in appropriate part of this report and financial statements.

4. legal Proceedings(a) A law-suit filed by or against the body corporate during the quarterly period- No mentionable suits have been filed by the bank except for regular law suit concerning loan recovery and tax liabilities arising in normal course of banking business.(b) A law-suit filed by or against the promoter or director of the body corporate involving statutory regulations or criminal offence- The bank does not have knowledge of any such claims.(c) A law-suit, if any, filed against the promoter and director for committing economic crimes- The bank does not have knowledge of any such claims.

5. Analysis of stock Performance of the Body corporate(a) Management’s view on the performance of the stocks of the body corporate in the stock exchange-The bank’s share price is guided by market operations of the capital market. The bank does not comment on its share transactions(b) High, low and closing price of the stocks of the company

during each quarter of the preceding year along with total volume of trading of shares and number of days traded.

6. Problems and challengesunhealthy competition induced by increasing liquidity in the banking sector along with reduced investment opportunities, fluid political conditions among declining business sentiment, impact of the earthquake on the nation’s economy, acute discomfort in the transportation and supply system, trade deficit, fluctuating exchange rates and increasing inflation rates have been recognized by the bank as external problems and challenges and to tackle the challenges apart from those outside of control of the bank, the bank has adopted business diversification, customer focused quality service along with effective risk management strategy.

7. corporate governance description of management’s initiatives towards good corporate governance:a. The bank has a board of directors along with committees of the board namely Audit committee, risk Management committee and committee relating To staff services And Facilities. Management level executive committee as well as Asset and liability Management committee are also operational.b. internal audit is conducted by the internal auditors of the bank to manage the internal control processes. regular meetings of the audit committee are conducted to ensure the execution and review of suggestions presented in the audit report.c. Various internal policies, regulations and directives have been put in place to minimize operational risk as well as to regulate the transactions.d. employees code of conduct has been issued to ensure maintenance of corporate governance. The compliance of the same is also periodically reviewed.

8. if there is a deviation of 20% or more between the details as per the audited financial statements and those forecasted in the prospectus, details of such deviation -No prospectus has been issued during the fiscal year 2014-15.

9. details on special events and circumstances as specified in sub rule (5) of rule 22 -None

PquArter (moNtH) mAximum Price miNimum Price closiNg Price totAl sHAres totAl dAys

Per sHAre (Nrs.) Per sHAre (Nrs.) Per sHAre (Nrs.) trAded trAded

First quarter( mid October 2014) 2,680 2,140 2,340 220,692 56

second quarter( mid january 2015) 2,376 1,564 1,869 157,467 57

Third quarter( mid April 2015) 2,062 1,830 1,920 130,018 57

Fourth quarter( mid july 2015) 2,010 1,575 1,910 98,036 45

independent auditor’s report -group


Consolidated Balance sheetAs at 16 July 2015 (31 Ashadh 2072)

Capital & liaBilities this Year previous Year

1. Share Capital 4,754,950,200 3,656,602,080

2. Reserves & Surplus 4,764,561,194 4,014,637,138

3. Non Controlling Interest 38,741,506 37,472,096

4. Debentures & Bonds 300,000,000 300,000,000

5. Borrowings - -

6. Deposits 103,957,095,808 75,360,769,196

7. Bills Payable 243,433,464 213,579,243

8. Proposed Dividend 250,260,537 1,371,225,780

9. Income Tax Liabilities 964,391 2,510,756

10. Other Liabilities 4,385,990,637 5,336,167,790

total 118,695,997,737 90,292,964,080

assets this Year rs. previous Year rs.

1. Cash Balance 1,820,201,446 1,468,154,377

2. Balance with Nepal Rastra Bank 12,984,904,257 7,068,078,842

3. Balance with Banks/Financial Institutions 3,846,621,869 4,417,202,556

4. Money at Call and Short Notice 323,541,000 737,854,000

5. Investment 30,978,933,625 18,283,592,425

6. Loans, Advances and Bills Purchased 65,501,925,164 54,684,093,633

7. Fixed Assets 827,282,530 859,996,370

8. Non Banking Assets - -

9. Other Assets 2,412,587,846 2,773,991,877

total 118,695,997,737 90,292,964,080

(IN NPR)

group finanCials

sashin Joshi s. p. poudyal d.g. agrawal n. Chaudhary

Chief Executive Officer Chairman Director Director

DATe: october 4, 2015

PLACe: Kathmandu

As per our Report of even date

fCa shashi satyal

Managing Partner

TR Upadhya & Co.

Chartered Accountants

Krishna d. Bhattarai

Chief Financial Officer

ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director


Consolidated profit and loss accountFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

partiCulars this Year previous Year

1. Interest Income 5,778,165,636 5,652,370,171

2. Interest expense 2,233,742,466 1,938,750,424

net interest income 3,544,423,170 3,713,619,747

3. Commission and Discount 500,560,120 480,959,859

4. Other Operating Income 271,608,285 304,257,855

5. exchange Income 512,477,284 529,995,584

total operating income 4,829,068,859 5,028,833,045

6. Staff expense 754,703,900 637,866,371

7. Other Operating expense 630,050,041 557,216,961

8. exchange Loss - -

operating profit before provision for possible losses 3,444,314,918 3,833,749,713

9. Provision for Possible Losses 169,025,826 237,955,213

operating profit 3,275,289,092 3,595,794,500

10. Non Operating Income /(expense) 29,544,181 23,666,157

11. Provision for Possible Losses Write Back 2,095,609 14,667,229

profit from regular activities 3,306,928,882 3,634,127,886

12. Income/(expense) from extra-ordinary Activities (2,924,675) 34,002,205

profit from all activities 3,304,004,207 3,668,130,091

13. Provision for Staff Bonus 301,711,292 334,473,575

14. Provision for Income Tax 897,224,651 994,144,118

Current Tax 907,267,292 991,801,293

Prior Period Tax - 735,675

Deferred Tax (10,042,641) 1,607,150

15. Share of Non-Controlling Interest in the Profit of Susbsidiary 6,905,483 8,139,838

net profit/(loss) 2,098,162,781 2,331,372,560

(IN NPR)




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director


Consolidated profit & loss appropriation accountFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)


inCoMe

1. Accumulated Profit up to Last Year (Restated Balance) 492,933,551 724,583,471

2. Current Year’s Profit 2,098,162,781 2,331,372,560

3. exchange equalization Fund - -

4. Capital Adjustment Reserve - -

5. Deferred Tax Reserve - 1,607,150

6. Investment Adjustment Reserve - -

7. Dividend equalisation Fund - -

8. Contingent Reserve 449,733 300,000

total 2,591,546,065 3,057,863,182

expense

1. Accumulated Loss up to Last Year - -

2. Current Year’s Loss - -

3. General Reserve 419,000,000 464,000,000

4. Contingent Reserve 1,000,000 1,000,000

5. Institution Development Fund - -

6. Dividend equalization Fund - -

7. employees Related Reserve - -

8. Proposed Cash Dividend 250,260,537 1,371,225,780

9. Proposed Stock Dividend (Bonus Shares) 1,097,296,200 609,433,680

10. Special Reserve Fund - -

11. exchange Fluctuation Fund 45,500,000 27,100,000

12. Capital Redemption Reserve 60,000,000 60,000,000

13. Capital Adjustment Fund - -

14. Deferred Tax Reserve 10,042,641 -

15. Investment Adjusment Reserve 797,448 32,170,171

total 1,883,896,826 2,564,929,631

16. accumulated profit/(loss) 707,649,239 492,933,551

(IN NPR)




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director

Cons

olid

ated

sta

tem

ent o

f Cha

nges

in e

quity

Fo

r the

per

iod

17 J

uly

2014

to 1

6 Ju

ly 2

015

(1 S

hraw

an 2

071

to 3

1 As

hadh

207

2)

par

tiCu

lar

s sh

are

Capi

tal

aC

CuM

ula

ted

g

ener

al

pro

pose

d

Capi

tal

shar

e Co

nti

ng

ent

div

iden

d

Capi

tal

ex

Chan

ge

inte

res

t d

efer

red

in

vest

Men

t to

tal

pro

fit/

loss

r

eser

ve

Bo

nu

s r

eser

ve

preM

iuM

r

eser

ve

equ

aliz

atio

n

red

eMpt

ion

eq

ual

izat

ion

sp

rea

d

tax

adJu

stM

ent

aMo

un

t (r

s.)

shar

e fu

nd

fu

nd

r

eser

ve

fun

d

res

erve

r

eser

ve

res

erve

Bal

ance

as

on 1

7 Ju

ly 2

014

3,0

47,1

68,4

00

49

2,93

3,55

0 3

,084

,500

,000

609,

433,

680

-

74

,000

1

4,57

3,57

0

-

6

0,00

0,00

0 1

77,4

00,0

00

2,57

8,00

0 4

3,38

4,73

7 1

39,2

66,8

41

7,6

71,3

12,7

78

Chan

ges

in A

ccou

ntin

g Po

licy

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Bonu

s Sh

are

issue

d

609

,433

,680

-

-

(60

9,43

3,68

0)

-

-

-

-

-

-

-

-

-

-

Frac

tion

Shar

e Ad

just

men

t

from

Cas

h D

ivid

end

1,0

51,9

20

-

-

-

-

-

-

-

-

-

-

-

-

1,05

1,92

0

Incr

ease

in D

efer

red

Tax

expe

nse

(7

3,56

0.00

)

(73,

560)

res

tate

d o

peni

ng B

alan

ce

3,6

57,6

54,0

00

49

2,93

3,55

0 3

,084

,500

,000

-

-

74

,000

1

4,57

3,57

0

-

6

0,00

0,00

0 1

77,4

00,0

00

2,57

8,00

0 4

3,31

1,17

7 1

39,2

66,8

41

7,6

72,2

91,1

38

Surp

lus

on R

eval

uatio

n of

Pro

perti

es

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Def

icit

on R

eval

uatio

n of

Pro

perti

es

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Curre

ncy

Tran

slatio

n D

iffer

ence

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net

Gai

ns a

nd L

osse

s no

t rec

ogni

sed

in th

e In

com

e St

atem

ent

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Net

Pro

fit fo

r the

per

iod

- 2,

098,

162,

781

-

-

-

-

-

-

-

-

-

-

-

2

,098

,162

,781

adju

stm

ents

:

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Issu

ance

of S

hare

Cap

ital

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Def

icit

on R

eval

uatio

n of

Pro

perti

es

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Surp

lus

on R

eval

uatio

n of

Pro

perti

es

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Cash

Div

iden

d

-

(250

,260

,537

)

-

-

-

-

-

-

-

-

-

-

-

(250

,260

,537

)

Prop

osed

Sto

ck D

ivid

end

- (1

,097

,296

,200

)

-

1,

097,

296,

200

-

-

-

-

-

-

-

-

-

-

Gen

eral

Res

erve

Fun

d

-

(419

,000

,000

)

419

,000

,000

-

-

-

-

-

-

-

-

-

-

-

Cont

inge

nt R

eser

ve

- (1

,000

,000

)

-

-

-

-

1,00

0,00

0

-

-

-

-

-

-

-

equi

vale

nt a

mou

nt o

f med

ical

exp

ense

und

er

Hos

pita

lizat

ion

Sche

me

- 44

9,73

3

-

-

-

-

(449

,733

)

-

-

-

-

-

-

-

Div

iden

d eq

ualiz

atio

n Fu

nd

- -

-

-

-

-

-

-

-

-

-

-

-

-

Capi

tal R

edem

ptio

n Re

serv

e (D

eben

ture

Red

empt

ion)

-

(60,

000,

000)

-

-

-

-

-

-

6

0,00

0,00

0

-

-

-

-

-

exch

ange

Flu

ctua

tion

Rese

rve

-

(45,

500,

000)

-

-

-

-

-

-

-

45

,500

,000

-

-

-

-

Inte

rest

Spr

ead

Rese

rve

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Def

erre

d Ta

x Re

serv

e

-

(10,

042,

641)

-

-

-

-

-

-

-

-

-

10,

042,

641

-

-

Inve

stm

ent A

djus

tmen

t Res

erve

-

(797

,448

)

-

-

-

-

-

-

-

-

-

-

1

15,4

58

(6

81,9

90)

Bal

ance

as

on 1

6 Ju

ly 2

015

3,6

57,6

54,0

00

70

7,64

9,23

9 3

,503

,500

,000

1,

097,

296,

200

-

74

,000

1

5,12

3,83

7

-

12

0,00

0,00

0 2

22,9

00,0

00

2,57

8,00

0 5

3,35

3,81

8 1

39,3

82,2

99

9,5

19,5

11,3

93

(IN N

PR)

sash

in J

oshi

s.

p. p

oudy

al

d.g

. agr

awal

n

. Cha

udha

ry

Chie

f Exe

cutiv

e O

ffic

er

Chai

rman

D

irect

or

D

irect

or

DAT

e: o

ctob

er 4

, 201

5

PLAC

e: K

athm

andu

As

per o

ur R

epor

t of e

ven

date

fCa

shas

hi s

atya

l

Man

agin

g Pa

rtne

r

TR U

padh

ya &

Co.

Char

tere

d Ac

coun

tant

s

Kris

hna

d. B

hatt

arai

Chie

f Fin

anci

al O

ffic

er

ashi

sh s

harm

a

Dire

ctor

M. a

hmed

Dire

ctor

p.K

. pat

hak

Dire

ctor

v.p.

dan

i

Dire

ctor


Consolidated Cash flow statementFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)


(a) Cash flow from operating activities 7,044,098,092 6,704,844,483

1. Cash received 6,882,809,668 6,751,116,334

1.1 Interest Income 5,588,838,994 5,435,943,505

1.2 Commission and Discount Income 502,307,281 467,761,471

1.3 Income from Foreign exchange Transaction 512,477,284 506,331,999

1.4 Recovery of Loan Written Off 7,577,824 36,821,504

1.5 Other Incomes 271,608,285 304,257,855

2. Cash payment (4,728,838,488) (4,373,005,544)

2.1 Interest expenses (2,233,637,671) (1,942,436,297)

2.2 Staff expenses (1,073,824,960) (944,648,497)

2.3 Office Operating expenses (511,054,344) (432,277,969)

2.4 Income Tax Paid (909,964,125) (1,053,044,808)

2.5 Other expenses (357,387) (597,974)

Cash flow before changes in Working Capital 2,153,971,181 2,378,110,790

(increase)/decrease in Current assets (23,210,829,651) (10,847,074,919)

1. (Increase)/Decrease in Money at Call and Short Notice 414,313,000 896,452,157

2. (Increase)/Decrease in Other Short Term Investment (13,026,706,096) (2,617,410,860)

3. (Increase)/Decrease in Loans, Advances and Bills Purchase (10,961,185,057) (8,560,114,044)

4. (Increase)/Decrease in Other Assets 362,748,502 (566,002,172)

increase/(decrease) in Current liabilities 28,100,956,563 15,173,808,612

1. Increase/(Decrease) in Deposits 28,596,326,612 11,861,874,861

2. Increase/(Decrease) in Certificates of Deposits - -

3. Increase/(Decrease) in Short Term Borrowings (7,554,561) (21,653,811)

4. Increase/(Decrease) in Other Liabilities (487,815,488) 3,333,587,562

(b) Cash flow from investment activities 455,267,028 835,683,894

1. (Increase)/Decrease in Long-term Investment 326,151,361 692,498,078

2. (Increase)/Decrease in Fixed Assets (84,671,768) (100,360,524)

3. Interest income from Long term Investment 184,823,822 222,863,799

4. Dividend Income 28,963,613 20,682,541

5. Other - -

(c) Cash flow from financing activities (1,801,073,324) (484,491,413)

1. Increase/(Decrease) in Long term Borrowings (Bonds, Debentures etc) - -

2. Increase/(Decrease) in Share Capital* 1,051,920 1,116,650

3. Increase/(Decrease) in Other Liabilities - -

4. Increase/(Decrease) in Refinance/facilities received from NRB - -

5. Dividend Paid (1,802,125,244) (485,608,063)

(d) income/(loss) from change in exchange rate in Cash & Bank balance - -

(e) Current Year’s Cash flow from all activities 5,698,291,797 7,056,036,964

(f) opening Cash and Bank Balance 12,953,435,775 5,897,398,811

(g) Closing Cash and Bank Balance 18,651,727,571 12,953,435,775

(IN NPR)

*Only fraction share adjusted with Cash Dividend is disclosed as increment.




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director

independent auditor’s report -naBil BanK


Balance sheetAs at 16 July 2015 (31 Ashadh 2072)

Capital & liaBilities sChedule this Year previous Year

1. Share Capital 1 4,754,950,200 3,656,602,080

2. Reserves & Surplus 2 4,730,641,287 3,984,384,416

3. Debentures & Bonds 3 300,000,000 300,000,000

4. Borrowings 4 - -

5. Deposits 5 104,237,910,083 75,388,790,862

6. Bills Payable 6 243,433,464 213,579,243

7. Proposed Dividend 250,260,537 1,371,225,780

8. Income Tax Liabilities 964,391 2,510,756

9. Other Liabilities 7 1,467,541,449 2,357,452,783

total 115,985,701,411 87,274,545,920

assets sChedule this Year rs. previous Year

1. Cash Balance 8 1,820,201,446 1,468,154,377

2. Balance with Nepal Rastra Bank 9 12,924,604,257 7,068,078,842

3. Balance with Banks/Financial Institutions 10 1,258,934,331 1,457,249,561

4. Money at Call and Short Notice 11 323,541,000 737,854,000

5. Investment 12 30,972,487,414 18,276,752,741

6. Loans, Advances and Bills Purchased 13 65,501,925,164 54,691,648,194

7. Fixed Assets 14 812,440,482 843,137,744

8. Non Banking Assets 15 - -

9. Other Assets 16 2,371,567,317 2,731,670,461

total 115,985,701,411 87,274,545,920

Contingent Liabilities Schedule 17

Directors’ Declaration Schedule 29

Table of Capital Fund Schedule 30(A1)

Credit Risk Schedule 30(B)

Credit Risk Mitigation Schedule 30(C)

Operation Risk Schedule 30(D)

Market Risk Schedule 30(e)

Principal Indicators Schedule 31

Principal Accounting Policies Schedule 32

Notes to Accounts Schedule 33

Statement of Promoters’ Loan Schedule 34

Comparison of Unaudited and Audited Financial Statement Schedule 35

(IN NPR)

Schedules 1 to 17 form an integral part of this Balance Sheet.

finanCial stateMents -naBil BanK




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director


profit and loss accountFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

partiCulars sChedule this Year previous Year

1. Interest Income 18 5,762,345,126 5,636,158,253

2. Interest expense 19 2,236,063,893 1,939,745,260

net interest income 3,526,281,233 3,696,412,993

3. Commission and Discount 20 480,279,523 466,314,790

4. Other Operating Income 21 240,460,391 265,326,606

5. exchange Income 22 512,477,284 529,995,584

total operating income 4,759,498,431 4,958,049,973

6. Staff expense 23 743,484,326 627,573,275

7. Other Operating expense 24 613,018,342 543,158,113

8. exchange Loss - -

operating profit before provision for possible losses 3,402,995,763 3,787,318,585

9. Provision for Possible Losses 25 167,070,826 237,955,213

operating profit 3,235,924,937 3,549,363,372

10. Non Operating Income /(expense) 26 44,364,181 34,781,157

11. Provision for Possible Losses Write Back 27 2,095,609 14,667,229

profit from regular activities 3,282,384,727 3,598,811,758

12. Income/(expense) from extra-ordinary Activities 28 (2,924,675) 34,002,205

profit from all activities 3,279,460,052 3,632,813,963


14. Provision for Income Tax 887,513,712 983,003,928

Current Tax 896,878,251 980,684,051

Prior Period Tax - 735,675

Deferred Tax (9,364,539) 1,584,202

net profit/(loss) 2,093,813,608 2,319,557,472

(IN NPR)

Schedules 18 to 28 form an integral part of this Profit and Loss Account.




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director

profit & loss appropriation accountFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)


inCoMe

1. Accumulated Profit up to Last Year (Restated Balance) 463,687,204 707,175,161

2. Current Year’s Profit 2,093,813,608 2,319,557,472

3. exchange equalization Fund - -

4. Capital Adjustment Reserve - -

5. Deferred Tax Reserve - 1,584,202

6. Investment Adjustment Reserve - -


8. Contingent Reserve 449,733 300,000

total 2,557,950,545 3,028,616,835

expense

1. Accumulated Loss up to Last Year - -

2. Current Year’s Loss - -

3. General Reserve 419,000,000 464,000,000

4. Contingent Reserve 1,000,000 1,000,000

5. Institution Development Fund - -


7. employees Related Reserve - -

8. Proposed Cash Dividend 250,260,537 1,371,225,780

9. Proposed Stock Dividend (Bonus Shares) 1,097,296,200 609,433,680

10. Special Reserve Fund - -

11. exchange Fluctuation Fund 45,500,000 27,100,000

12. Capital Redemption Reserve (Debenture Redemption) 60,000,000 60,000,000

13. Capital Adjustment Fund - -

14. Deferred Tax Reserve 9,364,539 -

15. Investment Adjusment Reserve 797,448 32,170,171

total 1,883,218,724 2,564,929,631


(IN NPR)





PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director

stat

emen

t of C

hang

es in

equ

ity

Fo

r the

per

iod

17 J

uly

2014

to 1

6 Ju

ly 2

015

(1 S

hraw

an 2

071

to 3

1 As

hadh

207

2)

par

tiCu

lar

s sh

are

Capi

tal

aC

CuM

ula

ted

g

ener

al

pro

pose

d

Capi

tal

shar

e Co

nti

ng

ent

div

iden

d

Capi

tal

ex

Chan

ge

inte

res

t d

efer

red

in

vest

Men

t to

tal

pro

fit/

loss

r

eser

ve

Bo

nu

s r

eser

ve

preM

iuM

r

eser

ve

equ

aliz

atio

n

red

eMpt

ion

eq

ual

izat

ion

sp

rea

d

tax

adJu

stM

ent

aMo

un

t (r

s.)

shar

e fu

nd

fu

nd

r

eser

ve

fun

d

res

erve

r

eser

ve

res

erve

Bala

nce

as o

n 16

Jul

y 20

14

3,0

47,1

68,4

00

463

,687

,204

3

,084

,500

,000

6

09,4

33,6

80

-

74,

000

1

4,57

3,57

0

-

60,

000,

000

1

77,4

00,0

00

2,57

8,00

0 4

3,25

2,84

0

138,

392,

362

7,6

41,0

60,0

56

Chan

ges

in A

ccou

ntin

g Po

licy

-

Bonu

s Sh

are

issue

d 6

09,4

33,6

80

(609

,433

,680

)

-

Frac

tion

Shar

e Ad

just

men

t fro

m

Cash

Div

iden

d 1

,051

,920

1

,051

,920

Incr

ease

in D

efer

red

Tax

expe

nse

(7

3,56

0)

(7

3,56

0)

Rest

ated

Ope

ning

Bal

ance

3

,657

,654

,000

4

63,6

87,2

04

3,0

84,5

00,0

00

-

-

74,

000

1

4,57

3,57

0

-

60,

000,

000

1

77,4

00,0

00

2,57

8,00

0 4

3,17

9,28

0

138,

392,

362

7,6

42,0

38,4

16

Surp

lus

on R

eval

uatio

n of

Pro

perti

es

-

Def

icit

on R

eval

uatio

n of

Pro

perti

es

-

Curre

ncy

Tran

slatio

n D

iffer

ence

-

Net

Gai

ns a

nd L

osse

s no

t rec

ogni

sed

in th

e In

com

e St

atem

ent

-

Net

Pro

fit fo

r the

per

iod

2,

093,

813,

608

2,09

3,81

3,60

8

Adju

stm

ents

:

-

Tran

sfer

of R

eser

ve H

eadi

ng

-

Def

icit

on R

eval

uatio

n of

Pro

perti

es

-

Surp

lus

on R

eval

uatio

n of

Pro

perti

es

-

Cash

Div

iden

d

(250

,260

,537

)

(250

,260

,537

)

Prop

osed

Sto

ck D

ivid

end

(1,0

97,2

96,2

00)

1,

097,

296,

200

-

Gen

eral

Res

erve

Fun

d

(4

19,0

00,0

00)

419

,000

,000

-

Cont

inge

nt R

eser

ve

(1

,000

,000

)

1

,000

,000

-

Med

ical

exp

ense

s un

der

Hos

pita

lizat

ion

Sche

me

4

49,7

33

(449

,733

)

Div

iden

d eq

ualiz

atio

n Fu

nd

-

-

-

Capi

tal R

edem

ptio

n Re

serv

e

(Deb

entu

re R

edem

ptio

n)

(6

0,00

0,00

0)

60,

000,

000

-

exch

ange

Flu

ctua

tion

Rese

rve

(45,

500,

000)

45,

500,

000

-

Inte

rest

Spr

ead

Rese

rve

-

-

Def

erre

d Ta

x Re

serv

e

(9,3

64,5

39)

9

,364

,539

-

Inve

stm

ent A

djus

tmen

t Res

erve

(797

,448

)

7

97,4

48

-

Bala

nce

as o

n 16

Jul

y 20

15

3,6

57,6

54,0

00

674

,731

,821

3

,503

,500

,000

1,

097,

296,

200

-

7

4,00

0

15,

123,

837

-

12

0,00

0,00

0 2

22,9

00,0

00

2,57

8,00

0 5

2,54

3,81

9

139,

189,

810

9,4

85,5

91,4

87

(IN N

PR)


sash

in J

oshi

s.

p. p

oudy

al

d.g

. agr

awal

n

. Cha

udha

ry

Chie

f Exe

cutiv

e O

ffic

er

Chai

rman

D

irect

or

D

irect

or

DAT

e: o

ctob

er 4

, 201

5

PLAC

e: K

athm

andu

As

per o

ur R

epor

t of e

ven

date

fCa

shas

hi s

atya

l

Man

agin

g Pa

rtne

r

TR U

padh

ya &

Co.

Char

tere

d Ac

coun

tant

s

Kris

hna

d. B

hatt

arai

Chie

f Fin

anci

al O

ffic

er

ashi

sh s

harm

a

Dire

ctor

M. a

hmed

Dire

ctor

p.K

. pat

hak

Dire

ctor

v.p.

dan

i

Dire

ctor


Cash flow statementFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)


(a) Cash flow from operating activities 7,332,430,808 3,734,149,574

1. Cash received 6,815,560,667 6,681,328,098

1.1 Interest Income 5,573,018,484 5,419,731,587

1.2 Commission and Discount Income 482,026,684 453,116,402

1.3 Income from Foreign exchange Transaction 512,477,284 506,331,999

1.4 Recovery of Loan Written Off 7,577,824 36,821,504

1.5 Other Incomes 240,460,391 265,326,606

2. Cash payment (4,691,797,439) (4,341,335,894)

2.1 Interest expenses (2,235,959,098) (1,943,431,133)

2.2 Staff expenses (1,058,384,374) (931,533,070)

2.3 Office Operating expenses (498,671,965) (422,196,923)

2.4 Income Tax Paid (898,424,615) (1,043,576,794)

2.5 Other expenses (357,387) (597,974)

Cash flow before changes in Working Capital 2,123,763,228 2,339,992,204

(increase)/decrease in Current assets (23,219,814,082) (10,873,624,200)

1. (Increase)/Decrease in Money at Call and Short Notice 414,313,000 896,452,157

2. (Increase)/Decrease in Other Short Term Investment (13,026,181,506) (2,618,733,560)

3. (Increase)/Decrease in Loans, Advances and Bills Purchase (10,968,739,618) (8,559,767,855)

4. (Increase)/Decrease in Other Assets 360,794,042 (591,574,942)

increase/(decrease) in Current liabilities 28,428,481,662 12,267,781,570

1. Increase/(Decrease) in Deposits 28,849,119,221 11,778,982,663

2. Increase/(Decrease) in Certificates of Deposits - -

3. Increase/(Decrease) in Short Term Borrowings - -

4. Increase/(Decrease) in Other Liabilities (420,637,559) 488,798,907

(b) Cash flow from investment activities 472,719,770 856,621,118

1. (Increase)/Decrease in Long-term Investment 326,151,361 687,623,078


3. Interest income from Long term Investment 184,823,822 222,863,799

4. Dividend Income 43,783,613 31,797,541

5. Other - -

(c) Cash flow from financing activities (1,794,893,324) (479,856,413)

1. Increase/(Decrease) in Long term Borrowings (Bonds, Debentures etc) - -

2. Increase/(Decrease) in Share Capital* 1,051,920 1,116,650

3. Increase/(Decrease) in Other Liabilities - -

4. Increase/(Decrease) in Refinance/facilities received from NRB - -

5. Dividend Paid (1,795,945,244) (480,973,063)

(d) income/(loss) from change in exchange rate in Cash & Bank balance - -

(e) Current Year’s Cash flow from all activities 6,010,257,254 4,110,914,279

(f) opening Cash and Bank Balance 9,993,482,780 5,882,568,501

(g) Closing Cash and Bank Balance 16,003,740,034 9,993,482,780

(IN NPR)

* Only fraction shares adjusted with Cash Dividend is disclosed as increment.




PLACe: Kathmandu


fCa shashi satyal

Managing Partner

TR Upadhya & Co.




ashish sharma

Director

M. ahmed

Director

p.K. pathak

Director

v.p. dani

Director


* Other includes holding of Nepal Trust, Nepal Stock Exchange and promoter shares divested by NIDC Development Bank Ltd.

share Capital & ownershipAs at 16 July 2015

sChedule 1


1. share Capital

1.1 authorized Capital 3,700,000,000 3,100,000,000

a) 37,000,000 Ordinary Shares of Rs. 100 each 3,700,000,000 3,100,000,000

b) ………...Non-redeemable Preference Shares of Rs……….. each

c) …………Redeemable Preference Shares of Rs……….. each

1.2 issued Capital 3,657,654,000 3,047,168,400




1.3 paid up Capital 3,657,654,000 3,047,168,400




1.4 proposed Bonus shares 1,097,296,200 609,433,680

1.5 Calls in advance - -

1.6 total (1.3 + 1.4 + 1.5) 4,754,950,200 3,656,602,080

(IN NPR)

share ownershipAs at 16 July 2015

partiCulars % this Year previous Year

1. local ownership 50.00 1,828,827,000 1,523,584,200

1.1 Government of Nepal - - -

1.2 “Ka” Class Licensed Institutions - - -

1.3 Other Licensed Institutions 0.57 20,990,500 107,628,100

1.4 Other entities 9.67 353,695,500 294,611,000

1.5 General Public 30.00 1,097,296,200 914,150,520

1.6 Others * 9.76 356,844,800 207,194,580

2. foreign ownership 50.00 1,828,827,000 1,523,584,200

total 100.00 3,657,654,000 3,047,168,400

(IN NPR)


Details of Shareholders Holding ≥ 0.5% Shares

partiCulars this Year

aMount (in npr) %

1 NB International Limited 50.00 1,828,827,000.00

2 Rastriya Beema Sansthan 9.67 353,695,500.00

3 Nepal Industrial Development Corporation 0.57 20,990,500.00

4 Mr. Arjun Bandhu Regmi 1.16 42,451,500.00

5 Mr. Nirvana Kumar Chaudhary 0.89 32,576,100.00

6 Mr. Barun Chaudhary 0.85 31,057,100.00

7 Mrs. Sarika Chaudhary 0.78 28,593,400.00

8 Nepal Trust 0.59 21,670,800.00

9 Mr. Rahul Chaudhary 0.59 21,642,300.00

(IN NPR)

reserves & surplusAs at 16 July 2015

sChedule 2


1. general reserve 3,503,500,000 3,084,500,000

2. Capital reserve 74,000 74,000

a. Share Premium 74,000 74,000

3. Capital redemption reserve (debenture redemption) 120,000,000 60,000,000

4. Capital adjustment reserve - -

5. other reserve and fund 209,435,466 198,723,212

a. Contingent Reserve 15,123,837 14,573,570

b. Institution Development Fund - -

c. Dividend equalization Fund - -

d. Special Reserve Fund - -

e. Assets Revaluation Reserve - -

f. Deferred Tax Reserve 52,543,819 43,179,280

g. Other Free Reserve (Interest Spread Reserve) 2,578,000 2,578,000

h. Other Reserve (Investment Adjustment Reserve) 139,189,810 138,392,362


7. exchange fluctuation fund 222,900,000 177,400,000

total 4,730,641,287 3,984,384,416

(IN NPR)


debentures & Bonds As at 16 July 2015

Borrowings As at 16 July 2015

sChedule 3

sChedule 4


1. 8.50% Bond of Rs. 1000 each 300,000,000 300,000,000

Issued in July / August 2008 with maturity in July / August 2018

(Redemption Reserve till date: Rs.120,000,000.00)

2. ……….% Bond/Debentures of Rs……..…each - -

Issued on …………… with maturity on ……….

(Redemption Reserve till date:Rs…….)

total (1+2) 300,000,000 300,000,000


a. local

1. Government of Nepal - -

2. Nepal Rastra Bank (SLF) - -

3. Repo Liability - -

4. Inter-Bank and Financial Institutions - -

5. Other Organized Institutions - -

6. Others - -

total - -

B. foreign

1. Banks - -

2. Others - -

total - -

total (a+B) - -

(IN NPR)

(IN NPR)


depositsAs at 16 July 2015

sChedule 5


1. interest free deposits

a. Current deposits 12,848,379,756 9,545,929,798

1. local Currency 10,474,092,875 7,256,913,383

1.1 Nepal Government - -

1.2 “Ka” Class Licensed Institutions 336,325,410 178,110,500

1.3 Other Licensed Financial Institutions 341,546,110 354,389,780

1.4 Other Organized Institutions 8,679,343,392 6,062,115,454

1.5 Individuals 1,116,877,963 662,297,649

1.6 Others - -

2. foreign Currency 2,374,286,881 2,289,016,415

2.1 Nepal Government - -

2.2 “Ka” Class Licensed Institutions 5,020,320 10,903,900

2.3 Other Licensed Financial Institutions - -


2.5 Individuals 111,316,540 100,052,080

2.6 Others - -

B. Margin deposits 1,787,077,128 1,541,424,046

1. employees 8,391,898 7,193,935

2. Guarantee 356,892,733 350,142,418

3. Letter of Credit 742,460,517 670,063,597

4. Others 679,331,980 514,024,096

C. others 74,393,161 160,253,715

1. local Currency 74,393,161 160,253,715

1.1 Financial Institutions - -

1.2 Other Organized Institutions 66,817,000 119,207,775

1.3 Individual 7,576,161 41,045,940

2. foreign Currency - -

2.1 Financial Institutions - -

2.2 Other Organized Institutions - -

2.3 Individual - -

total (a+B+C) 14,709,850,045 11,247,607,559

(IN NPR)

Continued...


depositsAs at 16 July 2015

sChedule 5


2. interest Bearing deposits

a. savings deposits 42,715,056,067 32,601,836,671

1. local Currency 40,084,453,099 29,851,940,967

1.1 Institutions 751,620,160 627,280,200

1.2 Individuals 39,332,832,939 29,224,660,767

1.3 Others - -


2.1 Institutions 1,065,274,198 1,260,754,704

2.2 Individuals 1,565,328,770 1,489,141,000

2.3 Others - -

B. fixed deposits 15,871,934,806 11,854,875,045

1. local Currency 14,034,681,996 10,893,035,125

1.1 Institutions 7,480,487,600 3,952,195,520

1.2 Individuals 6,554,194,396 6,940,839,605

1.3 Others - -

2. foreign Currency 1,837,252,810 961,839,920

2.1 Institutions 1,713,872,990 900,296,440

2.2 Individuals 123,379,820 61,543,480

2.3 Others - -

C. Call deposits 30,941,069,165 19,684,471,587

1. local Currency 21,301,102,058 14,252,743,798

1.1 “Ka” Class Licensed Institutions - -

1.2 Other Licensed Financial Institutions 271,542,580 305,371,640


1.4 Individuals 2,058,663,700 1,830,289,890

1.5 Others - -


2.1 “Ka” Class Licensed Institutions - -

2.2 Other Licensed Financial Institutions - -


2.4 Individuals 15,149,670 17,055,550

2.5 Others - -

d. Certificate of deposit - -

1. Organized Institutions - -

2. Individuals - -

3. Others - -

total (a+B+C+d) 89,528,060,038 64,141,183,303

total deposits (1+2) 104,237,910,083 75,388,790,862

(IN NPR)

Continued...


Bills payable As at 16 July 2015

other liabilities As at 16 July 2015

Cash Balance As at 16 July 2015

sChedule 6

sChedule 7

sChedule 8


1. Local Currency 46,868,336 71,373,825

2. Foreign Currency 196,565,128 142,205,418

total 243,433,464 213,579,243


1. Gratuity Fund 63,141,191 69,310,823

2. employees Provident Fund - -

3. employees Welfare/ Leave Fund 123,091,223 101,569,076


5. Interest Payable on Deposits 25,202 1,378

6. Interest Payable on Borrowings 171,531 90,560

7. Unearned Discount and Commission 55,549,016 53,801,855

8. Sundry Creditors 796,513,185 1,255,633,738

9. Branch Reconciliation Account - -

10. Provision for Audit expense 975,000 1,100,000

11. Deferred Tax Liabilities - -

12. Dividend Payable 110,141,802 534,861,266

13. Others 19,800,567 10,831,524

total 1,467,541,449 2,357,452,783


1. Local Currency (Including Coins) 1,714,231,392 1,433,071,574


total 1,820,201,446 1,468,154,377

(IN NPR)

(IN NPR)

(IN NPR)


Money at Call and short notice As at 16 July 2015

sChedule 11


1. Local Currency 160,000,000 -


total 323,541,000 737,854,000

(IN NPR)

Balance With nepal rastra BankAs at 16 July 2015

Balance with Banks / financial institutionsAs at 16 July 2015

partiCulars loCal foreign CurrenCY

CurrenCY inr ConvertiBle fCY total this Year previous Year

1. nepal rastra Bank 12,875,332,573 - 49,271,684 49,271,684 12,924,604,257 7,068,078,842

a. Current Account 12,875,332,573 - 49,271,684 49,271,684 12,924,604,257 7,068,078,842

b. Other Account - - - - - -

partiCulars loCal foreign CurrenCY

CurrenCY inr ConvertiBle fCY total this Year previous Year

1. local licensed institutions 149,528,697 - - - 149,528,697 254,279,705

a. Current Account 149,528,697 - - - 149,528,697 254,279,705


2. foreign Banks - 539,929,808 569,475,826 1,109,405,634 1,109,405,634 1,202,969,856

a. Current Account - 539,929,808 569,475,826 1,109,405,634 1,109,405,634 1,202,969,856


total 149,528,697 539,929,808 569,475,826 1,109,405,634 1,258,934,331 1,457,249,561

(IN NPR)

(IN NPR)

sChedule 9

sChedule 10

Note: Balance as per the confirmation statements is Rs.13,022,127,205.64. Reconcilation is presented in Schedule 33 “Notes to Accounts”.

