Annual Report 2009 10 English

ALWAYS WITH

YOUALWAYS WITH

YOU

NIC BANK I 13th Annual Report 2009/10NIC BANK

Corporate O�ce: 279 Kamaladi Sadak, Kathmandu, Nepal, P.O.Box: 7367, Phone: 01-4262277, Fax 01-4241865Registered O�ce: Main Road-03. Biratnagar, Nepal, P.O.Box: 232, Phone: 021-521921, Fax: 021-522748

NIC BANK I 13th Annual Report 2009/10

TABLE OF CONTENTS About us 2Organizational Structure 4Financial Highlights 5Vision 6Mission 7Board of Directors 8Directors’ Report 12Chairman’s Speech 22Senior Management Team 24CEO Speaks 28Management Discussion and Analysis Report 30Review of Operation 32Products and Services 42Trade in Bullion 44Corporate Social Responsibility 46Branch Managers 48Auditor’s Report 50Balance Sheet 52Profit & Loss Account 53Profit & Loss Appropriation Account 54Statement of Changes in Equity 55Cash Flow Statement 56Schedules 57We Are At 104

ALWAYS WITH

YOU

2

Nepal Industrial & Commercial Bank Limited (NIC

Bank) commenced its operation on 21 July 1998.

The Bank was promoted by some of the prominent

business houses of the country. Promoters hold

51% of the shares while 49% is held by the general

public.

NIC Bank has over 34,000 shareholders. The

shares of the Bank are actively traded in Nepal

Stock Exchange with current market capitalization

of about NPR 8,210 million. The Bank has grown

rapidly with 26 branches throughout the country

while several branches are planned to be opened

this year. All branches are inter-connected through

optical fiber as well as V-Sat and are capable of

providing real time on-line transactions.


About us

ALWAYSYOUWITH

3

NIC Bank was the first commercial bank in Nepal

to have received ISO 9001:2000 certification for

its Quality Management System in the year 2006.

The Bank has recently been certified under the

upgraded ISO 9001:2008 standards for the Bank’s

Quality System on Commercial Banking Activities

for the first time in Nepal.

Furthermore, NIC Bank became the first Bank

in Nepal to be provided with a line of credit by

International Finance Corporation (IFC), an arm of

World Bank Group under its Global Trade Finance

Program, enabling the Bank’s Letters of Credit and

Guarantees to be accepted/ confirmed by banks

worldwide.

The Bank believes in continuously offering new

and value added services to its customers, with

commitment to quality and value to its clients at the

same time. Accordingly, the Bank has been in the

forefront in launching innovative products having

unique customer friendly features with immense

success.

The Only ISOCertified

Bank inNepal

The First Bankto be ProvidedLine ofCredit by IFC


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NIC Bank’s organizational structure is designed to support its business goals.

However, it is flexible enough in seeking to ensure effective control and supervision

and consistency in standards across all businesses at the same time. NIC Bank has

successfully embarked on a multi-pronged strategy of consolidation, administrative

streamlining, human resource up-skilling, strategic cost management, focused non-

performing assets management, balance sheet and treasury management and

controlled asset growth in tandem with strengthening the credit culture as well as

strategic marketing and sales. The Corporate Center comprises all shared services and

corporate functions including finance, company affairs, risk management, legal, human

resources, branding and corporate communications.

Organizational Structure

REVENUE

1,6

00

154

24 76 49 91 68

Interest from Loans

Interest from Investments

Interest - others

Commission and discounts

Other Operating Income

FX Income

Other Non-Operating Income/ Write Backs

NPR IN MILLION


5

Financial Highlights

ParticluarsFY

2004/05 FY

2005/06FY

20006/07FY

2007/08 FY

2008/09 FY

2009/10 Operating Performance Operating Profit (NPR millions) 202 212 291 393 526 705 Net Profit (NPR millions) 114 97 159 243 317 450 Financial Position Total Assets (NPR millions) 7,508 10,384 11,679 15,239 18,751 20,309 Loans and Advances (NPR millions) 4,909 6,902 9,129 11,465 13,916 12,929 Deposits and Borrowings (NPR millions) 6,692 9,224 10,420 13,420 16,240 17,692 Paid-up Capital (NPR millions) 500 600 660 944 *1,312 1,312Shareholders fund (NPR millions) 684 767 919 1,303 1,660 1,765Core Capital (NPR millions) 680 761 912 1,294 1,649 1,750 Key Indictors Earning Per Share (NPR) 22.75 16.10 24.01 25.75 27.83 34.30 Return on Equity (%) 17.44 14.12 20.68 22.57 24.23 27.09 Return on Assets (%) 1.69 1.08 1.36 1.60 1.88 2.30 Cost-income ratio (%) 30.98 32.67 29.09 28.06 26.99 26.67 Capital Adequacy Ratio (%) 13.29 13.54 12.20 13.11 12.42 12.92 Non-performing assets (%) 3.78 2.60 1.11 0.86 0.93 0.72 Dividend Payout Ratio (%) 30.00 10.53 21.05 21.05 15.79 26.32 Stock Price Share price: year end (NPR) 366 496 950 1,284 1,126 626 Market capitalization (NPR Million) 1,830 2,976 6,270 12,119 12,842 8,210 Price to Earning Ratio (%) 16.09 30.81 39.56 49.86 40.46 18.25 Others Employees 157 166 189 232 270 327Branch offices 8 8 10 16 20 26

Tax

Provisions

Staff Expenses

Transferred to Reserve

Interest Expenses

Other Operating Expenses

Expense from Extra-Ordinary Activities


COSTSNPR IN MILLION

195

82 119

450

1,03

1

138

46

*Includes proposed bonus shares of Rs. 171 millions & paid up capital of Rs. 1,141 millions.

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to become one of the most respectable banksin Nepal based on honorable conduct andlong-term financial performance.


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to become a leading bank in Nepal by providing complete financialsolutions to our customers, superior value to our shareholders andpromising growth opportunities to our employees.


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From Right (Anti-Clockwise) :

Mr. Lokmanya Golchha (Board Director)

Mr. Rajendra Aryal (Board Director)

Mr. Birendra Kumar Sanghai (Board Director)

Mr. Sashin Joshi (CEO)

Mr. Jagdish Prasad Agrawal (Board Chairman)

Mr. Tulsi Ram Agrawal (Board Director)

Mr. Ganesh Man Shrestha (Board Director)

Mr. Nirmal Kumar Agrawal (Board Director)

Mr. Niraj Shrestha (General Manager Business Banking)


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Board of Directors

NIC Bank is run by professionals and it believes in the highest standards of corporate governance. The Directors of NIC Bank are eminent personalities from various fields and they bring to the Board a wide range of professional experience and skills. They have signed a declaration to abide by the code of ethics as laid down by Nepal Rastra Bank (the central bank) and they are independent of management and free from any business or other relationship with the Bank. The directors retire every 4 years and if eligible, qualify for re- appointment. The Board’s mandate is to oversee the Bank’s strategic direction, review corporate performance, authorize and monitor strategic investments, ensure regulatory compliance and corporate governance and safeguard interests of all stakeholders.


10

NIC Bank Board of Directors

Jagdish Prasad AgrawalChairman (Promoter Group)


11

Tulsi Ram AgrawalDirector (Promoter Group)

Lokmanya GolchhaDirector (Promoter Group)

Nirmal Kumar AgrawalDirector (Promoter Group)

Rajendra AryalDirector (Public Shareholder Group)

Birendra Kumar SanghaiDirector (Public Shareholder Group)


Ganesh Man ShresthaProfessional Director

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Directors’ Report Directors of NIC are highly elated to present their report together with Balance Sheet and Profit and Loss statement for the year ended 16th July 2010. The report is in conformity with prevailing Company Act 2063, Banks and Financial Institutions Act 2063 and the directives issued by the central bank from time to time.

Financial HighlightsThe financial performance of NIC Bank for FY 2009/2010 is summarized below:

NPR in million

The Bank posted total income and net profit of NPR 705 million and NPR 450 million with a growth of 34% and 42%, respectively.

Appropriations

Out of the net profit after tax of NPR 450 million for FY 2009/10, NPR 89.96 million (previous year NPR 63.49 million) has been transferred to General Reserve Fund, NPR 3.01 million (previous year NPR 1.84 million), to Exchange Fluctuation Reserve and NPR 40 million (same as previous year) to NIC Bond Redemption Reserve as per statutory requirements, NPR 0.3 million has been written back from Deferred Tax Reserve (previous year NPR 3.1M provided). The total distributable profit, including NPR 31 million retained earnings of the previous year, is NPR 347.24 million. We have a track record of moderate but steady dividend declaration with a healthy dividend payout ratio which is guided by dual objective, first to provide appropriate reward to the shareholders and second to maintain healthy Capital Adequacy Ratio to support our business growth every year. In line with this objective, the Board of Directors has recommended a Cash Dividend of 26.31579% .

OPERATING PROFIT

200

5/06

- 2

12

200

6/07

- 2

91

200

7/08

- 3

93

200

8/09

- 5

26

200

9/10

- 7

05

DIVIDEND PER SHARE (INCLUDING BONUS) %

2005/0610.53% 2009/10

26.32%

2006/07 21.05%

2007/08 21.05%

2008/0915.79%

NPR IN MILLION

ParticularsYear ended 16 July 2010

Year ended 15 July 2009

% Change

Paid-up Capital 1,312 1,140 15Deposits & Borrowings 17,692 16,240 9Risk Assets 12,929 13,916 (7)Investments 4,947 3,026 63Total Assets 20,309 18,751 8Net Worth 1765 1660 6Operating Profit before provision 705 526 34Net Profit 450 317 42


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Capital AdequaciesThe Bank’s capital position is satisfactory with Capital Adequacy Ratio of 12.92% as on 16 July 2010 compared to minimum requirement of 10% under the Basel II framework. This reflects a sound position of the Bank.

Performance UpdateThe financial highlights of the Bank as at the end of 1st quarter of the current fiscal year as compared to the same period last year are as follows:

NPR in million

Particulars1st two months

ended 16 Sept 2010

1st two months ended

16 Sept 2009

Growth (%)

Operating Profit before provision

165 122 35

Total Deposit 16,002 15,841 1Loan & Advances 13,051 13,534 (4)

The Bank’s performance for the first two months in the current fiscal year has been encouraging despite the country’s challenging economic condition, fluid political situation and increasing competition, and it is expected that the Bank will be able to achieve a stable growth as in the past despite the challenges.

Branch NetworkThe Bank in line with its strategy to expand its reach and customer base through expansion of branch network, has added six new branches in the review year, viz, Satdbato, Teku and Pepsi chowk in Kathmandu valley and Narayanghat, Malangawa and Mahendranagar outside the Valley. The Bank has already established two new branches in the current fiscal year and plans to establish additional four during the current year taking its number of branches to thirty four.

In line with the Bank’s policy to gradually serve customers from its own premises, the Bank has already started to provide services from its own building at Biratnagar. Similarly, construction of Corporate Building on the land purchased at Kamaladi, Kathmandu is planned to be started soon.

CAPITAL ADEQUACY (%)

BALANCE SHEET SIzE

200

5/06

- 1

0,38

4

200

6/07

- 1

1,67

9

200

7/08

- 1

5,23

9

200

8/09

- 1

8,75

1

200

9/10

- 2

0,30

9

NPR IN MILLION

11.502005/06 2006/07 2007/08 2008/09 2009/10

12.00

12.50

13.00

13.50

14.00

Capital Adequacy Ratio


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Products and BrandingThe Bank takes pride in being able to consistently introducing new and upgraded services to its customers. Some of the new products and services that the Bank launched during the review period include:

• HappySavingsAccount • NICSocialAccount

Happy Savings Account is an interest bearing account which is targeted towards Women and Senior Citizens by providing 0.5% more interest than to other depositors, encouraging them to save more.

NIC Social Account is targeted to non-profit organizations. It is an interest - bearing account which is as good as a current account.