Note: Balance as per the confirmation statements is Rs.1,821,745,811.52. Reconcilation is presented in Schedule 33 “Notes to Accounts”.


investmentsAs at 16 July 2015

partiCulars purpose

trading others this Year previous Year

1. Nepal Government Treasury Bills - 7,992,935,745 7,992,935,745 5,706,470,899

2. Nepal Government Saving Bonds - - - -

3. Nepal Government Other Securities - 2,183,994,157 2,183,994,157 2,583,715,343

4. Nepal Rastra Bank Bonds (Term Deposits) - 4,750,000,000 4,750,000,000 -

5. Foreign Bonds - 253,902,471 253,902,471 240,311,307

6. Local Licensed Institutions - - - 13,125,720

7. Foreign Banks - 15,383,504,757 15,383,504,757 9,380,662,377

8. Organized Institutions’ Shares - 265,032,600 265,032,600 248,034,800

9. Organized Institutions’ Bonds and Debentures - - - -

10. Other Investments - 150,105,075 150,105,075 107,124,214

Total investment - 30,979,474,805 30,979,474,805 18,279,444,660

provision - 6,987,391 6,987,391 2,691,919

net investment - 30,972,487,414 30,972,487,414 18,276,752,741

(IN NPR)

sChedule 12


investment in shares, debentures and BondsAs at 16 July 2015

partiCulars Cost priCe MarKet priCe provision this Year previous Year

1. investment in shares 265,032,600 2,458,845,244 6,987,391 258,045,209 245,342,881

1.1 Rural Microfinance Development Center Limited 50,720,000 365,437,600 - 50,720,000 50,720,000

[557,920 ordinary shares of Rs. 100 paid up

(Including Bonus Shares 50,720)]

1.2 Nirdhan Utthan Bank Limited 16,711,200 465,524,280 - 16,711,200 16,711,200



1.3 Chhimek Laghu Bitta Bikash Bank Limited 24,377,900 475,257,090 - 24,377,900 7,380,100



1.4 Deprosc MicroFinance Development Bank Limited 9,726,700 297,640,800 - 9,726,700 9,726,700



1.5 Sanakisan Bikash Bank Limited 6,070,800 107,654,730 - 6,070,800 6,070,800


(Including Bonus shares 9,107)]

1.6 Swabalamban Bikash Bank Limited 12,490,500 461,900,260 - 12,490,500 12,490,500



1.7 Nepal Grameen Bikas Bank Limited 8,000,000 Not Listed 6,987,391 1,012,609 5,308,081

(80,000 ordinary shares of Rs. 100 paid up)

1.8 NADeP Laghubitta Bittiya Sanstha Ltd. 40,000,000 Not Listed - 40,000,000 40,000,000

(400,000 ordinary shares of Rs. 100 each)

1.9 Mahila Sahayatra MicroFinance Bittiya Sanstha Ltd. 4,000,000 Not Listed - 4,000,000 4,000,000


1.10 Jeevan Laghu Bittiya Bikas Bank Ltd. 10,000,000 Not Listed - 10,000,000 10,000,000


1.11 Karja Suchana Kendra Limited 1,235,500 Not Listed - 1,235,500 1,235,500



1.12 National Banking Training Institute 1,200,000 Not Listed - 1,200,000 1,200,000


1.13 Nepal Clearing House Limited 2,500,000 Not Listed - 2,500,000 2,500,000


1.14 Nabil Investment Banking Limited 78,000,000 Not Listed - 78,000,000 78,000,000

(780,000 ordinary shares of Rs. 100 each)

1.15 Visa Inc. - 176,925,736 - - -

(6,166 units of Class C Common Stock)

1.16 MasterCard Incorporated - 108,504,747 - - -

(11,140 units Class B Common Stock - CB1)

(IN NPR)

sChedule 12 (a)

Continued...


investment in shares, debentures and BondsAs at 16 July 2015

partiCulars Cost priCe MarKet priCe provision this Year previous Year

2. investment in debentures and Bonds 253,902,471 261,748,750 - 253,902,471 240,311,307

2.1 ICICI Bank Bonds 253,902,471 261,748,750 - 253,902,471 240,311,307

(Bonds of face value USD 2,500,000

at coupon rate 6.375% maturing

on 30 April 2022)

3. other investments 150,105,075 185,227,421 - 150,105,075 107,124,214

3.1 Mutual Fund - Nabil Balance Fund 1 105,000,000 141,750,000 - 105,000,000 105,000,000

(10,500,000 units of Rs. 10 each)

3.2 Mutual Fund - NMV Sulav Investment Fund 1 13,049,980 13,049,980 - 13,049,980 -

(1,304,998 units of Rs. 10 each)

3.3 Mutual Fund - NIBL Samridhi Fund 1 17,389,120 17,563,011 - 17,389,120 -


3.4 Mutual Fund - Laxmi Value Fund - Scheme 1 12,864,430 12,864,430 - 12,864,430 -


3.5 SWIFT Investment (denominated in €) 1,801,545 Not Listed - 1,801,545 2,124,214

total investment 669,040,146 2,905,821,415 6,987,391 662,052,755 592,778,402

4. provision for loss

3.1 Up to Previous Year 2,691,919 - - 16,291,166

3.2 Addition/(Writeback) This Year 4,295,472 - - (13,599,247)

total provision 6,987,391 - - 2,691,919

(IN NPR)

sChedule 12 (a)

note: 1. S.No.1.1 to 1.6 Market Value is based on the closing market price of “Ordinary Shares” recroded at Nepal Stock Exchange on 16.07.2015. The banks investment is in “Promoter Shares” that are seldom traded. 2. S.No.1.15 & 1.16 Market Value is based on the closing market price recorded at Nasdaq on 16.07.2015. 3. S.No.3.1 to 3.4 Market Value is based on the closing market price recroded at Nepal Stock Exchange on 16.07.2015. 4. Nepal Grameen Bikas Bank Ltd. (formerly Sudur Paschimanchal Grameen Bikash Bank Limited, Madhya Paschimanchal Grameen Bikash Bank Limited, Purwanchal Grameen Bikas Bank Ltd.) and Nepal Clearing House Limited have not declared and distributed cash dividend in the last three years.


held for trading investmentsAs at 16 July 2015

partiCulars MarKet priCe as at profit / loss reMarKs

Cost priCe ( rs.) 16-Jul-2015 16-Jul-2014 this Year (rs.) previous Year (rs.)

1. Nepal Government Treasury Bills - - - - -

2. Nepal Government Saving Bonds - - - - -

3. Nepal Government Other Securities - - - - -

4. Nepal Rastra Bank Bonds - - - - -

5. Foreign Bonds - - - - -

6. Shares of Local Licensed Institutions - - -

7. Debentures and Bonds of Local

Licensed Institutions - - - - -

8. Shares, Debentures and Bonds of

Local Organised Institutions - - - - -

9. Placement in Foreign Banks - - - - -

10. Inter Bank Lending - - - - -

11. Other Investments - - - - -

total investments - - - - -

(IN NPR)

sChedule 12.1

held to Maturity investmentsAs at 16 July 2015

partiCulars iMpaired aMount till profit / loss reMarKs

Cost priCe (rs.) 16-Jul-2015 16-Jul-2014 this Year (rs.) previous Year (rs.)

1. Nepal Government Treasury Bills 7,992,935,745

2. Nepal Government Saving Bonds -

3. Nepal Government Other Securities 2,183,994,157

4. Nepal Rastra Bank Bonds (Term Deposit) 4,750,000,000

5. Foreign Bonds (denominated in $) 253,902,471 - - - 11,772,918

6. Shares of Local Licensed Institutions -


Licensed Institutions -


Local Organised Institutions -

9. Placement in Foreign Banks 15,383,504,757 - -

10. Other Investments -

total investments 30,564,337,130 - - - 11,772,918

(IN NPR)

sChedule 12.2


available for sale investmentsAs at 16 July 2015

partiCulars MarKet priCe as at this Year investMent last Year reMarKs

Cost priCe 16-Jul-2014 (a) 16-Jul-2015 (B) adJustMent reserve (B -a) profit/ loss

1. Nepal Government Treasury Bills -

2. Nepal Government Saving Bonds -

3. Nepal Government Other Securities -

4. Nepal Rastra Bank Bonds -

5. Foreign Bonds -

6. Shares of Local Licensed Institutions 182,097,100 1,786,891,438 2,173,414,760 56,422,194 -


Licensed Institutions -


Local Organised Institutions 82,935,500 - - 78,000,000 -

9. Placement in Foreign Banks -

10. Other Investments 150,105,075 379,590,037 185,227,421 4,767,616 -

total investments 415,137,675 2,166,481,475 2,358,642,181 139,189,810 -

(IN NPR)

sChedule 12.3

note: Market Price represents only listed securities valued at their last traded price or reference price. Calculation of Investment Adjustment Reserve is presented in Schedule 33, “Notes to Accounts”


sCh

edu

le 1

3Cl

assi

ficat

ion

of l

oans

, adv

ance

s an

d B

ills

purc

hase

d &

pro

visi

onin

g As

at 1

6 Ju

ly 2

015

par

tiCu

lar

s

lo

ans

& a

dva

nCe

s

Bil

ls p

ur

Chas

ed &

dis

Cou

nte

d

this

Yea

r

pr

evio

us

Year

do

Mes

tiC

fo

rei

gn

to

tal

d

oM

esti

C

fo

rei

gn

t

ota

l

dep

riv

ed s

eCto

r

o

ther

insu

red

u

nin

sur

ed

1. p

erfo

rmin

g lo

ans

-

2

,841

,084

,610

5

8,85

9,53

7,64

7

4,04

1,77

3,28

5

65,7

42,3

95,5

42

179,

142,

956

19,3

13,0

69

198

,456

,025

65

,940

,851

,567

5

4,94

7,00

1,17

7

1.

1 Pa

ss

-

2

,841

,084

,610

5

6,39

2,17

6,36

8

4,04

1,77

3,28

5

63,2

75,0

34,2

63

179,

142,

956

19,3

13,0

69

198

,456

,025

63

,473

,490

,288

5

4,94

7,00

1,17

7

1.

2 W

atch

Lis

t

-

-

2,46

7,36

1,27

9

-

2,4

67,3

61,2

79

-

-

-

2

,467

,361

,279

-

2. n

on-p

erfo

rmin

g lo

ans

-

33,

350,

881

1,18

6,03

7,26

5

7

71,9

82

1,

220,

160,

128

1

5,00

0

644

,218

6

59,2

18

1,2

20,8

19,3

46

1,

256,

075,

230

2.

1 R

estru

ctur

ed /

Res

ched

uled

-

-

-

-

-

-

-

-

-

-

2.

2 Su

b-St

anda

rd

-

-

58,

293,

461

-

5

8,29

3,46

1

-

-

-

58

,293

,461

9

7,63

7,36

8

2.

3 D

oubt

ful

-

-

4

04,6

82,1

73

-

4

04,6

82,1

73

-

-

-

404

,682

,173

44

3,96

1,52

6

2.

4 Lo

ss

-

33,

350,

881

723

,061

,631

771

,982

757

,184

,494

15,0

00

644

,218

6

59,2

18

7

57,8

43,7

12

714,

476,

336

a. t

otal

loa

n (1

+2)

-

2,8

74,4

35,4

91

60,

045,

574,

912

4,

042,

545,

267

66

,962

,555

,670

17

9,15

7,95

6

19

,957

,287

1

99,1

15,2

43

67,1

61,6

70,9

13

56,

203,

076,

407

3. l

oan

loss

pro

visi

on

3.

1 Pa

ss

-

28,

410,

846

564

,679

,536

40

,417

,729

633

,508

,111

1,7

91,4

30

193

,131

1,9

84,5

61

6

35,4

92,6

72

550,

447,

850

3.

2 W

atch

Lis

t

-

-

4

9,34

7,22

6

-

49,

347,

226

-

-

-

49,3

47,2

26

-

3.

3 R

estru

ctur

ed /

Res

ched

uled

-

-

-

-

-

-

-

-

-

-

3.

4 Su

b-St

anda

rd

-

-

14,

721,

052

-

1

4,72

1,05

2

-

-

-

14

,721

,052

2

4,50

8,89

6

3.

5 D

oubt

ful

-

-

2

02,3

41,0

87

-

2

02,3

41,0

87

-

-

-

202

,341

,087

22

2,23

2,85

2

3.

6 Lo

ss

-

33,

350,

881

723

,061

,631

771

,982

757

,184

,494

15,0

00

644

,218

6

59,2

18

7

57,8

43,7

12

714,

238,

615

B. t

otal

pro

visi

onin

g

-

6

1,76

1,72

7

1,

554,

150,

532

41,

189,

711

1

,657

,101

,970

1,8

06,4

30

837

,349

2,6

43,7

79

1,6

59,7

45,7

49

1,

511,

428,

213

4. p

rovi

sion

ing

up to

pre

viou

s ye

ar

4.

1 Pa

ss

-

21,

930,

604

503

,392

,334

21

,024

,110

546

,347

,048

3,8

43,4

98

257

,304

4,1

00,8

02

5

50,4

47,8

50

467,

325,

467

4.

2 R

estru

ctur

ed /

Res

ched

uled

-

-

-

-

-

-

-

-

-

-

4.

3 Su

b-St

anda

rd

-

-

24,

508,

896

-

2

4,50

8,89

6

-

-

-

24

,508

,896

5

1,28

9,32

8

4.

4 D

oubt

ful

-

1

,703

,571

220

,529

,281

-

222

,232

,852

-

-

-

2

22,2

32,8

52

52,

320,

157

4.

5 Lo

ss

-

29,

951,

600

683

,463

,548

404

,176

713

,819

,324

58,5

41

360

,750

4

19,2

91

7

14,2

38,6

15

704,

760,

354

C. t

otal

pre

viou

s Ye

ar’s

pro

visi

on

-

53,

585,

775

1,43

1,89

4,05

9

2

1,42

8,28

6

1,5

06,9

08,1

20

3

,902

,039

6

18,0

54

4

,520

,093

1

,511

,428

,213

1,27

5,69

5,30

6

d. W

ritte

n B

ack

this

Yea

r

-

2,0

95,6

09

2,0

95,6

09

2,0

95,6

09

1,

067,

982

e. a

dditi

on t

his

Year

8,17

5,95

2

1

22,2

56,4

73

19,7

61,4

25

1

50,1

93,8

50

2

19,2

95

219

,295

150

,413

,145

23

6,80

0,88

9

f. C

hang

es t

his

Year

-

8,1

75,9

52

1

22,2

56,4

73

19,7

61,4

25

1

50,1

93,8

50

(2,

095,

609)

2

19,2

95

(1

,876

,314

)

148

,317

,536

23

5,73

2,90

7

net

loa

n (a

-B)

-

2

,812

,673

,764

5

8,49

1,42

4,38

0

4,00

1,35

5,55

6

65,3

05,4

53,7

00

177,

351,

526

19,1

19,9

38

196

,471

,464

65

,501

,925

,164

5

4,69

1,64

8,19

4

(IN N

PR)


securitywise loans, advances and Bills purchased As at 16 July 2015

sChedule 13 (a)


a. secured 67,018,834,706 56,049,776,742

1. Movable/Immovable Assets 60,312,865,287 51,567,286,653

2. Guarantee of Local Licensed Institutions - -

3. Government Guarantee - -

4. Internationally Rated Bank Guarantee - 79,047,800

5. export Documents 205,225,661 394,744,486

6. Fixed Deposit Receipts 1,005,228,889 421,315,406

a. Own 632,976,257 421,315,406

b. Other Licensed Institutions 372,252,632 -

7. Government Securities 6,925,597 9,901,573

8. Counter Guarantee - -

9. Personal Guarantee 4,527,293 5,287,379

10. Other Securities 5,484,061,979 3,572,193,445

B. unsecured 142,836,207 153,299,665

total 67,161,670,913 56,203,076,407

(IN NPR)

note: Credit Card loans is presented under Unsecured Loans.


sCh

edu

le 1

4fi

xed

asse

tsAs

at 1

6 Ju

ly 2

015

*Writ

ten

dow

n va

lue

par

tiCu

lar

s

as

sets

this

pr

evio

us

B

uil

din

g

veh

iCle

s M

aCh

iner

Y o

ffiC

e eq

uip

Men

t so

ftW

are

oth

ers

Year

Ye

ar

1. C

ost p

rice

a.

Pre

viou

s Ye

ar B

alan

ce

337,

533,

344

223,

725,

803

- 61

4,28

6,43

8 74

,029

,029

-

1,24

9,57

4,61

4 1

,140

,545

,259

b.

Add

ition

dur

ing

the

Year

- 2

3,63

4,00

0

45,4

52,6

12

9,66

0,58

6 -

78,7

47,1

98

146

,726

,490

c.

Rev

alua

tion/

Writ

e B

ack

This

Yea

r

-

-

-

d.

Sol

d du

ring

the

Year

- (1

9,14

2,70

7)

(2

,075

,278

) -

- (2

1,21

7,98

5)

(31,

939,

709)

e.

Writ

e of

f dur

ing

the

Year

-

-

(3

,758

,658

)

- -

(3,7

58,6

58)

(5

,757

,426

)

tota

l Cos

t (a+

b+c+

d+e)

33

7,53

3,34

4 22

8,21

7,09

6

-

653

,905

,114

83

,689

,615

-

1,

303,

345,

169

1,24

9,57

4,61

4

2. d

epre

ciat

ion

a.

Up

to P

revi

ous

Year

8

8,43

5,12

9 11

4,52

3,03

0

-

422

,034

,757

48

,896

,718

-

673

,889

,634

5

98,3

89,8

71

b.

For

Thi

s Ye

ar

12,

454,

911

22,

851,

358

50

,884

,196

14

,255

,311

-

10

0,44

5,77

6

102,

281,

092

c.

Rev

alua

tion/

Writ

e B

ack

This

Yea

r

-

-

-

d.

Dep

reci

atio

n on

Sol

d As

sets

- (1

2,92

8,74

2)

(1,9

97,0

41)

-

-

(14,

925,

783)

(2

1,09

7,54

0)

e.

Dep

reci

atio

n on

Writ

en O

ff As

sets

- -

(3

,419

,139

)

-

-

(3,4

19,1

39)

(5

,683

,789

)

tota

l dep

reci

atio

n

100,

890,

040

124

,445

,646

-

4

67,5

02,7

73

63,

152,

029

- 75

5,99

0,48

8

673,

889,

634

3. B

ook

valu

e (W

dv*

) (1-

2)

236,

643,

304

10

3,77

1,45

0

-

186

,402

,341

20

,537

,586

-

547,

354,

681

57

5,68

4,98

0

4. l

and

-

-

-

-

- 24

1,51

7,14

9

241,

517,

149

241,

517,

149

5. p

endi

ng C

apita

lizat

ion

- -

-

-

-

-

-

-

6. l

ease

hold

ass

ets

- -

-

-

-

23,5

68,6

52

23,

568,

652

2

5,93

5,61

5

tota

l (3+

4+5+

6)

236,

643,

304

103,

771,

450

-

1

86,4

02,3

41

20,

537,

586

265,

085,

801

812,

440,

482

84

3,13

7,74

4

(IN N

PR)


non Banking assetsAs at 16 July 2015

naMe & address of date of assuMing total non loss provision net non

BorroWer or partY non BanKing assets BanKing assets % BanKing assets previous Year

None

grand total

(IN NPR)

sChedule 15

other assetsAs at 16 July 2015


1. Stock of Stationery 9,440,905 6,649,319

2. Income receivable on Investment 76,384,776 100,710,966

3. Accrued Interest on Loan 581,099,487 - 513,111,074

Less: Interest Suspense Account (581,099,487) (513,111,074)

4. Commission Receivable - -

5. Sundry Debtors 688,720,076 1,225,739,457

6. Staff Loans & Advances 1,288,882,222 1,132,250,869

7. Pre - Payments 35,027,454 30,578,263

8. Cash in Transit - -

9. Other Transit items (including Cheques) - -

10. Drafts paid without notice - -

11. expenses not written off - -

12. Branch Reconciliation Account - -

13. Deferred Tax Assets 52,543,819 43,179,280

14. Others 220,568,065 192,562,307

total 2,371,567,317 2,731,670,461

(IN NPR)

sChedule 16

other assets (Additional Statement)As at 16 July 2015


up to 1 Year 1 to 3 Year aBove 3 Years total

1. Accrued Interest on Loan 262,374,940 83,443,142 235,281,405 581,099,487 513,111,074

2. Drafts Paid without notice - -

3. Branch Reconciliation Account

4. Domestic and Foreign Agency Balance - -

(IN NPR)

sChedule 16 (a)


Contingent liabilities As at 16 July 2015

sChedule 17


1. Claims on Institution but not accepted by the Institution 51,986,500 58,273,064

2. Letter of Credit (Full Amount) 6,886,214,956 9,772,537,040

a. Maturity up to 6 Months 4,473,782,726 6,192,423,719

b. Maturity more than 6 Months 2,412,432,230 3,580,113,321

3. Rediscounted Bills - -

4. Guarantees/Bonds 5,271,969,914 4,320,546,878

a. Bid Bonds 145,234,247 208,098,250

b. Performance Bonds 5,126,735,667 4,112,448,628

c. Other Guarantees/Bonds - -

5. Unpaid portion of Partly paid shares - -

6. Forward exchange Contract Liabilities 11,160,238,680 5,084,448,020

7. Bills under Collection 306,078,189 332,824,629

8. Acceptance & endorsement 1,530,565,246 1,472,160,990

9. Underwriting Commitment - -

10. Irrevocable Loan Commitment 9,809,832,031 4,885,238,406

11. Guarantee issued against Counter Guarantee of Internationally Rated Banks 3,144,130,727 4,887,658,757

12. Advance Payment Guarantee 2,289,308,859 1,725,150,072

13. Financial Guarantee - -

14. Contingent Liabilities on Income Tax 30,915,378 30,908,989

total 40,481,240,480 32,569,746,845

(IN NPR)


interest income For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 18


a. loans, advances and overdraft 5,373,719,674 5,182,022,393

1. Loans & Advances 3,786,360,809 3,528,028,455

2. Overdraft 1,587,358,865 1,653,993,938

B. investment 195,238,807 269,463,435

1. Government Securities 179,454,094 253,848,422

a. Treasury Bills 29,086,398 48,743,108

b. Development Bonds 150,367,696 205,105,314

c. National Saving Certificates - -

2. Foreign Securities 15,784,713 15,615,013

a. ICICI Bank Bond 15,784,713 15,615,013

b. ……….. - -

3. Nepal Rastra Bank Bonds - -

4. Debenture & Bonds - -

a. Bank/Financial Institutions - -

b. Other Organizations - -

5. Interbank Investment - -

a. Bank/Financial Institutions - -

b. Other Organizations - -

C. agency Balances 1,782,601 1,232,284

1. Local Banks/Financial Institutions - -

2. Foreign Banks 1,782,601 1,232,284

d. Money at Call and short notice 5,621,699 242,536

1. Local Banks/Financial Institutions 5,620,559 242,511

2. Foreign Banks 1,140 25

e. others 185,982,345 183,197,605

1. Certificate of Deposits (NRB Term Deposit) 8,283,025 -

2. Inter-Bank/Financial Institutions Loan - -

3. Placements in Foreign Banks 131,839,783 143,304,938

4. Staff Loans 45,859,537 39,892,667

total 5,762,345,126 5,636,158,253

(IN NPR)


interest expense For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

Commission & discountFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 19

sChedule 20


a. deposits 2,210,563,865 1,914,170,809

1. Fixed Deposits 670,970,171 586,503,957

1.1 Local Currency 662,625,938 574,177,566

1.2 Foreign Currency 8,344,233 12,326,391

2. Savings Deposits 1,090,910,654 783,760,778

2.1 Local Currency 1,079,149,173 773,235,065


3. Call Deposits 448,683,040 543,906,074

3.1 Local Currency 411,479,496 514,576,071


4. Certificate of Deposits - -

B. Borrowings 25,500,028 25,574,451

1. Debentures & Bonds 25,500,000 25,569,863

2. Loan from Nepal Rastra Bank - -

3. Inter Bank /Financial Institutions Borrowing 28 4,588

4. Other Organized Institutions - -

5. Others - -

C. others - -

total 2,236,063,893 1,939,745,260


a. Bills purchase & discount 1,570,388 1,734,697

1. Local 629,920 518,947

2. Foreign 940,468 1,215,750

B. Commission 427,052,977 409,858,918

1. Letters of Credit 95,666,333 94,787,377

2. Guarantees 79,931,821 73,143,348

3. Collection Fees 1,508,115 1,863,087

4. Remittance Fees 90,215,975 89,938,086

5. Cards and e-Banking 149,368,704 136,245,235

6. Share Underwriting/Issue - -

7. Government Transactions - -

8. Agency Commission 10,362,029 13,881,785

9. exchange Fee - -

C. others 51,656,158 54,721,175

total 480,279,523 466,314,790

(IN NPR)

(IN NPR)


other income For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

exchange gain/ (loss)For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

personnel expense For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 21

sChedule 22

sChedule 23


1. Safe Deposit Lockers Rental 8,939,851 7,931,025

2. Issue & Renewals of Credit Cards 3,503,228 6,344,133

3. Issue & Renewals of Debit Cards 16,231,902 29,595,871

4. Telex / T. T. / Communication Fees 24,113,797 19,428,742

5. Service Charges 164,046,175 166,764,779

6. Renewal Fees - -

7. Others 23,625,438 35,262,056

total 240,460,391 265,326,606


a. Revaluation 181,760,375 108,374,723

b. Trading (except exchange Fees) 330,716,909 421,620,861

total gain/(loss) 512,477,284 529,995,584


1. Salary 222,343,045 208,442,107

2. Allowances 269,669,128 238,086,375

3. Contribution to Provident Fund 21,329,493 19,456,032

4. Training expenses 11,428,342 7,326,161

5. Uniform 10,080,000 101,229

6. Medical 1,211,234 832,839

7. Insurance 8,336,697 8,597,247

8. Pension and Gratuity Contribution 98,666,539 67,638,185

9. Others 100,419,848 77,093,100

a. Leave expenses 63,448,093 40,485,806

b. Dashain expenses 33,704,840 33,189,671

c. Other expenses 3,266,915 3,417,624

total 743,484,326 627,573,275

(IN NPR)

(IN NPR)

(IN NPR)


office operating expense For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 24


1. House Rent 86,030,333 71,637,604

2. electricity & Water 17,425,144 17,590,703

3. repair & Maintenance 5,094,037 6,282,675

a. Building 1,870,958 3,271,925

b. Vehicles 3,223,079 3,010,750

c. Others - -

4. Insurance 11,516,367 14,473,024

5. Postage, Telex, Telephone & Fax 31,233,297 31,088,286

6. Office equipment and Furniture Repair 15,278,830 13,017,892

7. Travelling Allowances & expenses 6,291,535 6,070,803

8. Printing & Stationery 47,329,545 23,134,574

9. Books & Periodicals 819,839 850,651

10. Advertisements 12,895,698 15,395,134

11. Legal expenses 1,299,095 1,151,283

12. Donations 20,073,715 57,000

13. expenses relating to Board of directors 4,184,246 2,985,087

a. Meeting Fees 1,877,000 1,192,000

b. Other expenses 2,307,246 1,793,087

14. Annual General Meeting expenses 1,784,450 1,169,487

15. expenses relating to audit 1,175,000 1,100,000

a. Audit Fees 1,175,000 1,100,000

b. Other expenses - -

16. Commission on Remittances - -

17. Depreciation on Fixed Assets 113,316,856 117,831,211

18. Amortization of Pre-Operating expenses - -

19. Share Issue expenses - -

20. Technical/Consultancy Services Fee 37,809,562 32,402,648

21. entertainment - -

22. Written Off expenses - -

23. Security expenses 49,759,062 49,676,672

24. Deposit & Credit Guarantee Premium 21,070,621 17,052,412

25. Commission & Discount - -

26. others 128,631,110 120,190,967

a. Fuel expenses 32,248,070 35,718,247

b. Tea/ Coffee/ Snacks 6,507,563 5,812,658

c. Contract Service expense 40,857,413 38,106,496

d. Small Purchase 2,153,806 1,109,229

e. Customer Relations and Sponsorship 2,743,621 3,819,201

f. Membership Fees 824,100 856,400

g. Janitorial 10,524,554 10,058,536

h. Others 32,771,983 24,710,200

total 613,018,342 543,158,113

(IN NPR)


provision for possible losses For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

non-operating income/(loss)For the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

provision for possible losses Write BackFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 25

sChedule 26

sChedule 27


1. Loans and Advances 150,413,145 236,800,889

2. Investments 4,295,472 -

3. Non-Banking Assets - -

4. Other Assets 12,362,209 1,154,324

total 167,070,826 237,955,213


1. Profit/(Loss) on Sale of Investments - -

2. Profit/(Loss) on Sale of Fixed Assets 580,568 2,983,616

3. Dividend 43,783,613 31,797,541

4. Subsidies Received from Nepal Rastra Bank - -

a. Compensation Agreement for Losses of Specified Branches - -

b. Interest Indemnity - -

c. exchange Counter - -

5. Others - -

total non-operating income/(loss) 44,364,181 34,781,157


1. Loans and Advances 2,095,609 1,067,982

2. Non-Banking Assets - -

3. Investments - 13,599,247

4. Other Assets - -

total 2,095,609 14,667,229

(IN NPR)

(IN NPR)

(IN NPR)


income/(expense) from extra-ordinary activitiesFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

sChedule 28


1. Recovery of Write off Loan 7,577,824 36,821,504

2. Voluntary Retirement Scheme expenses - -

3. Bad Loan Written Off (10,145,112) (2,221,325)

4. Other Income/(expense) (357,387) (597,974)

total (2,924,675) 34,002,205

(IN NPR)

details of loan Written-offFor the period 17 July 2014 to 16 July 2015 (1 Shrawan 2071 to 31 Ashadh 2072)

tYpes of loan Written off tYpes of Basis of loan efforts Made for reMarKs

aMount (rs.) seCuritY of seCuritY approved BY reCoverY of loans

1. Working Capital Loan

2. Project Loan

3. Fixed Capital Loan

4. Personal Loan 9,490,450

5. Credit Card Loan 654,661

6. Others

total loan 10,145,112

(IN NPR)

sChedule 28 (a)

Regular follow ups, notice publication and blacklisting with Credit Information Center Ltd.


sCh

edu

le 2

9st

atem

ent o

f loa

ns a

nd a

dvan

ces

exte

nded

to d

irect

ors/

Chi

ef e

xecu

tive/

pr

omot

ers/

em

ploy

ees

and

shar

ehol

ders

with

mor

e th

an 1

% s

hare

s

As a

t 16

July

201

5

naM

e o

f pr

oM

ote

r/d

ireC

tor

/ o

uts

tan

din

g u

p t

o l

ast

Year

r

eCo

ver

ed in

Cu

rr

ent

Year

ad

dit

ion

al l

end

ing

o

uts

tan

din

g a

s o

f 16

Ju

lY 2

015

Chie

f ex

eCu

tive

off

iCer

pr

inCi

pal

in

ter

est

pr

inCi

pal

in

ter

est

in t

his

Yea

r

pr

inCi

pal

in

ter

est

a. d

irect

ors

-

-

-

-

-

-

-

1.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

2.

……

….…

……

……

……

…...

….

-

-

-

-

-

-

-

3.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

B. C

hief

exe

cutiv

e o

ffice

r

-

-

-

-

-

-

-

1.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

2.

……

….…

……

……

……

…...

….

-

-

-

-

-

-

-

3.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

C. p

rom

oter

s

-

-

-

-

-

-

-

1.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

2.

……

….…

……

……

……

…...

….

-

-

-

-

-

-

-

3.

……

……

……

……

……

……

….

-

-

-

-

-

-

-

d. e

mpl

oyee

s (in

clus

ive

of f

amily

Mem

bers

)

20,9

26,3

88

1

9,06

2

1

,397

,407

6,

325

3

49,4

54

18

,896

,528

52,

401

1.

Gan

ja B

ahad

ur D

ahal

/ K

alya

ni D

ahal

6

45,6

50

-

-

349

,454

9

95,1

03

-

2.

Gita

Adh

ikar

i & D

illi R

am A

dhik

ari

900

,094

6,

325

53,1

70

6,32

5

-

8

46,9

24

-

3.

Sub

ash

Chan

ndra

/ Cha

ndra

Pra

sad

and

Nan

da K

umar

Bha

ttara

i

18,0

37,9

22

-

1

,187

,561

-

-

16

,850

,360

52,

401

4.

Ash

ok K

umar

Tha

pa C

hhet

ri

3

60,8

17

-

156

,675

-

-

204

,142

-

e. s

hare

hold

ers

39

,934

,514

-

1

4,58

8,13

9

-

-

25,3

46,3

75

-

1

. Mr.

Arju

n B

andh

u R

egm

i

39,9

34,5

14

-

14,

588,

139

-

-

25

,346

,375

-

2

. ……

….…

……

……

……

…...

….

-

-

-

-

-

-

-

3

. ……

……

……

……

……

……

….

-

-

-

-

-

-

-

tota

l 6

0,86

0,90

2

1

9,06

2

15

,985

,546

6,

325

3

49,4

54

44

,242

,903

52,

401

(IN N

PR)

Not

e: 1

. Pre

sent

ed in

S.N

o. D

abo

ve a

re lo

ans

exte

nded

to fa

mily

mem

bers

of e

mpl

oyee

s. L

oan

give

n to

em

ploy

ees

agai

nst f

ixed

dep

osits

/ go

vern

men

t sec

uriti

es, c

redi

t fac

ilitie

s un

der E

mpl

oyee

s

By-

Law

s, a

nd E

duca

tion

Loan

for a

broa

d st

udie

s (a

ppro

val o

btai

ned

from

NR

B) a

re n

ot p

rese

nted

und

er L

oans

ext

ende

d to

Em

ploy

ees

(incl

usiv

e of

Fam

ily M

embe

rs).

2.

Mr.

Arju

n B

andh

u Re

gmi’s

sha

re h

oldi

ng in

the

Ban

k st

ood

at 1

.16%

at 1

6 Ju

ly 2

015.

Abo

ve lo

an is

ext

ende

d to

M/S

Syn

chro

Med

ia P

vt. L

td. w

here

he

is a

maj

ority

sha

reho

lder

.


table of Capital fund sChedule 30 (a)

partiCulars as at 16 JulY 2015 as at 16 JulY 2014

1.1 risk Weighted exposures

a. Credit Risk 78,774,890,311 66,294,544,686

b. Operation Risk 6,896,370,460 5,902,879,583

c. Market Risk 374,092,980 208,692,670

total risk Weighted exposures Before adjustment 86,045,353,751 72,406,116,939

adjustment under pillar - ii

ADD: 2% of the total RWe added under Supervisory Review as per 6.4.a.9

for Overall Risk Management” of Capital Adequacy Framework 2007,

NRB Unified Directive 1,720,907,075 1,448,122,339

ADD:.. % of the total RWe due to non compliance to Disclosure Requirement

Add: … % of the total deposit due to insufficient Liquid Assets

total risk Weighted exposures 87,766,260,826 73,854,239,278

1.2 Capital as at 16 July 2015 as at 16 July 2014

Core Capital (tier 1) 8,937,834,021 7,149,441,284

a. Paid up equity Share Capital 3,657,654,000 3,047,168,400

b. Irredeemable Non-cumulative preference shares

c. Share Premium 74,000 74,000

d. Proposed Bonus equity Shares 1,097,296,200 609,433,680

e. Statutory General Reserves 3,503,500,000 3,084,500,000

f. Retained earnings 674,731,821 463,687,204

g. Un-audited current year cumulative profit

h. Capital Redemption Reserves

i. Capital Adjustment Reserves

j. Dividend equalization Reserves - -

k. Debenture Redemption Reserves 120,000,000 60,000,000

L. Other Free Reserves 55,121,819 45,830,840

m. Less: Goodwill

n. Less: Fictitious Assets

o. Less: Deferred Tax Assets (52,543,819) (43,252,840)

p. Less: Investment in equity of licensed Financial Institutions

q. Less: Investment in equity of institutions with financial interests (78,000,000) (78,000,000)

r. Less: Investment in equity of institutions in excess of limits

s. Less: Investments arising out of underwriting commitments

t. Less: Reciprocal crossholdings

u. Less: Other Deductions


Less: Shortfall In Provision

Less: Loans & Facilities extended to Related Parties & Restricted Lending (40,000,000) (40,000,000)

supplementary Capital (tier 2) 1,216,622,163 1,110,210,020

a. Cumulative and/or Redeemable Preference Share

b. Subordinated Term Debt (net of redemption reserve) 180,000,000 240,000,000

c. Hybrid Capital Instruments

d. General loan loss provision 659,408,516 539,844,088

e. exchange equalization Reserves 222,900,000 177,400,000

f. Investments Adjustment Reserves 139,189,810 138,392,362

g. Assets Revaluation Reserves

h. Other Reserves 15,123,837 14,573,570

total Capital fund (tier 1 and tier 2) 10,154,456,184 8,259,651,304

1.3 Capital adequacy ratio as at 16 July 2015 as at 16 July 2014

tier 1 Capital to total risk Weighted exposures 10.18% 9.68%

tier 1 and tier 2 Capital to total risk Weighted exposures 11.57% 11.18%

(IN NPR)

122 Nabil Bank LimitedsC

hed

ule

30

(B)

Cred

it r

isk

As a

t 16

July

201

5

a

s at

16

JulY

201

5

as a

t 16

Ju

lY 2

014

asse

ts

Bo

oK

val

ue

speC

ifiC

el

igiB

le

net

val

ue

ris

K

ris

K W

eig

hte

d

net

val

ue

ris

K W

eig

hte

d

pr

ovi

sio

n

CrM

Wei

gh

t

expo

sur

e

expo

sur

e

a. B

alan

Ce s

hee

t ex

po

sur

es

a B

C

d=

a-B

-C

e f=

d*e

Cash

Bal

ance

1

,820

,201

,446

-

-

1

,820

,201

,446

0%

-

1

,468

,154

,377

-

Bal

ance

With

Nep

al R

astra

Ban

k

12,

924,

604,

257

-

-

1

2,92

4,60

4,25

7

0%

-

7,0

68,0

78,8

42

-

Gol

d

-

-

-

-

0%

-

-

-

Inve

stm

ent i

n N

epal

ese

Gov

ernm

ent S

ecur

ities

8

,976

,929

,902

-

-

8

,976

,929

,902

0%

-

8

,290

,186

,242

-

All C

laim

s on

Gov

ernm

ent o

f Nep

al

279

,990

,121

-

-

2

79,9

90,1

21

0%

-

279

,990

,121

-

Inve

stm

ent i

n N

epal

Ras

tra B

ank

Secu

ritie

s

5,9

50,0

76,6

78

-

-

5,9

50,0

76,6

78

0%

-

-

-

All c

laim

s on

Nep

al R

astra

Ban

k

1,0

76,9

33

-

-

1,0

76,9

33

0%

-

10,

422,

600

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral B

ank

(eCA

Rat

ing:

0-1

) -

-

-

-

0%

-

-

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral B

ank

(eCA

Rat

ing:

2)

-

-

-

-

20%

-

-

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral B

ank

(eCA

Rat

ing:

3)

-

-

-

-

50%

-

-

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral B

ank

(eCA

Rat

ing:

4-6

) -

-

-

-

10

0%

-

-

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral B

ank

(eCA

Rat

ing:

7)

-

-

-

-

150%

-

-

-

Clai

ms

On

BIS

, IM

F, e

CB, e

C an

d on

Mul

tilat

eral

Dev

elop

men

t Ban

ks

(MD

Bs)

reco

gniz

ed b

y th

e Fr

amew

ork

-

-

-

-

0%

-

-

-

Clai

ms

on O

ther

Mul

tilat

eral

Dev

elop

men

t Ban

ks

-

-

-

-

100%

-

-

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

0-1

) -

-

-

-

20

%

-

-

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

2)

-

-

-

-

50%

-

-

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

3-6

) -

-

-

-

10

0%

-

-

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

7)

-

-

-

-

150%

-

-

-

Clai

ms

on d

omes

tic b

anks

that

mee

t cap

ital a

dequ

acy

requ

irem

ents

2

,647

,289

,221

-

-

2

,647

,289

,221

20

%

529

,457

,844

1

,665

,325

,010

3

33,0

65,0

02

Clai

ms

on d

omes

tic b

anks

that

do

not m

eet c

apita

l ade

quac

y

requ

irem

ents

7

1,26

6,26

0

-

-

71,

266,

260

10

0%

71,

266,

260

1

95,4

67,2

56

195

,467

,256

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g 0-

1)

2,1

18,6

96,8

95

-

-

2,1

18,6

96,8

95

20%

4

23,7

39,3

79

2,5

85,5

13,3

99

517

,102

,680

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g 2)

1

,953

,648

,383

-

-

1

,953

,648

,383

50

%

976

,824

,192

4

21,0

91,7

67

210

,545

,884

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g 3-

6)

-

-

-

-

100%

-

-

-

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g 7)

-

-

-

-

15

0%

-

-

-

Clai

ms

on fo

reig

n ba

nk in

corp

orat

ed in

SAA

RC

regi

on o

pera

ting

with

a bu

ffer o

f 1%

abo

ve th

eir r

espe

ctiv

e re

gula

tory

cap

ital r

equi

rem

ent

12,

689,

337,

133

-

-

1

2,68

9,33

7,13

3

20%

2

,537

,867

,427

8

,394

,479

,746

1

,678

,895

,949

Clai

ms

on D

omes

tic C

orpo

rate

s

46,

537,

862,

808

1

8,74

1,12

6 3

6,18

1,05

5

46,

482,

940,

626

10

0%

46,

482,

940,

626

37

,155

,694

,639

3

7,15

5,69

4,63

9

Cont

inue

d...

(IN N

PR)


sCh

edu

le 3

0 (B

)Cr

edit

ris

kAs

at 1

6 Ju

ly 2

015

a

s at

16

JulY

201

5

as a

t 16

Ju

lY 2

014

asse

ts

Bo

oK

val

ue

speC

ifiC

el

igiB

le

net

val

ue

ris

K

ris

K W

eig

hte

d

net

val

ue

ris

K W

eig

hte

d

pr

ovi

sio

n

CrM

Wei

gh

t

expo

sur

e

expo

sur

e

a. B

alan

Ce s

hee

t ex

po

sur

es

a B

C

d=

a-B

-C

e f=

d*e

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA 0

-1)

-

-

-

-

20%

-

-

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA 2

) -

-

-

-

50

%

-

-

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA 3

-6)

-

-

-

-

100%

-

-

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA 7

) -

-

-

-

15

0%

-

-

-

Reg

ulat

ory

Ret

ail P

ortfo

lio (N

ot O

verd

ue)

6,3

14,0

92,7

84

865

,063

512

,173

,859

5

,801

,053

,862

75

%

4,3

50,7

90,3

96

3,3

19,5

22,6

32

2,4

89,6

41,9

74

Reg

ulat

ory

Ret

ail P

ortfo

lio e

xcep

t for

Gra

nula

rity

-

-

-

-

10

0%

-

-

-

Clai

ms

secu

red

by re

side

ntia

l pro

pert

ies

7

,387

,029

,029

1

,419

,874

-

7

,385

,609

,154

60

%

4,4

31,3

65,4

93

6,3

77,4

85,5

34

3,8

26,4

91,3

20

Clai

ms

not f

ully

sec

ured

by

resi

dent

ial p

rope

rtie

s -

-

-

-

15

0%

-

-

-

Clai

ms

secu

red

by re

side

ntia

l pro

pert

ies

(Ove

rdue

) 8

8,99

9,95

3

26,

271,

622

-

6

2,72

8,33

1

100%

6

2,72

8,33

1

16,

926,

259

1

6,92

6,25

9

Clai

ms

secu

red

by C

omm

erci

al re

al e

stat

e

676

,897

,820

1

,500

,000

-

6

75,3

97,8

20

100%

6

75,3

97,8

20

1,6

78,7

57,3

87

1,6

78,7

57,3

87

Past

due

cla

ims

(exc

ept f

or c

laim

sec

ured

by

resi

dent

ial p

rope

rtie

s)

1,6

51,7

18,3

99

950,

050,

414

3

,210

,000

6

98,4

57,9

85

150%

1

,047

,686

,978

1

,237

,145

,358

1

,855

,718

,038

Hig

h R

isk

clai

ms

1

,979

,639

,180

1

,319

,841

28

,637

,991

1

,949

,681

,347

15

0%

2,9

24,5

22,0

21

1,1

71,6

62,1

65

1,7

57,4

93,2

48

Inve

stm

ents

in e

quity

and

oth

er c

apita

l ins

trum

ents

of

inst

itutio

ns li

sted

in th

e st

ock

exch

ange

5

25,7

20,5

96

-

-

525

,720

,596

10

0%

525

,720

,596

4

53,4

97,2

45

453

,497

,245

Inve

stm

ents

in e

quity

and

oth

er c

apita

l ins

trum

ents

of

inst

itutio

ns n

ot li

sted

in th

e st

ock

exch

ange

6

8,73

7,04

5

6,9

87,3

91

-

61,

749,

654

15

0%

92,

624,

481

6

4,51

4,94

6

96,

772,

419

Staf

f loa

n se

cure

d by

resi

dent

ial p

rope

rty

1,1

96,8

95,7

07

-

-

1,1

96,8

95,7

07

60%

7

18,1

37,4

24

889

,421

,028

5

33,6

52,6

17

Inte

rest

Rec

eiva

ble/

clai

m o

n go

vern

men

t sec

uriti

es

8,9

81,4

97

-

-

8,9

81,4

97

0%

-

27,

836,

616

-

Cash

in tr

ansi

t and

oth

er c

ash

item

s in

the

proc

ess

of c

olle

ctio

n -

-

-

-

20

%

-

-

-

Oth

er A

sset

s 3

,223

,790

,904

1,3

66,6

84,3

43

-

1,8

57,1

06,5

61

100%

1

,857

,106

,561

4

,608

,852

,745

4

,608

,852

,745

tota

l

119

,093

,482

,950

2,3

73,8

39,6

75 5

80,2

02,9

05 1

16,1

39,4

40,3

70

6

7,70

8,17

5,82

8

87,3

80,0

25,9

15

57,

408,

574,

661

Cont

inue

d...