During the review period, various product and services like VISA Debit Card, Internet banking, PSTN bill payment, Mobile bill payment, Utility bill payment etc. were introduced. 25 new ATMs were installed in this review period and the Bank is planning for the installation of an ATM Switch and 10 new ATMs in the current year. More and more of our branches have started offering extra-banking services including 365 days banking services.

The Bank has continuously enriched its brand building to increase value to its business. The Bank believes that image is a valuable intangible asset which has already been proven by the fact that NIC is the first commercial bank in the country to be awarded ISO 9001:2000 and ISO 9001:2008 certification for Quality Management System and to get a line of credit from International Finance Corporation (IFC), an arm of World Bank Group, under its Global Trade Finance Program. In the same line NIC Bank has also been provided a line of credit by Asian Development Bank (ADB) under its “Trade Finance Facilitation Program”.

TechnologyDevelopment/InformationManagementSystem

The Bank has been consistently successful in keeping pace with technology advancement and has been able to network all of its branches, which have helped to process transactions on a real-time online basis which not only have saved time but also helped to minimize operational risk and improve its MIS. In line with the Bank’s technology policy we will be centralizing data processing and other back-office functions in order to enhance processing efficiencies and to establish a reliable disaster recovery mechanism. The Bank places high priority in managing and protecting its information resources and system for which it has a comprehensive IT policy which cover data center operation, hardware, network security and computer system related issues under strict supervision of the Bank’s Internal Audit and Compliance Department.

Human Resource ManagementThe Bank has always viewed its human resource as its main resource. The Bank’s staffing need continued to increase during the year due to


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significant increase in the business and the Bank’s strategic expansion projects. The Bank has always viewed its human resource as a strategic partner for its success. Hence, the development and management of human capital is an essential element of our strategy and a key management activity. The Bank continues to focus on the development of its employees through both in-house and external training. Continuous enhancement of knowledge and skills is vital, given the rapidly changing business environment and the constant challenges they pose. The bank believes that building a learning organization is critical for being competitive, meeting customer expectations and bringing new ideas and technology to the organization.

DirectorsMr. Ganesh Man Shrestha has been appointed as an in dependent Professional Director effective from 1st November 2009. We would like to take this opportunity to welcome him on the Board.

Mr. Lokmanya Golchha has resigned from Board of Directors from 25th October 2010 due to personal reasons. We would like to express our gratitude for his support and guidance to the Bank during his tenure.

AuditorsThe Statutory Auditor Mr. Gopal P. Rajbahak, FCA will retire at the conclusion of the forthcoming Annual General Meeting and is not eligible for re-appointment. We would like to thank him for his contributions to the Bank. Based on the recommendation of the Bank’s Audit Committee, the Board of Directors has proposed appointment of another Auditor for the fiscal year 2010/2011.

Directors’ Responsibility StatementIn adherence to the provisions of the Companies Act 2063, Nepal Rastra Bank and based on the information provided by the management, the Directors state that:

• Duringthepreparationofannualaccounts,theapplicableaccountingstandardshave been followed.

• Accounting policies adopted were applied consistently. Reasonable andprudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Bank as at 16th July 2010 and of the profit of the Bank for the year ending on that date.

• Properandsufficientcarehasbeentakenforthemaintenanceofadequateaccounting records in accordance with the provisions of the Company Act for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities.

• The annual accounts of theBank havebeenpreparedon a going concernbasis.

• ThereisnoamountreceivablebytheBankfromDirectors,ChiefExecutiveOfficer, substantial shareholders and their close relatives as well as associated firms, companies that have a potential conflict of interest with the bank at large.


16

Management Discussion and AnalysisThe Management Discussion and Analysis Report is a part of this annual report as required by Company Act 2063.

CorporategovernanceNIC Bank has always believed on best practice in corporate governance. The Bank’s corporate governance policy is directed not only towards compailance of regulatory and legal requirements but also towards adherence to best business practices, transparency and disclosure to all stakeholders. The corporate governance framework in the Bank is based on effective independent Board, which is not involved in day-to-day management, and the constitution of different Board Committees with independent Directors to oversee critical issues. There are three such committees viz. Board Credit/ Management Committee, Audit Committee and Building Construction Committee in the Bank.

The Board of Directors fully support and are committed to the corporate governance model adopted by the Bank, which encompasses the principles of full disclosure and transparency, social responsibility and accountability, zero tolerance compliance culture, business and customer confidentiality, non-tolerance of conflict of interests and independent management.

In line with NRB’s directives a Corporate Governance Committee comprising of Head Audit and Compliance (Coordinator), Manager Operations, Legal Officer and Manager Human Resource have been established. The main purpose of this committee is to review the corporate governance status of the Bank and suggest the Management on improvements.

Composition of Board of directorsThe composition of the board of directors of the Bank is as per the Company Act 2063 and Bank & Financial Institution Act 2063. Directors of the Bank have signed a declaration as per regulations related to the code of ethics issued by Nepal Rastra Bank. The directors are independent of management and free from any business or other relationship with the Bank which could materially interfere with the exercise of their judgment. Renowned personalities from various sectors comprise the Directors of the Bank which bring a wide range of experience, skills and ideas. The Directors retire every four years and if eligible, qualify for re-appointment.

The Board of Directors provides the Management with guidance and strategic direction without any interference on day to day business and represents the interests of the Bank’s shareholders in optimizing long-term value. The Board’s mandate is to oversee the Bank’s strategic direction, review corporate performance, authorize and monitor strategic investments, ensure regulatory compliance and safeguard interests of shareholders.


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Board MeetingsMeetings of the Board of Directors are generally scheduled in advance and notice of each board meeting is given in writing to each Director along with the agenda and other pertinent information. Board members are free to propose any agenda to the board meeting if they feel it’s needed. Board members have complete access to all the information of the Bank. Senior Management is also invited to attend the Board meetings, so as to provide additional inputs to the issue being discussed by the Board.