(IN N

PR)

Cont

inue

d...


sCh

edu

le 3

0 (B

)Cr

edit

ris

kAs

at 1

6 Ju

ly 2

015

a

s at

16

JulY

201

5

as a

t 16

Ju

lY 2

014

asse

ts

Bo

oK

val

ue

speC

ifiC

el

igiB

le

net

val

ue

ris

K

ris

K W

eig

hte

d

net

val

ue

ris

K W

eig

hte

d

pr

ovi

sio

n

CrM

Wei

gh

t

expo

sur

e

expo

sur

e

B. o

ff B

alan

Ce s

hee

t ex

po

sur

es g

ro

ss B

oo

K

a B

C

d=

a-B

-C

e f

=d

*e

Rev

ocab

le C

omm

itmen

ts

-

-

-

-

0%

-

-

-

Bill

s U

nder

Col

lect

ion

306

,078

,189

-

-

3

06,0

78,1

89

0%

-

332

,824

,629

-

Forw

ard

exch

ange

Con

tract

1

1,16

0,23

8,68

0

-

-

11,

160,

238,

680

10

%

1,1

16,0

23,8

68

5,0

84,4

48,0

20

508

,444

,802

LC C

omm

itmen

ts W

ith O

rigin

al M

atur

ity U

p to

6 m

onth

s

dom

estic

cou

nter

part

y 4

,473

,782

,726

-

50

7,43

8,17

4 3

,966

,344

,552

20

%

793

,268

,910

5

,847

,316

,833

1

,169

,463

,367

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

) -

-

-

-

20

%

-

-

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

2)

-

-

-

-

50%

-

-

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

3-6

) -

-

-

-

10

0%

-

-

-

fore

ign

coun

terp

arty

(eCA

Rat

ing

7 )

-

-

-

-

150%

-

-

-

LC C

omm

itmen

ts W

ith O

rigin

al M

atur

ity O

ver 6

mon

ths

dom

estic

cou

nter

part

y 2

,412

,432

,230

-

30

6,44

4,33

6 2

,105

,987

,895

50

%

1,0

52,9

93,9

47

3,1

76,3

92,9

37

1,5

88,1

96,4

68

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

) -

-

-

-

20

%

-

-

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

2 )

-

-

-

-

50%

-

-

-

fore

ign

cout

erpa

rty

(eCA

Rat

ing:

3-6

) -

-

-

-

10

0%

-

-

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

7)

-

-

-

-

150%

-

-

-

Bid

Bon

d, P

erfo

rman

ce B

ond

and

Coun

ter g

uara

ntee

dom

estic

cou

nter

part

y

5,2

71,9

69,9

14

-

522,

178,

116

4,7

49,7

91,7

99

50%

2

,374

,895

,899

3

,821

,437

,982

1

,910

,718

,991

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

) 1

,419

,702

,887

-

1,

135,

762,

310

283

,940

,577

20

%

56,

788,

115

2

52,6

10,6

78

50,

522,

136

fore

ign

coun

terp

arty

(eCA

Rat

ing:

2)

233

,631

,553

-

11

6,81

5,77

7

116

,815

,777

50

%

58,

407,

888

1

27,6

87,1

42

63,

843,

571

fore

ign

coun

terp

arty

(eCA

Rat

ing:

3-6

) 6

69,2

74,1

90

-

-

669

,274

,190

10

0%

669

,274

,190

3

55,9

20,8

50

355

,920

,850

fore

ign

coun

terp

arty

(eCA

Rat

ing:

7)

-

-

-

-

150%

-

-

-

Und

erw

ritin

g co

mm

itmen

ts

-

-

-

-

50%

-

-

-

Cont

inue

d...

Cont

inue

d...

(IN N

PR)


sCh

edu

le 3

0 (B

)Cr

edit

ris

kAs

at 1

6 Ju

ly 2

015

a

s at

16

JulY

201

5

as a

t 16

Ju

lY 2

014

asse

ts

Bo

oK

val

ue

speC

ifiC

el

igiB

le

net

val

ue

ris

K

ris

K W

eig

hte

d

net

val

ue

ris

K W

eig

hte

d

pr

ovi

sio

n

CrM

Wei

gh

t

expo

sur

e

expo

sur

e

B. o

ff B

alan

Ce s

hee

t ex

po

sur

es g

ro

ss B

oo

K

a B

C

d=

a-B

-C

e f

=d

*e

Lend

ing

of B

ank’

s Se

curit

ies

or P

ostin

g of

Sec

uriti

es a

s co

llate

ral

-

-

-

-

100%

-

-

-

Rep

urch

ase

Agre

emen

ts

-

-

-

-

100%

-

-

-

Adva

nce

Paym

ent G

uara

ntee

2

,289

,308

,859

-

95

8,98

1,75

4 1

,330

,327

,105

10

0%

1,3

30,3

27,1

05

652

,580

,657

6

52,5

80,6

57

Fina

ncia

l Gua

rant

ee

-

-

-

-

100%

-

-

-

Acce

ptan

ces

and

endo

rsem

ents

1

,530

,565

,246

-

-

1

,530

,565

,246

10

0%

1,5

30,5

65,2

46

1,4

72,1

60,9

90

1,4

72,1

60,9

90

Unp

aid

port

ion

of P

artly

pai

d sh

ares

and

Sec

uriti

es

-

-

-

-

100%

-

-

-

Irrev

ocab

le C

redi

t com

mitm

ents

(sho

rt te

rm)

9,8

09,8

32,0

31

-

63,4

27,3

55

9,7

46,4

04,6

76

20%

1

,949

,280

,935

4

,833

,315

,392

9

66,6

63,0

78

Irrev

ocab

le C

redi

t com

mitm

ents

(lon

g te

rm)

-

-

-

50

%

-

-

Oth

er C

ontin

gent

Lia

bilit

ies

30,

915,

378

-

-

3

0,91

5,37

8

100%

3

0,91

5,37

8

30,

908,

989

3

0,90

8,98

9

Gua

rant

ee c

laim

ed b

ut n

ot a

ccep

ted

/ hon

oure

d 5

1,98

6,50

0

-

-

51,

986,

500

20

0%

103

,973

,000

5

8,27

3,06

4

116

,546

,127

tota

l 3

9,65

9,71

8,38

4

-

3,61

1,04

7,82

1 3

6,04

8,67

0,56

3

1

1,06

6,71

4,48

3

26,0

45,8

78,1

61

8,8

85,9

70,0

25

tota

l rW

e fo

r cr

edit

ris

k (a

) +(B

) 1

58,7

53,2

01,3

35 2

,373

,839

,675

4,1

91,2

50,7

26 1

52,1

88,1

10,9

33

7

8,77

4,89

0,31

1 1

13,4

25,9

04,0

76

66,

294,

544,

686

adju

stm

ent u

nder

pill

ar -

ii

Add:

10%

of t

he lo

an a

nd fa

cilit

ies

in

exce

ss o

f Sin

gle

Obl

igor

Lim

it

Add:

1%

of t

he c

ontra

ct(S

ale)

val

ue in

cas

e

of th

e sa

le o

f cre

dit w

ith re

cour

se

tota

l rW

e fo

r Cr

edit

ris

k (a

fter

Ban

k’s

adju

stm

ent o

f pill

ar -

ii)

158

,753

,201

,335

2,3

73,8

39,6

75 4

,191

,250

,726

152

,188

,110

,933

78,

774,

890,

311

113

,425

,904

,076

6

6,29

4,54

4,68

6

(IN N

PR)

Cont

inue

d...


Cred

it r

isk

Miti

gatio

nAs

at 1

6 Ju

ly 2

015

Cred

it e

xpo

sur

es

dep

osi

ts

dep

osi

ts

go

ld

go

vt.&

g

’tee

of

seC/

g’t

ee o

f g

’tee

of

g’t

ee o

f se

C/g

’tee

of

tota

l

W

ith

Ban

K

Wit

h o

ther

nr

B

go

vt. o

f o

ther

d

oM

esti

C M

dB

s fo

rei

gn

Ban

Ks/

fi

se

Cur

itie

s n

epal

so

ver

eig

ns

Ban

Ks

B

anK

s

(a

) (B

) (C

) (d

) (e

) (f

) (g

) (h

) (i)

Bal

ance

she

et e

xpos

ures

Cash

Bal

ance

-

Bal

ance

With

Nep

al R

astra

Ban

k

-

Gol

d

-

Inve

stm

ent i

n N

epal

ese

Gov

ernm

ent S

ecur

ities

-

All C

laim

s on

Gov

ernm

ent o

f Nep

al

-

Inve

stm

ent i

n N

epal

Ras

tra B

ank

Secu

ritie

s

-

All c

laim

s on

Nep

al R

astra

Ban

k

-

Clai

ms

on F

orei

gn g

over

nmen

t and

Cen

tral B

ank

(eCA

:0-1

)

-

Clai

ms

on F

orei

gn g

over

nmen

t and

Cen

tral B

ank

(eCA

: 2)

-

Clai

ms

on F

orei

gn g

over

nmen

t and

Cen

tral B

ank

(eCA

: 3)

-

Clai

ms

on F

orei

gn g

over

nmen

t and

Cen

tral B

ank

(eCA

: 4-6

)

-

Clai

ms

on F

orei

gn g

over

nmen

t and

Cen

tral B

ank

(eCA

: 7)

-

Clai

ms

On

BIS

, IM

F, e

CB, e

C an

d on

Mul

tilat

eral

Dev

elop

men

t Ban

ks

(MD

Bs)

reco

gniz

ed b

y th

e Fr

amew

ork

-

Clai

ms

on O

ther

Mul

tilat

eral

Dev

elop

men

t Ban

ks

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

: 0-1

)

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

: 2)

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

: 3-6

)

-

Clai

ms

on P

ublic

Sec

tor e

ntity

(eCA

: 7)

-

sCh

edu

le 3

0 (C

)

Cont

inue

d...

(IN N

PR)


Cred

it r

isk

Miti

gatio

nAs

at 1

6 Ju

ly 2

015

Cred

it e

xpo

sur

es

dep

osi

ts

dep

osi

ts

go

ld

go

vt.&

g

’tee

of

seC/

g’t

ee o

f g

’tee

of

g’t

ee o

f se

C/g

’tee

of

tota

l

W

ith

Ban

K

Wit

h o

ther

nr

B

go

vt. o

f o

ther

d

oM

esti

C M

dB

s fo

rei

gn

Ban

Ks/

fi

se

Cur

itie

s n

epal

so

ver

eig

ns

Ban

Ks

B

anK

s

(a

) (B

) (C

) (d

) (e

) (f

) (g

) (h

) (i)

Clai

ms

on d

omes

tic b

anks

that

mee

t cap

ital a

dequ

acy

requ

irem

ents

-

Clai

ms

on d

omes

tic b

anks

that

do

not m

eet c

apita

l

adeq

uacy

requ

irem

ents

-

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g: 0

-1)

-

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g: 2

)

-

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g: 3

-6)

-

Clai

ms

on fo

reig

n ba

nk (e

CA R

atin

g: 7

)

-

Clai

ms

on fo

reig

n ba

nk in

corp

orat

ed in

SAA

RC

regi

on

oper

atin

g w

ith a

buf

fer o

f 1%

abo

ve th

eir r

espe

ctiv

e

regu

lato

ry c

apita

l req

uire

men

t

-

Clai

ms

on D

omes

tic C

orpo

rate

s / I

ndiv

idua

ls

36,

181,

055

-

3

6,18

1,05

5

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA: 0

-1)

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA: 2

)

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA: 3

-6)

-

Clai

ms

on F

orei

gn C

orpo

rate

s (e

CA: 7

)

-

Reg

ulat

ory

Ret

ail P

ortfo

lio (N

ot O

verd

ue)

505,

248,

262

6

,925

,597

51

2,17

3,85

9

Reg

ulat

ory

Ret

ail P

ortfo

lio (O

verd

ue)

Reg

ulat

ory

Ret

ail P

ortfo

lio e

xcep

t for

Gra

nula

rity

-

Clai

ms

secu

red

by re

side

ntia

l pro

pert

ies

-

Clai

ms

not f

ully

sec

ured

by

resi

dent

ial p

rope

rtie

s

-

Clai

ms

secu

red

by re

side

ntia

l pro

pert

ies

(Ove

rdue

)

-

sCh

edu

le 3

0 (C

)

Cont

inue

d...

Cont

inue

d...

(IN N

PR)

128 Nabil Bank LimitedCr

edit

ris

k M

itiga

tion

As a

t 16

July

201

5

Cred

it e

xpo

sur

es

dep

osi

ts

dep

osi

ts

go

ld

go

vt.&

g

’tee

of

seC/

g’t

ee o

f g

’tee

of

g’t

ee o

f se

C/g

’tee

of

tota

l

W

ith

Ban

K

Wit

h o

ther

nr

B

go

vt. o

f o

ther

d

oM

esti

C M

dB

s fo

rei

gn

Ban

Ks/

fi

se

Cur

itie

s n

epal

so

ver

eig

ns

Ban

Ks

B

anK

s

(a

) (B

) (C

) (d

) (e

) (f

) (g

) (h

) (i)

Clai

ms

secu

red

by C

omm

erci

al re

al e

stat

e

-

Past

due

cla

ims

(exc

ept f

or c

laim

sec

ured

by

resi

dent

ial p

rope

rtie

s)

3,

210,

000

3,

210,

000

Hig

h R

isk

clai

ms

28,6

37,9

91

-

28,

637,

991

Inve

stm

ents

in e

quity

and

oth

er c

apita

l ins

trum

ents

of in

stitu

tions

list

ed in

the

stoc

k ex

chan

ge

-

Inve

stm

ents

in e

quity

and

oth

er c

apita

l ins

trum

ents

of in

stitu

tions

not

list

ed in

the

stoc

k ex

chan

ge

-

Staf

f loa

n se

cure

d by

resi

dent

ial p

rope

rty

-

Inte

rest

Rec

eiva

ble/

clai

m o

n go

vern

men

t sec

uriti

es

-

Cash

in tr

ansi

t and

oth

er c

ash

item

s in

the

proc

ess

of c

olle

ctio

n

-

Oth

er A

sset

s

-

off

Bal

ance

she

et e

xpos

ures

Rev

ocab

le C

omm

itmen

ts

-

Bill

s U

nder

Col

lect

ion

-

Forw

ard

exch

ange

Con

tract

Lia

bilit

ies

-

LC C

omm

itmen

ts W

ith O

rigin

al M

atur

ity

Up

to 6

mon

ths

dom

estic

cou

nter

part

y 50

7,43

8,17

4

50

7,43

8,17

4

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

)

-

fore

ign

coun

erpa

rty

(eCA

Rat

ing:

2)

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

3-6

)

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

7)

-

LC C

omm

itmen

ts W

ith O

rigin

al M

atur

ity

Ove

r 6 m

onth

s do

mes

tic c

ount

erpa

rty

306,

444,

336

306

,444

,336

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

)

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

2)

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

3-6

)

-

fore

ign

coun

terp

arty

(eCA

Rat

ing:

7)

-

Bid

Bon

d, P

erfo

rman

ce B

ond

and

Coun

ter g

uara

ntee

dom

estic

cou

nter

part

y 52

2,17

8,11

6

52

2,17

8,11

6

fore

ign

coun

terp

arty

(eCA

Rat

ing:

0-1

)

1,13

5,76

2,31

0

1,1

35,7

62,3

10

fore

ign

coun

tepa

rty

(eCA

Rat

ing:

2)

11

6,81

5,77

7

116

,815

,777

fore

ign

coun

terp

arty

(eCA

Rat

ing:

3-6

)

-

sCh

edu

le 3

0 (C

)

(IN N

PR)

Cont

inue

d...

Cont

inue

d...


Cred

it r

isk

Miti

gatio

nAs

at 1

6 Ju

ly 2

015

Cred

it e

xpo

sur

es

dep

osi

ts

dep

osi

ts

go

ld

go

vt.&

g

’tee

of

seC/

g’t

ee o

f g

’tee

of

g’t

ee o

f se

C/g

’tee

of

tota

l

W

ith

Ban

K

Wit

h o

ther

nr

B

go

vt. o

f o

ther

d

oM

esti

C M

dB

s fo

rei

gn

Ban

Ks/

fi

se

Cur

itie

s n

epal

so

ver

eig

ns

Ban

Ks

B

anK

s

(a

) (B

) (C

) (d

) (e

) (f

) (g

) (h

) (i)

fore

ign

coun

terp

arty

(eCA

Rat

ing:

7)

-

Gur

ante

e cl

aim

ed b

ut n

ot h

onor

ed

-

Und

erw

ritin

g co

mm

itmen

ts

-

Lend

ing

of B

ank’

s Se

curit

ies

or P

ostin

g of

Sec

uriti

es a

s Co

llate

ral

-

Rep

urch

ase

Agre

emen

ts

-

Adva

nce

Paym

ent G

uara

ntee

18

,452

,141

940,

529,

613

958,

981,

754

Fina

ncia

l Gua

rant

ee

-

Acce

ptan

ces

and

endo

rsem

ents

-

Unp

aid

port

ion

of P

artly

pai

d sh

ares

and

Sec

uriti

es

-

Irrev

ocab

le C

redi

t com

mitm

ents

(sho

rt te

rm)

59,8

27,9

52

3,5

99,4

03

63,

427,

355

Irrev

ocab

le C

redi

t com

mitm

ents

(lon

g te

rm)

-

Oth

er C

ontin

gent

Lia

bilit

ies

4,

191,

250,

726

sCh

edu

le 3

0 (C

)

(IN N

PR)

Cont

inue

d...


operations riskAs at 16 July 2015

partiCulars Year 1 Year 2 Year 3 last Year

Net Interest Income 3,696,412,993 3,515,938,047 2,978,248,622

Commission and Discount Income 459,164,723 393,050,514 364,075,214

Other Operating Income 267,837,635 209,905,066 201,084,866

exchange Fluctuation Income 529,995,584 489,051,079 447,070,485

Additional Interest Suspense during the period 130,814,746 11,144,071 98,947,274

gross income (a) 5,084,225,681 4,619,088,777 4,089,426,461

Alfa (b) 15% 15% 15%

fixed percentage of gross income [c=(a×b)] 762,633,852 692,863,317 613,413,969

Capital requirement for operational risk (d) (average of c) 689,637,046 590,287,958

Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 10

equivalent risk Weight exposure [f=(d×e)] 6,896,370,460 5,902,879,583


if gross income for all the last three years is negative

Total Credit and Investment (Net of Specific Provision) - -

Capital Requirement for operational risk (5%) - -

Risk Weight (reciprocal of capital requirement of 10%) in times 10 10

equivalent Risk Weight exposure (g) - -

equivalent risk Weight exposure (h=f+g) 6,896,370,460 5,902,879,583

sChedule 30 (d)

(IN NPR)

note: Year 1 - FY 2070/071Year 2 - FY 2069/070Year 3 - FY 2068/069


Market risk As at 16 July 2015

CurrenCY this Year previous Year

open position open position relevant open relevant open

(fCY) (npr) position position

INR 262,851,597 420,759,694 420,759,694 381,764,364

USD 2,936,310 298,475,946 298,475,946 19,047,256

GBP 20,456 3,247,926 3,247,926 2,314,534

eUR 20,102 2,224,499 2,224,499 2,545,179

THB 13,580 40,333 40,333 55,016

CHF 33,795 3,603,224 3,603,224 1,255,764

AUD 774 57,938 57,938 776,897

CAD (90,957) (7,151,020) 7,151,020 1,920,090

SGD 17,436 1,296,700 1,296,700 2,447,908

JPY 161,898 132,967 132,967 946,887

HKD 16,190 212,251 212,251 43,435

DKK 219,426 3,269,443 3,269,443 2,403,360

SeK 80 954 954 -

SAR 97,594 2,644,797 2,644,797 670,106

QAR 24,880 694,650 694,650 117,851

AeD 102,385 2,834,017 2,834,017 219,210

MYR 19,303 515,583 515,583 105,395

KRW 4,326,000 383,284 383,284 -

CNY 31,984 523,584 523,584 752,091

KWD 349 117,152 117,152 -

BHD - - - -

total open position (a) 733,883,922 748,185,963 417,385,344

fixed percentage (b) 5% 5%

Capital Charge for Market risk [c=(a×b)] 37,409,298 20,869,267

risk Weight

(reciprocal of capital requirement of 10%) in times (d) 10 10

equivalent risk Weight exposure [e=(c×d)] 374,092,980 208,692,670

(IN NPR)

sChedule 30 (e)

principal indicators finanCial Year partiCulars indiCators 2010/11 2011/12 2012/13 2013/14 2014/151. Net Profit/Gross Income % 22.29 23.74 32.66 33.49 29.93 2. earnings Per Share Rs. 65.91 83.23 91.05 76.12 57.24 3. Market Value per Share Rs. 1,252 1,355 1,815 2,535 1,910 4. Price earning Ratio Times 17.72 16.21 19.08 33.38 33.37 5. Dividend (including bonus) on share capital % 30.00 60.00 65.00 65.00 36.84 6. Cash Dividend on Share Capital % 30.00 40.00 40.00 45.00 6.84 7. Interest Income/Loans & Advances % 12.50 12.85 11.64 10.16 8.50 8. employee expense/Total Operating expense % 11.91 12.26 19.59 20.99 20.70 9. Interest expense on Total Deposit and Borrowings % 6.15 5.74 3.67 2.69 2.56 10. exchange Gain/Total Income % 4.60 6.26 7.20 7.91 7.33 11. Staff Bonus/ Total employee expenses % 42.05 48.26 48.90 50.67 40.10 12. Net Profit/Loans & Advances % 3.73 4.14 5.04 4.54 3.31 13. Net Profit/ Total Assets % 2.43 2.80 3.25 2.65 2.06 14. Total Credit/Deposit % 78.29 77.91 74.90 74.55 64.43 15. Total Operating expenses/Total Assets % 6.91 6.73 4.84 3.56 3.53 16. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital % 8.83 9.30 9.98 9.68 10.18 b. Supplementary Capital % 1.75 1.71 1.61 1.50 1.39 c. Total Capital Fund % 10.58 11.01 11.59 11.18 11.57 17. Liquidity (CRR) % 4.90 8.60 9.32 11.32 14.15 18. Non Performing Loans/Total Loans % 1.77 2.33 2.13 2.23 1.82 19. Base Rate % - - 7.04 5.67 5.78 20. Weighted Average Interest Rate Spread % 4.37 4.95 5.48 5.03 3.97 21. Book Net Worth per Share Rs. 225 269 275 251 259 22. Total Shares Outstanding Number 20,297,694 20,297,694 24,368,414 30,471,684 36,576,540 23. Total Permanent employees Number 657 650 742 724 706 24. Return on equity % 29.02 30.25 32.78 27.91 22.73 25. Return on Assets % 2.43 2.80 3.25 2.65 2.06 26. Dividend Payout Ratio % 42.45 71.80 68.32 85.59 64.36 27. earnings Yield % 5.64 6.17 5.24 3.00 3.00 28. Dividend Yield % 2.40 4.43 3.58 2.56 1.93 29. Cost to Income Ratio % 63.50 57.16 48.60 44.95 51.35 30. Total Assets to Shareholders’ Fund times 12.73 10.09 9.56 9.69 11.91 31. Shareholders’ Fund to Liability including Contingent Liability % 6.61 7.71 8.33 8.13 6.64 32. Number of Offices Number 49 52 51 51 55 33. Number of ATMs Number 68 78 81 85 89

sChedule 31

note: 1. Gross Income in S.N. 1 comprises of Gross Interest Income, Commission and Discount, Other Operating Income and Exchange Income. 2. EPS in S.No.2 is computed in line with Nepal Accounting Standard (NAS) 26 Earning Per Share. Accordingly previous years EPS have been restated where required. Detail policy is disclosed in Schedule 32 “Principal Accounting Policies”.

3. Market Value per Share in S.N. 3 is the closing price of ordinary shares quoted in Nepal Stock Exchange on Wednesday, the 16th July 2015. 4. The Interest Income in S. N. 7 is the interest income from loans and advances (excluding staff loans) only. The loans and advances are the average loans and advances for the entire financial year. The average balance during the year was Rs.60,133,333,318.10. 5. Total Operating Expense in S.N. 8 comprises Gross Interest Expense, Staff Expense and Other Operating Expense. 6. The Deposits and Borrowings in S.N.9 are the average deposits and borrowings (including debentures) for the entire financial year. The average balances of deposits and borrowing during the year was Rs.87,000,336,345.05 and Rs.300,018,630.14 respectively. 7. Total Income in S.N. 10 is same as Gross Income in S.N. 1 comprising of Gross Interest Income, Commission and Discount, Other Operating Income and Exchange Income. 8. The Loans and Advances in S.N. 12 is same as Loans and Advances in S.N. 7 and is the average balance for the entire financial year. 9. Total Assets in S.N. 13 and S.N. 15 are average balance of assets computed by averaging outstanding balance of previous financial year and current financial year. 10. Credit and Deposit in S.N. 14 is the outstanding balance as of balance sheet date.

11. CRR in the S.N. 17 is computed on the basis of cash and cash equivalents and deposits outstanding on the balance sheet date. The CRR (as per NRB Directives) for the last week of the current financial year is 16.98%. 12. Return on Equity in S.N. 25 is computed by taking average Equity including Proposed Dividend of previous year till the date of AGM and average after-tax net profit of current year. Figures of previous years have been restated accordingly wherever necessary. 13. Earnings Yield represent earning (attributable to equityholders) per market value of share.

14. Dividend Yield represent dividend per market value of share.



1. Corporate information

1.1 reporting entity: Nabil Bank Limited (hereinafter referred to as “the Bank”) is a joint venture public limited company, incorporated on 11th May 1984 as per the then Companies Act 1964 of Nepal, and domiciled in Nepal. It is a “Ka” class licensed institution licensed under the Bank and Financial Institutions Act, 2006 and commenced its commercial banking operations from 12th July 1984 as per the then Commercial Banking Act, 1964. The registered office of the Bank is located at Nabil Centre, Durbar Marg, Kathmandu, Nepal. Its ordinary shares (Class C), institutional investor shares (Class B) and promoter shares (Class A) are listed on the Nepal Stock Exchange Limited (the sole stock exchange in Nepal) for public trading.

1.2 reporting period: Financial Year is based on Nepali Calendar and the reported period covers the period between 1st of Shrawan 2071 and 31st of Asadh 2072. This corresponds to English Calendar period between 17th July 2014 to 16th July 2015.

1.3 SubSidiary: Nabil Investment Banking Ltd. (herein after referred to as “the Subsidiary”) is a subsidiary company of the Bank. It was incorporated on 07th of February 2010 as a public limited company as per the Companies Act 2006. It is a Merchant Banker licensed by Securities Board of Nepal under the Securities Businessperson (Merchant Banker) Regulations, 2008. The Bank, as at the Balance Sheet date, holds 74.29% controlling interest in the Subsidiary.

The financial year of the Subsidiary is common to that of the Bank (parent company). The current Financial Year ended on 16thJuly, 2015.

1.4 the bank and the SubSidiary are ColleCtively referred to aS “the group”.

2. prinCipal aCtivitieS:

2.1 The principal activities of the Bank are to provide full-fledged commercial banking services including, agency services, trade finance services, card services, e-commerce products and services and commodity trading services to its customers through its strategic business units, branches, extension counters, ATMs and network of agents.

2.2 The principal activities of the Subsidiary are to provide merchant/investment banking services that include management of public offerings, portfolio management, underwriting of securities, fund managementof mutual fund schemes, depository participant’s service under Central Depository Service (CDS)and administration and record keeping of securities of its clients.

3. approval of finanCial StatementS by board of direCtorS

3.1 The accompanied financial statements including consolidated financial statements have been authorized by the Board of Directors, vide its resolution dated October 04, 2015 and recommended for its approval by the Annual General Meeting of the shareholders.

4. reSponSibility for finanCial StatementS

4.1 The Board of Directors, per paragraph 6 of NAS 01, “Presentation of Financial Statements” read in conjunction to Section 108 of the Company Act 2006, is responsible for the preparation of financial statements of the Bank. The Board of Directors acknowledges this responsibility as set out in the “Annual Report of the Board of Directors”.

4.2 These financial statements include the following components:

a. Balance Sheet (including Consolidated Balance Sheet) disclosing the information on financial position of the Group and the Bank;

b. Profit and Loss Account (including Consolidated Profit and Loss Account) disclosing the financial performance of the Group and the Bank for the period under review;

c. Cash Flow Statement (including Consolidated Cash Flow Statement) disclosing the information on the ability of the Group and the Bank to generate cash and cash equivalents;

d. Statement of Changes in Equity (including Consolidated Statement of Changes in Equity) showing all changes in equity of the Group and Bank;and

e. Notes to the Financial Statements comprising a summary of principal accounting policies of the Group and the Bank and other relevant explanatory notes that is of material importance to the readers of the financial statements to facilitate informed decision making.

SChedule: 32 principal accounting policies


5. Statement of ComplianCe

5.1 The consolidated financial statements of the Group and separate financial statements of the Bank have been prepared in accordance with Nepal Accounting Standards (“NAS”) as issued by the Nepal Accounting Standard Board (NASB) and in accordance with International Financial Reporting Standards – IFRS 10 “Consolidated Financial Statements”, except otherwise stated by Nepal Rastra Bank (NRB) Directives, Bank & Financial Institutions Act 2006 and Company Act 2006.

5.2 NAS comprise of all accounting standards as well as interpretations issued by the NASB that were effective at the time of preparation and presentation of financial statements. As of the balance sheet date, NASB has pronounced nineteen accounting standards in effect and seven accounting standards for voluntary application.

5.3 NRB Directives comprise of NRB Unified Directives and circulars issued by NRB (the licensing and regulatory authority) relevant to the preparation and presentation of financial statements. Financial Statements have been presented in the schedules and formats prescribed in NRB Unified Directives, these being Statutory Forms.

5.4 The Group and the Bank do not adopt accounting treatments that are inconsistent with NRB Directives and NAS and comply with these in all material respects. In case of any inconsistency prevailing between the provisions in NRB Directives and NAS, NRB Directives have been complied with to the extent of such inconsistencies. Deviations with these, if any, have been explained in Schedule 33 “Notes to Accounts” against disclosure of specific items of financial statements.

6. baSiS of preparation

6.1 Assets and liabilities reported in the consolidated financial statements of the Group and the separate financial statements of the Bank are presented in functional currency i.e. Nepalese Rupees (NRs.) and are prepared on historical cost convention except for translated foreign currency value.

6.2 Preparation of financial statements in conformity with NAS requires the use of certain critical accounting estimates and also requires management to exercise judgment in process of applying the Group’s and the Bank’s accounting policies.

7. baSiS of ConSolidation

7.1 The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 10 “Consolidated Financial Statements”. In preparing the consolidated financial statements, the financial statements of the Bank and the Subsidiary are combined line by line by adding together like items of assets, liabilities, equity, income and expenses.

7.2 The consolidated financial statements of the Bank for the year ended on July 16, 2015 comprise of the accounts of the Bank and the Subsidiary. The Bank consolidates the financial statements of the Subsidiary only when it controls the Subsidiary. An investor controls investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

para 8 of ifrS 10 outlines three conditions to be fulfilled in order to establish control:

(a) power over the investee;

(b) exposure, or rights, to variable returns from its involvement with the investee; and

(c) the ability to use its power over the investee to affect the amount of the investor’s returns.

in the case of the bank and the Subsidiary’s investor-investee relationship,

(a) Power over the Subsidiary exists from the voting rights granted by the equity share. The Bank holds 74.29% of controlling interest in the Subsidiary.

(b) The Subsidiary’s capital composes only of equity instruments and the Bank’s returns from the involvement in equity instruments have the potential to vary with the performance of the Subsidiary. The Bank has thus exposure, or rights, to variable returns from its involvement with the Subsidiary.

(c) The Bank has deputed its staff as CEO of the Subsidiary. The Bank thus has the ability to exercise its power over the Subsidiary to affect the amount of the Bank’s return.

7.3 The financial statements of the Subsidiary are included in the consolidated financial statement from the date that control effectively commences until the date that the control effectively ceases.

7.4 All intra Group transactions and balances, income and expenses and any unrealised gains / losses arising from such inter-company transactions and balances are eliminated in full while preparing the consolidated financial statements.

8. SignifiCant aCCounting poliCieS

8.1 The principal accounting policies applied by the Group and the Bank in the preparation of these financial statements are presented below. These policies have been consistently applied to all the years presented unless stated otherwise.

a. equity Equity is the residual interest of the equity holders in the assets after deducting all its liabilities. It comprises of all funds contributed by equity holders, retained earnings and reserves representing appropriation of retained earnings.

- The Group discloses all residual interest in the form of Share Capital and Reserves & Surplus on the face of balance sheet except proposed cash dividend, which is separately disclosed as Proposed Dividend on the face in line with the format prescribed by NRB. The proposed cash dividend continues to remain as a part of equity until the date of ratification by AGM.


- As per Section 44 of Bank and Financial Institutions Act 2006, all licensed institutions are required to transfer minimum 20% of net profit after tax to the General Reserve until it becomes double of paid up capital.The Bank consistently transfers the fund from the profit in the General Reserve to comply with this requirement. There is no such statutory requirement for the Subsidiary.

- As per Section 45 of the aforesaid Act, all licensed institutions are required to transfer minimum 25% of the Total Revaluation Gain (except gain from revaluation of Indian Currency) in the Exchange Fluctuation Reserve. The Bank consistently maintains the Reserve by transferring the fund from the profit to comply with this requirement. There is no such statutory requirement for the Subsidiary.

- As per Directives 4 of NRB Unified Directives, all licensed institutions are required to maintain Deferred Tax Reserve equivalent to the amount of Deferred Tax Asset. The Bank consistently maintains equivalent reserve to the amount of deferred tax asset to comply with the requirement of the Directives. The Subsidiary also adopts uniform policy.

- As per Directives 4 of NRB Unified Directives, all licensed institutions are required to maintain Debenture Redemption Reserve in respect of borrowing raised through debenture issuance. Beginning 6th year of debenture issuance the Bank has been appropriating 20% of the carrying value of debenture to this reserve fund, as per approval obtained from NRB. The Subsidiary has not raised any borrowing through debenture issuance.

- The Group maintains Investment Adjustment Reserve for Available for Sale Investment which is not made available for distribution to its equity holders.

- The Bank has constituted a Contingent Reserve in line with “Scheme for Payment of Staff Hospitalization Charges” that is primarily intended to fund staffs’ medical treatment for cases of severe ailments that are not covered by medical insurance policy. According to this Scheme, the Bank appropriates NRs.1,000 thousand from Retained Earning towards this reserve on annual basis and transfers back to Retained Earning to the extent of amount that is funded to the staff in the year of such funding. No such reserve is being maintained by the Subsidiary.

b. aSSetS Assets are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Group’s assets include all assets controlled by the Group from which it expects derivation of economic benefits in the future to the Group. The assets of the Group comprise of cash, balances held with the central bank and financial institutions, investments (including derivative investment), loans and advances, fixed assets, non-banking assets and the assets aggregated under other assets.

i. loans and advances including bills purchased

- Loans and advances include direct finance provided to the customers. These comprise of business loans of short term and long term nature, project and infrastructure loans, consumer loans, credit card loans, bills purchased and discounted and loans to deprived sectors.

- Loans and advances are recognised when the loans are actually disbursed and are derecognized at the time of their settlement.

- Bills purchased or discounted are recognised as loans when the bills are actually purchased or discounted and are derecognized at the time of their settlement by presentation and/or endorsement.

- These are presented at net of loan loss provisions and are not stated on amortised cost basis.

ii. investment

- Investment includes short term and long term placements, money at call and short notice, derivative investments, government securities (development bonds and Treasury Bills), bonds, debentures, mutual fund investments and share investments in subsidiary companies and other organised institutions.

- All investments are initially recognised at cost, being fair value of the consideration given, including acquisition charges associated with the investment. The investments held by the Bank are classified in following 3 categories:

i. Held till Maturity (HTM) Investments: These investments are primarily intended to be held until the maturity and are stated at cost and carried at these values in the Balance Sheet until maturity. Any impairment loss arising in such investments are provisioned and charged to the Profit and Loss Account (Income Statement). Premiums paid/ discount received while acquiring HTM Investments is recognized as a part of the initial cost and subsequently adjusted with the interest income on effective interest basis until the maturity.

ii. Held for Trading (HFT) Investments: These are marketable investments and held with the primary intention of resale over a short period of time. These investments are initially measured at cost and subsequently recognised at market value. Gains or losses arising from trading / revaluation are recognised in Profit and Loss Account (Income Statement).

iii. Available for Sale (AFS) Investments: These are the investments held with the primary intention to recover the value of investments through sale rather than continuing to hold them. These investments are initially measured at cost and subsequently recognised at market value. Any gains or losses arising till the investments are held are recognised on Investment Adjustment Reserve.Any gains or losses are recognised in Profit and Loss accounts only at the time of disposal of such investments.

While assessing the market value, consideration is given to the transaction activities in the stock exchange and conservative approach is adopted in order to avoid overstatement of the equity position. Accordingly, those investments which are not actively traded at the stock market are carried at cost and not measured at market prices. Amount equivalent to 2% of such investments are earmarked on Investment Adjustment Reserve from the retained earnings in line with the requirement of NRB.


In case of unquoted investments other than the investments in the Subsidiary, investment adjustment reserve is maintained to the extent of 100% of such investment:

- to the period of maximum 1 year from the date of investment, if the company is already incorporated prior to the investment of the Bank and the shares of such company are not listed in stock exchange within 1 year from the date of investment;

- to the period of maximum 2 years from the date of investment, if the company is newly incorporated and the Bank has also promoted such company and the shares of such company are not listed in the stock exchange within 2 years from the date of investment.

In case of investment in the Subsidiary, whether listed or not in stock exchange, investment adjustment reserve is maintained to the extent of 100% of such equity investment. Such investment is also deducted while determining the Tier 1 Capital for Capital Adequacy calculation purpose in line with the requirement of NRB Directives.

- All investments are subject to periodic review as required by NRB Directives.

iii. property, plant and equipment (fixed assets)

- Property, plant and equipment are tangible items that are held for use in the production or supply of services, for rental to others, or for administrative purposes and are expected to be used during more than one financial year.

- Group’s property, plant and equipment comprise of the Bank’s and the Subsidiary’s land and premises registered under its ownership, office equipments and furniture, vehicles, leasehold developments, software applications and assets under construction or work-in-progress.

- Cost of an item of property, plant and equipment is recognised as an asset, if and only if, it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. The cost of an item of property, plant and equipment comprises of purchase prices including taxes, custom duties and any costs that is directly attributable to bring the asset to the location and condition that is necessary for it to be capable for operating in the manner intended by the management. Costs incurred for dismantling / removal and for restoration of site are recognised as a part of the new item of the property, plant and equipment. Cost of an item of an asset includes cost of an asset under construction and work-in-progress.

- Any subsequent cost incurred for the property, plant and equipment is recognised as an asset if it meets the recognition criteria. The cost that does not qualify as an asset is charged off in the Income Statement as repair and maintenance.

- The carrying amount of an asset is derecognised at the time of disposal or when no future economic benefits are expected to flow from its use or disposal. The gain or loss arising from de-recognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised.

- The carrying amount of the property, plant and equipment is the amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses.

- Non-consumable items costing less than NRs. 5,000 are expensed off in the year of purchase.

- The Bank consistently adopts cost model for entire class of its property, plant and equipment.

iv. inventory - Stationery

i. Stationery stocks are inventories in the form of materials or supplies held by the Group to be consumed while rendering the services. The Group does not hold any item of the inventory that is in the state which is not readily usable (i.e. raw material or semi-finished) for rendering the services or that for the selling purposes.

ii. Stationeries are measured either at the lower of cost or net realisable value (NRV), except for certain items that are specifically used only by the Group and the Bank. Such specific items are measured at the lower of cost or replacement price.

iii. The stationeries are written down on an item by item basis, when the inventories are damaged or have become wholly or partially obsolete that affects the effective use while rendering services.

iv. Stationeries are recorded at actual cost basis and charged to revenue at the time of its consumption.

- bullion Stock under Consignment

The Bank holds precious metals (gold and silver) in its custody arising from consignment transaction. Risks and rewards pertaining to the asset prices are vested with the consignor. The Bank merely acts as a consignee to the consignor and hence does not recognise the stock in its books as an inventory.

v. Staff loans - Staff loans are loans granted to the staffs as per the Integrated Staff Loan Policy of the Bank and are recognised as loans at the time of their disbursement. They are derecognised at the time of recovery/settlement.

- Staff loans comprise of housing loan facility, personal loan facility and vehicle loan facility and are presented under “Staff Loans and Advances” in Schedule 16 of the Financial Statements.

vi. interest receivables - Interest receivable comprise of interest accrued on loans (including receivables on loans to staffs under Integrated Staff Loan Policy of the Bank) and investments and are recognised on daily basis based on the outstanding balance at the end of the day.

- Interest receivables on loans (except staff housing loans) are stated at full value and are disclosed net of interest suspense under “Accrued Interest on Loan” in Schedule 16 of the Financial Statements. Similarly, Interest receivables on staff housing loans are presented under “Others” in the same Schedule.

- Interest receivables on investments are stated at full value.


vii. prepayments - Prepayments are the amount paid in advance on account of provision of services in future. Prepayments comprise of amount paid in advance for insurance services, rental of leased premises, communication like internet connectivity, maintenance of services (AMCs) and other miscellaneous services.

- Prepayments are recognised as asset at full value on the date of payment.

- They are derecognised as and when services are received or at the time service accrues or period mature.

viii. Security deposits - Security deposits are the amount deposited by the Bank or the Group on account of security of fees on services that is being received from the provider.

- They are recognised as security deposits until the receipt of service continues and the Bank and the Group do not have any intentions to discontinue the service.

ix. non banking assets (nba) - Non Banking Assets of the Bank comprise of assets or the mortgaged properties realised from the borrowers in lieu of settlement of the loan after exercising all efforts for settlement in cash.

- NBA is recognised lower of recoverable amount from the market (Net Realisable Value) and outstanding dues recoverable from the borrower, immediately after the ownership of assets is transferred to the Bank at the concerned authority. The recoverable amount from the market is estimated on the basis of independent evaluation of the approved Valuator. NBA is derecognized at the time of its disposal.

- 100% loss provision is maintained for NBA and continues to remain until it is disposed off.

C. liabilitieS Liabilities are present obligations of the entity arising from past events, the settlement of which are expected to result in an outflow from the entity of resources embodying economic benefits. Liabilities of the Group and the Bank comprise of borrowings, deposits, bills payable, dividend payable, interest accruals, unearned income, sundry creditors and other liabilities.

i. borrowings - Borrowings comprise of local and foreign currencies’ inter-bank borrowing and the debentures issued to the public.

- Borrowings are recorded at the full value and recognised on the effective dates mentioned in the deed or contract. Borrowings are derecognised at the time of its disposal / settlement.

ii. deposits - Deposits of the Bank and the Group comprise of local and foreign currencies’ current deposits, savings deposits, call deposits, time deposits, margin deposits and other deposits of the customers held by the Bank and the Group.

- Deposits are stated at full value and recognised on the date of deposition. Deposits are derecognised at the time of its withdrawal / maturity.

iii. bills payable - Bills payable are negotiable instruments issued/endorsed by the Bank for consideration received in exchange from the customer. Bills payable comprise of manager cheques, travellers cheques, drafts issued in local currency and foreign currencies payable at the counter of the Bank and the cheques realised at Nostro banks on behalf of customer sent for collection by endorsement.

- These are recorded at full value and recognised at the time of its issuance for the consideration received. They are derecognised at the time of its disposal at the Bank’s counter or after receipt of information of disposal from other banks and financial institutions.

iv. dividend payable - Dividend payables are the dividends, payable to its equity holders duly ratified by the current or earlier Annual General Meetings.

- They are stated at full value immediately after Annual General Meeting ratifies the Board’s proposal on dividend. Immediately before the Annual General Meeting’s ratification, it retains the status of Equity.

v. interest accruals - Interest accruals comprise of interest payables on deposits, borrowings and debenture. They are recognised on the outstanding balance at the end of the day on daily basis.

- Interest accruals are derecognised at the due date i.e. on the date it is credited in customers’ account.

vi. unearned income - Unearned Income comprise of income received in advance on account of loans under subvention scheme, LC fees and guarantee fees issued with a risk period of more than 1 year period and for fees with more than NRs.50,000 (fifty thousand).

- They are recognised as liability at the time of its receipt and are derecognised as and when income accrues and / or risk period expires.

- Unearned interest income is presented in “13 Others” in Schedule 7 of the financial statements.

vii. provisions for expenses - Provisions are liabilities of uncertain timing or amount. They are recognised as liabilities when the Group or the Bank has a present obligation (legal or constructive) as a result of past event and that there


are probabilities of outflow of resources embodying economic benefits to settle the obligation and can be estimated reliably.

- While making an estimate, consideration is given to immediate trends, past practices and approved polices. In extremely rare circumstances, where no reliable estimate can be made, a liability exists that cannot be recognised. That liability is disclosed as a contingent liability.

- Provisions for utility expenses: Provisions for utility expenses are recognised based on immediate trends. Excess or deficits are adjusted in the subsequent months.

- Provisions for communication expenses: Provisions for communication (viz., telephone, swift) are recognised based on immediate trends. Activity log wherever possible is also considered while estimating the provision. Excess or deficits are adjusted in the subsequent months.

- Provision for audit fee expenses: Audit fees are provisioned based on the remuneration fixed by the equity holders at the Annual General Meeting.

- Provision for staff bonus expenses: Staff bonus is provided as per Bonus Act, 1974.The Bonus Act requires provision at the rate of 10% on the amount of net profit before tax.

- employee leave:

i. Employee leave are compensated absences and comprises of annual leave, sick leave, casual leave, maternity leave, paternity leave, substitute leave and bereavement leave and are compensated as per Employee Bye-Laws of the Bank and the Subsidiary.

ii. Entitlement to compensated absences fall into two category:a. accumulating; and b. non accumulating

iii. The Group recognizes cost of compensated absences as follows:a. in case of accumulating, when the employees render service that increases their entitlement to future compensated absences; and b. in case of non accumulating, when the absences occur.

iv. Annual leave and sick leave are accumulated to the maximum extent of 60 days and 45daysrespectively and is carried forward for the use in future periods. Leave balance in excess of 105daysasatmid April is paid each year. Leave earned and accrued on a proportionate basis as at the balance sheet date (Mid July) is recognized as liability duly reduced by the absences availed by the employees.

v. The bank does not value leave liability based on actuarial valuation.

viii. gratuity, insured benefits and provident fund: - Gratuity, insured benefits and provident fund are post-employment benefits available only to the permanent employees and after completing designated service period or probation period.

- The Bank and the Subsidiary make regular contribution to the approved Retirement Fund and to the Insurance Company for the disposal of gratuity, insurance and provident fund obligations. These benefits are “Defined Contributions Plans” and the Bank and the Subsidiary have limited legal or constructive obligation, only to the extent that they agree to contribute to the fund, and in consequence, actuarial risk (that benefits will be less than expected) and investment risk (that the assets invested by the independent entity will be insufficient to meet expected benefits) fall on the employee. As such the bank does not value employee gratuity based on actuarial valuation.

- Gratuity, insured benefits and provident fund obligation to employees are computed as per the approved policy of the Bank and the Subsidiary and are expensed off in the Profit and Loss Account on accrual basis. Provident fund obligation is settled every month while the insured benefits are paid in advance and are recognized as prepayments and settled on monthly basis. Gratuity obligation is determined and settled on the last month of each financial year (i.e. Mid July). Contribution to approved retirement fund against the gratuity obligations (incremental) has been made since Mid July 2004 annually.

- The gratuity obligation disclosed as “Gratuity Fund” in Schedule 7 of the financial statement is the total gratuity obligation accrued till Mid July 2003 and payable to the employees of the Bank who are continuing their employment as at the balance sheet date. At the time of retirement (including resignation) of the employee, the obligation is settled by paying the amount from this Fund. The Bank does not bear any further obligation (either legally or constructively) to pay return on this fund to the employees.

d. inCome Incomes are increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in than equity, other than those relating to contributions from equity participants. Income comprises of interest income, fees and commission, foreign exchange income, cards income, disposal income etc.

i. interest income - Interest income comprise of interest earnings on foreign currencies and local currency loans & advances, investments in Bonds, Treasury Bills and Placements.

- Interest income on loans and advances (except staff housing loan under Integrated Staff Loan Policy) are recognised on cash basis as prescribed by NRB Directives, which is not in accordance with NAS 7 “Revenue” that prescribes recognition of interest on effective interest method. The practice followed by the Bank, as per NRB Directives, is more conservative and prudent. Interest income on staff housing loans is recognised on accrual basis as permitted by NRB.

- Interest income on Investments, including earnings from call accounts, fixed deposits and staff house loan, is recognized on effective interest method. Interest accruals on bonds and debentures at the time of


purchase are reduced from the cost of acquisition. Discount or premium on bonds / debentures and transaction costs are adjusted with the cost of investment to determine effective interest rate. Interest Income on treasury bills are capitalised in the bid value.

- Interest income received by the Bank from the vendors / dealers under subvention scheme at the beginning of the loan tenure is initially recognised as liability and subsequently charged to Profit or Loss Account (Income Statement) as and when they are earned.

- All interest earnings (including on foreign currency assets) are accounted in functional currency.

ii. fees and Commission income - Fees and commission on credit service (management/ appraisal) including renewals are recognised as and when credit line is approved or renewed. All other fees ancillary to credit services is recognised as and when services are rendered. The recognition of fees is not in line with NAS 7 “Revenue”, which prescribes that the fees that are integral part of the effective interest rate of a financial instrument and should be recognised by making an adjustment in the effective interest rate but is in accordance with NRB Directives which prescribes recognition of interest on loans and advances on cash basis.

- Commission on guarantee exceeding NRs.50,000 covering period more than a year is accounted for on accrual basis over the period of guarantee. Commission other than above are recognised immediately after issuance of guarantee.

- Commissions on LC issuance / amendment, LC acceptance, draft issuance, card issuance are recognised at the time of issuance / amendment /acceptance. Ancillary communication fees on LCs (issued, amended, accepted and settlement) are recognised at the time of their issuance, amendment, acceptance and settlement.

- Renewal fees and cancellation charges are recognised as and when services are renewed or cancelled.

- Bill purchases, remittance are recognised at the time of transactions.

- Rental fees for letting safe deposit lockers are initially recognised when the occupancy right is granted to the customer and subsequent renewal fees are recognised immediately after rental period expires.

- Agency commission on insurance services which do not require rendition of additional services in future are recognised on the effective commencement or renewal dates of the policies.

- Commission from bullion operation is recognised at the time the risks and rewards attributable to the bullion are transferred to the buyer.

- Fees for management service rendered to the Subsidiary are recognised at the end of every month in line with the contract executed.

- All other commissions are accounted after rendering the services.

iii. dividend income - Cash dividend on equity shares is recognised as and when right to receive is established. Dividend declared from net profit of pre-acquisition period is recognised as a recovery of part of cost unless it is difficult to segregate into pre-acquisition and post-acquisition dividend. In case there is a difficulty in segregation, such dividends are recognised as revenue.

- Cash dividend declared by resident companies are recorded at net of withholding tax, while declared by non resident companies are recorded at gross value. Dividend income from resident Mutual Funds is recorded at gross values. Tax deducted by Mutual Fund and non resident companies is recognised as Advance Tax to the extent adjustable with the Bank’s corporate tax liability.

- Bonus/Stock dividend declared and whose right to receive has been established is not recognised as income. The quantity of shares received as bonus/stock dividend is disclosed in Schedule 12(A) of the financial statements.

iv. foreign exchange transactions - Foreign currency transactions are initially recognised in functional currency, by applying to the foreign currency amount, the prevailing exchange rate between the functional currency and the foreign currency at the date of transaction.

- Each foreign currency assets and liabilities arising from foreign currency transactions and outstanding at the end of the day are revaluated by mid exchange rate prevailing at the end of each day. Mid exchange rate is the average exchange rate of Non-Cash Ask Rate and Bid rate.

- Gain or loss realized on trading of foreign currencies is recognized on daily basis and accountedas Trading Gain / (Loss). This is presented under “Trading Gain / (Loss) in Schedule 22 of the financial statements.

- Gains/losses arising due to fluctuation in exchange rates of different foreign currencies at every point of time (including intra-day fluctuations) is recognized on daily basis and accounted as Revaluation Gain / (Loss). This is presented under “Revaluation Gain/(Loss)” in Schedule 22 of the financial statements.

- Premium/discount on foreign exchange forward contract is accounted for as trading gain or loss at the time of transaction and presented under “Trading Gain / (Loss)” in Schedule 22 of the financial statements.

- 25% of such revaluation gain is transferred to Exchange Fluctuation Fund charging Profit and Loss Appropriation Account as per NRB Directives.

v. recovery from Written-off loans - Recovery from written-off loans is recognised as income when the amount is actually received from the borrower.


- All transaction costs viz., legal costs, notice publication expense, negotiation fees etc. incurred for the recovery of written-off loans are reduced from the gross recovery amount and disclosed in Schedule 28 of the financial statements.

vi. gain / (loss) arising on disposal of assets - The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

The carrying amount of an item of property, plant and equipment is derecognised:

a. on disposal; or b. when future economic benefits are not expected from its use or disposal. - The gain or loss arising on disposal of Available for Sale Investments is included in the profit or loss when the investments are actually sold.

e. expenSeS Expenses are decrease in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

i. interest expense - Interest expense comprise of interest expense accrued on foreign currencies and local currency deposits, bonds and borrowings.

- All interest expenses are accounted in functional currency on accrual basis.

ii. employment benefits - Employee benefits are all forms of consideration given by the Bank and the Subsidiary in exchange for service rendered by employees.

- This comprises of: a. short term employee benefits viz., salary and all allowances, short term compensated expenses, (annual leave, sick leave etc.), profit sharing bonuses and perquisites (car facility, subsidized loans) that is payable within twelve months after the end of the period;

b. post employment benefits that is payable after the completion of employment; and

c. termination benefits that is payable as a result of the Bank’s and the Subsidiary’s decision to terminate an employee’s employment before the normal retirement date or of an employee’s decision to accept voluntary retirement in exchange of those benefits.

- Short term employee benefits are recognised as an expense when an employee renders the service or at the time when the entitlement of compensation increases due to rendition of service.

- Post employment benefits are recognised as expense when the entitlement of compensation accrues as a result of rendition of service.

iii. depreciation - Depreciation is the systematic allocation of depreciable amount of an asset over its useful life.

- Each part of an item of property, plant and equipment of the Group which is identifiable separately is depreciated separately. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

- Depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by the management. For simplicity, depreciation is charged from the next month it is made available for use. Depreciation of an asset ceases when it is derecognised at the time of its disposal.

- Depreciationonassets ischarged to Income Statement on diminishing balance method. Based on past experience regarding the economic life of different classes of assets, their estimated life and depreciation rates have been determined as follows, after considering for the likely scrap value at the end of estimated life. nature of aSSetS eStimated uSeful life depreCiation rate

Furniture 10 years 25%Equipments 10 years 25%Vehicles 7 years 20%Computers 7 years 25%Building 50 years 5%

- Furniture consists of metal / wooden working desks, chairs, sofa, tables, etc. The useful economic life of these assets has been observed to be about 10 years on an average, and the depreciation rate of 25% on diminishing balance method has been derived also considering the likely salvage value at the end of its useful economic life.

- Equipment consists of generators, UPS, inverters, water treatment plants, etc. The useful economic life of these assets has been observed to be about 10 years on an average, and the depreciation rate of 25% on diminishing balance method has been derived also considering the likely salvage value at the end of its useful economic life.

- The life of office vehicles varies from 6 years in case of vehicle scheme to as high as 12 years at branches. Average life as such has been estimated at 7 years and the depreciation rate of 20% on diminishing balance method has been derived also considering the likely salvage value at the end of its useful economic life.

- Computers are meant for specific use in Core Banking and the life may run up to more than 10 years in some cases. Average life of computers has been estimated at 7 years and the depreciation rate of 25% on diminishing balance method has been derived also considering the likely salvage value at the end of its useful economic life.


- The useful economic life of building at 50 years and depreciation rate of 5% have been estimated based on the generally accepted practice.

- Leasehold assets (improvements) and cost of Software licenses are amortized over a period of useful life of the asset, estimated as 5 years from the recorded date.

iv. impairment provision - The amount of loss that results due to the reduction of recoverable amount than the carrying amount of an asset or as a result of legal requirement is charged to Profit and Loss Account as an impairment loss. The impairment loss is provided for on the credit portfolios, investments, receivables and fixed assets (if any) at every reporting date.

a. Loan Loss Provision - Provision for possible losses on loans is made to cover the risks inherent in the Bank’s credit portfolio. Provision for possible losses from loans, advances and bills purchased are made at the rates ranging from 0.25% (first slab for insured deprived sector loans) up to 100% (for overdue loans exceeding one year) according to the classification of such risk assets as per NRB Directives. Additional provision in excess of the regulatory requirement (NRB Unified Directives) can also be made to ensure comfortable cushion.

b. Provision on Investments - Impairment on quoted investments is recognised by assessing the recoverable amount of an investment from the stock exchange and the cost of an investment. In case of investments that are not actively traded at stock exchange, recoverable amount is computed on equity basis. Impairment is determined when the carrying amount exceeds the recoverable amount.

- In case of unquoted investments, recoverable amount of an investment is determined on an equity basis. Impairment loss is recognised if the recoverable amount so calculated on an equity basis is less than the cost of an investment.

c. Impairment on Fixed Assets - The Bank does not identify Cash Generating Unit (CGU) i.e. the smallest group of fixed assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.Hence no impairment loss is provided unless there is clear evidence that an asset’s market value has been reduced.

- The Bank and the Subsidiary assess, at each reporting date, whether there is any indication that an impairment loss recognised in prior periods for an asset no longer exist or may have reduced. If any such indication exists, the Bank and the Subsidiary estimate the recoverable amount of that asset. The Bank and the Subsidiary reverse impairment loss to the extent it has been expensed off in prior years when the recoverable amount exceeds the carrying amount.

v. Write off expense - Loan accounts graded ”Bad / Loss” are written off from the books in compliance with NRB Directives and Income Tax Act 2002, without prejudice to the Bank’s right to recovery.

-Impairment provisions on loss accounts are written back at the time of loan written-off.

vi. income tax expense - Income tax expense comprises of current tax, deferred income tax and prior period tax i.e. additional income tax assessed by the tax auditor and taxation authorities. Disclosure of additional income tax in the Profit and Loss Account is made as required by NRB.

- Current tax liabilities (assets) are the amounts that are expected to be paid to (recovered from) the Inland Revenue Department in respect of income of current year. The tax rates (and tax laws) used for the computation are those that are enacted or substantively enacted by the Balance Sheet date. Accordingly, provision for current tax has been made with reference to the profit of the financial year based on the provisions of the Income Tax Act 2002 and amendments thereto.

- Deferred taxes are recognized and provided for on temporary differences arising between taxable incomes and accounting incomes.

- Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

- Deferred tax assets are not recognised unless there is convincing evidence that there will be sufficient future taxable income available to realize such assets. Deferred tax assets & liabilities are netted off and presented either under ‘Other Assets’ or under ‘Other Liabilities’.

- Deferred Tax Reserve is earmarked to the extent of outstanding balance of Deferred Tax Assets as per NRB guidelines.

f. reCovery of prinCipal and intereSt on loanS - The Bank applies amount recovered from borrowing customers, first for recovery of overdue interest and then for recovery of overdue principal. There is one exception to this treatment in case of restructuring / rescheduling of non-performing loan accounts, where the amount recovered from borrowing customer can be applied first for recovery of a minimum 25% of overdue interest and thereafter for recovery of overdue principal. This policy is consistent with the regulatory provisions prescribed by NRB.

g. Contingent liabilitieS - The contingent liabilities comprise of: a. possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or


b. present obligations that arise from past events but is not recognised because: i. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii. the amount of the obligation cannot be measured with sufficient reliability.

- All letter of credit, bank guarantee and forward exchange contract liabilities, within their validity period, have been shown in full amount as contingent liabilities in accordance with the directive issued by NRB.

- Besides above, all known liabilities wherever material are provided for, and liabilities, which are material and whose future outcome cannot be ascertained with reasonable certainty, are treated as contingent and disclosed under contingent liabilities.

h. eventS after the balanCe Sheet date Events after the Balance Sheet Date are those events, favorable and unfavorable, that occur between the Balance Sheet date and the date when the financial statements are authorized for issue.

- In this regard, all material and important events that occurred after the balance sheet date have been considered and appropriate disclosures are made in the financial statements underPoint No. 16 in Schedule 33 “Notesto Accounts”.

i. earningS per Share a. Basic Earnings per Share is calculated for profit or loss attributable to the Bank’s and the Subsidiary’s ordinary equity holders and, if presented, profit or loss from continuing operation attributable to those equity holders. It is calculated by dividing profit or loss attributable to ordinary equity holders (in the numerator) by the weighted average number of ordinary shares outstanding (in the denominator) during the period.

- The earnings attributable to the ordinary equity holders comprise of the earnings of the Bank and the Subsidiary after adjustment of all expenses including tax expense and preference dividends, differences arising on the settlement of preference shares, and other similar effects of preference shares classified as equity.

- Ordinary equity (share) comprises an equity instrument that is subordinate to all other classes of equity instruments of the Bank and the Subsidiary, if any.

- Weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period, multiplied by a time-weighting factor. The time-weighting factor is the number of days that the shares are outstanding as a proportion of the total number of days in the period.

- In a capitalization or bonus issue to share split, ordinary shares are issued to existing shareholders for no additional consideration, therefore the number of ordinary shares outstanding is increased without a corresponding increase in resources. The number of ordinary shares outstanding before the event is adjusted for the proportionate change in the number of ordinary shares outstanding as if the event had occurred at the beginning of the earliest period presented.

b. Diluted Earnings per Share is calculated for profit or loss attributable to the Bank’s and the Subsidiary’s ordinary equity holders and, if presented, profit or loss from continuing operation attributable to those equity holders. It is calculated by dividing profit or loss attributable to ordinary equity holders (in the numerator) by the weighted average number of ordinary shares outstanding (in the denominator) during the period and is adjusted for the effects of all dilutive potential ordinary shares.

- As a result of adjustment for the effects of dilutive potential ordinary shares:

i. profit or loss attributable to ordinary equity holders of the Bank and the Subsidiary is increased by the after-tax amount of dividends and interest recognised in the period in respect of the dilutive potential ordinary shares and is adjusted for any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; and

ii. the weighted average number of ordinary shares outstanding is increased by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

- Dilutive potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares. It comprises of convertible instruments like convertible preference shares, convertible debentures, options and warrants and similar such instruments.

J. baSiS of intereSt Computation - Interest expenses on deposits/borrowings/bonds and interest income on loans & local currency investments are computed on the basis of 365 days a year.

- Interest on foreign currency investments is computed on the basis of 365 days a year for GBP and 360 days a year for USD, EUR, DKK and JPY.

8.2 The Bank and its subsidiary adopt uniform accounting policies for like transactions and events in similar circumstances, to the extent that do not contradict with regulatory provisions of Nepal Rastra Bank.


SChedule: 33

notes to accounts1. Share Capital

1.1. paid-up equity CapitalNepal Rastra Bank (NRB), the licensing and regulatory authority, has prescribed NRs.2,000,000 thousands minimum paid up equity capital re-quirement for class “A” licensed commercial banks as at the balance sheet. The Bank’s paid up equity capital stands at NRs. 3,657,654 thousands.

Over the years the Bank has enhanced its paid up equity capital organically, through issuance of stock dividends, as presented in th table hereunder.

1.2. propoSed ChangeS in paid-up equity CapitalThe Board of Directors of the Bank in its meeting dated September 29, 2015 has passed a resolution recommending for distribution of stock divi-dend at 30% of paid up equity capital at year ended July 16, 2015. The Bank’s paid up equity capital shall increase by NRs.1,097,296 thousands upon approval of the resolution from the upcoming shareholders Annual General Meeting. After approval of the proposed resolution, there shall also be additional incremental impact due to upward rounding of fraction share adjustments in the paid-up equity.

* Rs. 40 per share was called to make paid-up capital at Rs. 100 per share.

partiCularS equity enhanCement year of iSSue

Initial issuance (469,707 @ NRs.60 per share) 28,182 1984 - 85

Additional issuance (3,820 @ NRs.60 per share) 229 1985 - 86

Additional issuance (180 @ NRs.60 per share) 11 1986 - 87

Additional issuance (23,333 @ NRs.60 per share) 1,400 1987 - 88

Additional issuance (2,960 @ NRs.60 per share) 178 1988 - 89

Final Call (500,000 @ NRs. 40 per share)* 20,000 1991 - 92

Issuance of 30% Bonus Shares 15,426 1992 - 93











Issuance of 20 % Bonus Shares 610,486 2014 - 15

Capital issued and paid up at balance sheet date 3,657,654

(NRS. 000)


2. reServe and SurpluS

2.1. general reServeUnder section 44 of the Banks and Financial Institutions Act 2006, licensed institutions are required to appropriate 20% of net profit to general reserve fund each year. This is a statutory reserve fund and non-distributable, except if specifically approved by the regulator. Institutions are required to appropriate fund into this reserve until the reserve balance is twice the size of paid up equity capital.

The Bank has appropriated NRs.419,000 thousands into general reserve from current year’s profit. The bank’s reserve position is presented hereunder:

2.2. Contingent reServeThe Bank has appropriated NRs.1,000 thousands into contingent reserve fromcurrent year’s profit.The Bank has paid a total sum of NRs.450 thousands towards treatment of life-threatening ailments of two of its employees. This amount has been transferred from contingent reserve to retained earnings and recognized as medical expense presented in Schedule 23 of the financial statements

2.3. deferred tax reServeThe bank’s Deferred tax reserve has increased by NRs.9,365 thousands in the current year. As of balance sheet date the Bank’s deferred tax reserve stands at NRs.52,544 thousands.

2.4. inveStment adJuStment reServeThe bank has maintained adequate Investment Adjustment Reserve (IAR)asper regulatory requirement prescribed in NRB directives 04/071 and 08/071. The Bank has appropriated NRs.797 thousands into IAR from current year’s profit. As of balance sheet date the balance in IAR stands at NRs.139,190 thousands. Detail information on IAR calculation and additional information on “Available for Sale” investment portfolio is presented in point 5.6.3 of this notes to account.

2.5. exChange fluCtuation fundUnder section 45 of the Banks and Financial Institutions Act 2006, licensed institutions are required to appropriate 25% of net foreign exchange revaluation gain to exchange fluctuation fund each year. This applies to revaluation gain on foreign currency position except the Indian currency.

The Bank has appropriated NRs.45,500 thousands into exchange fluctuation fund from current year’s profit. The bank’s reserve position is presented hereunder:

2.6. Capital redemption reServe (debenture redemption)As per provisions in clause 5 of NRB directive 16/071 licensed institutions are required to maintain a redemption reserve in respect of debenture liability. Regulator has approved debenture issuance of the Bank vide their letter bearing reference number Bai.Bi.Ni.Bi./Bi.R 2/Nabil Bank/9/064/65 dated 09th May 2008 (27.01.2065 B.S.). As per the approval terms the bank is required to transfer 20% of the face value of debenture to capital redemption reserve each year, starting from the 6th year of debenture issuance. Current Year being the 7th year, the bank has appropriated NRs. 60,000 thousands to redemption reserve this year. The total Capital Redemption Reserve stands at NRs. 120,000 at end of the current year.

3. propoSed dividend

3.1. nabil bankThe Board of Directors of the Bank, at its meeting dated September 29,2015 has passed a resolution recommending for distribution of dividend as stated hereunder, based on the paid up equity capital at year ended July 16, 2015.

Stock dividend Nrs.30 per share. The Bank’s paid up equity capital shall increase by NRs1,097,296 thousands upon approval of the board resolution at the upcoming shareholder’s Annual General Meeting. Proposed stock dividend is also presented as share capital on the face of balance sheet, in line with the presentation format prescribed by NRB.

Cash dividend NRs.6.84per share. Total cash dividend payable for the year will amount to NRs.250,261thousands.Proposed cash dividend has been appropriated from the profit and disclosed separately on the face of balance sheet, per presentation format prescribed by NRB.

(NRS. 000)

(NRS. 000)

(NRS. 000)

partiCularS amount amount

Opening balance 3,084,500

Minimum regulatory requirement @

20% of net profit 418,763

Actual amount transferred to

General Reserve 419,000 419,000

Closing balance 3,503,500

partiCularS amount amount

Opening balance 177,400

Minimum regulatory requirement @ 25% of

revaluation gain presented in Schedule 22 45,440

Actual amount transferred to

Exchange Fluctuation Fund 45,500 45,500

Closing balance 222,900

partiCularS amount

Opening balance 14,574

Add: Appropriation from current year’s Profit 1,000

Less: Transferred to Retained Earnings on

account of reimbursement to staff (450)

Closing balance 15,124


3.2. SubSidiary Co. (nabil inveStment banking ltd.)The Board of Directors of the Subsidiary, at its meeting dated August 19, 2015 has passed a resolution recommending for distribution of cash dividend Nrs.20per share, based on the paid up equity capital at year ended July 16, 2015.This will be decided at the upcoming share-holders Annual General Meeting of the Subsidiary.

Total cash dividend payable for the year will amount to NRs.21,000thousands.In line with the provisions in Nepal Accounting Standard – NAS 05 on “Events after Balance Sheet Date” the proposed dividend has not been recognized as liability at balance sheet date. This has been disclosed in Subsidiary’s financial statements under Notes to Accounts. This complies with the provisions of NAS 01 on “Presentation of Financial Statements”.

3.3. No interim dividends were paid out during the year by the Bank or the Subsidiary. All dividend payments attract withholding tax at source at 5% of dividend amount.

4. foreign promoter ShareholdingNRB Circular 22/070/071 stipulates that shareholding by foreign com-panies (other than financial institutions) be divested to foreign financial institutions and/ or domestic individual / corporates latest by end of financial year 2014-15. Shareholding of NB International Ltd., the foreign promoter shareholder of the Bank stands at 50% as of balance sheet, and has not been divested as required under the regulations.

5. aSSetS

5.1. balanCe With nepal raStra bank (nrb)Bank balance with NRB stands at NRs.12,924,604 thousands at the balance sheet date. Reconciliation of the balances per ledger with statements is presented hereunder:

5.2. balanCe With domeStiC bankS and finanCial inStitutionSBank balance with domestic banks stands at NRs.149,529 thousands at the balance sheet date. Reconciliation of the balances per ledger with statements is presented hereunder:

5.3. balanCe With foreign bankS and finanCial inStitutionSBank balance with foreign banks stands at NRs.1,109,406 thousands at the balance sheet date. Reconciliation of the balances per ledger with statements is presented hereunder:

(NRS. 000) (NRS. 000)

(NRS. 000)

(NRS. 000) (NRS. 000)

(NRS. 000)

partiCularS ledger Statement

Unreconciled balance as on 16.07.2015 12,924,604 13,022,127

We Debit (115,081) -

They Debit (7,344) -

We Credit 136,576 -

They Credit 83,372 -

Reconciled balance as on 16.07.2015 13,022,127 13,022,127


unreconciled balance as on 16.07.2015 1,109,406 1,670,950

We Debit (977,184) -

They Debit (35,397) -

We Credit 1,428,640 -

They Credit 145,486 -

reconciled balance as on 16.07.2015 1,670,950 1,670,950


unreconciled balance as on 16.07.2015 149,529 150,795

We Debit (269) -

They Debit (45) -

We Credit 1,312 -

They Credit 269 -

reconciled balance as on 16.07.2015 150,795 150,795

age ledger Statement ledger Statement

debit debit Credit Credit

< 1 month 115,081 6,724 110,975 82,888

> 1 month < 3 months - 620 11,549 -

> 3 month < 6 months - - 4,471 -

> 6 month < 12 months - 1 2,223 352

> 12 month < 24 months - - 3,030 -

> 24 months - - 4,328 132

total 115,081 7,344 136,576 83,372



< 1 month 977,184 35,337 1,402,194 142,661

> 1 month < 3 months - 26 20,671 153

> 3 month < 6 months - 34 5,552 156

> 6 month < 12 months - - 223 -

> 12 month < 24 months - - - -

> 24 months - - - 2,517

total 977,184 35,397 1,428,640 145,486



< 1 month 269 39 230 269

> 1 month < 3 months 0 6 942 -

> 3 month < 6 months - - 140 -

> 6 month < 12 months - - - -

> 12 month < 24 months - - - -

> 24 months - - - -

total 269 45 1,312 269

reConCiliation Statement reConCiliation Statement

reConCiliation Statement

ageing detailS ageing detailS

ageing detailS


5.4. inter-branCh reConCiliationThere are no un-reconciled balances in case of inter-branch transactions as on balance sheet date.

5.5. loanS and advanCeSThe Bank’s year-on-year gross loans and advances to customers increased by 19.5% to reach NRs.67,161,671 thousands at balance sheet date. Business Loans that comprise of term loans, overdraft, trust receipt and other working capital loans occupy 74% of total lending portfolio. Similarly, about 19% of the portfolio is occupied by consumer retail loans and credit card loans while 7% of total exposure is occupied by real estate loans.

NRB Directive 03/071 has defined real estate loans as residential real estate loans in excess of NRs.10 million; business complex and residential apartment construction loans; loans to income generating commercial complex; and other real estate loans for land purchasing and plotting.

NRB Directives 03/071 has set a maximum ceiling of lending to total real estate sector at 25% of gross loans and advances. At balance sheet date, bank’s exposure under this head is 7% of total loan portfolio. The Bank stands in compliance to this requirement.

5.6. inveStmentS

5.6.1. held for tradingNRB Circular 05/071/72 dated 2071.05.04 (August 20th 2014) has capped Held for Trading portfolio of licensed institutions at 1% of core capital. As of balance sheet date the Bank does not hold investments that are primarily intended for trading purpose because the bank does not recognize securities trading activity as its core business activity.

5.6.2. held to maturity investmentsOverall held to maturity investments of current financial year have increased by 70.52% over the previous financial year. HTM investment listed on stock exchange is presented net of impairment provision on the balance sheet date.

(NRS. 000)

(NRS. 000)

type of loan and advanCeS Current year previouS year ChangeS

volume %

1. Real Estate Loan 4,897,786 4,473,455 424,331 9.5

a. Residential Real Estate Loan (except Home Loan up to NRs.10 million) 1,517,725 1,100,801 416,924 37.9

b. Business Complex & Residential Apartment Construction Loan 754,977 616,487 138,490 22.5

c. Income generating Commercial Complex Loan 321,245 534,541 (213,296) (39.9)

d. Other Real Estate Loan (Including Land purchase & Plotting) 2,303,840 2,221,626 82,214 3.7

2. Personal Home Loan up to NRs.10 Million 5,884,760 5,161,490 723,270 14

3. Margin Type Loan - - - 0

4. Term Loan 10,604,097 8,566,788 2,037,309 23.8

5. Overdraft / TR Loan / Working Capital Loan 38,843,669 32,113,926 6,729,743 21

6. Others 6,931,359 5,887,418 1,043,941 17.7

total 67,161,671 56,203,077 10,958,594 19.5

type of inveStmentS at CoSt impairment Current previouS %

year year Change

1. Nepal Government Treasury Bills * 7,992,936 - 7,992,936 5,706,471 40.1

- 7 days (reverse repo) 1,200,000 - 1,200,000 -

- 91 days 1,349,400 - 1,349,400 5,706,471

- 126 days 1,518,260 - 1,518,260 -

- 139 days 99,863 - 99,863 -

- 182 days 848,208 - 848,208 -

- 363 days 198,326 - 198,326 -

- 364 days 2,778,878 - 2,778,878 -

2. Nepal Government Other Securities 2,183,994 - 2,183,994 2,583,715 (15.5)

3. NRB Bonds (Term Deposits) 4,750,000 - 4,750,000 - -

3. Foreign Bonds (denominated in US $) 253,902 - 253,902 240,312 5.7

4. Placement in local and foreign banks 15,383,505 - 15,383,505 9,393,788 63.8

total 30,564,337 - 30,564,337 17,924,286 70.5

*The Accrued Interest Receivable on treasury bills at balance sheet date is NRs.8,208 thousands. This has been capitalized in the value of treasury bills, being amortization of discount.


Equity Investments in other local institutions (not listed) presented above is exempted from IAR requirement. These include equity investments in Credit Information Center Ltd., National Banking Training Institute Ltd. and Nepal Clearing House Ltd.

5.6.3.1. equity investments in local licensed bfisThese comprise of equity investments in promoter shares of Class “D” licensed micro financial institutions. The bank has invested as founding promoter shareholder with the intention of aligning its priorities with those of the government towards development of the microfinance sector. These investments count towards regulatory deprived sector lending requirement.

These investments are recognized at historical cost net of impairment, considering inactive market and unavailability of market prices for this class of shares. Ordinary class of shares are actively traded at Stock Exchange but are generally quoted at price much higher than those actually fetched by promoter class shares. Moreover, bulk promoter shares are seldom traded due to trading restrictions imposed by the regulators. The number of institutional investors required to ensure active trading of these shares is also limited. Due to these reasons, quoted market price cannot be used to estimate their fair value and hence have been measured at historical cost rather than “mark-to-market” measurement required under NRB directives 4 and 8.

Investment in reverse repo securities NRs.1,200,000 thousands has been grouped under Treasury Bills. Similarly, investment in Term Deposit auction of NRB, the central bank, NRs.4,750,000 thousands has been grouped under NRB Bonds.

Investment in Foreign Bonds comprise of securities denominated in USD, which is presented in functional currency i.e. NRs. equivalent terms. The change in value from previous year is due to the change in exchange rate. Nobonds were acquired or disposed during the current financial year.

5.6.3. available for Sale investments (afS)The Bank’s “Available for Sale” investments (AFS) comprised of all investments other than “Held ToMaturity” investments and “Held For Trading” investments. These investments should be marked to market on a regular basis and the difference to be adjusted through reserves as required under NRB Directives 4 and 8. The bank has deviated from

this measurement method and continues to recognize AFS portfolio at historical cost net of impairment loss. The rationale for this deviation is elaborated in the following paragraphs for specific group of investments.

NRB Directive 04/071 stipulates requirement of Investment Adjust-ment Reserve (IAR) to the extent of 2% of AFS portfolio. NRB Directive 08/071 has stipulated additional IAR requirement for investments in not listed securities and allowed complete exemption for certain securities.

The Bank has complied to the IAR requirement by maintaining IAR at 2% of investments in listed securities and at 100% of investments in not listed securities.The bank hasmaintained IAR at 100% of its equity investment in subsidiary and has also deducted such investment under Tier – I Capital. Detail calculation of IAR for different groups of AFS investment is presented hereunder:

(NRS. 000)

type of inveStmentS hiStoriCal CoSt impairment net iar

inveStment requirement

1. Listed Securities 276,401 6,987 269,413 5,388

- Equity in local licensed BFIs 128,097 6,987 121,110 2,422

- Mutual Fund units 148,304 - 148,304 2,966

2. Not listed Securities 138,737 - 138,737 133,802

- Equity in local licensed BFIs 44,000 - 44,000 44,000

- Equity in local BFIs under licensing process 10,000 - 10,000 10,000

- Equity in other local institutions 4,936 - 4,936 -

- Equity in SWIFT 1,802 - 1,802 1,802

- Equity in subsidiary company 78,000 - 78,000 78,000

Closing balance 415,138 6,987 408,150 139,190

Opening balance of IAR 138,392

additional appropriation to iar in current year 797


These investments are tested for impairment on equity basis and any impairment loss is recognized in the Profit and Loss account as described in Schedule 32 “Principal Accounting Policies”.

5.6.3.2. investment in mutual fund unitThe Bank has obtained license from Security Exchange Board of Nepal (SEBON) on 01st February 2012 to sponsor Mutual Fund schemes. The bank has sponsored a Mutual Fund Scheme under name “Nabil Balanced Fund – I”. The Bank has subscribed to 10,500,000 units @ Rs.10 per Unit.

The Bank has invested in this fund to comply with the regulatory provision that requires 15% seed capital injection by the Fund Manager or the Fund Sponsor. The Bank’s investment constitutes 14% of the fund size. Remaining 1% is subscribed by the Fund Manager. This being seed capital, the prospect for the Bank to sell off this investment is subject to regulators permission, which the bank has assessed to be remote. Therefore the Bank has recognized this investment at historical cost basis rather than “mark-to-market” measurement required under NRB directives 4 and 8.

As at balance sheet date the Net Assets Value of Nabil Balanced Fund – I is NRs.15.87 per unit. Based on the closing market price of NRs.13.50 on 16th July 2015 at Nepal Stock Exchange the market value of this investment is NRs.141,750 thousands.

In the current year the bank also invested in initial offering of three other mutual fund schemes, upon request from the respective fund managers. As presented in Schedule 12 (A) of the financial statements these investments are collective recognized at cost at NRs.43,304 thousands and their collective market value is NRs.43,477 thousands. The bank has recognized these investments at historical cost, assessing the prospects for bulk transactions to be remote at the current stage of market development for mutual fund.

5.6.3.3. equity investments in foreign entitiesThe Bank holds different classes of common stocks in MasterCard International and VISA Inc.

MasterCard International on conversion into a private stock corporation allocated its franchisee class B common stock to its members in recognition of their membership interest. The bank presently holds 11,140 units of Class B Common Stock having a par value of USD 0.0001 each in MasterCard International Incorporated. Holders of Class B common stock are entitled to receive equal amount of dividend declared for Class A stock and confer equity rights but not the voting rights in MasterCard Incorporated.

The shares of Class B common stock may be traded privately among the eligible members of MasterCard International Incorporated (subsidiary of MasterCard Incorporated) while Class A common stock is traded in New York Stock Exchange. As on 16th July 2015, the closing price of Class ACommonStock was USD 95.82 per share. The fair value of the Bank’s holding of 11,140 units is around NRs.108,505 thousands.

Similarly, the Bank currently holds 6,166 units of Class C Common Stock of VISA Inc. having a par value of USD 0.0001 each allocated after its conversion to VISA Inc. This class of stock is eligible for public sale since 7thFebruary, 2011 and trades at same price as Class A or Class B shares. Effective March 19, 2015 the conversion rate for Class C Common Stock is equals to 4 units of Class A Common Stock. At 16th July 2015, Class A Common Stocks were priced at USD70.57, which derives the equivalent price of Class C Common Stock at USD 282.28 per share.Based on this the fair value of Bank’s holding on that date is NRs.176,926 thousands.