During this review period, a total of twelve Board Meetings were held. The attendance of each Director at the Board meetings and at the last Annual General Meeting along with sitting fees paid is enlisted below:

Board of DirectorsBoard Meeting

Annual General Meeting Attendance

Number of Meetings Attended

Sitting Fees Paid NPR

Mr. Jagdish Prasad Agrawal 12 88,000 √Mr. Tulsi Ram Agrawal 12 77,000 √Mr. Birendra Kumar Sanghai 7 42,000 -Mr. Nirmal Kumar Agrawal 12 77,000 √Mr. Rajendra Aryal 12 77,000 √Mr. Lokmanya Golcha 12 77,000 √Mr. Ganesh Man Shrestha 10 63,000 √Mr. Niraj Shrestha (General Manager- Business Banking & Company Secretary)

12 - √

Mr. Sashin Joshi (Chief Executive Officer)

12 - √

Board Committees The Board delegates particular matters to the committee of the Board to deal with specific areas of operation and to enable better and more focused attention on the affairs of the Bank. These committees prepare the groundwork for the decision-making and report at the subsequent Board meeting.


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Audit CommitteeIn adherence to the provisions of the central bank, the Bank has an Audit Committee, which is responsible for independently evaluating the adequacy of all internal controls, audit procedures and techniques, overseeing financial reporting processes and disclosures to ensure that the financial statements are correct, sufficient and credible. It also ensures that operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. In addition to this, the Committee also pro-actively recommends improvements in operational process and service quality.

The Committee objectively reviews the reports of internal auditors and statutory auditors ensuring that adequate follow-up is done by Management on observations and recommendations made by the auditors. To maintain objective, professional and cost-effective relationship, the Committee reviews the performance of the Bank’s statutory auditors at the time of appointment. It is the Audit Committee’s

Board Credit/Management CommitteeNumber of Meetings

AttendedSitting Fees Paid ( NPR)

Mr. Tulsi Ram Agrawal, Chairman 12 84,000Mr. Nirmal Kumar Agrawal, Member 12 84,000Mr. Ganesh Man Shrestha, Member 5 35,000Mr. Birendra Kumar Sanghai, Member 1 7,000Mr. Sashin Joshi, Chief Executive Officer, Member 8 -Mr. Niraj Shrestha, General Manager Business Banking 10 -

EARNING PER SHARE

16.1

0%

24.0

1%

25.7

8%

27.8

3%

34.3

0%


Board Credit/Management CommitteeThe Board Credit/Management Committee comprises of Chief Executive Officer or his nominee and other non-executive independent directors. Committee provides advice and assistance to the Board in formulation of strategic plans for overall improvement of the Bank. The Committee assists the Board in credit approvals exceeding the Credit Approval Discretion delegated by the Board to Chief Executive Officer. The Committee also assists the Board in any other assignments/responsibilities assigned to it by the Board from time to time. Committee meetings were held twelve times during the review period. The attendance was as under:

NON PERFORMING ASSETS (NPA) TO RISK ASSETS

2.60

%

1.11

%

0.86

%

0.93

%

0.72

%

0.06

%

0.06

%

0.11

%

0.23

%

0.18

%

200

5/06

200

5/06

2

006/

07

200

6/07

200

7/08

200

7/08

200

8/09

200

8/09

200

9/10

200

9/10

19

prerogative to invite senior executives and external auditors whom it considers appropriate to be present at the meetings.

The Bank practices extensive internal controls including restricted access to the Bank’s computer system, appropriate segregation of front and back office operations and strong audit trails. The Audit Committee of the Board also reviews the performance of the Audit & Compliance Department and reviews the effectiveness of controls and compliance with regulatory guidelines.

The Committee reviews the internal audit reports and makes suggestions to the Management and the Board to improve internal controls. The Committee also reviews annual accounts, statutory audit report, Nepal Rastra Bank’s inspection report and recommends their adoption by the Board of Directors. The Committee met seven times during the year under review. The Committee also met prior to the finalization of the accounts for the year ended on 16th July 2010.

Audit Committee Number of Meeting Attended Sitting Fees Paid (NPR)Mr. Rajendra Aryal, Coordinator 7 49,000Mr. Birendra Kumar Sanghai, Member 3 21,000Mr. Lokmanya Golchha, Member 6 42,000Mr. B.K. Agrawal, Invitee 1 7,000Mr. Purna Man Napit, Head Audit & Compliance, Member Secretary

7 -

Building Construction CommitteeBuilding Construction Committee has been formed to assist the Board in carring out necessary tasks for the construction of the Bank’s Corporate Building at Kamaladi, Kathmandu. The Committee met six times during the review period.

Building Construction Committee Number of Meeting Attended Sitting Fees Paid (NPR)Mr. Lokmanya Golchha, Coordinator 6 42,000Mr. Rajendra Aryal, Member 6 42,000Mr. Birendra Kumar Sanghai, Member 3 21,000

Annual General MeetingsThe details regarding date and venue of Annual General Meetings (AGM) held in the last three years are as follows:

AGM Date VenueTenth General Meeting Dec 14, 2007 Meeting hall of Morang Udhyog Sangathan, BiratnagarEleventh General Meeting Dec 17, 2008 Meeting hall of Morang Udhyog Sangathan, BiratnagarTwelfth General Meeting Dec 18, 2009 Meeting hall of Morang Udhyog Sangathan, Biratnagar

At the last AGM, shareholders of the Bank holding in aggregate 67.03% of the share capital attended either in person or by proxy.


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200

5/06

200

6/07

200

7/08

200

8/09

200

9/10


Communication and Relationship with Shareholders

NIC Bank has more than 34000 shareholders as at fiscal year ended 16th July 2010. The main channel of communication to the shareholders is through the annual report, which includes the Chairman’s Statement, Directors’ Report, Management Discussion & Analysis, Chief Executive Officer’s comment, and the audited financial results. The AGM is the principal forum for face-to-face communication with shareholders, where the entire Board is answerable to specific queries of the shareholders. The Board acknowledges its responsibility towards its shareholders and, therefore, encourages open and active dialogue with all its shareholders, be it individuals or the corporate investors. Regular communication with shareholders ensures that the Bank’s strategy is delivered with clear understanding.

Shareholders can also keep track of quarterly performance and financial position of the Bank through the press and the Bank’s website, www.nicbank.com.np. The Annual Report also contains general shareholders information including list of major shareholders.

RETURN ON ASSETS

1.05

%

1.44

%

1.81

%

1.88

%

2.30

%

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Related Party TransactionsThere were no related party transactions with Directors, Management, Subsidiaries or relatives of Directors that have potential conflict with the interests of the Bank at large.

Going ConcernWe consider it appropriate to adopt the going concern principle of accounting in preparing financial statements since we are satisfied that the Bank has adequate resources to continue its business for the foreseeable future.

AcknowledgementsThe trust and confidence of our shareholders has always acted as a catalyst in the success of the Bank. They have always been a faithful partner in every step of our progress. The Bank is also committed to work for augmenting shareholders value. In our path towards excellence in banking services, our customers, patrons and well-wishers have stood by us throughout.

The Board of Directors expresses their gratitude for all the guidance and co-operation for the continued support received from the Nepal Rastra Bank, Securities Board, Nepal Stock Exchange, Company registrar‘s Office, Ministry of Finance and other government and regulatory agencies for their continued support and guidance to the Bank from time to time. The Board of Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and look forward to their continued contribution in building one of the most respectable banks in Nepal based on honorable conduct and long-term financial performance. NIC Bank considers itself to be fortunate enough to be blessed with such a work force.

COST TO REVENUE

32.6

7%

29.0

9%

28.0

6%

26.9

9%

26.6

7%

NET INTEREST MARGIN

2.74

%

2.87

%

3.44

%

2.83

%

3.75

%

200

5/06

200

5/06

200

6/07

200

6/07

200

7/08

200

7/08

200

8/09

200

8/09

200

9/10

200

9/10


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CHaiRmaN SpeakS

On behalf of the Board of Directors of NIC Bank, it is my pleasure to extend a warm welcome to all the shareholders and distinguished guests at the Bank’s 13th Annual General Meeting.

Today, I am delighted to report yet another milestone in our growth. The Bank has been able to achieve excellent performance in the review year 2009/10 with a net profit growth of 42% over last year to Rs.449.84 million.

Total assets have now reached Rs. 20, 309 million. The Bank believes in prudential and managed asset growth which are also reflected in our healthy nominal Non Performing Assets of a mere 0.7%. Our Capital Adequacy Ratio as on 17th July 2010 is at a comfortable 12.92 % under the modified Basel II framework.

It gives me immense pleasure to announce that the Board of Directors has recommended a cash dividend of 26.31579 % to the shareholders.

I am privileged to announce that your NIC Bank is the first and only bank in Nepal to have been awarded the ISO 9001:2008 certification for the Bank’s Quality Management System on Commercial Banking Activities. This certification has been accepted as a symbol of excellence and quality worldwide

In order to expand reach and network, the Bank added 6 new branches in the review fiscal year, viz, at Satdobato (Lalitpur) , Narayanghat, Malangawa, Teku (Kathmandu), Mahendranagar & old Sinamangal Pepsi chowk (Kathmandu). Two more have been added in the current year with additional 4 planned making a total of 34 branches by the end of the year.

We have installed 25 ATMs spread all over Nepal from Mechi to Mahakali with 10 more in the pipeline. Our ATM terminals accept ATM Cards issued by any institution under SCT & Visa Network. The Bank is proud to announce that it has also launched both domestic & international VISA Cards.

The Bank has already moved to its new building “NIC Bhawan” at Biratnagar and in the same line we are in the process of constructing our corporate office in Kathmandu soon.

The performance of the Bank in the year has been outstanding with increase in business volume and expansion of branches throughout the country. The Bank will continue to strive to improve its performance and the directors are confident of delivering superior results in the current year.

I would like to take this opportunity on behalf of the Board to thank our esteemed shareholders for their trust in and support to us. Likewise, I would like to express my gratitude to our customers for their continued faith and patronage without which we could not have reached where we are today. I would also like to thank the Government of Nepal, Nepal Stock Exchange and Nepal Rastra Bank for their continued cooperation as well as guidance. Likewise, I would also like to thank the whole team of NIC Bank- the management & the staff members for their dedication and commitment, which have been the a key factor in ensuring such stellar performance of the Bank.

NIC Bank‘s performance at every stage in the past has been commendable and I am confident that we will be able to sustain enduring growth in the years to come.

Thank you. Jagdish Prasad Agrawal

Chairman


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Senior management Team


NIC Bank’s Board of Directors is supported by a management team comprising of well-qualified and experienced professionals.

Sashin Joshi Chief Executive Officer

Niraj Shrestha General Manager - Business Banking

Bimal Daga Asst. GM Risk Management

Purna Man Napit Head Audit & Compliance

Sunil Pokharel Head Retail Banking

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Prabin Basnet Manager - Operations

Binay Dahal Branch Manager Biratnagar

Sudhir Agrawal Branch Manager Birgunj

Saurabh Bahadur Singh Manager - Consumer Credit Consumer Banking

Saroj Shrestha Senior Manager Business Banking

Bhanu Dabadi Manager - Consumer Lending

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Senior management Team

Saroj Guragain Head - Financial Markets, Commodities & Investment

Deepak Shrestha Manager Liability Marketing

Sushil Bhattarai Manager Information Technology

Arjun Chhetri Relationship Manager Transaction Banking

Prahlad Nidhi Tiwari Head Credit Support Unit

Yunesh Puri Head Cards

27


Ritesh Aryal Manager - SME

Sanchita Gorkhali Manager Human Resource

Shrina Joshi Manager Corporate Affairs

Sudeep Subedi Officer Accounts

Sunamrata Shrestha Officer Administration

Bishwa Subedi Officer Legal

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CeO SpeakS

2009/10 was yet another yearof impressive performance

achieved in the backdrop of verydifficult market conditions thatprevailed throughout the year.

The Bank has been ableto maintain a strong momentum across all financial parameters. Our Net Profit for the year was NPR 449.84 million, a smart increase of 42 % on the prior year growth of 31%. The Bank increased the balance sheet size by a mere 8.31%. Our non performing loans is at a nominal 0.7%. This is a clear realization of the benefits of our strategy of extracting better value through managed growth and a better risk profile. These results are in stark contrast to that of many others in the financial sector. Our Return on Equity, our key management metric, which has been improving gradually over the years, was 27.09% in 2009/10 whereas the return on Assets was 2.30% which were 24.23% % and 1.88%, respectively last year. This puts us amongst the best performing banks in the industry. The Bank being a performance driven company, is guided by the need to deliver on value creation for our stakeholders.