These shares were conferred to the bank without any transfer value payment, and hence are not recognized in the financial statements, except for disclosure of fair market value.

5.6.3.4. equity investments in bfis under licensing processThis comprise of equity investments in promoter shares of Jeevan LaghubittaBikas Bank Ltd., a micro financial institutions which is under process of obtaining license from the regulator. This investment is recognized at historical cost in absence of market price.

5.6.3.5. equity investments in SubsidiaryAs of balance sheet date, the Bank has invested NRs.78,000 thousands in its subsidiary, holding an effective equity interest of 74.29%. Subsidiary’s corporate information is presented in Schedule 32 “Principal Accounting Policies” of this financial statement. These investments are recognized at historical cost in absence of market price.

5.6.3.6. equity investments in other local institutionsThese comprise equity investments made in local companies whose services complement banking business. The Bank holds promoter group equity shares in Karja Suchana Kendra Limited (Credit Information Bureau of Nepal), National Banking Training Institute and Nepal Clearing House Ltd. These investments are not listed ones and are recognized at historical cost. NRB Directives 4 and 8 have exempted these securities from measurement at mark-to-market.

5.6.3.7. equity investments in SWiftThe Bank holds eight unit shares in SWIFT (Society for Worldwide Interbank Financial Telecommunication) having nominal value of EUR 125 per share. These shares are conferred to the Bank in respect of its membership interest in SWIFT network. These shares are entitled to voting rights at the annual General Meeting of SWIFT shareholders.

SWIFT shares are not listed at any stock exchange and do not confer any dividend payments. Based on net assets valuation the transfer value of one SWIFT share has been fixed at EUR 3,430 (EUR 125 capital and EUR 3,305 premium) at the June 2014 General Meeting of SWIFT shareholders. There has been no revision in transfer value since then.

This investment is recognized at historical cost being the actual transfer value paid while subscribing to the shares awarded to the Bank. The share is denominated in EUR but is presented in functional currency i.e.


NRs. equivalent terms. The change in value from previous year is due to the change in exchange rate. No shares were acquired or disposed during the year.

5.7. fixed aSSetS

5.7.1. leasehold assetsSummary of movement in leasehold assets of the Bank and the Group is presented hereunder:

5.8. other aSSetSFollowing disclosure relate to Other Assets NRs.2,371,567 thousands presented in the face of balance sheet and follow the order of presentation in Schedule 16.

5.8.1. Stock of StationeryAs at balance sheet date, the Bank’s closing stock of stationery is valued at NRs.9,441 thousands. Out of this stationery worth NRs.4,581 thousands are held at branches and those worth NRs.4,859 thousands are held at central store. No material items that are disposable / obsolete were held in possession at the balance sheet date.

5.8.2. income receivable on investmentsIncome receivable on investments comprise of interest accrued on placements, bonds and term deposit of central bank. Interest accrued on treasury bills, being amortization of discount, has been capitalized in the bid value.

5.8.3. accrued interest receivable on loanAs at balance sheet date, the Bank’s accrued interest receivable on loan is valued at NRs.581,099thousands.These comprise of interest

on loans, advances and bills purchased that have accrued but not yet realized in cash at balance sheet date. The portion of interest that has not yet fallen due stood at NRs.118,884 thousands while those that are under overdue status stood at NRs.462,215 thousands.

The bank has recognized interest suspense equivalent to the entire accrued interest that is not realized in cash at year end. This treatment of recognizing interest income on loans in cash basis complies with regulatory provisions, although deviates from NAS 07 “Revenue”.

5.8.4. Sundry debtorsSundry Debtors comprise of accounts receivables and deposits at Large Tax Payer’s Office. Deposit at LTPO is made as per the requirement of Income Tax Act which stipulates for deposition of 1/3 of disputed tax before contesting at the Inland Revenue Department for administrative review against the assessment order.

5.8.5. Staff loans and advancesStaff Loans and Advances are extended in line with the integrated staff loan policy of the bank. Eligibility criteria for availing staff loans are directly linked to the period of service under permanent payroll of the Bank.

Loans extended to staffs have increased during the year as more staffs became eligible and actually availed such facilities. The loans outstanding as at the balance sheet date were as under:

The Bank has been extending housing loans to its employees under the integrated staff loan policy of the bank. As such provision for staff housing fund as required by the Labour Act 1992 has not been created. The Bank has recognized interest income on staff housing loan on accrual basis upon obtaining specific approval from the regulator. Interest income on staff auto and personal loans is recognized in cash basis following the general regulatory guideline of cash based interest income recognition on loans.

(NRS. 000)

(NRS. 000)

(NRS. 000)

(NRS. 000)

partiCularS nabil SubSidiary group

bank Co.

At Cost 66,204 6,955 73,159

- opening balance 72,942 6,955 79,897

- additions this year 10,504 - 10,504

- deductions this year (17,242) - (17,242)

Amortization 42,635 2,218 44,853

- opening balance 47,006 827 47,833

- additions this year 12,871 1,391 14,262

- deductions this year (17,242) - (17,242)

net closing balance 23,569 4,737 28,306

partiCularS loCal foreign total

CurrenCy CurrenCy

- Interest accrued on placements 44 63,868 63,911

- Interest accrued on bonds 8,981 3,417 12,399

- Term Deposit with NRB 77 - 77

total 9,102 67,285 76,387

partiCularS Current previouS

year year

Account Receivables 677,816 1,214,835

- Nepal Rastra Bank 1,077 10,422

- Customers 107,309 146,696

- Employees 35,369 39,750

- Others 534,061 1,017,967

Deposit at Large Tax Payers Office 10,904 10,904

total 688,720 1,225,739


year year

Auto Loan 34,995 34,111

Personal Loan 276,319 208,719

Housing Loan 977,568 889,421

total 1,288,882 1,132,251


5.8.6. prepaymentsPrepayments relate to charges such as rent, insurance, communication, asset maintenance contracts, etc. that require payment in advance whereas recognized as expense on accrual basis. Break up of prepayment balance at year end is presented hereunder:

5.8.7. othersThis item consists of accrued interest receivable on staff loans and security amount deposited by the bank for availing public utility services.

AIR on Staff Housing Loan is realized out of proceeds from Endowment Life Policy. Before disbursement of individual home loan to employees, an endowment life policy is purchased by the Bank for insured sum equivalent to the principal loan amount. The insured policy is purchased for a period earlier of 20 years or remaining service period of the employee till retirement. Employees pay insurance premium in respect of individual policy on monthly basis. Upon maturity of the endowment policy, the proceeds / bonus are applied towards settlement of interest and principal loan amount in a single installment. Any surplus or shortfall is entitled to the concerned employees.

5.9. bullion StoCkAs at balance sheet date, the Bank holds 80 Kilograms of gold and 550 Kilograms of silver in its custody as a consignee. At balance sheet date the fair market value of gold and silver in bank’s consignee is NRs.297,772 thousands and NRs.26,908 thousands respectively, based on the international market price and currency exchange rate.

During the year the Bank received in consignment 200 Kilograms of gold and 8,210 Kilograms of silver. Similarly, it sold 266 Kilograms of gold and 8,480 Kilograms of silver.

As stated in Schedule 32 “Principal Accounting Policies”, the Bank acts as a consignee to the consignor and hence does not recognize bullion stock in its book as inventory.

6. liabilitieS

6.1. debentureS and bondSThe Bank allotted Nabil Bank Bond 2075 (2018 A.D.) of total face value NRs.300,000 thousands in July/August 2008 A.D., redeemable in July / August 2018 A.D. The Bond is listed in Nepal Stock Exchange (NEPSE) with symbol NABILB2075.The carrying value of the debenture at balance sheet date is NRs.300,000 thousands.

6.2. depoSitS

6.2.1. During the current financial year, the Bank has been able to increase overall deposits by 38.3% or NRs.28,849,119 thousands. Movement in different deposit segments is presented hereunder:

(NRS. 000)

(KILOGRAMS)

(NRS. 000)


year year

Prepaid items

- Rent 8,957 8,574

- Insurance 12,313 13,097

- Maintenance 8,343 5,513

- Communication 3,330 2,511

- Others 2,085 883

total 35,027 30,578

partiCularS gold Silver

opening balance 146 820

add : consignments received during the year 200 8,210

less : sold to commercial banks (192) (3,000)

less : sold to non bank parties (74) (5,480)

Closing balance 80 550

Value in USD

- Gold Price USD 1,144.65 per Ounce 2,929,388

- Silver Price USD 14.97 per Ounce 264,713

value in nrs.000 (@ nrs.101.65 per uSd) 297,772 26,908


year year

AIR on Staff Loan 219,327 191,312

Advance deposits for utilities 1,241 1,250

total 220,568 192,562

(NRS. 000)

depoSitS Current year previouS year ChangeS

volume %

Interest Free Deposits 14,709,850 11,247,608 3,462,242 30.8

- local currency 12,335,563 8,944,571 3,390,992 37.9

- foreign currency 2,374,287 2,303,037 71,250 3.1

Interest Bearing Deposits 89,528,060 64,141,183 25,386,877 39.6

- local currency 75,420,237 54,997,720 20,422,517 37.1

- foreign currency 14,107,823 9,143,463 4,964,359 54.3

total 104,237,910 75,388,791 28,849,119 38.3


6.2.2. deposit insuranceThe bank has insured savings and fixed deposits of all natural per-son account holders for balance up to NRs.200 thousands threshold amount. For this the Bank has entered into an agreement with the insurer, Deposit and Credit guarantee Corporation Pvt. Ltd. on 13th December 2011. As of balance sheet date, the total insured deposit portfolio is NRs.11,093,149 thousands and total number of insured deposit accounts is 301,053.

6.3. billS payableBills payable comprise of manager’s check, local currency demand drafts, traveller’s check issued by the Bank and bills (check) realized on behalf of customers from Nostro banks but not yet credited in custom-ers’ accounts. The bank also issues foreign currency demand drafts of Nostro banks, in which case the respective Nostro accounts are credited directly rather than recognizing payable against the issued instrument. Sale of Travellers Check has since stopped in Nepal.

6.4. other liabilitieSFollowing disclosure relate to Other Liabilities Nrs.1,467,541 thousands presented in the face of balance sheet and follow the order of presenta-tion in “Schedule 7” of financial statements.

6.4.1. gratuity fundThe Bank has a separate Gratuity Fund in respect of gratuity obligation that accrued till Mid July 2003. As per Income Tax Rules, 2003, this portion of retirement benefit is tax free for employees. This obligation is settled when staffs retire or resign from the services of the Bank. During the current financial year the Bank settled gratuity obligation of NRs.7,620 thousands from this fund.

Gratuity obligations that have accrued after Mid July 2003 are being settled in the same year in which they accrue, under the “Defined Con-tribution Plan” as stated in Schedule 32 “Significant Policies”. As such the bank does not value employee gratuity based on actuarial valuation..

6.4.2. employees Welfare / leave fundThe bank’s obligation under accrued staff leave has increased by NRs.21,522 thousands in the current year. Calculation of incremental leave obligation is presented hereunder:

Employees leave obligation has increased this year due to the rise in average salary scale. In the current year the average salary of bank em-ployee increased by NRs.10 thousands to reach Nrs.56 thousands. The total leave accrual period, on the other hand, has reduced slightly by 28 months. Salary of employee was revised upwards this year, following the settlement of collective bargaining with employees union, which is held once in every two years, per the provision in Labor Act. Likewise salary of management level employees was also raised to maintain the pay structure.

The bank does not value leave liability based on actuarial valuation.

6.4.3. provision for Staff bonusIn line with provision of Bonus Act 1974, the employee bonus is calcu-lated hereunder:

(NRS. 000)

(NRS. 000)

(NRS. 000)


year year

Local currency bills 46,868 71,374

- demand draft 1,118 2,665

- bill of exchange 226 0

- manager’s check 45,524 68,709

Foreign currency bills 196,565 142,205

- bill of exchange 195,057 137,933

- manager’s check 1,508 4,031

- travellers’ check - 241

net closing balance 243,433 213,579

partiCularS average laSt draWn Weighted total leave monthly Salary average leave obligation aCCrued

a. opening balance as at 16-Jul-2014 101,569

i. As at 16-Jul-2014 45,310 2,242 101,569

ii. As at 16-Jul-2015 55,598 2,214 123,091

b. incremental leave obligation in current year 10,288 (28) 21,522

Closing balance as at 16-Jul-2015 123,091

presented in Schedule 7 “other liabilities” 123,091

Incremental obligation due to impact of:

- salary raise (on leave balance at 16-Jul-2015) 10,288 23,061

- deccreased leave period

(on salary level at 16-Jul-2015) (28) (1,539)

incremental leave obligation in current year 21,522


year year

Opening balance 69,311 76,931

- settled in respect of retired employees (5,804) (6,195)

- settled in respect of resigned employees (366) (1,425)

Closing balance 63,141 69,311


year year

Profit from all activities per profit and loss account 3,279,460 3,632,814

Adjustments:

- TDS reversal on final withholding

income of FY 2013-14 - (36)

Adjusted Net profit before bonus and

taxes for bonus calculation 3,279,460 3,632,778

provision for staff bonus @ 10% of net profit before tax 298,133 330,253

provision for staff bonus per profit and loss account 298,133 330,253

(NRS. 000)(NRS.) (MONTHS)


6.4.4. unearned incomeAs of balance sheet date, the Bank’s total outstanding on unearned income stood NRs.56,804 thousands, detail of which is presented hereunder:

Unearned fee on guarantee and unearned interest on loans extended under sub-vention schemes are both presented in “Schedule 7” of the financial statements in headings “Unearned Discount and Commission” and “Others” respectively.

6.4.5. Sundry CreditorsA break-down of the sundry creditor balance is presented hereunder.

Payable to customers are mostly on account of items such as prepaid cards, payable to cards and e-banking merchants, remittance awaiting disposal, etc. TDS payable balances are those arising on regular banking business and are deposited on monthly basis by the 25th of the follow-ing month of TDS collection, which is in compliance to the Income Tax Act. Other payable balance is mostly on account of outstanding payable to the consignor of bullion stock.

6.4.6. dividend payableIn line with provision of Bonus Act 1974, the employee bonus is calcu-lated hereunder:

In compliance with Directive 16 of NRB Unified Directives and Section 82(3) Bank and Financial Institutions Act 2006 the Bank has published a general notice to equity holders on 3rdAugust 2015 calling them to collect unclaimed dividends.

6.4.7. others NRs.19,801 thousands presented under this heading relate to provi-sion for various expenses. Apart from this it also includes NRs.1,255 unearned interest income on loans under sub-vention scheme, whichis also disclosed in point 6.4.4 “Unearned Income”.

7. Contingent liabilitieS (off balanCe Sheet itemS)

7.1. ClaimS on inStitution but not aCCepted by the inStitution The bank has received but not honored guarantee claims totaling NRs.16,387 thousands. Theseclaimswere received from Customs Officeafter expiry of guarantee. These are pending settlement owing to differences in interpretations of legal provisions.

Additionally, there are guarantee claims totaling NRs.33,515 thousands received by the bank but not honored at year end.The acceptance and settlement of these claims will follow the normal course of bank’s business.

7.2. reConCiliation of guarantee preSented in SChedule 17 and SChedule 30(b) In calculation of risk weighted exposure for Capital Adequacy calculation as per BASEL II guideline the bank has assigned zero risk weight to contingent liability in respect of guarantee issued by the Bank against Counter Guarantee backing of Foreign Financial Institution for an infrastructure project. The bank has obtained regulator’s approval vide NRB letter Bai.Bi.NniBi/BiR.2/Nabil Bank/17/067/68 and Bai.Bi.NniBi/BiR.2/Nabil Bank/5/067/68 to this effect. Due to this reason, differ-ent bank guarantee figures are presented in Schedule 17 “Contingent Liabilities” and in Schedule 30(B) “Credit Risk”. Reconciliation of same is presented hereunder:

(NRS. 000)

(NRS. 000)

(NRS. 000)

(NRS. 000)


year year

- fees on bank guarantee 55,549 53,802

- interest loan extended under subvention schemes 1,255 2,069

total 56,804 55,871


year year

- TDS payable 113,604 101,999

- VAT payable 974 1,597

- Stale instruments 5,578 6,406

- Payable to Customers 444,044 399,049

- Payable to Employees 1,480 17,865

- Other Payables 230,832 728,718

total 796,513 1,255,634


year year

Dividend relating to profit of Financial Year (FY)

1989 - 1990 to 1999 - 2000 2,259 2,869

2000 - 2001 to 2004 - 2005 4,567 4,274

2005 - 2006 to 2010 - 11 14,336 15,893

2011 - 2012 to 2013- 2014 88,980 511,825

total 110,142 534,861


year year

guarantee stated in Schedule 17 : 10,705,409 10,933,356

Guarantees (Bid Bond / Performance Bond) 5,271,970 4,320,547

- Advance Payment Guarantee 2,289,309 1,725,150

- Guarantee issued against Counter Guarantee

of Internationally rated banks 3,144,131 4,887,659

guarantee stated in Schedule 30(b) : 8,980,982 7,308,751

- Advance payment guarantee 2,289,309 1,725,150

- Bid bond, performance bond and counter guarantee

domestic counterparty 5,271,970 4,320,547

foreign counterparty (ECA Rating: 0-1) 1,419,703 1,263,054

foreign counterparty (ECA Rating: 2) 233,632 255,374

foreign counterparty (ECA Rating: 3-6) 669,274 355,921

9,883,887 7,920,046

- Counter guarantee assigned zero risk weightage 821,522 3,013,310

reconciled position 10,705,409 10,933,356


7.3. Contingent inCome tax liability Large Tax Payers’ Office (LTPO) conducts its assessment of each year’s tax filing done by the Bank generally within four years after end of each year. Following its assessment, LTPO can issue its reassessment order revising tax liability of the bank. However, the bank may choose to contest against such decisions. Such process would follow, in order, applying for administrative review to Director General at Inland Revenue Department (IRD) level; case filing at Revenue Tribunal; and case filing at Supreme Court.

Till the balance sheet date, the bank’s corporate tax liability up to income year 2005-06 has been cleared by the tax authority. Further, reassessment from LTPO has been completed for up to income year 2009-10. For the reassessment of last four years however, the bank has contested against the upward revision in tax liability as issued by LTPO in their reassessment order. Total contested amount of NRs.30,915 thousands that include additional tax, interest surcharges and penalty,inrespect of these four income years has been recognized as Continent Liability and presented in Schedule 17 of Financial Statements.

8. inCome

8.1. intereSt inCome on loanS and advanCeS Regulatory provision requires recognition of interest income from loans and advances on cash basis. NRB directive 04/070 proviso to Section 5(1) has additionally allowed licensed institutions to recognize as interest income, such amount that stood accrued at year end but has been subsequently recovered in cash within 15 days after year-end date. Further, following the devastating earthquake that hit Nepal in April 2015, NRB circular no. 30/071/72 has allowed licensed institutions to recognize interest income, such amount that accrued in the current year and is realized in cash up to October 17, 2015. The Bank did not chose to exercise these options and recognized in current year’s interest income only that amount accrued and recovered in cash within 16th July 2015.

The recognition of interest income on cash basis as required by regulatory requirement is not in accordance with NAS 7 “Revenue”, which stipulates that interest income be recognized on accrual basis.

8.2. dividend inCome The Bank has recognizedNRs.43,784 thousands as dividend income during the current financial year. NRs.14,700 thousands received from Mutual Fund is accounted on gross basis. NRs.27,640 thousands received from other domestic companies are accounted on net basis as final withholding income. NRs.1,444 thousands received from foreign entities (NRs.842 thousands from Visa Inc. and NRs.602 thousands from MasterCard Inc.) are accounted on gross basis.

Tax deducted by mutual fund and foreign entities is claimed at the time of filing income tax returns to the maximum extent available as per Income Tax Act of Nepal.

9. expenSeS

9.1. Staff expenSe

9.1.1. gratuity expense The Bank, during the current financial year, settled NRs.98,667 thousands in respect of gratuity obligation accrued till the balance sheet date by contributing in the approved retirement fund. The Bank does not have any incremental gratuity obligation as of balance sheet date. The gratuity expense is presented under “Pension and Gratuity Contribution” in Schedule 23 of the Financial Statements.

9.1.2. uniform expense As per Employee By-laws, office uniform used to be provided to employees up to certain corporate level once in every two years. Effective from current year employee uniform policy has been changed to provide uniform allowance once each year. Such expense is recognized as operating expense in the same year. This expense is also recognized as a component of taxable income while calculating employees’ individual tax liability.

9.1.3. others expense

Each year during the annual dashain festival, employees are provided with festival allowance equivalent to their one month’s gross salary.

During the current financial year, the bank accounted total leave expense of NRs.63,448 thousands. Of thisNRs.21,522 thousands was provided for incremental leave obligation (presented in Schedule 7) while NRs.41,926 thousands was paid to employees as leave encashment. Calculation of incremental leave obligation is also disclosed earlier in point 6.4.2 “Employee Welfare/ Leave Fund”. Per Employee By-laws, accrued leave period can accumulate up to maximum ceiling of 105 days. At Mid April each year, when fresh leave is assigned to employees, accrued leave period in excess of 105 days is settled in cash payment.

Under other staff expense the bank expensed NRs.427 thousands for providing souvenir to staff serving in the bank for over 25 years, in recognition of their contribution and dedication to the bank’s growth. The bank also expense Nrs.1,020 thousands towards immediate relief to staff whose property and life suffered extensive damage from the earthquake. Besides, funeral grant Nrs.255 thousands, cash incentive Nrs.343 thousands and overtime Nrs.1,222 thousands are also grouped in this heading.

(NRS. 000)


year year

- dashain allowance 33,705 33,190

- leave encashment and provisions 63,448 40,486

- Other Staff Expense 3,267 3,418

net closing balance 100,420 77,093

presented in Shedule 23 ‘personnel expense’ 100,420 77,093


9.2. impairment loSS

9.2.1. In case of investments in local listed companies, impairment test is conducted based on their prevailing market price.

9.2.2. In case of investments in local non-listed companies, impairment test is conducted on equity basis based on most recent provisional financial statement at mid-April 2015 that the bank has received from these institutions.

9.2.3. In case of accounts receivable, impairment test is conducted by assessing level of doubt over its recoverability.

9.2.4. The bank recognized total impairment loss of NRs.164,975 thousands in the current year, calculation as presented hereunder:

9.2.5. At previous year end the bank had recorded impairment loss of NRs.2,692 thousands in its equity investment in three domestic companies (licensed microfinance institutions). In the current year all these microfinance institutions, along with two other microfinance institutions, underwent merger to form Nepal Grameen Bikas Bank Ltd. Government of Nepal has provided subsidy of Nrs.100,000 thousands in the new company. The company has called for additional equity injection from existing shareholders of one of the original companies whose networth was negative. The merger process is not yet completed at current year end and the new shareholding structure in the merged entity is yet to be finalized at the shareholders special annual general meeting. The bank has tested for impairment of its investment at cost in the merged company on equity basis and recognized further impairment loss of NRs.4,295 thousands in the current year.

9.2.6. In the current year the bank has recognized additional impairment loss of NRs.12,362 thousands on receivables from customers, assessing its recoverability as doubtful. Such receivable mostly relate to expenses incurred towards maintaining security of collateral in bank’s control in case of default borrowing customers.

9.2.7. In the current year the bank has recognized net additional impairment loss of NRs.148,318 thousands on loans and advances to customers, calculated as per regulatory requirements and presented in “Schedule 13” of the financial statements.

9.3. inCome and deferred tax

9.3.1. Corporate tax rate The corporate tax liabilities of Group are computed and assessed individually. As per Income Tax Act 2002, the tax rates enacted and substantively enacted at the balance sheet date are 30% and 25% respectively for the Bank and its Subsidiary.

9.3.2. Current tax After adjusting for disallowable and tax free items the Bank and its subsidiary have computed current year corporate tax expense of NRs.896,878 thousands and NRs.9,609 thousands respectively. Calculation detail is presented hereunder.

(NRS. 000)

(NRS. 000)


year year

Impairment loss (net of write back):

- on loans and advances (net of write back) 148,318 235,733

- on investments 4,295 (13,599)

- on FCY bonds - (11,773)

- on LCY equity instruments 4,295 (1,826)

- on account receivable from customers 12,362 1,154

total 164,975 223,288

partiCularS nabil SubSidiary

bank year

Profit from all activities 3,279,460 39,364

- provision for staff bonus (298,133) (3,579)

Profit before tax and tax related adjustments 2,981,327 35,786

Add back disallowable expenses 44,519 6,972

- donation 74 -

- provision on investments and receivables 16,658 1,955

- employee’s leave provision 21,522 262

- capital nature expense charged to revenue 1,265 -

- excess depreciation and repair expense - 4,745

- other disallowed expenses 5,000 10

Deduct allowable expenses and inadmissible income (36,252) (4,322)

- gain on sale of fixed assets (581) -

- gratuity expense paid to employees (6,170) -

- final with holding income - dividend, meeting fees (28,022) (72)

- excess depreciation charged for tax computation (1,479) (4,250)

Taxable Income 2,989,594 38,436

Corporate tax liability @ 30% and

@ 25% respectively 896,878 9,609

Current year tax presented in profit and loss account 896,878 9,609

note: figures stated in parenthesis are deductible balance.


9.3.3. deferred taxThe difference between Current Tax disclosed above in point 9.3.2 and Accounting tax computed below is recognized as deferred tax. Account-ing tax is computed on accounting profit which is profit before tax (before adjustments of temporary difference) less any permanent differences. Permanent difference in the case of Group arose on donation (not paid to tax exempt entity) and meeting fees and dividend received from domestic companies (the tax of which is final withholding tax) where the bank has held equity interest. The bank’s and group’s deferred tax calculation for current year is disclosed hereunder.

Inter-company adjustments appearing above are in respect of dividend payout made by the Subsidiary to the Bank in the current year. NRs.14,820 thousands is the net dividend received by the Bank whereas NRs.780 thousands is the TDS on dividend payout. The Bank has accounted this dividend income net of tax as final withholding income.

9.3.4. reconciliation of accounting tax with tax expenseThe relationship between tax expense and accounting profit is explained reconciling figures as under:

(NRS. 000)

(NRS. 000)

partiCularS nabil SubSidiary inter-Co. group

bank Co. adJuStment total

Profit from all activities 3,279,460 39,364 (14,820) 3,304,004

- provision for staff bonus (298,133) (3,579) - (301,711)

profit before tax and adjustments 2,981,327 35,786 (14,820) 3,002,293

Adjustments for permanent difference:

- donation 74 - - 74

- other disallowed expenses 5,000 10 - 5,010

- final withholding income (28,022) (72) - (28,094)

accounting profit after adjustments 2,958,379 35,724 (14,820) 2,979,283

Accounting tax @ 30% and @ 25% respectively (A) 887,514 8,931 - 896,445

Current Tax per Profit and Loss Account (B) 896,878 9,609 780 907,267

deferred tax income (b-a) 9,365 678 10,043

partiCularS nabil SubSidiary inter-Co. group

bank Co. adJuStment total

Profit before tax and tax related adjustments 2,981,327 35,786 (14,820) 3,002,293

- corporate tax rate 30% 25%

Corporate tax 894,398 8,946 903,345

Tax impact of permanent difference:

- donation 22 - 22

- other disallowed expenses 1,500 3 1,503

- final withholding income (8,407) (18) (8,425)

Prior period tax - - -

total accounting tax 887,514 8,931 896,445

Accounting Tax as expensed in Profit and Loss account:

- current tax 896,878 9,609 780 907,267

- deferred tax (9,365) (678) (10,043)

- prior period tax - - -

total tax expense in profit and loss account 887,514 8,931 780 897,225


9.3.5. deferred tax assetsAt current year end deferred tax assets of the Bank increased to NRs.52,544 thousands from previous year’s NRs.43,179 thousands.

The Subsidiary’s deferred tax assetsincreased to NRs.810thousands from previous year’s NRs.132 thousands. Detail calculation of temporary differences and deferred tax assets/liabilities at 16th July 2015 are presented hereunder:

* Net Temporary difference presented in parenthesis represents net taxable difference.

9.3.6. temporary difference in fixed assetsDetail on carrying amount and tax base of the Bank’s fixed assets having taxable / deductible differences are presented as under:

9.3.7. The Bank and its subsidiary have deposited advance tax in line with Income Tax Act 2002. The amount is disclosed in the face of balance sheet by netting with income tax liabilities. Offsetting of ad-vance tax and tax liabilities of the Bank and its subsidiary have not been done for presentation in consolidated financial statements.

There is advance tax (net of tax liability) of NRs.4,465 thousands in the book of subsidiary as of balance sheet date. 10. non-Controlling intereSt (nCi)The Bank’s effective interest in its Subsidiary remained at 74.29% while that of NCI remained at 25.71% at balance sheet date.

10.1. nCi’S Share in the profit of SubSidiaryNet profit of Subsidiary attributable to NCI is disclosed as under:

partiCularS Current year previouS year

nabil bank nabil inveSt group nabil bank nabil inveSt group

temporary difference on fixed assets (37,790) 413 (37,377) (36,995) (83) (37,077)

- tax base 533,134 15,255 548,389 564,626 16,776 581,402

- carrying value 570,923 14,842 585,765 601,621 16,859 618,479

other items of temporary differences 212,936 2,827 215,763 180,925 610 181,536

- provision for other assets 19,716 1,955 21,671 7,354 - 7,354

- employees’ leave provision 123,091 872 123,963 101,569 610 102,179

- employees’ gratuity provision 63,141 - 63,141 69,311 - 69,311

- investment impairment provision 6,987 - 6,987 2,692 - 2,692

net temporary difference * 175,146 3,240 178,386 143,931 528 144,459

DTA calculation @ 30% / 25% 52,544 810 53,354 43,179 132 43,311

DTA presented in Schedule 16 (restated) 52,544 - 52,544 43,179

(NRS. IN MILLION)

(NRS. 000)

(NRS. 000)

(NRS. 000)

partiCularS Carrying tax taxable

amount baSe differenCe

asset Class :

- vehicle 103,771 94,879 8,892

- building 236,643 231,664 4,979

- software 20,538 16,621 3,917

- leasehold 23,569 15,437 8,132

- office equipment 186,402 172,673 13,729

- other assets - 1,859 (1,859)

total 570,923 533,134 37,790

partiCularS nabil SubSidiary group

bank Co.

Opening balance 2,511 (2,535)

add : current tax 896,878 9,609

less : advance tax paid (895,914) (11,540)

less : previous year’s tax paid (2,511) -

Closing balance : liability / (asset) 964 (4,465) 964

tax liability in balance Sheet 964 964

detailS of advanCe nabil SubSidiary group

tax paymentS bank Co.

- 1st instalment 378,600 - 378,600

- 2nd instalment 255,555 - 255,555

- 3rd instalment 255,555 - 255,555

- tax deducted at source by withholder 6,204 11,540 17,743

total 895,914 11,540 907,453

(NRS. 000)


year year

Subsidiary’s operating profit 39,364 46,431

- less : provision for staff bonus (3,579) (4,221)

- less : provision for income tax (8,931) (10,555)

Subsidiary’s net profit 26,855 31,655

nCi’s share @ 25.71% 6,905 8,140


10.2. nCi in ConSolidated balanCe SheetWith increase in Subsidiary’s net worth, the proportionate equity attrib-utable to NCI has also increased to NRs.38,742 thousands from previ-ous years NRs.37,472 thousands. This is a year-on-year growth rate of 3.39%.Growth rate was recorded at 12.82% in the previous year.

Besides, their share of growth in equity, NCI also benefited from a grossdividend payout of NRs.5,400 thousands, or 20% on paid up equity, out of previous years income that was subsequently distributed in the current year.

11. riSk management and baSel ii diSCloSure

» Risk is an inherent feature of any business and it drives an entity towards income generation. Likewise, risk management objective of the Bank is to strike balance between risk and return, and ensure optimum risk-adjusted return on capital. A reasonable level of return is essential for sustainability of the business. However, taking higher risk in search of higher earnings may have chances to result in failure of business. Thus effective risk management is a must for business success. Towards this end Nabil Bank has implemented robust risk management architecture as well as policies and processes approved by the Board of Directors. These encompass independent identifica-tion, measurement and management of risks across various facets of banking operation.

» Bank has been following the practices that are envisaged in Principles of Basel Committee on Banking Supervision and are taken as refer-ence before assuming risk exposure in any new business. The bank, taking stock of local ingredients as well, defines different risk aspects and designs system to minimize and remove those risks. The Bank’s risk appetite and approach towards risk taking is discussed in detail at management level and board level. These are always aligned with the business, its return and sufficiency of capital.

» The bank follows Internal Capital Adequacy Assessment Process (ICAAP) and Risk Management Guidelines while taking decision on any business. It has always taken note of ICAAP and has taken steps accordingly in ensuring soundness of capital position and sustainabil-ity of the business. Bank’s different committees like Audit Committee, Risk Management Committee review the business and risks periodi-cally and take account of stress test results, scenario analysis so as to align risk, return and capital in sustainable manner.

» Increasing complexities in risks, vulnerabilities of businesses and fast changing world with intense competition pose a threat to sustain-ability. The Bank, in order to address the varieties of risk that keep coming out of business operations, has identified different risks and adopted different measures to minimize them.

» Capital is crucial component in any business and even more so in case of banks. Hence, bank capital is regulated so as to withstand the impact of adverse developments in its internal operations and its external operating environment. Similarly the bank needs to maintain sufficient capital for business growth. Nabil Bank has adopted Internal Capital Adequacy Assessment Process and it follows Risk Management Guidelines while taking decision on any business. Audit Committee and Risk Management Committee of the Board review the business and risks aspects periodically. These committees also take account of stress test results and scenario analysis so as to align the bank’s risk / return portfolio and ensure adequacy of capital consider-ing business sustainability at all times.

» Capital planning is an integral part of the bank’s medium term strategic planning and annual budget formulation process. Total risk weighted exposures for the projected level of business operations is calculated, the required capital level is projected, and a plan is formulated to retain the required capital.

» Ever since its establishment 31 years ago, the bank has been able to generate and retain substantial earnings in order to ensure adequate capital formation, as required for its business growth. The bank is well capitalized and able to maintain the required capital through internal generation, and equally through other means if needed.

» The bank’s business is exposed to increasing complexities in risks which pose a threat to sustainability. Failure in timely identification of risk and its correction/management poses a serious threat to our busi-ness success. As such risk management is a daunting task that has a grave impact on our operations. Understanding the fact the bank has been taken account of likely impact and has aligned its business that addresses the issue under each risk area.

» Banking business in Nepal is exposed to Credit Risk to a much larger extent. Nabil’s business is also concentrated in its Credit Risk Expo-sure. Bulk of its earnings is generated from credit related business, be it in form of interest income, fee income or forex income. Given the volatile economic environment that we operate in, the margin between performing loan and non-performing loan can often be very thin. Therefore it is always a major threat that any of the bank’s credit customers may default.

» Nabil has always placed Credit Risk Management high in the priority list. The bank has Credit Policy and Investment Policy in place which guides the do’s and the don’ts in business generation. Any generation of risk assets and their impact on long term value generation is well deliberated in every credit proposals. Risks and returns are properly weighed and risk mitigating measures are explicitly spelled out.

(NRS. 000)

SubSidiary Co. nCi’S Share

partiCularS Current previouS Current previouS

year year year year

Carrying amount

- paid up equity capital 105,000 105,000 27,000 27,000

- reserves and surplus 45,661 40,725 11,742 10,472

total 150,661 145,725 38,742 37,472

increment in carrying amount 3.39% 3.39%


» In its’ Risk Management Architecture the bank has set clear demarca-tion between business generation division and risk management divi-sion. Accordingly the bank has set up a separate Credit Risk Division, which is headed by Chief Risk Officer (CRO), one of the most senior level positions in the Bank. The division is independent to business generation and does not have any targets, nor has any incentive for growth in business. The division oversees global, macro, micro and unit level risk that arise out of daily business operation as well as out of changes in market conditions that affect particular borrowing customers / counterparties.

» The Bank’s credit functions are broadly categorized as Large and Corporate (including infrastructure financing), SME and Retail credit. Credit Risk Division is manned with separate set of skills for analyz-ing risks in these different credit functions and all of them report to the Chief Risk Officer. Besides, the bank has a system to check and analyze the health of credit portfolio minutely at each borrowing unit level irrespective of size of the exposure on defined periodic manner. At all times this system ensures that any borrowing unit showing smoke signal gets prompt doses of correction as deemed appropriate.

» The Bank makes credit extension decision by assessing each business proposal thoroughly. It also ensures that the inherent credit risks that are associated with the business are addressed appropriately through coverage of better safety margin, additional collateral back up and lower exposure to keep the business at low leverage.

» There is separate Credit Administration and Support Division (CAS Division), which prepares security documents and retains custody of same. This is a four eyes concept in verifying the security aspects in line with the approved conditions. CAS Division is also indepen-dent to business division and it ensures, on an ongoing basis, on the safety and going concern of the borrowing customers, through post relationship assessment. Periodic review of all accounts under credit exposure is one of the prudent practices that the Bank follows in order to take necessary steps to avert/minimize the risk. Quarterly on-site inspection of the borrower and suggestion for timely corrective actions itself help protect borrowers as well. Besides, in case any bor-rower face difficulties and pose a risk to the Bank in terms of fall in the value of assets, the Bank sets aside adequate loan loss provision. Any business decision for credit exposure is taken only if it is vetted and approved by the credit risk division. Business generation unit singly cannot take a credit exposure decision except on instrument purchase where security is instrument itself and the loan gets settled once instrument is realized.

» Bank has standardized Product Papers that stipulate proper gover-nance and procedure for all credit relationship. Similarly, periodic monitoring of business and annual review of credit relationship provides the bank a fair idea on whether or not to continue the relationship. Besides, periodic review of same by the Internal Audit Department or Statutory Audit also assists in identifying the status of exposure/relationship in line with guiding documents of the Bank. Any weaknesses on the part of the business of borrower and the re-lationship strength are independently assessed by Internal Audit and

the advice is taken positively for necessary changes. Similarly there is separate division Centralized Loan Administration Department (CLAD) for exposure accounting, disbursement and settlement. This is again independent to Business, Credit Risk Division and CAS.

» Within the Credit Risk Management, processes are well defined where checking, control and independence of the credit extension, risk assessment, review, monitoring and exposure accounting is fully complied with.

» All such actions and processes are properly recorded, reported and discussed. These reports on need basis and on a defined frequency are put to the oversight of Senior Management, Risk Management Committee and the Board. Internal Audit Department of the bank too takes up the matter on credit observations and discusses the same at Audit Committee. Senior Management or the Board, on need basis, issue instruction as appropriate wherever necessary.

» One of the growing risks among others these days is Operations Risk that arises out of inefficient processes and people inside and outside the Bank. Asset Liability Management Committee (Alco) is the management committee where operating risk, market risk and other risks are discussed, in line with ALM Policy. Banking System (BS) is another area of concern where it has witnessed growing threat from outside. Information and Technology Division in the bank reviews and checks the security aspects in line with IT Policy of the Bank. Bank has conducted an IS Audit of the bank’s system and suggestions given by the audit with respect to safety and security standards are being put in place.

» Bank has separate division to oversee operation risk including Compliance of KYC and AML. The division is headed by senior level staff with adequate access to the daily report, operational processes and right to recommend the changes in the system and procedures. The head of operation risk directly reports to the Chief Risk Officer. Bank has SIMs (Standing Instruction Manuals) for all businesses of the bank. All the activities are undertaken in line with the set criteria in the Standing Instruction Manual, policies and guidelines including Directives and circulars from central bank (the regulatory authority). Similarly daily functions at operations are independently reported through separate reporting line other than business generation and credit risk where independence of checking and control is complied with.

» Processes are reviewed periodically so that their perfection can be weighed and any shortcoming can be addressed. Most of the functions like line approval, bill payment, loan disbursement are centralized which controls activities that can cause mistake due to inadequate knowledge on the part of staff. Similarly awareness to the public is made on our services and products periodically by placing the notices in the website of the bank, or in branches or publishing notices as appropriate. Staffs are given orientation on the job includ-ing that of system of the bank before they are placed for the job and are guided to follow the SIMs for the job. Any staff for the first time in any job is put under the supervision of an experienced staff and is


allowed to work independently after attaining required skills. Bank has Whistle Blowing Policy to report to senior or management directly on anyone’s suspicious conduct outside and inside the bank. Skill development and skill enhancement programs are conducted on peri-odic basis and staffs identified for the program get the opportunity for training, seminar and workshop. Adequate numbers of trainings are conducted and staffs required with training are given the opportunity for skill enhancement. Knowledge sharing is one of the core methods of skill development. If a staff gets any training, s/he is encouraged to share the same among the peers in the division/branch.

» In operations, the Bank has put in place a maker and checker concept in which a transaction has to compulsorily go through two individuals from a control standpoint with proper transaction right to capture deviations, if any. Similarly MIS Reports are generated to check correctness of transactions and any mistakes are promptly addressed and rectified. The activities of a personnel and division / branch can be viewed and monitored centrally through an integrated system, which helps in minimizing the risk of misconduct, if any. The Bank has an on-line replication Disaster Recovery Site (DRS) which captures the record of each transaction that takes place at the Production Server. Both the sites (Production Server and Disaster Recovery – Back up site) are housed in well-conditioned and high shock resistant buildings and are at different seismic zone, far from each other. DRS is outsourced to a professionally managed company having expertise in the sector. Drill is being done periodically and is being tested occasionally to assess the functioning of DRS.

» Each desktop is implemented with Active Directory System (ADS) which does not allow user to take away the data in devices like data traveler (pen drive) or bring in data for processing or any other purposes posing threat to the repository. Similarly individual data in desk are also stored and backed up in periodic interval at data center so that any loss of data in desktop can be retrieved from data center.

» The Bank has a separate Legal division which is adequately manned by qualified and experienced staff. All legal agreements, deeds and documents including claims and charges are thoroughly studied prior to making any decision involving such documents. Compliance with existing rules and regulations and business practices globally and lo-cally are taken into account before arriving at the decision. The cases where the Bank needs expert’s opinion on any of the issues the same is done through the expert in the respective field.

» The Bank in line with Basel provisions calculates risk exposure and allocates sufficient capital/cushion for perceived operational risks.

» Market Risks are discussed at Asset Liability Management Committee (ALCO) of the bank and even discussed at respective division level on open position on daily basis. The limits for open position are controlled, level wise which ensures in-depth knowledge of the market and movement before taking decision (by choice). The month-ly reports on such aspects are well discussed and dealt in ALCO. The committee ensures functioning of the jobs in line with the policies and procedures and suggests/recommends for necessary steps col-lectively to address the risk on interest rate movement, exchange rate movement and equity price changes. Most of the market operations (investments) are done from the Treasury Front Office which reports to the Chief Financial Officer and exposure accounting including booking of income/expense is done from Treasury Back Office (TFO) which reports to the Chief Operating Officer. The Bank assesses the open position on daily basis and calculates risk exposure for alloca-tion of required capital in line with Basel provisions. Likely impact on earnings due to change in the market condition and change in the standing of the counterparty are well assessed periodically and neces-sary actions are taken as appropriate. TFO is equipped with advanced dealing platform for timely and effectively concluding the deals. Similarly the unit is equipped with modern and advanced information system on global news, market movements and any incidents so that bank can manage and maintain the position favorably.

» The Bank takes on the capital adequacy norms pursuant to the cen-tral bank’s statutory provision under Basel requirements, like ICAAP, Risk Management Guidelines etc. The determinants to this end are the past experiences with the products, Bank’s own risk assessment culture and contingency management for unpredictable situations. To this effect, going by the best international practices, the Bank pro-vides for adequate capital to withstand the inherent risks against the assets of the Bank. Wherever possible the Bank obtains additional collateral, set aside higher safety margin and operates under prudent banking norms. The Bank, equally through its annual plans, projects the capital adequacy and risk exposure growth which is reviewed monthly. The Bank also reviews its total risk weighted exposure and Capital Adequacy Ratio (CAR) on daily basis. There are discussed at ALCO and X-Com meetings on monthly basis. If growth exposure is higher than the formation of capital in the Bank, the Bank pulls rein on business generation so that CAR can be maintained. However the Bank has not experienced such instances in its history of 30 years. The adequacy of capital is seriously taken into consideration at regu-lar meetings like ALCO, X-Com (Executive Committee), RMC and the Board meetings.


11.1. riSk management frameWork and reporting line are preSented aS folloWS:

board of the directors

Chief executive officer

Chief risk officer(Credit Risks and Legal Risks)

Head-Legal, Operation Risk, AML & Compliance

Head – Credit Risk Management of Infrastructure, Corporate,

SME, and Retail Credit

alCo (including CEO)

(operations risks and market risks -

exchange, interest, equity price, liquidity

and others risk)

Committee relating to Staff Services & facilities audit Committee

risk management Committee


11.2. Internal audit of the Bank is independent from the manage-ment and directly reports to Audit Committee, a board level committee. Internal Audit too has adopted risk based auditing approach. Further the bank’s Planning Unit assesses macroeconomic indicators both on a national and international level and observes the market trend and suggests for necessary action to minimize the risks involved.

11.3. Bank has Risk Management Committee (a board level com-mittee comprising member from risk divisions of the bank also) where overall risk management including performance of the bank is discussed in detail so as to assess the solvency of the bank and necessary instruc-tions are issued to concerned division and recommendation are made to the Board for necessary deliberation and implementation.

11.4. Bank has Human Resource Service Benefit Committee (a board level committee comprising members from HRD and Finance divisions of the bank also) where overall policy with respect to employment management and staff benefit is assessed and necessary suggestions are made to the Board taking account of market/environment.

11.5. The Bank has developed a risk assessment culture and has in place the required reports for assessing concentration of risks. Periodic performance reporting based on Balanced Scorecard, in line with capital strength, to the Board is also in place. These reports are periodically put up to the board. Board also reviews the same and issues instructions, as appropriate, to the Bank’s management. » Deposits with Banks,» Deposits with other banks and financial institutions,» Securities / instruments issued by the Government and NRB,» Guarantee of government of Nepal,» Security / guarantee of other sovereigns,» Guarantee of domestic banks,» Security / guarantee of specified multilateral development banks, and» Security / guarantee of foreign banks.

11.6. Credit risk mitigating factors are recognized only when following eligibility criteria is fulfilled:» That the Bank holds clear rights over the collateral to liquidate in the event of default,» That the credit quality of the borrower (obligor) and the collateral does not have material positive correlation,» That the maturity of the collateral is longer than the maturity of the credit exposure being undertaken,» That the currency mismatches arising from possible differences in denomination of currencies of collateral and credit exposure is minimized to the extent possible. In case of existence of mismatches, 10% haircut is assigned on the gross value of CRM,» That the Bank employs policies and procedures to manage legal, operational, liquidity and market risks that may be exposed from the credit risk mitigating factors, » That the guarantees of domestic and foreign institutions are unconditional whatsoever.

11.7. During the current financial year, the Bank has availed the benefits of credit risk mitigation as under: While availing the benefits of credit risk mitigation, supervisory haircuts have been assigned on case to case basis by:

» 20%, in case of CRM in the form of deposits with other banks and financial institutions,» 20% and 50%, in case of CRM in the form of security / guarantee of foreign banks with ECA rating 0 - 1 and ECA rating 2.

11.8. Capital Structure and Capital adequacy: As at balance sheet date, the Bank’s capital adequacy status is presented as under: Details on calculation of the Bank’s Capital Adequacy Ratio at balance sheet date is presented in financial statements under Schedule 30 (A1), 30 (B), 30 (C), 30 (D) and 30 (E). Major aspects of the bank’s risk exposure, capital structure and capital ratios are also disclosed in this section.

(NRS. 000)

(NRS. 000)


year year

Benefits availed of following credit risk mitigants :

- deposit with own bank 1,987,618 1,630,925

- deposit with other banks and financial institutions - -

- securities and bank guarantees

issued by foreign banks 2,193,108 2,195,597

- securities issued by nepal government and

nepal rastra bank 10,525 6,525

total 4,191,251 3,833,047


year year

Total Capital Fund 10,154,456 8,259,651

- Core Capital Fund (Tier - I) 8,937,834 7,149,441

- Supplementary Capital Fund (Tier - II) 1,216,622 1,110,210

Total Risk Weighted Exposures (RWE) 87,766,261 73,854,239

tier - i Capital fund to total rWe (%) 10.18 9.68

total Capital fund to total rWe (%) 11.57 11.18


11.8.1. Components of tier i Capital fund:

Other Free reserve includes deferred tax reserve and interest spread reserve presented in Schedule – 2 of the financial statements.

11.8.2. deductions from Capital:Deductions in Tier I Capital Fund have been made for equivalent amounts in respect of following items:» Bank’s equity investment in its Subsidiary NRs.78,000 thousands» Loan extended to individual / company holding more than 1% shares of the bank NRs.40,000 thousands.» Deferred tax assets NRs.52,544 thousands.

11.8.3. Components of tier ii Capital fund:

Subordinated term debt presented at NRs.180,000 thousands above is net of debenture redemption reserve NRs.120,000 thousands that is presented under Tier I Capital Fund. This presentation reflects the diminishing value of these instruments as a continuing source of strength and complies with the requirement of applying a cumulative discount (amortization) factor of 20% per annum for capital adequacy computations, during the last 5 years to maturity. This presentation ensures avoidance of a sudden drop in the bank’s capital fund, by debenture value, in the final year of debenture redemption. The carrying value of debenture continues at its face value of NRs.300,000 thousands in the bank’s financial statements.

general loan loss provision created in respect of performing loans is eligible for inclusion in Tier II Capital Fund. The maximum threshold is set at 1.25% of total risk weighted exposures i.e. NRs.1,097,178 thousands derived from total risk exposures of the bank as of current year end. However, the additional loan loss provision created for performing loans in respect of loans secured by personal guarantee and loans extended in excess of the bank’s single obligor limit are defined as specific provision and do not qualify for inclusion in Tier II Capital Fund. The bank has thus presented NRs.659,409 thousands general loan loss provision component under Tier II capital fund in above table. This figure differs with the loan loss provision of NRs.684,840 thousands in respect of pass loans (including watch list) presented in Schedule 13 due to the reason explained above.

other reserves NRs.15,124 thousands presented under Tier II Capital Fund is the contingent reserve fund disclosed in this notes to accounts earlier in point 2.2.

(NRS. 000) (NRS. 000)


year year

Eligible items for Tier - I Capital Fund :

a. Paid up equity share capital 3,657,654 3,047,168

b. Irredeemable Non-cumulative preference shares - -

c. Share Premium 74 74

d. Proposed Bonus Shares 1,097,296 609,434

e. General Reserves 3,503,500 3,084,500

f. Retained Earnings 674,732 463,687

g. Current year Profit/(loss) - -

h. Debenture Redemption Reserves 120,000 60,000

i. Capital Redemption Reserves - -

j. Capital Adjustment Reserves - -

k. Dividend Equalization Reserves - -

l. Other Free Reserves 55,122 45,831

m. Less: Goodwill - -

n. Less: Fictitious Assets not written off - -

o. Less: Deferred Tax Reserve (52,544) (43,253)

p. Less: Investment in equity of licensed

Financial Institutions - -

q. Less: Investment in equity of institutions

with financial interests (78,000) (78,000)

r. Less: Loans & Facilities extended to

Related Parties & Restricted Lending (40,000) (40,000)

Core Capital fund (tier - i) 8,937,834 7,149,441


year year

Eligible items for Tier - II Capital Fund :

a. Cumulative and / or Redeemable Preference Share - -

b. Subordinated Term Debt 180,000 240,000

c. Hybrid Capital Instruments - -

d. General loan loss provision 659,409 539,844

e. Exchange Equalization Reserves 222,900 177,400

f. Investments Adjustment Reserves 139,190 138,392

g. Assets Revaluation Reserves - -

h. Other Reserves 15,124 14,574

Supplementary Capital fund (tier - ii) 1,216,622 1,110,210


11.8.4. details of Subordinated term debt:The Bank issued Nabil Bank Bond 2075 (2018 A.D.) for face value of NRs.300 million in July/August 2008. Main features of the bond are as follows:

» Maturity period: 10 Years.» Interest rate: 8.5% per annum.» Interest Payment frequency: Half Yearly.» Claim in case of liquidation: After depositors.» Creation of Debenture Redemption Reserve from year 2013/14 (i.e. from 6th year). Accordingly debenture redemption reserve of NRs.60,000 thousands i.e.20% of NRs.300,000 thousands is being credited into the reserve fund since previous year. The total fund in debenture redemption reserve stands at Nrs.120,000 thousands.

11.8.5. risk Weighted exposures for Credit risk, market risk and operational risk:The Bank’s total Risk Weighted Exposures at current year end is recorded at NRs.87,774,207 thousands, that is a 18.85% growth over NRs.73,854,239 thousands at previous year end.

11.8.6. risk Weighted exposures under 11 categories of Credit risk:

(NRS. 000)


year year

Risk Weighted Exposures :

» for Credit Risk 78,774,890 66,294,545

» for Operational Risk 6,896,370 5,902,880

» for Market Risk 374,093 208,693

Adjustments under Pillar - II

» add: …. % of the total RWE due to non

compliance to Disclosure Requirement - -

» add: … % of the total Deposit due to

insufficient Liquid Assets - -

» add: 2% of the total RWE upon

Supervisory Review 1,720,907 1,448,122

total risk Weighted exposures

(after bank’s adjustments of pillar ii) 87,766,261 73,854,239

(NRS. 000)


year year

Risk exposure categories under Credit Risk :

a. Claims on Government & Central Bank - -

b. Claims on Other Financial Entities - -

c. Claims on Banks 5,064,876 3,388,574

d. Claims on Domestic Corporates and

Securities Firms 46,482,941 37,155,695

e. Claims on Regulatory Retail Portfolio 4,350,790 2,489,642

f. Claims Secured by Residential Properties 5,149,503 4,377,070

g. Claims secured by Commercial real estate 675,398 1,678,757

h. Past due claims 1,110,415 1,855,718

i. High Risk claims 3,017,147 1,854,266

j. Other Assets 1,857,107 4,608,853

k. Off Balance Items 11,066,714 8,885,970

total risk weighted exposure under Credit risk 78,774,890 66,294,545


period 0-7 8-30 31-90 91-180 181-270 271-365 1 year

dayS dayS dayS dayS dayS dayS and above total

assets

1. Cash Balances 18,202 - - - - - - 18,202

2. Balances held with Banks

and Financial Institutions 12,589 - - - - - 129,246 141,835

3. Investments in Foreign Banks - 20,991 33,900 48,564 33,545 16,835 2,539 156,374

4. Call Money 3,235 - - - - - - 3,235

5. Government Securities - - 79,172 7,484 10,415 18,358 - 115,429

6. NRB Bonds - - - - 2,426 6,629 12,785 21,840

7. Inter-Bank / Financial Lending /

Investments in Local Banks - - - - - - - -

8. Loans and Advances

(including staff loans) 13,122 27,171 71,521 61,390 43,929 43,929 423,443 684,506

9. Accrued Interest Receivables

(including AIR from staff loans) 182 343 1,102 1,056 1,021 883 3,417 8,004

10. Reverse Repo 12,000 - - - - - - 12,000

11. Receivable under Commitment - - - - - - - -

12. Receivable under facility

mentioned in S. No. 20, 21 and 22 13,696 20,317 66,783 52,807 54,706 35,426 37,461 281,196

13. Others 11 39 791 39 - - 244 1,124

total assets 73,037 68,862 253,269 171,339 146,042 122,061 609,135 1,443,746

liabilities

14. Current Deposits (Including

Margin Deposits and Matured TDs) 5,820 9,132 - - - - 132,147 147,099

15. Savings Deposit 14,528 21,792 - - - - 390,830 427,151

16. Fixed Deposits 2,307 15,828 40,279 44,383 21,287 23,136 11,499 158,719

17. Bonds / Debentures - - - - - - 3,000 3,000

18. Borrowings: - - - - - - - -

Call / Short Notice - - - - - - - -

Inter-Bank / Financial Institutions - - - - - - - -

Refinance - - - - - - - -

Others (Standing Liquidity Facility) - - - - - - - -

19. Other Liabilities and Provisions 2,001 5,730 1,607 696 142 155 2,766 13,098

Sundry Creditors - - - - - - - -

Bills Payable 487 730 730 487 - - - 2,434

Accrued Interest Payable - - - - - - - -

Provisions - - - - - - - -

Others 1,514 5,000 876 210 142 155 2,766 10,664

20. Payable to Institutions under

Commitment (Customer Acceptance) 1,642 4,605 7,003 638 - - - 13,888

21. Unutilised Credit Facilities 5,377 8,675 22,142 23,692 27,161 10,916 135 98,098

22. Letter of Credit / Guarantee (Net) 8,198 9,295 45,059 26,099 28,020 22,315 34,003 172,989

23. Repo - - - - - - - -

24. Payable of facilities under

mentioned in S. No. 11 - - - - - - - -

25. Call Deposit 17,142 25,713 - - - - 266,556 309,411

26. Others 85 - - - - - - 85

total liabilities 57,101 100,769 116,089 95,509 76,610 56,522 840,936 1,343,537

net assets 15,936 (31,907) 137,181 75,830 69,432 65,539 (231,801) 100,209

Cumulative net assets 15,936 (15,971) 121,209 197,039 266,471 332,010 100,209

12. Statement of liquidity riSk analySiS As at 16 July 2015

NPR in Lakhs


13. related partieS diSCloSureS

13.1. key management perSonnel

Key Management Personnel of the Bank include members of the Board, Chief Executive Officer and all managerial level executives. Following is a list of Board of Directors and CEO bearing office at 16th July 2015.

Mr. Shambhu Prasad Poudyal - Chairman Mr. Dayaram Gopal Agrawal - DirectorMr. Nirvana Kumar Chaudhary - DirectorMr. Ashish Sharma - DirectorMr. Mohiuddin Ahmed - DirectorMr. Sashin Joshi - Chief Executive Officer

13.2. CompenSation to key management perSonnel

13.2.1. Compensation to board of directorsAll members of the Board are non-executive directors and no executive compensation is paid to the directors. Specific non-executive allowances paid to directors are as under:

Directors are paid a monthly allowance of NRs.15 thousands towards coverage of newspaper and communication expenses. Other expenses are incurred for conducting board meeting and towards reimbursement of travelling, accommodation and daily allowances paid to directors who do not reside in Nepal and have to come to Nepal for attending board meetings.

13.2.2.Compensation to management level employeesDuring the current financial year NRs.225,608 thousands was incurred towards compensation to executive Management Team of the Bank. The table presented hereunder in segregation of such compensation into short term benefits and post-retirement benefits. Short term benefits are paid to employees in the same year these accrued. Post-retirement benefits include incremental leave provision, payment to gratuity fund, employer’s contribution to employee’s provident fund, and employee’s life insurance premium paid by the employer. These benefits accrue over employment period but are realizable to employee post-retirement from employment.

Other benefits (perquisites) are provided to CEO and managerial level employees as per the Bank’s policy. Above, head count and total benefits also include payment made in current year to those management personnel who retired/resigned during the year. As of balance sheet date, total 48 management personnel (including CEO) are in the services of the Bank.

Post-retirement benefit to CEO NRs.122 thousands presented above is the provident fund and incremental leave provision expensed in the current year.

13.3. tranSaCtionS With SubSidiary

13.3.1. The Bank entered into a Management Service Agreement (MSA) with Subsidiary for providing management services.Provisions laid in MSA are in line with arms-length principle. The Bank receives reimbursement of human resource cost for its employee deputed at the Subsidiary. Reimbursed amount is the actual cost incurred by the Bank.

13.3.2. The Bank has entered into a Service Level Agreement (SLA) with Subsidiary for providing various administrative services. Provisions laid in SLA are in line with arms-length principle. The Bank received NRs.500 thousands annual fee in respect of providing administrative services.

SLA also covers outsourcing of the Bank’s bullion business operations to the Subsidiary. The Bank pays 30% of net income earned from bullion business to the Subsidiary as outsourcing fee. The Bank paid NRs.2,061 thousands to Subsidiary under this head.

13.3.3. Subsidiary’s deposits balance with the Bank is NRs.280,814 thousands and total interest payments ondeposit is NRs.2,502 thousands. Similarly, Subsidiary’s overdraft balance with the Bank standsnil and total interest receipts on overdraft is NRs.8 thousands.

13.3.4. Subsidiary is the Bank’s share registrar for the current year. The Bank paid NRs. 425 thousands to Subsidiary as annual fee under this head.

(NRS. 000)

nature of tranSaCtion Current previouS

year year

Meeting Fees Paid 1,877 1,192

Allowance and other expenses

relating to Board Meetings 2,307 1,793

total Compensation paid 4,184 2,985

(NRS. 000)

managerial level head Short term poSt total

Count benefitS retirement benefitS

benefitS

Chief Executive Officer 1 13,193 122 13,315

Asst. General Manager and above 4 22,780 5,994 28,774

below Asst. General Manager 46 139,607 31,065 170,672

total 51 175,580 37,181 212,761


13.3.5. The Bank sells Portfolio Management Service (PMS) products of the Subsidiary through its branches. The Bank receives, as commission, 50% of net income from PMS sale in the first year of product sale, and thereafter 20% of net income in the subsequent years of product renewal. The bank recognized net commission income of NRs.369 thousands in the current year.

SLA also coversoutsourcingof the Bank’s bullion business operations to the Subsidiary. The Bank pays 30% of net income earned from bullion business to the Subsidiary as outsourcing fee. The Bank paid NRs.2,061 thousands to Subsidiary under this head.

13.3.6. The Bank accounted net dividend receipts of NRs.14,820 thousands from Subsidiary. Subsidiary distributed 20% dividend on paid up capital from the profit of previous financial year 2013-14.

13.3.7. All receipt and payment transactions entered into by the Bank with Subsidiary were made net of TDS. The TDS has been duly deposited at Tax Office.

13.4. tranSaCtionS With CompanieS Where direCtorS have finanCial intereSt

In the current financial year the Bank entered into financial transactions with following related entities where directors of the Bank have financial interest.

13.4.1. united inSuranCe Company (nepal) ltd. (uiC)Mr. Ashish Sharma, director of the Bank, held chairmanship at UIC. Atcurrent year end UIC maintained deposit balance of NRs.538 thousands in its current account with the Bank.

UIC has appointed the Bank as one of its insurance agents. The bank has included insurance policies issued by UIC under its bancassurance products.In the current year UIC paid NRs.497 thousands to the Bank as insurance agency commission for its policies sold by the Bank.

No loans were granted andall transactions with UIC were conducted in arms-length.

13.4.2. Cg finCo pvt. ltd. (Cgf)Mr. Nirvana Chaudhary, director of the Bank, held chairmanship at CGF. CGF is a depository client of the Bank and has maintained NRs.4,383 thousands in its deposit account maintained with the Bank. The BankpaidNRs.40 thousands interest to CGF in the current year.

CGF is a 25.71% shareholder in the bank’s Subsidiary Co. Nabil Investment Banking Ltd.The Subsidiary recorded gross dividend payout of NRs.5,400 thousands to CGF during the current year that was distributed out of previous year’s profit. The payment was made net of 5% TDS.

No loans were granted and all transactions with CGF were conducted in arms-length.

13.5. tranSaCtionS With the bank’S poSt - employment benefit plan

13.5.1. The Bank’s post-employment benefit plan is managed by Nabil Bank Limited Retirement Fund (NRF).In the current financial year the Bank has entered into financial transactions with NRF as explained below.

13.5.2. The Bank paid NRs.119,996 thousands to NRF towards employer’s Provident Fund and Gratuity contribution of its employees for the year.

13.5.3. The Bank has entered into a Service Level Agreement (SLA) with NRF wherein the bank shall provide necessary Human Resource to NRF with sole purpose of delivering quality service as per the set standard structures of the Bank in exchange for an annual fee of NRs.1,500 thousands. In the current financial year the Bank received NRs.1,500 thousands in SLA fees from NRF.

13.5.4. NRF’s deposit balance with the Bank is NRs.284,211 thousands and total interest payments on deposit is NRs.5,435 thousands. NRF also avails overdraft limit of NRs.100,000 thousands with the bank and the outstanding was nil at year end. The Bank recorded total interest receipts on overdraft of NRs.228 thousands.

13.5.5. NRF’s has invested in debentures issued by the Bank for NRs.149,905 thousands and interest payments on debenture is NRs.12,742 thousands.

13.5.6. All receipts and payment transactions entered into by the Bank with Nabil RF have been subject to withholding tax. Deducted amounts have been duly deposited at Tax Office.

14. ratioS and other information

14.1. Weighted average intereSt rate Spread The current year witnessed surplus liquidity in the domestic financial system for the entire year. As a result both the yield on loans and investment as well as the cost of deposit recorded a decline from previous year’s level.

nature of tranSaCtion Current previouS

year year

Weighted average interest :

- yield on loans and investments 6.53% 7.72%

- cost on deposit and borrowings 2.56% 2.69%

net interest Spread 3.97% 5.03%


Above yield and cost is calculated based on the annual average volume of loans, investments, deposits and bonds/borrowings. The actual interest income and interest expense reported in the bank’s profit and loss account have been taken in the above calculations.

14.2. intereSt Spread for the month of aSar 2072Under regulatory requirement, licensed banks and financial Institutions are required to publish monthly interest spread of local currency deposits and local currency loans / investment in government securities. The Bank’s local currency interest spread for the month of Asar 2072 (the last month of current financial year) is recorded at 4.55%.

note: Interest income and Interest Expense are annualised for spread calculation.

14.3. earnings per ShareThe Bank’s and the Group’s earnings per share has been disclosed in line with Nepal Accounting Standard (NAS) 26 on Earning per Share in financial statements under Schedule 31 “Principal Indicators”. As on balance sheet date, the Bank’s and the Group’s earnings per share stood at NRs.57.24 and NRs.57.36 respectively.

The Bank’s and the Group’s EPS has decreased by NRs.18.88 and NRs.19.15 respectively. The decrease is due to the rise in number of outstanding equity shares and the negative growth rate in net profit in the current year. In the current year the bank’s paid up capital increased by 20%, out of bonus shares issuance. On the other hand the bank’s net profit has also declined by 9.73%.

The Bank and the Group has not issued any form of capital raising instruments with embedded options of conversion into equity shares. Consequently, the Bank’s and the Group’s basic and diluted earnings per share both stand at NRs.57.24 and NRs.57.36 respectively.

14.4. non-performing aSSetS

14.4.1. amount of non-performing assets (both gross and net)The Bank’s gross non-performing loans is recorded at NRs.1,220,819 thousands, which is 1.82% of total loan. The bank has set aside possible loss provisioning of NRs.974,906 thousands in respect of these loan assets. The provision (related to non-performing loans) coverage for gross non-performing loans is 79.86%. Similarly total loan loss provision coverage of NRs.1,659,746 thousands over gross non-performing loans is 135.95%.

(NRS. 000)

partiCularS average inCome / yield/

volume expenSe CoSt

LCY Loans and Investments 73,931,580 468,048 7.45

- local currency loans 63,128,129 452,984 8.45

- investment in government securities 10,803,451 15,065 1.64

LCY Deposits 84,184,562 207,446 2.90

lCy interest Spread for asar 2072 month 4.55

(NRS. 000)

partiCularS nabil group

bank

Net Profit for the year (in NRs. 000) 2,093,814 2,098,163

Weighted average number of outstanding shares 36,576,540 36,576,540

earnings per Share in nrs. 57.24 57.36

Earnings per Share in NRs. (previous year) 76.12 76.51

Annual growth rate in Earnings per Share -24.80% -25.02%

(NRS. 000)


year year ChangeS %

Loan Classification per NRB’s definition

- pass loan (including watch list) 65,940,852 54,947,001 10,993,850 20.0

- non performing loans 1,220,819 1,256,075 (35,256) (2.8)

- restructured / rescheduled - - - -

- substandard 58,293 97,637 (39,344) (40.3)

- doubtful 404,682 443,962 (39,279) (8.8)

- loss 757,844 714,476 43,367 6.1

gross loans and advances 67,161,671 56,203,076 10,958,595 19.5


14.5. Write off loanS and intereSt SuSpenSeWritten off loan is presented in Schedule 28(A) of the financial state-ments. Additional information on interest suspense related to such loan is presented as under:

14.6. Summary of book write off loan and recovery

* The bank has relinquished its recovery rights considering remote possibil-

ity of loan recovery. The bank made actual write off of interest amounting to

NRs.5,222 thousands in full and final settlement of written off accounts in

the current year.

14.7. movement in loan loSS proviSion and intereSt SuSpenSeThe bank’s loan loss provision has increased by NRs.148,318 thou-sands or 9.81% and reached NRs.1,659,746 thousands at year end. Of this, NRs.134,392 thousands is set aside for incremental performing loan volume (including watch list) while the remaining NRs.13,925 thousands is set aside for adverse movement in non-performing loan.

Interest suspense also increased by NRs.67,988 thousands or 13.25% and reached NRs.581,099 thousands at year end. The suspended interest figures is about 10.08% of the bank’s gross interest income reported in Profit and Loss account. Interest accruals on non-performing loans continue to be booked under suspense.

(NRS. 000)

(NRS. 000)

partiCularS prinCipal intereSt total

- loan written off till previous year 708,983 283,534 992,517

- loan written off in current year 10,145 5,773 15,918

Total loan written off (A) 719,128 289,307 1,008,435

- recovered till previous year (488,692) (82,382) (571,074)

- recovered in current year (3,645) (3,933) (7,578)

Total recovery from written off loan (B) (492,337) (86,315) (578,652)

Net not recovered portion (A-B) 226,792 202,992 429,783

- book write off 201,534 145,176 346,710

- actual write off * 25,257 57,816 83,073

Recovery ratio (on total write-off amount) 68.46% 29.84% 57.38%

partiCularS Current previouS ChangeS %

year year

Loan Loss Provision 1,659,746 1,511,428 148,318 9.81

Interest Suspense (581,099) (513,111) (67,988) 13.25

(NRS. 000)

partiCularS amount

Loan Written Off 10,145

Interest Suspense related to written off loan 5,773

(NRS. 000)

partiCularS groSS loSS net

npl proviSion loan

Performing Loan 65,940,852 684,840 65,256,012

Non Performing Loans (NPL) : 1,220,819 974,906 245,913

- restructured / rescheduled - - -

- substandard 58,293 14,721 43,572

- doubtful 404,682 202,341 202,341

- loss 757,844 757,844 -

total 67,161,671 1,659,746 65,501,925

npl ratios :

Gross NPL to Gross loans and advances 1.82%

Net NPL to Net loans and advances 0.38%

npa ratioS


15. diSCloSure of ComponentS of CaSh and CaSh equivalentS in CaSh floW Statement:

15.1. from operating aCtivitieS:

15.1.1. interest income

15.1.2. Commission and discount income

15.1.3. income from foreign exchange transaction

15.1.4. interest expense

partiCularS Current year (Cy) previouS year (py)

interest income in income Statement 5,762,345,126 5,636,158,253

Interest Income from Long term Investment (166,152,409) (220,720,327)

Income Receivable on Short Term Investments (Current Year) (63,985,784) (69,640,561)

Income Receivable on Short Term Investment (Previous Year) 69,640,561 92,594,687

Interest Receivable on Staff Housing Loan (Current Year) (219,327,295) (191,312,536)

Interest Receivable on Staff Housing Loan (Previous Year) 191,312,536 173,755,044

Unearned Interest Income - Vehicle Loan (Current Year) 161,726 429,389

Unearned Interest Income - Vehicle Loan (Previous Year) (429,389) (909,046)

Unearned Interest Income - Housing Loan (Current Year) 1,093,175 1,639,763

Unearned Interest Income - Housing Loan (Previous Year) (1,639,763) (2,263,079)

Unearned Interest Income - Bills (Current Year) - -

Unearned Interest Income - Bills (Previous Year) - -

Cash inflow 5,573,018,484 5,419,731,587


Commission and Discount Income in Income Statement 480,279,523 466,314,790

Unearned Commission - Guarantee (Current Year) 55,549,016 53,801,855

Unearned Commission - Guarantee (Previous Year) (53,801,855) (67,000,243)

Cash Inflow 482,026,684 453,116,402


Exchange Income in Income Statement 512,477,284 529,995,584

Unearned Commission - Forward (Current Year) - -

Unearned Commission - Forward (Previous Year) - (23,663,585)

Cash Inflow 512,477,284 506,331,999


interest expense in income Statement (2,236,063,893) (1,939,745,260)

Interest Payable on Deposit (Current Year) 25,202 1,378

Interest Payable on Deposit (Previous Year) (1,378) (64,854)

Interest Payable on Borrowing (Current Year) 171,531 90,560

Interest Payable on Borrowing (Previous Year) (90,560) (3,712,957)

Cash outflow (2,235,959,098) (1,943,431,133)

(NRS.)

(NRS.)

(NRS.)

(NRS.)


15.1.5. Staff expense

15.1.6. office operating expense

15.1.7. income tax payments


Staff expenses as per income Statement (743,484,326) (627,573,275)

Bonus Expenses (regrouped from other liabilities) (298,132,732) (330,252,563)

total Staff expenses (1,041,617,058) (957,825,838)

Grauity Fund Balance (Current Year) 63,141,191 69,310,823

Grauity Fund Balance (Previous Year) (69,310,823) (76,931,147)

Leave Provision (Current Year) 123,091,223 101,569,076

Leave Provision (Previous Year) (101,569,076) (81,653,026)

Other Staff Expenses Payable (Current Year) - -

Other Staff Expenses Payable (Previous Year) - -

Staff Bonus Payable (Current Year) 298,132,732 330,252,563

Staff Bonus Payable (Previous Year) (330,252,563) (316,255,521)

Cash outflow (1,058,384,374) (931,533,070)


office operating expenses as per income Statement (613,018,342) (543,158,113)

Depreciation / Amortisation on Fixed Assets / Intangibles 113,316,856 117,831,211

Accrued Expense Payable (Current Year) 10,891,893 9,862,372

Accrued Expense Payable (Previous Year) (9,862,372) (6,732,393)

Cash outflow (498,671,965) (422,196,923)


Income Tax Expense in Income Statement (Current Year) (896,878,251) (980,684,051)

Prior Period Tax - (735,675)

Current Year Tax Liability 964,391 2,510,756

Previous Year Tax Liability (2,510,756) (64,667,824)

Cash Outflow (898,424,616) (1,043,576,794)

reConCiliation of inCome tax paid from tax exhibit Current year (Cy) previouS year (py)

1st Instalment of Corporate Tax Paid in Advance 378,600,000 401,640,000

Advance Tax Deposited at the request of LTPO - 50,000,000

2nd Instalment of Corporate Tax Paid in Advance 255,555,000 228,340,000

3rd Instalment of Corporate Tax Paid in Advance 255,555,000 291,420,000

Payment of Previous Year’s Tax 2,510,756 66,872,707

Payment of Prior’s Year Tax - 735,675

TDS Deposition (Insurance Commision, TSF, Dividend) 6,203,859 4,532,637

Effect of PY reinstatements (35,775)

Cash Outflow 898,424,615 1,043,505,244

(NRS.)

(NRS.)

(NRS.)

(NRS.)


15.1.8. other expense

15.1.10. (increase)/decrease in loans, advances and bills purchase

15.1.9. (increase)/decrease in other Short term investment


income/(expense) from extra-ordinary activities as per income Statement (2,924,675) 34,002,205

Recovery of Loan Write Off (7,577,824) (36,821,504)

Bad Loan Write Off 10,145,112 2,221,325

Cash outflow (357,387) (597,974)

partiCularS Current year (Cy) previouS year (py) infloW/(outfloW)

total investment in balance Sheet 30,972,487,414 18,276,752,741 (12,695,734,673)

Nepal Government Other Securities (2,183,994,157) (2,583,715,343) (399,721,186)

Foreign Bonds (253,902,471) (240,311,307) 13,591,164

Organized Institutions’ Shares (265,032,600) (248,034,800) 16,997,800

Organized Institutions’ Bonds and Debentures - - -

Indexed Linked and Credit Linked Deposits - - -

Mutual Fund (148,303,530) (105,000,000) 43,303,530

SWIFT Investment (1,801,545) (2,124,214) (322,669)

Provision for Investments 6,987,391 2,691,919 (4,295,472)

Cash inflow (outflow) 28,126,440,502 15,100,258,996 (13,026,181,506)


Loans and Advances in Balance Sheet (Net of Provision & Loan Write-Off) (65,501,925,164) (54,691,648,194) (10,810,276,970)

Net Provision Change (148,317,536) (148,317,536)

Loan Write Off During the Year (10,145,112) (10,145,112)

Cash inflow (outflow) (65,660,387,812) (54,691,648,194) (10,968,739,618)


Loans and Advances in Balance Sheet (Net of Provision & Loan Write-Off) (54,691,648,194) (46,369,834,571) (8,321,813,623)

Net Provision Change (235,732,907) - (235,732,907)

Loan Write Off During the Year (2,221,325) - (2,221,325)

Cash inflow (outflow) (54,929,602,426) (46,369,834,571) (8,559,767,855)


total investment in balance Sheet 18,276,752,741 16,332,043,012 (1,944,709,729)

Nepal Government Other Securities (2,583,715,343) (3,310,078,588) (726,363,245)

Foreign Bonds (240,311,307) (239,654,168) 657,139

Organized Institutions’ Shares (248,034,800) (210,034,800) 38,000,000

Organized Institutions’ Bonds and Debentures - - -

Indexed Linked and Credit Linked Deposits - - -

NCM Mutual Fund (105,000,000) (105,000,000) -

SWIFT Investment (2,124,214) (2,041,186) 83,028

Provision for Investments 2,691,919 16,291,166 13,599,247

Cash inflow (outflow) 15,100,258,996 12,481,525,436 (2,618,733,560)

(NRS.)

FY 2014/15 IN NRS.

FY 2014/15 IN NRS.

FY 2013/14 IN NRS.

FY 2013/14 IN NRS.


15.1.11. (increase) / decrease in other assets

15.1.12. (increase) / decrease in other liabilities


other assets in balance Sheet (net of provision) (2,371,567,317) (2,731,670,461) 360,103,144

Income receivable on Investment 76,384,776 100,710,966 (24,326,190)

Interest receivable from Staff Housing Loan 219,327,295 191,312,536 28,014,759

Deferred Tax 52,543,819 43,179,280 9,364,539

Provision on Receivables (19,715,883) (7,353,673) (12,362,210)

Cash outflow (2,043,027,310) (2,403,821,352) 360,794,042


Bills Payable as per Balance Sheet 243,433,464 213,579,243 29,854,221

Other Liabilities as per Balance Sheet 1,467,541,449 2,357,452,783

Interest Payable on Deposits (25,202) (1,378)

Interest Payable on Borrowings (171,531) (90,560)

Gratuity Fund (63,141,191) (69,310,823)

Employees’ Welfare Fund / Leave Fund (123,091,223) (101,569,076)

Provision for Staff Bonus (298,132,732) (330,252,563)

Dividend Payable (110,141,802) (534,861,266)

Unearned Income (Int on Housing/Vehicle Loans and Bills) (1,254,901) (2,069,152)

Accrued Expense Payable (10,891,893) (9,862,372)

Unearned Income (Guarantee) (55,549,016) (53,801,855)

Other Staff Expenses Payable - -

805,141,958 1,255,633,738 (450,491,780)

Cash outflow (420,637,559)


Bills Payable as per Balance Sheet 213,579,243 529,597,845 (316,018,602)

Other Liabilities as per Balance Sheet 2,357,452,783 1,071,099,849

Interest Payable on Deposits (1,378) (64,854)

Interest Payable on Borrowings (90,560) (3,712,957)

Gratuity Fund (69,310,823) (76,931,147)

Employees’ Welfare Fund / Leave Fund (101,569,076) (81,653,026)

Provision for Staff Bonus (330,252,563) (316,255,521)

Dividend Payable (534,861,266) (41,097,769)

Unearned Income (Int on Housing/Vehicle Loans and Bills) (2,069,152) (3,172,125)

Accrued Expense Payable (9,862,372) (6,732,393)

Unearned Income (Guarantee) (53,801,855) (90,663,828)

Other Staff Expenses Payable - -

1,255,633,738 450,816,229 804,817,509

Cash outflow 488,798,907


other assets in balance Sheet (2,731,670,461) (2,150,374,151) (581,296,310)

Income receivable on Investment 100,710,966 125,808,564 (25,097,598)

Interest receivable from Staff Housing Loan 191,312,536 173,755,044 17,557,492

Deferred Tax 43,179,280 44,763,482 (1,584,202)

Provision on Receivables (7,353,673) (6,199,349) (1,154,324)

Cash outflow (2,403,821,352) (1,812,246,410) (591,574,942)

FY 2014/15 IN NRS.

FY 2014/15 IN NRS.

FY 2013/14 IN NRS.

FY 2013/14 IN NRS.


15.2. from inveSting aCtivitieS: 15.2.1. (increase) / decrease in long term investments

15.2.2. (increase) / decrease in fixed assets

15.2.3. interest income from long term investment


Foreign Bonds 253,902,471 240,311,307 (13,591,164)

Long Term Government Bonds 2,183,994,157 2,583,715,343 399,721,186

Shares Investment 265,032,600 248,034,800 (16,997,800)

Mutual Fund 148,303,530 105,000,000 (43,303,530)

SWIFT Investment 1,801,545 2,124,214 322,669

Indexed Linked Deposits / Credit Linked Deposits - - -

Cash outflow 2,853,034,303 3,179,185,664 326,151,361


Addition during the Year (Excluding LeaseHold) (78,747,198) (146,726,490)

Addition during the Year (LeaseHold) (10,504,119) (2,618,289)

Closing Work In Progress - -

Opening Work In Progress - 49,447,381

Disposal During the Year 7,212,288 14,234,098

Cash outflow (82,039,029) (85,663,300)


interest income in income Statement 166,152,409 220,720,327

Income Receivable on Long Term Investment (Current Year) (12,398,992) (31,070,405)

Income Receivable on Long Term Investment (Previous Year) 31,070,405 33,213,877

Cash inflow 184,823,822 222,863,799


Foreign Bonds 240,311,307 239,654,168 (657,139)

Long Term Government Bonds 2,583,715,343 3,310,078,588 726,363,245

Shares Investment 248,034,800 210,034,800 (38,000,000)

Mutual Fund 105,000,000 105,000,000 -

SWIFT Investment 2,124,214 2,041,186 (83,028)

Indexed Linked Deposits / Credit Linked Deposits - - -

Cash outflow 3,179,185,664 3,866,808,742 687,623,078

FY 2014/15 IN NRS.

NRS.

NRS.

FY 2013/14 IN NRS.


15.3. from inveSting aCtivitieS:

15.3.1. dividend payments


Closing dividend payable in balance Sheet 110,141,802 534,861,266

Proposed Cash Dividend Previous Year (1,371,225,780) (974,736,560)

Opening Dividend Payable in Balance Sheet (534,861,266) (41,097,769)

Cash outflow (1,795,945,244) (480,973,063)

NRS.

16. eventS after the balanCe Sheet dateNo circumstances have arisen since the Balance Sheet date which would require adjustments to or disclosure in the Financial Statements other than those disclosed below.

16.1. propoSed dividendThe Board of Directors of the Bank have recommended the payment of dividend of NRs.36.84 per share which consists of a cash dividend of NRs.6.84 per share and a stock dividend of NRs.30 per share for the year ended July 16, 2015. This will be decided at the forthcoming Annual General Meeting of the Bank.