Our performance distinctiveness is uniquely defined by our work culture. Our corporate culture begins with our five values that drive everything we do - Trust, Integrity, Commitment, Innovation and Involvement.

The key to our business success is meeting and exceeding our clients’ needs, diversifying business and our priority - to enhance our service levels and product offerings, to maintain and improve our existing client relationships, and to take advantage of new business opportunities as they emerge.


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Our business model is not predicated on taking advantage of inflating asset prices or speculative short-term opportunities but on long-term sustainable relationships. Our robust customer base consists of commercial end-users including large trading, processing and manufacturing establishments; small & medium enterprises; and individuals in our retail segment who have a regular need for our services. We largely avoided the pitfalls that have imperiled some other larger banks in the past and produced a satisfactory ROE for the year.

We are in the business of taking risks not only to optimize our returns on investment but also to provide our customers with efficient service delivery and banking facilities, which add value to them. We have a commitment to our shareholders, customers, regulators and employees to manage these risks and to keep them within manageable limits. We believe that our risk management systems are sound and robust. There is no substitute to experience and common sense to ensure that we do not place our organization at risk. However, the days ahead in the Nepali financial market appear to be ever more challenging with a plethora of new untested players coming into the market in an environment of continuing political fluidity, tight liquidity, growing asset bubble, unhealthy business practices, increasing labour activism and lackluster economic growth. Market turmoil can be anticipated and we need to remain vigilant and cautious.

Last year, we expanded our network of branches to 26 by adding 6 more to last year’s 20, spanning all across the country from Mechi in the east to Mahakali in the far west. To increase our reach further in the semi-urban areas, we have already opened 2 more in the current year and plan to open another 4 by the end of the year. In the course of improving service delivery and our distribution channel we have installed 25 ATMs cross the country with 10 more planned and have introduced internet banking & NIC Visa Debit Cards - both Domestic and International.

Once again, we are extremely proud of being the first and only bank in Nepal to have been awarded the upgraded ISO 9001:2008 certification for the Bank’s Quality System on Commercial Banking Activities. This certification has been accepted as a symbol of excellence worldwide. This certification attests to the ability of the Bank to consistently provide quality products and services that meet customers’ requirements in line with international standard and enhance their satisfaction level through effective application of the systems and processes.

We are committed to the highest standards of corporate governance. This, along with our prudent risk management practices, zero-tolerance compliance culture; and system-driven and performance-driven environment that we operate under have been the bedrock of NIC Bank’s foundation which we believe is the mantra of our success that will also help us in getting through the challenges ahead, in addition to being a good corporate citizen by engaging ourselves with charity organizations for the benefit of the communities we live in.

To conclude, I would like to express my sincere thanks to all my colleagues at the Bank for their contribution, dedication and commitment to this year’s exceptional performance and my Board of Directors for their unstinted support, prudent counsel, long term vision, and the trust & confidence placed on our team.

I am confident that we will continue to enhance value and meet the expectations of all our stakeholders.

Sashin Joshi

Chief Executive Officer

Once again,we are extremelyproud of beingthe first andonly bank inNepal to havebeen awarded the upgradedISO 9001:2008certification for the Bank’s QualitySystemonCommercialBanking Activities.


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management Discussionand analysis Report

Taking into consideration the economic condition of the country and unstable political condition, the macro-economic indicators for the review period doesn’t seem to be encouraging. Based on the preliminary estimates of the Central Bureau of Statistics, the gross domestic product (GDP) has witnessed a growth of 3.5 percent at basic price and 4.6 percent at producer’s price in the review period in comparison to the growth rates of 3.9 percent and 4.9 percent respectively the previous year. The agriculture and non-agriculture sectors are estimated to have grown at 1.1 percent and 5.1 percent respectively in the review period. Such growth rates were 3.0 percent and 4.7 percent respectively in the previous year.

The annual average consumer price inflation moderated to 10.5 percent in 2009/10 compared to an increase of 13.2 percent in 2008/09. The y-o-y consumer price index rose by 10.1 percent in Mid-July 2010, as against a rise of 11.4 percent in the previous year. The annual average wholesale price inflation rose by 12.6 percent in 2009/10 compared to a 12.8 percent rise in the previous year. The y-o-y wholesale price inflation moved up by 7.0 percent in mid-July 2010 compared to an increase of 15.3 percent in the previous year.

Nepal’s merchandise exports declined to NPR 61.13 billion (9.7 percent) in the review period. Such exports had grown to NPR. 67.70 billion (14.2 percent) a year ago. The merchandise imports, on the other hand, grew to NPR 378.80 billion (33.2 percent) in 2009/10. Such imports had grown to NPR 284.47 billion (28.2 percent) last year. The balance of payments posted a loss of NPR 2.62 billion in 2009/10 as against a surplus of NPR 44.76 billion last year. The current account also registered a deficit of NPR 32.35 billion as against a surplus of NPR 41.44 billion last year. The gross foreign exchange reserves dropped by 7.0 percent to NPR 266.57 billion in mid-July 2010 from a level of NPR 286.54 billion as at mid-July 2009. Such reserves had grown by 34.8 percent last year.

The government budget deficit, on cash basis, increased by 13.8 percent to NPR 39.1 billion in 2009/10, such deficit was NPR 34.4 billion in 2008/09. The ratio of budget deficit to GDP remained at 3.3 percent in the review year, as against 3.5 percent in the previous year.

The government expenditure, on cash basis, increased by 20.2 percent to Rs.248.37 billion in 2009/10 compared to an increase of 37.8 percent to NPR 206.69 billion in the previous year. In the review year, the government’s recurrent expenditure rose by 20.7 percent to NPR 144.38 billion compared to an increase of 35.4 percent in the previous year. An upward revision in the salary and allowances of the civil servants and teachers by the Government of Nepal mainly attributed to such a rise in the recurrent expenditure. Likewise, increasing expenditure on special security plan, growing amount of subsidies to public schools and increment in the distribution of economic assistance accounted for such a rise in the recurrent expenditure.