16.2. reCognition of intereSt inCome on deferred CaSh baSiS Regulatory provision requires recognition of interest income from loans and advances on cash basis. NRB directive 04/070proviso to Section 5(1) has additionally allowed licensed institutions to recognize as interest income, such amount that stood accrued at year end but has been subsequently recovered in cash within 15 days after year-end date. Further, following the devastating earthquake that hit Nepal in April 2015, NRB circular no. 30/071/72 has allowed licensed institutions to recognize interest income, such amount that accrued in the current year and is realized in cash up to October 17, 2015. The Bank did not chose to exercise these options and recognized in current year’s interest income only that amount accrued and recovered in cash within 16th July 2015.

17. rounding off, regrouping and reStatementS

17.1. All figures have been rounded off to the nearest rupee.

17.2. Previous year’s figures have been regrouped/restatedin some places for better presentation and explained as under:

17.2.1. Regrouping effect in Profit and Loss Account

As a result of above regrouping, there has been equivalent restatement of NRs.7,150,067 in cash flow statements under Cash Flow from Operating Activities item 1.2 Cash Received – Commission and Discount Income.

As a result of above regrouping, there has been equivalent restatement of NRs.2,511,029 in cash flow statements under Cash Flow from Operating Activities item 1.5 Cash Received – Other Incomes.

CommiSSion and nabil group

diSCount inCome (nrS.)

Commission and Discount Income presented

in last year’s financial statements 459,164,723 473,809,792

Regrouping effect in following items :

- Cards and E-Banking 5,415,876

- Agency Commission 13,881,785

- Others (12,147,594)

Net effect of regrouping 7,150,067 7,150,067

Restated in current year’s financial statements

under Previous Year Column 466,314,790 480,959,859

other inCome (NRS.) nabil group

Other Income presented in last year’s

financial statements 267,837,635 306,768,884


- Others (2,511,029) (2,511,029)

Restated in current years financial statements


SChedule 20

SChedule 21


offiCe operating expenSe (nrS.) nabil group

Office Operating Expense presented in last

years financial statements 514,256,925 528,315,773


- Salary (Contract Staff Expense) 24,262,150

- Postage, Telex, Telephone 4,639,038

Net effect of regrouping 28,901,188 28,901,188



deferred tax expenSe (nrS.) nabil group

Deferred Tax Expense in previous year’s


- Impact of reconciliation of Deferred

Tax Assets with Tax Base as per Income Tax 73,560 73,560

Restated in current years financial statements


SChedule 24

17.2.2. reStatement effeCt in profit and loSS aCCount

perSonnel expenSe (nrS.) nabil group

Personnel Expense presented in last years



- Salary (Contract Staff Expense) (24,262,150) (24,262,150)



SChedule 23

As a result of above regrouping, there has been equivalent restatement of NRs.24,262,150 in cash flow statements under Cash Flow from Operating Activities item 2.2 Cash Payment – Staff Expenses.

As a result of above regrouping, there has been equivalent restatement of NRs.28,901,188 in cash flow statements under Cash Flow from Operating Activities item 1.2 Cash Payment – Office Operating Expenses.

As a result of above restatements, there have been equivalent restate-ments in opening equity (deferred tax reserves in statement of change in equity), Other assets (deferred tax assets in Schedule 16) and Net Profit (tax expense).


Statement of loans availed by promoters / shareholders clas-sified under promoters’ group from other banks and financial institutions by pledging shares under their ownership

promoter/ Shareholding Statement of loanS

ShareholderS under total no % on total name of bankS loan amount no of

promoter group of ShareS paid up Capital and finanCial ShareS remarkS

SChedule 34

(In NPR)

Comparison of unaudited and audited financial StatementAs of 16.07.2015 of Financial Year 2014-15

NIDC Development Bank Ltd, one of the founding promoters of Nabil Bank Ltd., has divested its holding through public auction in order to comply with the regulatory directives on cross holding. These shares are now held by general public and are freely traded at Nepal Stock Exchange Ltd. As of balance sheet date, 190 of those shareholders have pledged total 788,622 units promoter share with various Banks and Financial Institutions and Co-operative Societies.

partiCularS aS per unaudited aS per audited varianCe reaSonS for

finanCial finanCial in amount in % varianCe

Statement Statement

1. total Capital and liabilities (1.1 to 1.7) 117,652,435 115,985,701 (1,666,733) -1.42%

1.1 Paid up Capital 3,657,654 4,754,950 1,097,296 30.00% Note 1

1.2 Reserve and Surplus 6,082,988 4,980,902 (1,102,086) -18.12% Note 2

1.3 Debenture and Bonds 300,000 300,000 - 0.00%

1.4 Borrowings - - - 0.00%

1.5 deposits (a+b) 104,237,910 104,237,910 - 0.00%

Domestic Currency (a) 87,706,843 87,706,843 - 0.00%

Foreign Currency (b) 16,531,067 16,531,067 - 0.00%

1.6 Income Tax Liability 874 964 90 10.32% Note 3

1.7 Other Liabilities 3,373,009 1,710,975 (1,662,034) -49.27% Note 4

2. total assets (2.1 to 2.7) 117,652,435 115,985,701 (1,666,733) -1.42%

2.1 Cash and Bank Balance 16,003,740 16,003,740 - 0.00%

2.2 Money at Call and Short Notice 323,541 323,541 - 0.00%

2.3 Investments 30,979,475 30,972,487 (6,987) -0.02% Note 5

2.4 Loans and Advances 67,161,671 65,501,925 (1,659,746) -2.47% Note 6

2.5 Fixed Assets 812,440 812,440 - 0.00%

2.6 Non Banking Assets - - - 0.00%

2.7 Other Assets 2,371,567 2,371,567 - 0.00%

SChedule 35

Continued...

NPR ‘000


Comparison of unaudited and audited financial StatementAs of 16.07.2015 of Financial Year 2014-15

partiCularS aS per unaudited aS per audited varianCe reaSonS for

finanCial finanCial in amount in % varianCe

Statement Statement

3. profit and loss account

3.1 Interest Income 5,762,345 5,762,345 - 0.00%

3.2 Interest Expense 2,236,064 2,236,064 - 0.00%

a. net interest income (3.1-3.2) 3,526,281 3,526,281 - 0.00%

3.3 Fees,Commission and Discount 480,280 480,280 - 0.00%

3.4. Other Operating Income 240,460 240,460 - 0.00%

3.5. Foreign Exchange Gain/Loss (Net) 512,477 512,477 - 0.00%

b. total operating income (a+3.3+3.4+3.5) 4,759,498 4,759,498 - 0.00%

3.6. Staff Expense 743,484 743,484 - 0.00%

3.7. Other Operating Expense 608,018 613,018 5,000 0.82% Note 7

C. operating profit before provision (b-3.6-3.7) 3,407,996 3,402,996 (5,000) -0.15%

3.8. Provision for Possible Losses 166,902 167,071 169 0.10% Note 8

d. operating profit (C-3.8) 3,241,094 3,235,925 (5,169) -0.16%

3.9. Non Operating Income/Expenses (Net) 44,364 44,364 - 0.00%

3.10. Write Back of Provision for Possible Loss 2,096 2,096 - 0.00%

e. profit from regular activities (d+3.9+3.10) 3,287,554 3,282,385 (5,169) -0.16%

3.11. Extra Ordinary Income/Expense (Net) (2,925) (2,925) - 0.00%

f. profit before bonus and taxes (e+3.11) 3,284,629 3,279,460 (5,169) -0.16%

3.12 Provision for Staff Bonus 298,603 298,133 (470) -0.16%

3.13 Provision for Tax 887,424 887,514 90 0.01%

g. net profit/(loss) (f-3.12-3.13) 2,098,603 2,093,814 (4,790) -0.23%

SChedule 35

NPR ‘000

Note 1: Impact of Nrs.1,097,296 thousands out of profit appropriation for stock dividend @ 30% on paid up equity capital.

Note 2: Impact of Nrs. 1,097,296 thousands due to stock dividend declaration and of Nrs.4,790 thousands due to changes in Profit and Loss Account.

Note 3: Impact of changes in Provision for Tax expense in Profit and Loss Account.

Note 4: Impact of Provision for possible losses (also refer Note 5 and Note 6) presented in Other Liabilities in Un-audited statements but netted off

with specific assets in Audited statements.

Note 5: Investments reported net of loss provision Nrs.6,987 thousands in Audited Financial Statements.

Note 6: Loans and Advances reported net of loss provision Nrs.1,659,746 thousands in Audited Financial Statements.

Note 7: Additional expense booked following Statutory Audit.

Note 8: Additional expense booked following Statutory Audit.

Continued...


partiCularS aS at 16-Jul- 2015 aS at 13-apr-15 16-Jul-2014 (audited)

group nabil group nabil group nabil

1. total Capital and liabilities (1.1 to 1.7) 120,362,731 117,652,435 105,268,411 105,164,563 91,807,158 88,788,740

1.1 Paid up Capital 3,657,654 3,657,654 3,657,654 3,657,654 3,656,602 3,656,602

1.2 Reserve and Surplus 6,116,907 6,082,988 5,633,999 5,604,234 5,385,936 5,355,684

1.3 Debenture and Bond 300,000 300,000 300,000 300,000 300,000 300,000

1.4 Borrowings - - - - - -

1.5 Deposits (a+b) 103,957,096 104,237,910 90,836,938 91,292,874 75,360,769 75,388,791

Domestic Currency (a) 87,426,029 87,706,843 73,773,845 74,229,782 63,914,269 63,942,291

Foreign Currency (b) 16,531,067 16,531,067 17,063,093 17,063,093 11,446,500 11,446,500

1.6 Income Tax Liability 874 874 33,046 33,046 2,511 2,511

1.7 Other Liabilities 6,291,458 3,373,009 4,769,470 4,276,754 7,063,867 4,085,152

1.8 Non-Controlling Interest 38,742 - 37,303 - 37,472 -

2. total assets (2.1 to 2.7) 120,362,731 117,652,435 105,268,411 105,164,563 91,807,158 88,788,740

2.1 Cash and Bank Balance 18,651,728 16,003,740 12,201,749 12,158,024 12,953,436 9,993,483

2.2 Money at Call and Short Notice 323,541 323,541 867,655 867,655 737,854 737,854

2.3 Investments 30,985,921 30,979,475 22,224,071 22,218,532 18,286,284 18,279,445

2.4 Loans and Advances 67,161,671 67,161,671 66,306,796 66,306,796 56,195,522 56,203,076

a. Real Estate Loan 4,910,265 4,910,265 4,792,108 4,792,108 4,473,455 4,473,455

1. Residential Real Estate Loan

(Except Personal Home Loan up to Rs.10 Million) 1,542,582 1,542,582 1,385,940 1,385,940 1,100,801 1,100,801

2. Business Complex & Residential Apartment

Construction Loan 728,594 728,594 790,677 790,677 616,487 616,487

3. Income generating Commercial Complex Loan 304,643 304,643 325,662 325,662 534,541 534,541

4. Other Real Estate Loan

(Including Land purchase & Plotting) 2,334,446 2,334,446 2,289,829 2,289,829 2,221,626 2,221,626

b. Personal Home Loan up to Rs.10 Million 5,850,715 5,850,715 5,725,040 5,725,040 5,161,490 5,161,490

c. Margin Type Loan - - - - - -

d. Term Loan 10,556,047 10,556,047 9,676,123 9,676,123 8,566,788 8,566,788

e. Overdraft Loan/TR Loan/WC Loan 38,869,529 38,869,529 39,164,783 39,164,783 32,106,371 32,113,926

f. Others 6,975,115 6,975,115 6,948,7 41 6,948,741 5,887,418 5,887,418

2.5 Fixed Assets 827,283 812,440 818,430 802,797 859,996 843,138

2.6 Non Banking Assets - - - - - -

2.7 Other Assets 2,412,588 2,371,567 2,849,712 2,810,760 2,774,065 2,731,744

(NRS. IN MILLION)

unaudited financial highlights As at 4th Quarter End of FY 2014/15


partiCularS 16-Jul-2015 13-apr-15 16-Jul-2014 (audited)

group nabil group nabil group nabil

3. profit and loss account 4th quarter this year 3rd quarter this year 4th quarter last year

3.1 Interest Income 5,778,166 5,762,345 4,289,443 4,278,177 5,652,370 5,636,158

3.2 Interest Expense 2,233,742 2,236,064 1,608,484 1,610,241 1,938,750 1,939,745

a. net interest income (3.1-3.2) 3,544,423 3,526,281 2,680,959 2,667,936 3,713,620 3,696,413

3.3 Fees,Commission and Discount 500,560 480,280 374,229 361,423 473,809 459,165

3.4 Other Operating Income 271,608 240,460 222,635 195,946 306,769 267,838

3.5 Foreign Exchange Gain/Loss (Net) 512,477 512,477 347,333 347,333 529,996 529,996

b. total operating income (a+3.3+3.4+3.5) 4,829,069 4,759,498 3,625,156 3,572,638 5,024,194 4,953,411

3.6 Staff Expenses 754,704 743,484 504,401 496,112 662,129 651,835

3.7 Other Operating Expenses 625,050 608,018 415,720 403,056 528,316 514,257

C. operating profit before provision (b-3.6-3.7) 3,449,315 3,407,996 2,705,034 2,673,470 3,833,750 3,787,319

3.8 Provision for Possible Losses 168,857 166,902 173,080 173,080 237,955 237,955

d. operating profit (C-3.8) 3,280,458 3,241,094 2,531,954 2,500,390 3,595,795 3,549,363

3.9 Non Operating Income/(Expenses) Net 29,544 44,364 40,871 40,871 23,666 34,781

3.10 Write Back of Provision for Possible Loss 2,096 2,096 563 563 14,667 14,667

e. profit from regular activities (d+3.9+3.10) 3,312,098 3,287,554 2,573,388 2,541,824 3,634,128 3,598,812

3.11 Extra Ordinary Income/Expenses (Net) (2,925) (2,925) (9,024) (9,024) 34,002 34,002

f. profit before bonus and taxes (e+3.11) 3,309,174 3,284,629 2,564,364 2,532,800 3,668,130 3,632,814

3.12 Provision for Staff Bonus 302,181 298,603 233,124 230,255 334,474 330,253

3.13 Provision for Tax 897,134 887,424 689,943 682,770 994,071 982,930

g. net profit/(loss) (f-3.12-3.13) 2,109,858 2,098,603 1,641,297 1,619,776 2,339,586 2,319,631

3.14 Share of Non-Controlling Interest on

Profit of Subsidiary 6,905 - 5,534 - 8,140 -

h. net profit/(loss) (g-3.14) 2,102,952 2,098,603 1,635,763 1,619,776 2,331,446 2,319,631

4. ratios & others (%) as at 16-Jul-15 as at 13-apr-15 as at 16-Jul-2014 (audited)

4.1 Capital Fund to RWA 11.91 11.86 11.81 11.71 11.31 11.24

4.2 Non Performing Loan (NPL) to Total Loan 1.82 1.82 2.05 2.05 2.23 2.23

4.3 Total Loan Loss Provision to Total NPL 135.94 135.94 123.28 123.28 120.33 120.33

4.4 Cost of Funds (Annualized) 3.18 3.18 3.20 3.20 3.34 3.34

4.5 CDC Ratio 65.12 65.12 76.19 76.19 77.51 77.51

4.6 Base Rate 5.78 5.78 6.07 6.07 5.67 5.67

4.7 LCY Interest Spread (per NRB Directive) 4.55 4.55 4.56 4.56 5.71 5.71

(NRS. IN MILLION)


StruCture of Share Capital

repreSentation in the board of direCtorSRepresentation of “A” Class Shareholders(in relation to 50% interest of NB International Ltd.)1. Mr. Dayaram Gopal Agrawal 2. Mr. Nirvana Chaudhary3. Mr. Mohiuddin Ahmed4. Mr. Virender Paul Dani

Representation of “B “ Class Shareholders(in relation to 20% interest of promoter shares withFinancial Institutions/General Public)To be elected by 32nd AGM.

Representation of “C” Class Shareholders(in relation to 30% interest of public shareholders)1. Mr. Shambhu Prasad Poudyal2. Mr. Ashish Sharma

Shareholder’S profileAs at balance sheet date (16th July, 2015), the Bank’s Share Registrar, M/s. Nabil Investment Banking Ltd. has recorded following details of shareholders:

StoCk SymbolNabil Bank’s Shares are traded on the Nepal Stock Exchange Ltd. (NEPSE) with stock symbol “NABIL” for ordinary shares and “NABILP” for promoter shares.

annual general meetingThe 31st Annual General Meeting (AGM) of the Bank will be held on 28th December 2015 at 12:00 noon at Nepal Academy Hall, Kamaladi, Kathmandu, Nepal. Following agendas will be discussed in the meeting:

ordinary reSolution1. To approve Directors’ Report 2014/15 (2071/72);

2. To approve Balance Sheet as of 16 July 2015, Profit and Loss Account and Cash Flow Statement for the year ended thereat, together with Auditor’s Report;

ShareholderS’ information

06

Shareholding range no. of total ShareholderS ShareS held1-100 3,861 209,630 101-500 6,435 1,434,244 501-1000 2,108 1,490,449 1001-2500 1,537 2,603,452 2501-5000 545 1,947,278 5001-10000 187 1,328,594 10001-25000 81 1,132,919 25001-50000 22 721,898 50001-100000 14 1,029,856 Above 100000 15 24,678,220 total 14,805 36,576,540


3. To approve consolidated books of accounts i.e. including books of accounts of Bank’s subsidiary Nabil Investment Banking Ltd. for the F.Y. 2014/15(2071/72);

4. To approve cash dividend @ 6.842% of the paid up capital as proposed by the Board; and

5. To appoint Auditor, as per Section 111 of Companies Act, 2063, for the Fiscal Year 2015/16 (2072/73) and to fix the auditor’s remuneration (Pursuant to Sec. 60(2) of the Banks & Financial Institutions Act, 2063, the present Auditor T.R. Upadhya & Co. can be reappointed).

SpeCial reSolution1. To approve increment of Bank’s Authorized Capital to Rs. 5 billion;2. To approve to issue Bonus shares at the rate of 10:3 (i.e. 3 bonus shares for presently held every 10 shares) from the profit of F.Y. 2014/15, for increasing issued and paid up capital to Rs. 4,754,950,200/- and also to approve conversion of fraction shares, if any, arisen due to the said ratio, into whole by adjusting against cash dividend, so as to maintain the present shareholding ratio of the different groups of shareholders;

3. To approve amendment in Clause 5(1), 5(2) and 5(3) of Memorandum and Rule 8(3), 20(5) and 27(5) of Articles of Association of the Bank and to authorize the Board (or its nominee) for making necessary changes in the proposed amendments if the same is advised by Regulatory Authority(ies); and

4. To provide approval as per Clause 105(1)(c) of the Companies Act, 2063.

Shareholder enquirieS and CommuniCationCommuniCationThe Bank regularly communicates all the pertinent information to shareholders, customers and general public through print media (national daily) and electronically through Bank’s official website www.nabilbank.com. The detailed information on AGM including ordinary agendas and special agendas to be discussed in the meeting is published in the national daily newspapers 21 days prior to the date of AGM.

Similarly, interim financial highlights are published within the stipulated deadline of 30 days prescribed by the Securities Board of Nepal. These statements along with Basel II Disclosures as prescribed by Point 7.4(b) of Capital Adequacy Framework 2007 (updated July 2008) under Directive 1 of NRB Unified Directives are posted in the Bank’s official website.

enquireSAny enquiries related to the shareholders of Nabil Bank on the share register viz., maintenance of shareholder’s record, share transfer including domestic transfer in case of death of a shareholder, replacement of lost share certificates, pledge of shares, dividend warrants/bonus shares declared and ratified by the AGM, payment against dividend/lost warrant, opening of Demat Account, dematerialization of shares should be sent at the address given below:Nabil Investment Banking Ltd.Naxal, Narayan Chaur, Kathmandu, NepalTel : 977-1-4411604, 4411733Fax : 977-1-4410554Email : [email protected] :www.nabilinvest.com.np

taxation on dividendS and bonuS ShareStaxation on dividendSPursuant to Section 88(2) of the Income Tax Act 2002, the tax on dividend, both cash and bonus shares, received by the shareholders of Nabil Bank from the Nabil Bank is subject to withholding tax at the rate of 5%. The tax is final withholding tax as per Section 92(1) (a) of the Act and need not require further assessment while filing annual tax return under Section 96.

However, the dividend distributed by the Bank from the dividend earned from the resident company is not subject to tax at the time of its distribution as per Section 54(3).The Bank has received dividend of NRs. 115.64 million from the resident companies from financial year 2001- 02 till 2014-15. Capitalization of profits is deemed as distribution under Section 53(1) (b) of the Act and hence, issuance of bonus shares by the Bank from the profits earned (excluding dividend received) is subject to withholding tax at the rate of 5% under Section 88(2).


Dividends received by the bank through its shareholding in different companies from the period 2058/59 to 2071/72 are presented hereunder:

Capital gainS on diSpoSal of ShareSPursuant to clause (a) of Section 95A (2) of the Income Tax Act, 2002 (amended by Finance Ordinance 2071), the gain on disposal of shares listed in the Securities Board of Nepal

computed as per Section 37 of the Act is subject to with holding tax at the rate of 5%, in case, the beneficiaryof the gain is resident natural person and at the rate of 10%, in case of any other person other than resident natural person. Shares of Nabil Bank are listed both in the Securities Board of Nepal and Nepal Stock Exchange Ltd.for the purpose of public trading and therefore the gain ondisposal of Bank’s shares is subject to with holding tax in accordance to clause (a) of Section 95A (2).

Gain or loss arising from disposal of shares under Section37 of the Act shall be the amount that is determined by reducing the amount incurred while acquiring the shares with the amount that is received at the time of its disposal.The amount of disposal in case the Nabil Bank’s shares are sold through stock exchange shall be the net amount received from the buyer less brokerage and other costs incurred during the transaction. The costs incurred forthe shares by the way of an acquisition through stock exchange shall be the amount paid to the beneficiary plus all costs attributable to the acquisition. Further, thecosts incurred for the shares by the way of transfer from the deceased person shall be the market value prevailing immediately before the death of the transferor. The tax being withheld on the gains arising from disposal of sharesis an advance tax and the tax credit is available at the time of filing annual tax returns.

year nrS. ‘000

1. FY 2001-02 (2058-59) 323

2. FY 2002-03 (2059-60) 418

3. FY 2003-04 (2060-61) 456

4. FY 2004-05 (2061-62) 477

5. FY 2005-06 (2062-63) 469

6. FY 2006-07 (2063-64) 720

7. FY 2007-08 (2064-65) 1,851

8. FY 2008-09 (2065-66) 2,409

9. FY 2009-10 (2066-67) 7,765

10. FY 2010-11 (2067-68) 10,527

11. FY 2011-12 (2068-69) 16,074

12. FY 2012-13 (2069-70) 18,065

13. FY 2013-14 (2070-71) 28,447

14 FY 2014-15 (2071-72) 27,640

total 115,640


direCtorS’ reportFOR THE FISCAL YEAR 2014/15

respected Shareholders,On behalf of Nabil Investment Banking Limited, I would like to welcome all the shareholders in the Sixth Annual General Meeting (AGM) of the Company. Nabil Bank Limited with its mission to be the First Choice Provider of Complete Financial Solutions incepted “Nabil Investment Banking Ltd. (Nabil Invest)” as a Subsidiary in order to develop the company as Investment Banker of First Choice in the long run expanding continuously its scope of activities.

I will be presenting achievements of the Company during the review FY 2014/15, policies and strategies adopted by and future plans of the Company in this AGM for your endorsement and resolution. In this context, I would like to seek your consent for presenting financial glimpses of the company for the review period including audited Balance Sheet, Income Statement and Cash Flow Statement for your approval. I request you all to discuss and approve the same.

Now, I proceed to briefly inform the overall capital market situations along with expansion in financial systems of the Country during the review fiscal year:

expanSion in finanCial SyStem:1. presence of banks and financial institutionsThe number of BFIs and Insurance Companies as of July 16, 2015 are as follows:

The number of BFIs licensed by NRB as of mid July 2014 was 200 which reduced to 193 as of mid July 2015. After the issuance of Mergers Bylaws, 2012 by NRB, several BFIs were merged causing the decline for the total number of BFIs. Accordingly, the number of commercial banks as of mid July 2015 is 30 whereas the number of development banks, finance companies and micro-finance development banks are respectively 76, 48 and 39.

2. deposit mobilizationDuring the review FY 2014-15, the total deposit of BFIs has increased by 20.1 percent (NRS. 282 billion 60 million). The deposit increased by 18.4 percent (NRS. 218 billion 680 million) in previous FY. During the review period, the deposits of commercial banks and development banks have increased by 21.4 percent and 15.2 percent respectively, whereas the deposit of finance companies has decreased by 0.6%. During the previous year, the deposits of commercial banks, development banks and finance companies had increased by 17.8, 29.1 and 5.7 percent respectively.

3. loans and investmentIn the FY 2014-15, loans and investment of BFIs increased by 17.5 percent (NRS. 229 Billion 300 Million). Last FY it was increased by 14.4 percent (NRS. 165 Billion 480 Million). During the review period, loans and investment of commercial banks, development banks and financial institutions has increased by 18.8 percent, 3.5 percent and 0.3 percent respectively. Similarly, loans provided to private sector by BFIs has increased by 19.8 percent (NRS. 221 billion 610 million) in the review period. Loans and investment had increased by 18.7 percent (NRS. 176 Billion 140 Million) in the last FY. Out of the loans disbursed to private sectors in the review period, loans disbursed by commercial banks, development banks and financial institutions have increased by 20.0 percent, 16.0 percent and 0.4 percent respectively.

nabil inveStment banking limited

bfiS/inSuranCe CompanieS mid July 2015 mid July 2014

Commercial Banks 30 30

Development Banks 76 84

Finance Companies 48 53

Microfinance Institutions 39 37

Co-operatives Licensed by NRB

(for Limited Banking Services) 15 15

Insurance Companies 25 25

Merchant Bankers licensed by SEBON 16 14

07


4. interest ratesThere was slight rise on the interest rates on 91 days TB and weighted average interest rate in interbank transactions as of mid July 2015 as compared to mid July 2014. The weighted average interest rate on 91 days TB remained 0.1739 percent as of mid July 2015 which was 0.02 percent as of mid July 2013. Similarly, the weighted average interest rate on interbank transactions among commercial banks as of mid July 2015 was 1.01 percent as compared to 0.16 percent in the same period previous year. The weighted average interest rate on interbank transactions among other financial institutions as of mid July 2015 stood up at 3.89 percent while the similar rate was 2.40 percent last year.

As on mid July 2015, spread on weighted average interest rate of commercial banks is 4.61 percent. During the same point of time last year, the spread rate was 5.21 percent. Similarly, average base rate of commercial banks is 7.88 percent as of mid July 2015 in comparison to 8.36 percent as on mid July 2014.

Securities market:The main glimpses of securities market of the country during FY 2014/15 are as follows:

a. By the mid of July 2015 NEPSE index reached a level of 961.2 points with a decrease of 7.2 percent over the previous year same period where it was 1,036.1 points. NEPSE index made an exceptional rise by 99.9 percent on mid July 2013 to reach 1036.1 points.

b. During the review, there was a decline of 6.4% in market capitalization and remained at NRS. 989.4 billion at the end of review period. During FY 2014/15, market capitalization stood 46.6 percent of total GDP of the country as compared to 54.4 percent as on mid July 2014.

c. The entire market capitalization as on mid July 2015 comprised of 77.8 percent banks and financial institutions (including insurance companies), 7.0 percent hydropower, 3.0 manufacturing and processing companies, 2.5 percent hotels, 0.1 percent trading companies and 9.6 percent other companies.

d. The number of listed companies with NEPSE reached 232 by the mid July 2015 whereas it was 237 in mid July 2014. A small decrease in the count of listed companies was observed

because of merger of some BFIs. The listed companies comprise of 198 banks and financial institutions (including insurance companies), 18 manufacturing and processing companies, 4 hotels, 4 trading companies, 6 hydropower companies and 2 others.

e. In the review period, the paid up capital of listed companies increased by 22.6 percent to be NRS. 179 billion 690 million. During the FY 2014/15, a total of NRS. 24.45 billion worth shares have been listed including ordinary shares of NRS. 9.94 billion, bonus share equivalent to NRS. 1.05 billion and right shares of NRS. 12.97 billion.

f. Securities Business: During the review period, 16 Securities Business Persons (Merchant Banker) licensed by SEBON have been providing their services of Issue Management, Share Registration, Portfolio Management and Underwriting in accordance with their paid up capital. Some of the institutions are also rendering the services of Fund Manager/Depository and Depository Participant (CDS) under the provisions of prevailing laws.

g. Approval of Securities Issue: During the review period, SEBON approved issuance of common shares (IPO) of 22 corporate bodies (including mutual fund schemes) comprising NRS. 9.03 billion, right issues of 22 companies comprising NRS. 2.31 billion which resulted to share registration, approval of prospectus and share issuance worth equivalent to NRS. 11.34 billion of 44 companies and debenture issue of 5 commercial banks consisting of NRP 2.90 billion. Similarly, bonus shares of NRS. 15.22 billion of 103 companies have been registered with SEBON during the review period.

In the previous year, SEBON approved issuance of NRS. 7.41 billion worth common shares of 44 companies including IPO of 19 corporate bodies comprising NRS. 3.17 billion and right issues of 25 companies comprising NRS. 4.24 billion and debenture issue of 3 commercial banks consisting of NRS. 1.45 billion. Similarly, bonus shares of 84 companies equivalent to NRS. 6.66 billion was registered with SEBON during the review period.

Summary of finanCial information of fy 2014/15

The major activities of the company and its financial highlights during FY 2014/15 have been presented below:


maJor aCtivitieS:issue management: During the review period, the company in the capacity of Issue Manager signed agreement for debenture issue of 2 commercial banks and right share issue of 4 body corporates. The company successfully managed debenture issue of 1 commercial bank and 2 right share issues during the review period. The company has been providing debenture trusteeship services to 7 commercial banks. Further, under the agreement signed last year for issuing IPO, the Company has successfully completed issue management of a microfinance company and allotted the shares to the eligible applicants within mid August 2015.

portfolio management Service: As per the objective of the company to cater its services to the investors, the company has been providing Portfolio Management Services (PMS) to its broader clientele in a professional manner. Accordingly, the asset under management (AUM) of 272 PMS clients as at the end of the review period stands at NRS.874 million.

mutual fund: The Company has been successfully rendering services of Fund Manager and Depository to Nabil Balanced Fund I under the Nabil Mutual Fund. The Company has already filed application and prospectus of the second scheme, Nabil Equity Fund, with size of Rs. 1 billion to SEBON for approval.

depository participant and registrar to Shares: The Company has already obtained the DP license from SEBON in FY 2012/13 and took the membership of CDS and Clearing Limited in order to provide DP services to its clientele. Until the review period, 1,768 demat accounts have been opened with the company. Likewise, the company has been rendering RTS service to 8 listed companies including Nabil Balanced Fund – I.

Corporate advisory Service: During the review period, the Company has been rendering services of Loan Syndication, Investment Advisory and Business Valuation under the Corporate Advisory Services. The Company has adopted policy of expanding such services in the coming years and extending required co-operation, through co-ordination with Nepal Merchant Bankers Association, to SEBON to amend the existing laws and regulation related to merchant banking services. Further, the Company has continued, as in the previous years, providing administrative services to its promoter Nabil Bank Limited in the current FY also.

During FY 2014/15, the company has earned about NRS. 20.7 million from securities business (including PMS), NRS. 28.1 million from mutual fund and remaining income constitute the return of NRS. 18.3 million from investment of its share capital and the fund received during issue management; and service fees of NRS. 2.06 million in lieu of various administrative/operational supports provided to its promoter Nabil Bank Limited. Similarly, the Company’s attempt to maximize the short term returns by investing in the IPOs including mutual funds’ units resulted to an income of NRS. 1.92 million during the review period.

financial highlights:The financial position of the company as on mid July 2015 is as under:

The company witnessed a slight decrease of 2.55 percent in its revenue in the review period as compared to previous period whereas total expense has increased by 17.72 percent resulting to a decrease in net profit by 15.16 percent. Despite the impact of high magnitude earthquake that struck Nepal adversely affecting the share market, the performance of the company seems to be satisfactory in the review period. Like in previous year, this year also the company has proposed to distribute 20 percent cash dividend (NRS. 21 million) to its shareholders.

the additional details as required by section 109(4) of prevailing Companies act has been presented in annexure.

partiCularS fy 2014/15 fy 2013/14 groWth (%)

Share Capital 105 105 -

Total Assets* 171 163 4.86%

Total Income 74 75 -2.55%

Total Expenses 34 29 17.72%

Operating Profit 39 46 -15.22%

Net Profit

(After Employees Bonus and Tax) 27 32 -15.16%

Proposed Dividend 21 21 -

No. of Shares (in thousands) 1,050 1,050 -

Earnings Per Share (Rs.) 25.58 30.15 -15.16%

Return on Assets (Rs.) 15.67 19.37 -19.10%

Net worth per Share

(after Dividend)(Rs.) 143.49 138.79 3.39%

*Excluding the monies placed with bankers to the issue account to be

refunded to the applicants after allotment of securities in the IPO.

(NRS. IN MILLION)


expreSSion of gratitude:On behalf of the Board, I would like to express sincere gratitude to all the customers, well-wishers, promoter company Nabil Bank Limited and its employees; and institutional shareholder CG Finco Pvt. Ltd. for their continuous support and cooperation. I also thank all the Regulators for their cooperation and guidance. On behalf of the board, I would like to thank the former chairman of the company, Mr. Anil Gyawali, for bringing this company in the state it is today through his leadership role and professional contribution. I extend my sincere thanks to Mr. Sujan Kumar Kafle of M/s Sujan Kafle & Associates, Chartered Accountants and Mr. Sudarshan Raj Pandey of M/s S.R. Pandey & Co., Chartered Accountants for professionally completing the audit of the company and Nabil Balanced Fund I under Nabil Mutual Fund for the review period and suggestion and contributions made during the course of audit. Similarly, my especial thanks go to all the employees of the company for their noteworthy contributions for achieving objectives of the company and expect similar contributions in the days ahead. Further, I would like to express my warmest gratitude to the board members for their valuable suggestions and support.

Thank you.On behalf of the Board

Sashin JoshiChairman

Date: October 11, 2015

information under SeCtion 109(4) of CompanieS aCt, 2063a) buSineSS aSSeSSment of revieW fiSCal year:During the review period, the Company, as issue manager, signed an agreement for a debenture issue of 2 commercial banks and right share issue of 4 companies and successfully managed debenture issue of 1 commercial bank and 2 right share issues. The Company has been providing debenture

trusteeship services to 7 commercial banks RTS services to 8 companies including Nabil Balance Fund I.

The company has already started rendering full fledged PMS services and rendering Fund Management and Depository services to Nabil Balance Fund I under Nabil Mutual Fund with an objective of establishing the company as “Investment Banking” company in addition to Issue Manager. The Company has been taking necessary actions for the issuance of second scheme, Nabil Equity Fund, with size of Rs. 1 billion. The Company has started Loan Syndication, Investment Advisory and Business Valuation under the Corporate Advisory Services.

b) any impaCt that CauSed to the buSineSS of the Company due to national and international Condition: In the context of Nepalese capital market not being directly linked with International markets, the changes in the international conditions do not have significant impact on Nepalese market. SEBON has already issued policies, regulations and directives relating to mutual fund, credit rating and central depository system and accordingly institutions have made their presence in the market to provide such services. In addition to that, Nepal Rastra Bank’s recent Monetary Policy stipulating requirement for the increment of paid up capital for all banks and financial institutions may further improve the market in the days to come. As a result of which, it is sure that there will be relative increment in the number of issues of IPOs/rights resulting a positive impact on the overall revenue of the company. However, as the time of issuance of constitution of the country is approaching, several political parties have set various demonstration and protest campaigns creating political instability and resulting in the delay of finalization of the constitution which might have adverse impact on the capital market and the company itself.

C) Current year’S aChievement until the date of preparation of report from the board of direCtorS vieW on future aCtivitieS of the Company: Till the date of this report, the company has already started refund of the monies to the applicants post allotment of the IPO shares of one microfinance development bank and is on the final stage for the issue of right shares of 2 commercial banks and 1 microfinance development bank. Similarly, the Company has been regularly rendering services like Depository Participant and Registrar to shares, scheme manager of Nabil Balanced Fund – I, Depository and advisory services.


In addition to the above services, the Company shall coordinate with the regulators to provide high level investment banking services (private equity, venture capital, investment advisory) to its clientele as provided by the regional level investment bankers after customizing them as per Nepalese requirement.

d) induStrial and profeSSional relation of the Company: The company has been maintaining cordial relationship with industrial and professional corporate bodies and enhancing its business substantially therefrom. The company has always placed high priority to the compliance with related acts, laws and directives issued by the regulators from time to time. The company has been conducting its business on the basis of healthy competition with other licensed merchant bankers. The company has been contributing growth of overall capital market with association with the Merchant Bankers’ Association in the capacity of President. There is amicable relationship between the management and other employees in the company.

e) board of direCtorS:The details of Board of Directors and the Chief Executive Officer have been presented below:

Note: 39th Board Meeting held on 2015-01-26 appointed Mr. Bharat Adhikari

as Independent Professional Director of the company. On the 42nd Board

meeting of the Company held on 2015-06-14, it was informed that the

agreement between the former chairman of the company Mr. Anil Gyawali who

was representing from the bank and Nabil Bank Limited was expired. The vacant

position was filled with unanimous decision of the 43rd Board meeting of the

Company to appoint Mr. Sashin Joshi representing from the bank as Chairman of

the Company.

f) board of direCtorS reSponSe on independent auditor’S report:The audit of review period was carried out by auditor Mr. Sujan Kumar Kafle of M/s Sujan Kafle & Associates, Chartered

Accountants appointed unanimously by the Sixth AGM of the company. The suggestions and remarks pointed by the auditor shall be addressed gradually. The Board discussed the auditor’s report and unanimously approved the audited annual accounts, Balance Sheet, Profit & Loss A/c, P/L Appropriation A/c and Cash Flow Statement of the company.

g) detailS of ShareS forfeited:The company has not forfeited any shares.

h) revieW of the progreSSeS made by the Company and itS SubSidiary and the poSition of the Same at the end of the fiSCal year:The progresses made and major activities undertaken by the company during the review period have already been mentioned above. Until now the company does not have any subsidiary.

i) any information given to the Company by itS fundamental ShareholderS:The information provided by promoter shareholder Nabil Bank Limited under group A and institutional shareholder CG Finco Pvt. Ltd. under group B have been maintained by the company.

J) ShareS held by the direCtorS and offiCialS of the Company and information reCeived by the Company on their involvement in trading ShareS:The directors of the company have been nominated by institutional shareholders and the directors have no shareholding and involvement of trading thereon. The same fact applies in case of independent professional directors.

k) information provided on perSonal intereSt of board of direCtorS and their CloSe relativeS regarding ContraCt or agreement done With the Company:The company has not received any such information.

l) buy baCk of ShareS by the Company and information pertaining to thiS:The company has not bought back any shares

m) information of internal Control SyStem:The internal audit of the company for the review period was carried out by the Internal Audit Department of the bank as per the provision of Service Level Agreement entered between the bank and the company. Further, the Board of the company has approved Financial Administration Bylaws, HR Bylaws including Product Paper and Standard Instruction Manual (SIM)

Mr. Sashin Joshi, Chairman Repesentative Group “A”Mr. Krishna Dutta Bhattarai, Director Repesentative Group “A”Mr. Kapil Adhikari, DirectorRepesentative Group “B”Mr. Mahesh Kumar Karki,Independent Professional Director Mr. Bharat Adhikari,Independent Professional Director Mr. Pravin Raman Parajuli,Chief Executive Officer/Company Secretary


of services rendered for maintaining effective internal control system and enhancing service quality. The Company has been reviewing and revising the above mentioned documents as per necessity.

n) detailS of management expenSeS inCurred during the year:The total management expenses under the heading of employee and administrative expense incurred by the company during the review period is NRs. 27,367,147.

o) remuneration, alloWanCeS and benefitS paid to direCtorS, managing direCtor, Chief exeCutive offiCer and offiCialS:The Articles of Association of the company lays down a provision of granting meeting allowance of NRs. 10,000 to the chairman and directors in each meeting of the Board. Accordingly, the company has the provision of paying NRs. 4,000 per month to its Professional Independent Directors as transportation and communication facility. During the review period, the company paid a total of NRs. 320,000 to its Professional Independent Directors and Directors representing from Group A as meeting allowance and a total of NRs. 32,000 as transportation and communication facility to its Professional Independent Directors. However, the Board of Directors representing Group A have not taken any meeting fees during the review period. The Company does not provide any other financial benefits to its Board of Directors.The employees of the company are being provided

remuneration, allowances and benefits as provided in the Employees’ Bylaws of the company approved by the Board. In case of employees deputed by the promoter bank, the remuneration, allowances and benefits have been provided as per the Bylaws of the bank and agreements between the bank and the company. Accordingly, the salary, allowances and addition to Provident Fund paid to Chief Executive Officer of the company in the review period amounts to NRs. 2,840,193.

p) inCome tax: The company has provided NRs. 8,930,939 for income tax liability for the review period which was calculated at the rate of 25% on net profit (after provision for staff bonus) of NRs. 38,436,164 i.e. NRs. 9,609,041 and adjusting deferred tax of NRs. 678,102 thereon.q) loCation of offiCe:The company currently has its office at Naxal, Kathmandu.

r) teChnology:The company has been using Accounting Software purchased from MicroBanker Pvt. Ltd. for recording all financial and accounting transactions.

Similarly, the company has been using different software developed by local vendor for transactions relating to issue management, RTS, PMS and fund management and depository under mutual fund. In addition, the company is operating its separate official website for its customers. Further, the Company has been customizing the software as required.

independent auditor’S report -nabil inveSt


balance SheetAs at 16 July 2015 (31 Ashadh 2072)

Capital & liabilitieS SChedule thiS year previouS year

Share Capital 1 105,000,000 105,000,000

Reserves and Surplus 2 45,661,413 40,724,819

Other Liabilities and Provisions 3 2,918,449,186 2,986,269,568

total 3,069,110,601 3,131,994,387

(IN NPR)

aSSetS SChedule thiS year previouS year

Cash and Bank Balance 4 2,920,801,813 2,979,974,661

Fixed Assets 5 14,842,048 16,858,626

Investments 6 92,446,211 92,839,684

Other Assets 7 41,020,528 42,321,416

total 3,069,110,601 3,131,994,387

Significant Accounting Policies Schedule 13 Notes to Accounts Schedule 14

Schedules 1 to 7 form integral part of the balance Sheet.

Suman kumar bohara pravin raman parajuli Sashin Joshi

Head - Accounts Chief Executive Officer Chairman

DATE: august 19, 2015

PLACE: Naxal, Kathmandu


Sujan kumar kafle, fCa

For and on behalf of

Sujan Kafle & Associates


kapil adhikari

Director

krishna dutta bhattarai

Director

bharat adhikari

Professional Independent Director

mahesh kumar karki


finanCial StatementS -nabil inveSt


income Statement (For the period from 17 July 2014 to 16 July 2015)

partiCularS SChedule thiS year previouS year

income

Income from Merchant Banking Activity 8 20,705,597 15,070,069

Income from Mutual Fund operations 9 28,071,513 24,394,407

Interest Income 18,331,148 18,178,724

Other Income 10 6,416,575 17,806,627

total income 73,524,833 75,449,828

expenses

Personnel Expenses 11 11,219,574 10,293,096

General Operating Expenses 12 16,147,573 13,775,832

Depreciation Charge 5 4,649,320 3,977,802

Interest Expenses 189,211 971,970

Provision for Doubtful Receivable 1,955,000 -

total expenses 34,160,678 29,018,700

profit from regular activities 39,364,155 46,431,128

Provision for Staff Bonus 3,578,560 4,221,012

profit before income tax 35,785,595 42,210,116

Provision for Income Tax 8,930,939 10,555,190

Current Tax 9,609,041 10,532,242

Deferred Tax (678,102) 22,948

net profit/(loss) for the year 26,854,656 31,654,926

Schedules 8 to 12 form integral part of the income Statement.










kapil adhikari

Director


Director

bharat adhikari


mahesh kumar karki


(IN NPR)


profit and loss appropriation account Fiscal Year 2014/15 (2071/2072)

partiCularS SChedule thiS year previouS year

income

Accumulated Profit up to Last Year (Restated Balance) 39,415,738 23,487,863

Current Year’s Profit 26,854,656 31,654,926

Deferred Tax Reserve - 22,948

total 66,270,394 55,165,738

expense

Accumulated Loss up to Last Year - -

Current Year’s Loss - -

Deferred Tax Reserve 678,102 -

Dividend Payment 21,000,000 15,750,000

total 21,678,102 15,750,000

retained earnings 44,592,292 39,415,738










kapil adhikari

Director


Director

bharat adhikari


mahesh kumar karki


(IN NPR)


Cash flow Statement (For the period from 17 July 2014 to 16 July 2015)

partiCularS thiS year previouS year

(a) Cash flow from operating activities (35,540,107) 2,887,802,712

1. Cash received from income 73,524,833 75,449,828

1.1 Income from Merchant Banking Operation 20,705,597 15,070,069

1.2 Income from Mutual Fund Operation 28,071,513 24,394,407

1.3 Interest Income 18,331,148 18,178,724

1.4 Other Income 6,416,575 17,806,627

2. Cash payment (43,316,880) (37,331,242)

2.1 Personnel Expenses (15,440,586) (13,115,427)

2.2 Office Operating Expenses (16,147,573) (13,775,832)

2.3 Interest Expenses (189,211) (971,970)

2.4 Income Tax Paid (11,539,510) (9,468,014)

Cash flow before changes in Working Capital 30,207,953 38,118,586

(increase)/decrease in Current assets 1,429,870 26,895,470

1. (Increase)/Decrease in Available for Sale and Trading Investments (524,590) 1,322,700

2. (Increase)/Decrease in Other Assets 1,954,460 25,572,770

increase/(decrease) in Current liabilities (67,177,929) 2,822,788,656

3. Increase/(Decrease) in Borrowings (7,554,561) (21,653,811)

4. Increase/(Decrease) in Other Liabilities (59,623,368) 2,844,442,467

(b) Cash flow from investment activities (2,632,742) (9,822,224)

1. (Increase)/Decrease in HTM Investment - 4,875,000


3. Interest income from Long term Investment - -

(c) Cash flow from financing activities (21,000,000) (15,750,000)

1. Increase/(Decrease) in Share Capital - -

2. Payment of Dividend (21,000,000) (15,750,000)

(d) income/(loss) from change in exchange rate in Cash & bank balance - -

(e) Current year’s Cash flow from all activities (59,172,849) 2,862,230,488

(f) opening Cash and bank balance 2,979,974,662 117,744,174

(g) Closing Cash and bank balance 2,920,801,813 2,979,974,662










kapil adhikari

Director


Director

bharat adhikari


mahesh kumar karki


(IN NPR)


Statement of Changes in equity Fiscal Year 2014/15 (2071/72)

partiCularS Share Capital retained deferred available for total

earningS tax reServe Sale reServe amount

balance as on 17 July 2014 105,000,000 39,415,738 131,897 1,177,184 145,724,819

Changes in Accounting Policy - -

Share Capital Adjustment -

Changes in Tax Accounting Policy - -

restated balance 105,000,000 39,415,738 131,897 1,177,184 145,724,819

Net Gains and Losses not recognised

in the Income Statement -

Net Profit for the period 26,854,656 26,854,656

adjustments: -

Issuance of Share Capital - -

General Reserve Fund -

Proposed Stock Dividend -

Cash Dividend (21,000,000) (21,000,000)

Available for Sale Reserve (918,063) (918,063)

Dividend Equalization Fund - -

Deferred Tax Reserve (678,102) 678,102 -

Closing balance 105,000,000 44,592,292 809,999 259,121 150,661,413










kapil adhikari

Director


Director

bharat adhikari


mahesh kumar karki


(IN NPR)


Share ownershipAs at 16 July 2015

partiCularS % thiS year % previouS year

1. local ownership 100.00 105,000,000 100.00 105,000,000

1.1 Government of Nepal - - - -

1.2 “Ka” Class Licensed Institutions 74.29 78,000,000 74.29 78,000,000

1.3 Other Licensed Institutions - - - -

1.4 Other Entities 25.71 27,000,000 25.71 27,000,000

1.5 General Public - - - -

1.6 Others - - - -

2. foreign ownership - - -

total 100.00 105,000,000 100 105,000,000

(IN NPR)

Details of Shareholders Holding ≥ 0.5% SharespartiCularS thiS year

% amount

Nabil Bank Limited 74.29 78,000,000

CG Finco Pvt. Ltd. 25.71 27,000,000

General Public - -

(IN NPR)

Share Capital (As at 16 July 2015)


1. Share Capital

1.1 authorized Capital 200,000,000 200,000,000

a) 2,000,000 Ordinary Shares of Rs. 100 each 200,000,000 200,000,000



1.2 issued Capital 150,000,000 150,000,000




1.3 paid up Capital 105,000,000 105,000,000




1.4 proposed bonus Shares - -

1.5 Calls in advance - -

(IN NPR)

SChedule 1


reserves & SurplusAs at 16 July 2015

other liabilities & provisions As at 16 July 2015

SChedule 2

SChedule 3


1. Deferred Tax Reserve 810,000 131,897

2. Available for Sale Reserve 259,121 1,177,184

3. Retained Earnings 44,592,292 39,415,738

total 45,661,413 40,724,819

(IN NPR)


1. Creditors and Accounts Payable 15,984,983 4,947,431

2. Payables and Refundables to Investors 2,897,734,364 2,968,565,241

3. Provision for Expenses 872,233 610,214


5. Deferred Tax Liability - -

6. Short Term Loan - 7,554,561

7. Others 279,048 371,109

total 2,918,449,188 2,986,269,568

(IN NPR)


Cash and bank balance As at 16 July 2015

SChedule 4


Cash balance - -

Petty Cash Fund - -

Current account 70,184,353 199,240,949

1. Nepal Rastra Bank 60,300,000 197,764,000

2. Nabil Bank Limited - -

3. Everest Bank Limited - 136,164

4. Sunrise Bank Limited (Current A/c - PMS) 310,031 37,877

5. NIDC Development Bank Ltd. (Current A/c- PMS) 1,264,641 125,311

6. Nabil Bank Limited - RTS 830,754 451,693

7. Civil Bank Limited 965,656 77,796

8. Commerz & Trust Bank Ltd. (Global IME Bank Ltd.) - 154,669

9. Grand Bank Ltd. (Current A/c - PMS) 761,988 95,762

10. Janata Bank Ltd. (Current A/c - PMS) 1,118,565 57,898

11. Global IME Bank Ltd. (Current A/c - PMS) 386,329 61,348

12. Citizens Bank International Ltd. (Current A/c - PMS) 1,025,305 -

13. Clean Energy Development Bank Ltd. (PMS) 591,482 111,792

14. Nepal Investment Bank Ltd. 185 185

15. Sanima Bank Ltd. (Current -PMS) 1,202,240 136,503

16. Lumbini Bank Ltd. (Current A/c - PMS) 816,254 4,595

17. Mega Bank Ltd. (Current A/c - PMS) 13,411 25,357

18. NMB Bank Ltd. (Current A/c - PMS) 136,774 -

19. NIC Asia Bank Ltd. (Current A/c - PMS) 460,737 -

Call account 337,459,046 9,718,563

1. Nabil Bank Limited 7,543,985 6,695,473

2. Pacific Development Bank Limited - -

3. Sanima Bank Limited 303,758,113 685,089

4. Nabil Bank Limited -RTS (SWBBL) 2,494,886 2,005,008

5. Nabil Bank Limited -RTS (Sana Kisan Bikas Bank) 6,115,192 332,994

6. Nabil Bank Limited - RTS (NBF I) 17,546,870 -

bankers to the issue account 2,513,158,414 2,771,015,148

1. Nabil Bank Limited (06 Account) 1,949,723 9,144,100

2. Mega Bank Nepal Limited 1,129,648 15,167

3. NMB Bank Limited - 300,128,578

4. Commerz & Trust Bank Limited - 32,336

5. Civil Bank Limited - 5,000

6. Sunrise Bank Limited - 76,880

7. Century Commercial Bank Ltd. 1,959,661

8. Janata Bank Nepal Ltd. - 200,045,425

9. Nepal SBI Bank Limited - 13,101

10. Global IME Bank Limited - 71

11. Laxmi Bank Limited 100,456,527 757,782,227

12. NIC Asia Bank Ltd. 23,043 1,031

(IN NPR)

Continued...



13. Nabil Bank Limited - MF 235,036 389,402

14. Nabil Bank Ltd. (Mega IPO) 6,991 995,158

15. Kumari Bank Limited - 1,000

16. Machhapuchhre Bank Ltd. - 37,607

17. Nabil Bank Ltd. (Mahila Sahayatra IPO) 236,090,838 7,839

18. Rastriya Banijya Bank Ltd. 115,493 10,000

19. NCC Bank Ltd. 300,192,123 350,067,243

20. Nepal Bangladesh Bank Ltd. 714,149,884 750,175,240

21. Citizens Bank International Ltd. - 400,128,082

22. Lumbini Bank Limited 13,513,577 -

24. Prabhu Bank Limited 524,394,229

25. Everest Bank Limited 261,454,317

26. Prime Commercial Bank Ltd. 209,407,552

27. Nepal Investment Bank Ltd. 4,500

28. Siddhartha Bank Limited 150,034,932

total 2,920,801,813 2,979,974,661

Continued...


SCh

edu

le 5

fixe

d as

sets

As a

t 16

July

201

5

par

tiCu

lar

S

aS

SetS

thiS

pr

evio

uS

b

uil

din

g

veh

iCle

S fu

rn

itu

re

Com

pu

ter

&

Soft

War

e o

ther

S ye

ar

year

off

iCe

equ

ipm

ent

1. C

ost p

rice

a. P

revi

ous

Year

Bal

ance

-

3,25

3,12

7 4,

858,

045

7,13

9,32

1 1,

297,

007

- 16

,547

,500

8,52

1,42

1

b. A

dditi

on d

urin

g th

e Ye

ar

- 2,

086,

400

- 54

6,34

2 -

- 2,

632,

742

8,88

3,82

4

c. R

eval

uatio

n/W

rite

Bac

k Th

is Y

ear

- -

- -

- -

-

d. S

old

durin

g th

e Ye

ar

- -

- -

- -

-

-

e. W

rite

off d

urin

g th

e Ye

ar

-

- -

- -

- -

(857

,744

)

tota

l Cos

t (a+

b+c+

d+e)

-

5,33

9,52

7 4,

858,

045

7,68

5,66

3 1,

297,

007

- 19

,180

,242

16

,547

,501

2. d

epre

ciat

ion

a. U

p to

Pre

viou

s Ye

ar

- 1,

471,

830

875,

480

2,

860,

601

608,

779

- 5,

816,

691

3,

679,

967

b. F

or T

his

Year

-

669,

219

995,

641

1,33

4,09

8 25

9,40

1 -

3,25

8,35

9 2,

687,

545

c. R

eval

uatio

n/W

rite

Bac

k Th

is Y

ear

-

-

- -

-

- -

-

d. D

epre

ciat

ion

on S

old

Asse

ts

-

- -

- -

- -

e. D

epre

ciat

ion

on W

riten

Off

Asse

ts

-

-

- -

- -

- (5

50,8

21)

tota

l dep

reci

atio

n -

2,

141,

049

1

,871

,121

4,

194,

699

868,

181

- 9,

075,

050

5

,816

,691

3. b

ook

valu

e (W

dv*

) (1-

2)

-

3,19

8,47

8

2,98

6,92

4 3

,490

,964

42

8,82

7 -

10

,105

,192

10

,730

,810

4. l

and

-

-

- -

- -

-

-

5. p

endi

ng C

apita

lizat

ion

- -

- -

- -

- -

6. l

ease

hold

ass

ets

-

-

-

-

- 4,

736,

856

4,

736,

856

6,

127,

817

tota

l (3+

4+5+

6)

-

3,19

8,47

8 2,

986,

924

3,49

0,96

4 42

8,82

7 4,

736,

856

14,8

42,0

48

16,8

58,6

26

(IN N

PR)


investments As at 16 July 2015

SChedule 6


fixed deposits 8,000,000 8,000,000

1. Nabil Bank Limited 8,000,000 8,000,000

Shares, debentures & mutual fund units 84,446,211 84,839,684

1. 12.5% Nepal SBI Bank Debenture 60,000,000 60,000,000

2. 11% Siddhartha Bank Debenture 15,000,000 15,000,000

3. Nabil Balanced Fund I (Seed Capital) 7,500,000 7,500,000

4. Century Commercial Bank Ltd IPO - 1,655,000

5. Ridi Hydropower Company Ltd. IPO - 31,584

6. Ekta Bikas Bank Ltd. IPO - 653,100

7. Rapbheri Bikas Bank Ltd. - IPO 424,943 -

8. Barun Hydropower Company Ltd. - IPO 1,000 -

9. Vijaya Laghubitta Bittiya Sanstha Ltd. - IPO 2,300 -

10. ILFCO Laghubitta Bittiya Sanstha Ltd. - IPO 1,500 -

11. NMB Sulav Fund I 522,000 -

12. NIBL Samriddhi Fund I 351,248 -

13. Laxmi Value Fund-1 643,220 -

total 92,446,211 92,839,684

(IN NPR)


other assets As at 16 July 2015

SChedule 7


1. Deferred Tax Assets 810,000 131,897

2. Account Receivables 32,088,257 38,721,991

Less: Provision for doubtful receivable (2,030,000) -

3. Advance Tax ( Net of Tax Liability) 4,465,254 2,534,785

4. Deposits 118,500 118,500

5. Advance Salary 60,000 161,062

6. Others 5,508,518 653,181

total 41,020,529 42,321,416

(IN NPR)

income from merchant banking activity (For the period from 17 July 2014 to 16 July 2015)

SChedule 8


1. Issue Management Income 5,180,817 7,817,868

2. Underwriting Commission 156,750 439,375

3. Registrar to Shares 3,383,554 2,367,805

4. Portfolio Management Services 7,179,832 4,445,022

5. Income from Auction of Shares Management 4,804,645 -

total 20,705,597 15,070,069

(IN NPR)

income from mutual fund operations (For the period from 17 July 2014 to 16 July 2015)

SChedule 9


1. Fund Management Fees - NBF I 22,457,210 19,515,526

2. Depository Fees - NBF I 5,614,303 4,878,881

total 28,071,513 24,394,407

(IN NPR)


other income (For the period from 17 July 2014 to 16 July 2015)

SChedule 10


1. Operational Support/Advisory Fees 2,060,508 7,459,433

2. Business Advisory 738,375 438,750

3. Gain on Sale of Securities 1,925,159 9,717,449

4. Dividend Income 1,121,841 9,396

5. Income from Depository Participant Service 278,540 -

6. Miscellaneous Income 292,152 181,599

total 6,416,575 17,806,627

(IN NPR)

personnel expenses (For the period from 17 July 2014 to 16 July 2015)

SChedule 11


1. Salary 4,829,443 4,316,984

2. Allowances 4,145,813 3,906,397

3. Contribution to Provident Fund 482,944 381,783

4. Overtime 1,975 7,506

5. Training Expenses 38,270 151,177

6. Dashain Expenses 771,523 664,494

7. Staff Insurance Premium 284,629 183,321

8. Leave Encashment 477,936 417,338

9. Gratuity Expenses 187,042 264,096

total 11,219,574 10,293,096

(IN NPR)


general operating expenses (For the period from 17 July 2014 to 16 July 2015)

SChedule 12


1. Supplies and Stationeries 322,626 654,280

2. Communication Expenses 309,128 272,021

3. Expenses relating to Audit

a. Audit Fees 65,000 55,000

b. Other Expenses - -

4. Repairs & Maintenance 808,431 281,327

5. Water 81,045 69,139

6. Electricity 416,844 393,364

7. Janitorial 30,228 35,959

8. Advertisement & Business Promotions 357,383 436,246

9. Insurance - Fire & Others 93,087 28,132

10. Board Meeting Fees 352,000 210,000

11. Professional Services - Others 500,000 500,000

12. Technical Management Service Fees 2,840,193 2,769,786

13. Fuel Expensses - Vehicle 354,249 377,119

14. Fuel Expensses - Generator 465,506 471,846

15. Newspapers/Periodicals/ Books 32,782 33,570

16. Tea, Coffee & Snacks 450,822 427,059

17. Membership Fees 45,000 45,000

18. Other Taxes & Fees (SEBON) 300,000 300,000

19. Vehicle Registration & Renewal 61,662 55,100

20. Contract Service Expenses 3,323,792 2,464,598

21. Miscellaneous Expenses 37,122 34,423

22. AGM Expenses 19,780 17,299

23.Travelling Expenses 43,243 17,277

24. AMC Charges 444,547 455,907

25. Bank Charges 18,902 35,050

26. Inaguration Expenses - 133,137

27. Office Shifting Expenses - 57,830

28. Rent Expenses 3,709,200 2,627,350

29. Loss on Disposal of Fixed Assets - 518,014

30. Credit Rating Charges 565,000 -

31. Donation to PM Diaster Relief Fund 100,000 -

total 16,147,573 13,775,832

(IN NPR)


SChedule: 13 Significant accounting policies

Schedules to and forming part of financial statements as of 16th July 2015

1. Corporate information Nabil Investment Banking Limited (Nabil Invest) is a limited liability Company, incorporated on 7th February, 2010 and domiciled in Nepal. It is a licensed Merchant Bank as a subsidiary of Nabil Bank Ltd. with CG Finco Pvt. Ltd. as its Institutional shareholder, licensed under Securities Businessperson (Merchant Banker) Rules, 2064 from the Securities Board of Nepal (SEBON). The registered address of Nabil Invest is Kathmandu, Nepal.

2. approval of finanCial StatementS by the board of direCtorS The Financial Statements for the year ended on 16th July, 2015 was approved for issuance by the Board of Directors on August 19, 2015.

3. prinCipal aCtivitieS and operationS Nabil Invest obtained license for commercial operation as a Securities Businessperson (Merchant Banker) from SEBON on May 26, 2010. The major activities of the Company are issue management, portfolio management services, underwriting of securities, securities trustee, registrar to shares, fund management & depository services of Nabil Mutual fund, depository participant services in a central depository services, corporate advisory services, allied support services etc.

iSSue management During the review period, Nabil Invest has entered into Agreements with following institutions for managing their public/right offer.

• First Microfinance Development Bank Ltd. (Right Issue) • Nepal Bangladesh Bank Ltd. (Debenture Issue) • Everest Bank Ltd. (Debenture Issue) • Sana Kisan Bikas Bank Ltd. • Machapuchchhre Bank Ltd. (Right Issue) • Prabhu Bank Ltd. (Right Issue)

The IPO of Mahila Sahayatra Microfinance Bittiya Sanstha Ltd. was opened in the review period for which agreement was entered in last fiscal year. The IPO was excessively oversubscribed and the allotment of the same has been completed on August 5, 2015. The IPO of debentures of Everest Bank Ltd. was successfully managed and correspondingly allotted on July 16, 2015.

Further, the Company has also successfully managed the right issues of City Development Bank & First Microfinance Development Bank Ltd.

underWriting: During the review period, Nabil Invest has not entered into any agreements to undertake the underwriting commitment of the IPOs. However, the underwriting commitment of IPO of Mahila sahayatra Microfinance Bittiya Sanstha Ltd. has been ceased as the issue was highly oversubscribed.

registrar to Shares (rtS) & depository participant (dp) Services: Nabil Invest has been rendering RTS services to the following companies:

• Nabil Bank Limited • Swabalamban Laghubitta Bikas Bank Limited. • Mega Bank Nepal Limited. • Sanima Bank Limited. • Prime Life Insurance Company Limited. • Sana Kishan Bikas Bank Limited. • Surya Life Insurance Company Limited

During the review period, the Company has entered into RTS agreement with Surya Life Insurance Company Limited while others are of continuation of earlier years.

In addition, Nabil Invest under Depository services has been rendering depository services to unit holders of Nabil Balanced Fund – I under Nabil Mutual Fund.

Nabil Invest has already started providing Depository Participant (DP) services in full fledge and has earned revenue of Rs. 278,540 in the reporting period. The number of De-mat accounts opened with the Company has crossed 1,768 by the end of Asar 2072 and the number is expected to grow further in the coming year.

portfolio management Services (pmS) PMS is a professional service offered by Portfolio Managers to their Clients to help them manage their wealth professionally. The Portfolio Manager manages the assets of the Client considering their investment goals and risk appetite. As managing investments requires time, knowledge, experience and constant monitoring, investors who lag these aspects seek the support of professional Portfolio Managers.

Nabil Invest provides the following services to the investors under PMS: • Discretionary Portfolio Management Services • Non Discretionary Portfolio Management Services • Advisory Services


The size of the total Assets under Management (AuM) has reached Rs 874 Million with client base of 272 including institutional clients at the end of the review period. Out of the total size, Rs 650 Million) constitutes the guaranteed returns portfolio.

fund management & depository Services to nabil mutual fund The Sponsor Nabil Bank appointed Nabil Invest, an institution licensed by SEBON to render Fund Management services to the schemes of Nabil Mutual Fund. The Company has been managing the assets of Nabil Balance Fund I, first scheme under Nabil Mutual Fund, as Fund Manager.

The Company has also been rendering Depository services to the unit holders of Nabil Balanced Fund I as per its license obtained from SEBON & in line with the provisions of prevailing regulations on mutual funds.

Further, the Company is preparing to launch Nabil Equity Fund, second scheme under Nabil Mutual Fund with a size of Rs. One Billion and has already filed a prospectus of the same with SEBON. SEBON has given feedback on the prospectus and has directed us to rate the Sponsor and Fund Manager to obtain final approval on the scheme. The process of credit rating is likely to take some more time to move ahead.

Corporate advisory Services Nabil Invest has started rendering advisory services to few institutions in the form of Loan Syndication, Investment Advisory and Business Valuation. During the review period, the Company has earned income of NRs. 738,375 from advisory services. The Company targets to widen the scope of advisory services in order to improve the revenue from this segment in the next fiscal year as SEBON has incorporated the additional scope of work that the Merchant Bankers will be allowed to render under Advisory Services in days ahead in line with regional markets in its proposed amendment on related draft regulation.

other Support Services Nabil Invest continued rendering its operational support services to Nabil Bank in their bullion operations in coordination with Treasury & the Branches of the Bank.

4. reSponSibility for finanCial StatementS The Management of Nabil Invest is responsible for the preparation of financial statements. The Management & the Board of Directors acknowledges the accountability of the Financial Statements prepared as set out in the “Annual Report of the Board of Directors”.

these financial Statements include the following components: a. a Balance Sheet disclosing the information on financial position of Nabil Invest;

b. an Income Statement disclosing the financial performance of Nabil Invest for the period under review;

c. a Statement of Changes in Equity showing all changes in equity of Nabil Invest;

d. a Cash Flow Statement disclosing the information on the ability of Nabil Invest to generate cash and cash equivalents; and

e. Notes to the Financial Statements comprising a summary of principal accounting policies and other relevant explanatory notes.

5. Statement of ComplianCe The Financial Statements which comprises components mentioned above have been prepared in accordance with Nepal Accounting Standards (NAS) pronounced by the Institute of Chartered Accountants of Nepal and in compliance with Companies Act, 2007.

6. baSiS of preparation The Financial Statements are presented in Nepalese Rupees (NRs) and are prepared on historical cost basis. Preparation of financial statements in conformity with NAS and GAAP requires the use of certain critical accounting estimates and also requires management to exercise judgement in the process of applying Nabil Invest’s accounting policies.

7. Summary of prinCipal aCCounting poliCieS the principal accounting policies adopted by the board of directors are presented below.

7.1 inCome reCognition a. income from investments

• Interest earnings on fixed deposits, call deposits and bonds and debentures are recognised on accrual basis. • Dividend on share investments is recognised as and when the right to receive is established.

b. fee income• Issue Management Income is recognised when the issue management services are fully rendered.

• Underwriting Commission is recognised when the Issuing Company complies with all the terms of underwriting commitment Agreement.

• Portfolio / Assets Management Income is recognised when the contract with the Client for the Portfolio Management Service is executed.

• Bond / Debenture Trusteeship Income are accounted for on accrual basis when the Trust Deed provides lump sum fee covering period more than 1 year, it shall be accounted on pro-rata basis.

• Income with respect to advisory services are recognised: - after the services are fully rendered, if the right to receive the fee is subject to the fulfilment of terms of advisory services, - on accrual basis, if the right to receive the fee is established after elapse of a time.

• Income from facilitation services to Bank’s customers for securities is recognised after the transactions are executed.

• Loan Syndication Fee is recognised after the loan syndication services are rendered.


• Fee from Business Outsourcing Services are recognised: - after the services are fully rendered, if the right to receive the fee is subject to the fulfilment of terms of business outsourcing services,

- on accrual basis, if the right to receive the fee is established after elapse of a time.

• Fee from Cross Sale Services are recognised when the cross selling services are rendered.

• Commission on ETF is accounted for as and when contract for ETF is executed.

c. gains / losses on trading and available for securities (sell)

• Gains and losses arising from trading are recognised after the securities are sold while gains and losses arising from revaluation are recognised on daily basis.

7.2 expenSe reCognition

a. interest on borrowings

• Interest expenses on borrowings are accounted for on accrual basis. • Interest assured on funds received for Portfolio Management are accounted for on accrual basis.

b. Staff bonus

• Provision for staff bonus is provided for as per the Bonus Act, 1974.

7.3 inveStmentS

a. the investments held by nabil invest are classified under 3 categories:

• Investments Held for Trading: These are marketable investments and held with the primary intention of resale over a short period of time. These investments are initially measured at cost and subsequently accounted at market value.

• Investments Available for Sale: These are investments held with the primary intention to recover value of investments through sale rather than continuing to hold. These investments are initially measured at cost and subsequently accounted at market value.

• Investments Held Till Maturity (HTM): These investments are primarily intended to be held till maturity and are valued at cost and carried at these values in the Balance Sheet till maturity. Any impairment losses arising in such investments are provisioned and charged in the Income Statement. Premiums paid while acquiring HTM Investments shall be recognized as the part of initial cost and subsequently amortized on proportionate basis till maturity.

b. Investments in unlisted companies are initially stated at cost and carried at these values in the Balance Sheet. Any impairment losses arising in such investments are provisioned and charged in the Income Statement. Nabil Invest recognizes equity method to calculate impairment losses on unlisted investments.

7.4 fixed aSSetS and depreCiation

a. Fixed assets are stated at cost less accumulated depreciation.

b. Depreciation is charged to Income Statement on Written Down Value method over the estimated useful lives of the fixed assets. The depreciation rates applied for various asset categories are as follows:

c. In case of fixed assets purchased during the year and booked for more than one month, depreciation is charged from the subsequent month of booking. Depreciation on fixed assets sold or disposed off during the year is charged to the previous month of such disposal.

d. Leasehold improvements are amortized over the period of lease.

e. Cost of computer software licences are capitalised and are amortized over a period of useful life of the software, estimated as 5 years from the date of acquisition.

f. Non-consumable items having life less than one year and/or costing less than NRs. 5,000 are expensed off during the year of purchase.

7.5 Contingent liabilitieS All types of guarantees & claims whose future outcome cannot be ascertained with reasonable certainty is recognized as contingent liabilities in accordance with NAS – 12 “Provisions, Contingent Liabilities and Contingent Assets”.

7.6 Stationery StoCk Stationery purchased are charged to revenue at the time of consumption and valued at average cost basis.

7.7 inCome taxeS

a. Provision for current tax is made based on the provisions of the Income Tax Act, 2058 and amendments thereto.

b. Deferred tax is recognized and provided for on the timing differences between taxable income and accounting income.

c. Deferred tax assets are not recognised unless there is a virtual/reasonable certainty that there will be sufficient future taxable income available to realize such assets. Deferred tax assets & liabilities are netted off and presented either under ‘Other Assets’ or under ‘Other Liabilities’.

d. The equivalent amount of outstanding Deferred Tax Assets is earmarked under Deferred Tax Reserve in order to make the accounting policy uniform with the accounting policy of Nabil Bank Limited, the parent Company.

nature of aSSetS depreCiation rate eStimated uSeful life

Furniture 25% 15 years

Equipments 25% 15 years

Vehicles 20% 7 years

Computers 40% 5 years

Building 5% 50 years

Leasehold Items 20% (Straight Line) 5 years


SChedule: 14 notes to accounts1. paid up Capital The issued and paid up capital of Nabil Invest is Rs.150 Million and Rs. 105 Million respectively. The remaining portion of the issued capital shall be issued by the Company in future in such a manner as the Board of the Company deems appropriate. Out of paid-up capital of Rs.105 Million, Nabil Bank Limited holds Rs.78 Million while the balance of Rs.27 Million is held by CG Finco Pvt. Ltd.

2. inCome tax and deferred tax The tax liability of Nabil Invest for the review period, after adjusting for inadmissible and tax free items computed on self-assessment basis under Income Tax Act, 2002 is Rs. 9,609,041.

Accounting tax has been computed on accounting profit which is profit before tax and adjustments for permanent difference arising out of dividend income from resident company as the tax on dividend from resident company is considered to be final withholding tax. The accounting tax has been calculated as under:

Deferred tax income of Rs.678,102 has been booked in the income statement this year on the taxable temporary difference arising due to charge of depreciation and on creating provision for Leave Encashment & doubtful receivable as shown hereunder:

before tax profit as per income Statement 35,785,596

add: disallowable expenses 6,972,478

Expenses without proper supporting 10,000

Excess Repair and Maintenance 96,138

Leave Provision 262,019

Provision for doubtful receivable 1,955,000

Depreciation as per Books 4,649,320

less: allowable exp & exempt income 4,321,909

Depreciation as per Tax 4,250,068

Dividend Income (Net of tax) 71,841

taxable income 38,436,164

income tax liability @ 25% 9,609,041

profit from regular activities 39,364,156

Provision for staff Bonus 3,578,560

profit before tax and tax related adjustment 35,785,596

Adjustment for permanent difference:

Disallowable Expenses 10,000

Dividend Income (71,841)

accounting profit after adjustment 35,723,755

accounting tax @ 25% 8,930,939

Current year tax 9,609,041

Deferred Tax 678,102

itemS Carrying amount tax baSe taxable temporary deduCtible temporary deferred tax liability /

differenCeS differenCeS (aSSetS)

Fixed Assets 16,858,626 16,775,997 82,629 - 20,657

Provision for Leave Encashment 610,214 - (610,214) - (152,554)

total (527,584) - (131,897)

itemS Carrying amount tax baSe taxable temporary deduCtible temporary deferred tax liability /

differenCeS differenCeS (aSSetS)

Fixed Assets 14,842,048 15,254,810 (412,762) - (103,190)

Provision for Leave Encashment 872,233 - (872,233) - (218,058)

Provision for Doubtful Receivable 1,955,000 - (1,955,000) (488,750)

total 17,669,281 15,254,810 (3,239,994) - (809,999)

deferred tax previouS year

deferred tax thiS year

Deferred Tax income booked in the review period is Rs. 678,102.

(IN NPR)

(IN NPR)


b. key management personnel Key Management Personnel of Nabil Invest includes the Board of Directors and the Chief Executive Officer:

Mr. Sashin Joshi Chairman Mr. Krishna Dutta Bhattarai Director Mr. Kapil Adhikari Director Mr. Mahesh Kumar Karki Independent Professional Director Mr. Bharat Adhikari Independent Professional Director Mr. Pravin Raman Parajuli Chief Executive Officer/Company Secretary

Note: The 39th Board meeting dated January 26, 2015 has appointed Mr. Bharat Adhikari as Independent Professional Director of the Company.

The terms of service of the CEO, Nabil Bank – Mr. Anil Gyawali who was also the Chairman of Nabil Invest as one of the representatives from Bank’s end expired on 19th May, 2015 and the Board of the Company as per the information received from the Bank in writing vide their letter dated June 9, 2015 took note of the same from its 42nd Board meeting dated June 14, 2015.

Further, the Board acknowledged the nomination of Mr. Sashin Joshi as the Director of the Company representing Nabil Bank as per the letter received from Nabil Bank dated July 13, 2015 & also unanimously selected Mr. Joshi as the Chairman as per Clause 27(6) of AOA of the Company vide its 43rd Board meeting dated July 14, 2015.

c. Compensation to key management personnel of nabil invest The total employee benefits paid to Mr. Pravin Raman Parajuli in the capacity as Chief Executive Officer of Nabil Invest in the review period amounts to Rs.2.84 Million.

d. transaction with key management personnel of the bank The Board of Directors representing the Bank have decided not to accept any meeting fees until otherwise decided at a later stage. However, this decision does not apply to the director representing CG Finco Pvt. Ltd. and Professional Independent Directors. The Company has paid Rs.320,000 to its Directors as meeting fee during the review period. In addition to meeting fee, the Company pays Rs. 4,000 per month to Professional Independent Directors towards communication and transportation allowance and Rs. 32,000 has been incurred by the Company under this heading in the review period. The Company does not provide any other financial benefits to its Board of Directors except mentioned above.

4. uSage of nabil bank’S infraStruCture/reSourCeS

a. Nabil Invest has entered into Service Level Agreement (SLA) with Nabil Bank under which the Company receives services of the Bank in areas like Administration, Operations, Accounts, Finance & Planning, Information Technology, Clearing & Settlement, Human Resources, Legal, Treasury etc. at an annual fees of Rs. 5,00,000.

b. Nabil Invest has also been availing services of the CEO deputed by the Bank. During the year, the Company has reimbursed Rs. 2,840,193 to the Bank as fees paid on actual cost basis for the deputed staff as per the provisions of Management Service Agreement (MSA) entered between Nabil Bank & the Company.

3. related partieS diSCloSureS a. nabil invest has the following related parties:

the Company has entered into following transactions with its related parties during f.y.2071/72:

name relationShip

Nabil Bank Limited Holding Company

CG Finco Pvt. Limited An Associate Company

related party tranSaCtionS amount

Nabil Bank Limited Balance in Call/Current Account Closing Balance Rs. 27,2814,275

Nabil Bank Limited Balance in Fixed Deposit Closing Balance Rs. 8,000,000

Nabil Bank Limited Interest Income on Call & Fixed Deposit Accounts Rs. 2,502,222

Nabil Bank Limited Proceeds realised from rendering operational support assistance for the Bank NRs.2,060,508

Nabil Bank Limited Annual Fee of RTS Service Provided Rs. 425,000

Nabil Bank Limited Interest paid on Short term loan Rs. 8,416

Nabil Bank Limited Service Level Agreement (SLA) Fees paid Rs.5,00,000

Nabil Bank Limited Technical Management Service Fee paid Rs.2,840,193


5. inveStmentS The investments of Nabil Invest constitute investment in Debentures, Time Deposits, Mutual Fund Units and Equity Shares purchased through IPO. Some of these investments have been made with objective of holding them till maturity for regular returns and hence valued at cost. The investments in equity shares through IPO shall be sold once they are listed with NEPSE and upon receipt of reasonable targeted returns. Such investments have been classified under Available for Sale Category and valued at fair value that is market price as on Balance Sheet date in case of shares which are listed with NEPSE. In case of shares which are not listed till the Balance Sheet date, they are valued at cost. The Company does not hold any investments which are classified as Held for Trading.

6. gain on Sale of SeCuritieS During the review period, Nabil Invest earned a realised gain of Rs. 1.93 Million from sale of shares which were purchased from Primary market (IPO) as detailed below:

partiCularS CoSt priCe market value market priCe

aS on aSar end 2072

held to maturity investments

fixed deposits 8,000,000.00 8,000,000.00

1. Nabil Bank Limited 8,000,000.00 8,000,000.00

bonds/ debentures 75,000,000.00 75,000,000.00

1. 12.5% Nepal SBI Bank Debenture (60,000 Debentures @ Rs. 1000 each) 60,000,000.00 60,000,000.00

2. 11% Siddhartha Bank Debenture (15,000 Debentures @ Rs. 1000 each) 15,000,000.00 15,000,000.00

mutual fund units 7,500,000.00 7,500,000.00

1. Nabil Balanced Fund I -Seed Capital (750,000 units @ Rs. 10 each) 7,500,000.00 7,500,000.00 13.50

total 90,500,000.00 90,500,000.00

available for Sale investments

investment in equity Shares/mutual fund units

1.Rapti Bheri Bikas Bank Limited IPO (1,693 shares @ Rs. 100 each) 169,300.00 424,943.00 251

2. Barun Hydropower Company Limited IPO (10 shares @ Rs. 100 each) 1,000.00 1,000.00 Not Listed

3. Bijaya Laghubitta Bittiya Sanstha Ltd. IPO (23 shares @ Rs. 100 each) 2,300.00 2,300.00 Not Listed

4. ILFCO Laghubitta Bittiya Sanstha Ltd. IPO (15 shares @ Rs. 100 each) 1,500.00 1,500.00 Not Listed

5. NMB Sulav Fund I (52,200 units @ Rs. 10 each) 522,000.00 522,000.00 10.00

6. NIBL Samriddhi Sulav Fund I (34,777 units @ Rs. 10 each) 347,770.00 351,247.70 10.10

7. Laxmi Value Fund I (64,322 units @ Rs. 10 each) 643,220.00 643,220.00 10.00

total 1,687,090.00 1,946,210.70

total investments 92,187,090.00 92,446,210.70

name of Company no. of unitS CoSt priCe net Sale proCeedS net gain

Century Commercial Bank Ltd. 5,000 500,000 1,635,893 1,135,893

Ridhi Hydro Power Company Limited 94 9,400 69,855 60,455

Laxmi Laghubitta Bikas Bank Limited 41 4,100 24,918 20,818

Ekta Bikas Bank Limited 6,531 653,100 1,361,092 707,992

total 1,166,600 3,091,759 1,925,159

the details of investments of the Company as on balance Sheet date is as follows: (IN NPR)

(IN NPR)


7. proviSion for doubtful reCeivableS The Company has created provision of Rs.14.25 lacs against receivable of issue management fees from Nabil Equity Fund which is in the final stage of approval from SEBON as first comment on the review of draft prospectus has been received from SEBON. The delay in approval process is mainly due to technical issues in credit rating. Further, Rs. 5.3 lacs has been provided against the receivable from one of the corporate clients in lieu of providing valuation related services by the Company. However, the Company is using its best efforts to realize/recover the receivables at the earliest possible.

8. intereSt inCome Nabil Invest has earned total interest income of Rs. 18,331,148 which includes Rs. 8,595,874.05 earned from placement of subscription amount raised from public offers with Bankers to the Issue and the remaining interest is received from Investment on Debentures and Bank Deposits.

9. bank balanCe The total bank balance of Nabil Invest as on Balance Sheet date stands at Rs. 2,920,801,813 which includes Rs. 2,609,534,900 of application money collected during the IPO of Mahila Sahatra

Laghubitta Bittiya Sanstha Ltd. that has been placed in various Bankers to the Issue (BTI) account and with Nepal Rastra Bank. The Company has already made the allotment of said share and will be refunding excess amount to the concerned applicants from August 10, 2015.

On the review date, the Company has Rs. 761,988 balance at current account maintained with Grand Bank Nepal Limited for which Nepal Rastra Bank has taken Prompt Corrective Action (PCA) due to failure to maintain capital adequacy ratio (CAR) as prescribed. However, the said balance has already been transferred to the operating account of the Company maintained with Nabil Bank Limited.

10. propoSed dividend The Board of Directors of Nabil Invest has decided to propose 20 percent of cash dividend for approval in its forth coming Annual General Meeting.

11. previouS year’S figureS have been regrouped/rearranged Wherever neCeSSary.


Winner- National Best Presented Accounts (BPA) Award, 2009




Recognition as Highest Tax Payer Among Commercial Banks, 2011

Recognition as Highest Tax Payer Among Commercial Banks, 2014