In 2009/10, revenue mobilization of the government increased significantly by 25.4 percent to NPR 179.95 billion, which accounted to 101.9 percent of annual budget estimate. The revenue had risen by 33.3 percent to NPR 143.47 billion in 2008/09.


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200

5/06

- 2

12

200

6/07

- 2

91

200

7/08

- 3

93

200

8/09

- 5

26 200

9/10

- 7

05

Consequently, the revenue to GDP ratio moved up to 15.2 percent in 2009/10 from that of 14.5 percent in 2008/09. Amongst the components of revenue in 2009/10, VAT constituted a share of 29.7 percent followed by income tax (18.7 percent), customs duties (19.5 percent), and excise duties (13.5 percent). In the previous year, such compositions were 27.6 percent, 19.2 percent, 18.6 percent and 11.3 percent respectively.

(Source: Current Macroeconomic Situation: Based on annual data of 2009/10, published by Nepal Rastra Bank)

FinancialSectorOverviewThe banking sector grew with more new players coming into the market during the review period. There are currently 27 commercial banks, 79 development banks and 79 financial companies besides more than hundreds of other credit and saving co-operatives and macro-finance institutions in the country. More than 260 banks and financial institution with an aggregate asset size of more than NPR 700 billion is an important part of Nepalese economy. With increasing competition there is a growing pressure on financial institutions to enhance their competitiveness by differentiation in products and services and up-gradation and adaptation of international technology along with the challenge to maintain quality asset. Poor business condition, stringent regulatory norms and above all the challenge of maintaining higher growth in terms of profitability value and satisfying the growing expectation of shareholders and customers has been a challenge and will continue in upcoming year.

In 2009/10, deposit mobilization of commercial banks increased by 12.6 percent (NPR 69.0 billion) amounting to NPR 618.9 billion as at mid-July 2010. The total deposits had increased by 30.4 percent (NPR 128.3 billion) in the previous year. In the review period Loans and Advances of commercial banks increased by 14.0 percent (NPR 72.9 billion) to NPR 593.6 billion. The liquid assets of the commercial banks stood at NPR 211.7 billion as at mid-July 2010. Of the components of liquid assets, liquid fund increased by 4.9 percent. In the review year, balance held abroad slightly increased by NPR 59.0 million amounting to NPR 60.0 billion while the balance with NRB increased by NPR 5.3 billion. However, another component of liquid assets, commercial banks’ investments in government securities, increased by NPR 11.1 billion in the review year. The credit-deposit ratio increased to 82.5 percent in mid-July 2010 from 81.6 percent in mid-July 2009. Similarly, the liquidity-deposit ratio declined to 34.2 percent in mid-July 2010 from 35.4 percent in mid-July 2009.

(Source: Current Macroeconomic Situation: Based on annual data of 2009/10, published by Nepal Rastra Bank)

OPERATING PROFIT

NPR IN MILLION


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Review of Operation Financial ConditionIn this review period also the Bank was able to achieve a significant growth. Total assets increased by 8% to NPR 20,309.33 million. Similarly, Net worth of the Bank increased to NPR 1,765 million from NPR 1,660 million in the previous year. Paid up capital of the Bank after issuance of 15% bonus share has increased by 15% to NPR 1,312 million.

The Core Capital of the Bank stood at NPR 1,750.46 million with a total Capital fund (including supplementary capital of NPR 260.10 million) of NPR 2,010.56 million as on 16th July 2010. The Bank’s Capital Adequacy ratio of 12.92 percent as per Basel II framework exceeded the statutory requirement by 2.92 percent. These figures clearly evidence a sound financial position of the Bank.

DepositsTotal deposits grew by 3 percent to NPR 15,969 Million. Total deposits comprises of 97 percent in Local Currency and 3 percent in Foreign Currency. The Bank was able to post a growth of 4 percent in case of local currency deposits.

Non-interest bearing deposits grew substantially by 43 percent over the previous year. Savings deposit decreased by 7% over the previous year whereas in Call Account the Bank was able to achieve a 9 percent growth.

Composition of Funds:

NPR. In million

Particulars Year ended 16 July 2010 Year ended 15 July 2009 % ChangeDeposits 15,969 15,580 2Local Currency 15,485 14,881 4Foreign Currencies 484 699 (31)Borrowings including subordinate debt 1,923 860 124

Loan PortfolioThe Bank’s total loans and advances outstanding at the end of the review year was NPR 12.9 billion at the fiscal year end. The Bank in accordance with its strategy has concentrated on SME and Consumer Lending sector and has been able to significantly increase the portfolio in the review year. The Bank aims to gradually realign its book to increase the share of sustainable and diversified non-corporate loans, with particular focus on SME’s with a strategy to cater to a wider range of customers across the country, whilst also continuing to expand its reach and services to the corporate clientele on selective basis.


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In line with the strategic approach adopted, the Bank managed to develop significant new business relationships with SME’s during the review year, with total clients in this segment crossing six hundred thirty with loans outstanding of NPR 1.83 billion at the fiscal end. The Bank believes that SME’s play a significant role in the country’s economy and provide longer-term sustainable and diversified business opportunities. A dedicated and skilled team has been placed for tapping opportunities in this segment.

The Bank’s Consumer Lending customer base has also increased to more than three thousand two hundred with an outstanding of NPR 3.79 billion (i.e., 29% of the Bank’s total loan outstanding), spread over an array of customized and innovative loan products.

(NIC BHAWAN - BIRATNAGAR )


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Review of Operation The Bank has quality processes placed (and consistently improved) across its branches for enhancement of customized lending business and reduced turnaround time. The Bank’s main focus elements of non-corporate lending are innovative product development, parity pricing, cross selling, customer convenience, easy access to finance and customer focus, while in case of corporate lending the strategy is geared towards providing comprehensive and customized financial solutions to its customers. The Bank offers a complete range of corporate banking products including transaction banking, trade finance services, foreign exchange and corporate financing solutions including project & infrastructure finance, working capital & term loans, structured financing, syndications, cash management and treasury and advisory services.

The Bank has always believed in prudent Risk Management, selective asset growth strategy and effective diversifications of the credit portfolio which, has resulted in gross Non Performing Assets (NPA) being contained to 0.72 percent of total loans and net NPA at a mere 0.18 percent, which is a clear reflection of very sound Risk Asset portfolio. Loans overdue for more than 90 days are included in Gross NPAs.

As per the prudential norms prescribed by Nepal Rastra Bank (central bank), the Bank has a loan loss provision of NPR 197 million as at 16th July 2010 including an increase of NPR 17.04 million charged to the Profit and Loss account during the year. The loan loss provision is adequate to cover 213 percent of gross NPAs, thereby, having minimal impact on the bottom line on account of potential write offs.

InvestmentThe Bank was able to register a growth of 63 percent in investments over the previous year with a significant increase of 390 percent growth in government securities. Total investments comprises of 58% in government securities, 6 percent in foreign securities, 8 percent in foreign banks and remaining as equity investments and interbank lending.

During the review year the Bank invested in NPR 1.2 million in National Banking Training Institute, promoted by Banks and Financial Institutions. The Bank’s investment is guided by the Bank’s investment strategy which mandates adequate levels of liquidity to support core business requirements, high degree of safety and optimization of returns consistent with acceptable levels of risk which are closely monitored and regularly reviewed by the Board.

Deployment of Funds

NPR in million

Particulars Year ended 16 July 2010 Year ended 15 July 2009 % ChangeLoans and Advances 12,929 13,916 (7)Investments 4,947 3,026 63 Local Currency 4,237 2,242 89 Foreign Currency 710 784 (9)

UnclaimedDividendThe Banks distributed 30 percent cash cum stock dividend in FY 2004/05, 10.53 percent


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cash cum stock dividend in FY 2005/06, 21.05 percent cash cum stock dividend in FY 2006/07, 21.05 percent cash cum stock dividend in FY 2007/08 and 15.79 percent cash cum stock in FY 2008/09. Dividend amount of NPR 1.84 million has not been claimed by shareholders as on 16th July 2010 and the Bank has been intimating the shareholders from time to time to collect the dividend through newspaper notices.

Operating ResultThe Bank has been able to achieve a significant growth both in Operating Profit before provisions and net profit. Profit before provisions has increased by 34 percent to NPR 705.40 million with a significant growth in net interest income and non-interest income.

Net profit after tax has increased by 42 percent to NPR 449.84 million mainly due to remarkable growth in non-operating income and loan loss provision written back.

Net Interest IncomeNet Interest Income for the review year has increased significantly by 44 percent to NPR 745.69 million mainly due to higher growth of interest income as compared to last year. The net interest margin for the review year was 3.75 percent as compared to previous year at 2.83 percent. Average rate of return on Loans and Advances and Investment was 10.65 percent which is 2.19 percent over last year. Similarly Average cost of deposits and borrowings increased to 6.90 percent in the review year from 5.63 percent in the previous year.

Non-Interest IncomeFee Based income and Foreign Exchange income increased by 6 percent to NPR 216 million with a remarkable increase of 22 percent in Commission & Discount income. Non-Interest Income is 22 percent of total revenue.

Risk ManagementRisk is an integral part of banking business and the Bank’s aim is to maximize the stakeholders’ value by achieving an appropriate balance between risk and returns and safeguard their deposits and investments. The Bank is exposed to various risks, e.g. credit risk, market risk, liquidity risk an operations risk. The Bank’s risk management strategy is based on a clear understanding of various risks, measurement procedures, continuous monitoring and control. In order to carry out adequate risk management, the Operations Manuals, Country/Operations circulars, policies issued from time to time, covering various products and services for mitigating various risks are continuously benchmarked with international best practices.

The Bank follows a self-audit system at its branches and units through verification of transactions/documents by an independent staff of branches/units so that errors are identified, and timely mitigated. After implementation of this procedure, the Bank has experienced much improvement in human/system error and also able to trace out the areas where control, guidance and training of staff are required. Further, the Bank has been conducting corporate level and regional level in-house training programs on various areas, e.g. Nepal Rastra Bank Directive/Circulars, products and procedures, corporate governance, Anti Money Laundering and Know Your Customer Due Diligence, Capital Adequacy-Basel II, negotiable instrument, cash and teller, etc, and to cover all the branches in order to achieve high personal effectiveness and to update


36

with current regulation/activities. General awareness, competencies are given to staff by conducting in house trainings so that corrective and preventive actions can be taken in order to mitigate these risks.

Credit RiskWhile financial institutions have faced difficulties over the years for a multitude of reasons, the major cause of serious banking problems continues to be directly related to lax credit standards, poor portfolio risk management, or a lack of attention to changes in economic or other circumstances that can lead to a deterioration in the credit standing of a bank’s counterparties. This has led to financial institutions being more aware of the need to identify, measure, monitor and control credit risk. Credit risk can simply be defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank’s risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credits. Banks should also consider the relationships between credit risk and other risks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organization. In order to minimize the credit risk, appropriate diversification of the loan portfolio and appropriate monitoring and control of the same is vital.

NIC Bank has ensured credit risk management through stringent credit norms/procedures by operating under a sound credit granting practice that includes a well-established procedure of comprehensive credit appraisal. The Bank has standardized credit approval process followed by maintaining an appropriate credit administration, measurement and monitoring process and ensuring adequate control over credit risk. As a part of our ongoing risk mitigation initiatives, we attempt to work with clients to modify and structure their loans to terms that better align with their business needs and cash flow which leads to a more effective way to meet obligations to the Bank. All credits are extended in strict compliance with the directives/circulars of Nepal Rastra Bank issued and amended from time to time. Further, the Bank also takes prudent measures even beyond the regulatory requirement to ensure better credit standards. The loan approval process of the Bank is decentralized, with varying approval limits which are delegated based on experience, knowledge and capabilities of each such individual. The Bank reviews its credit process and procedures through its credit committee at the Management and Board levels.

In the Small & Medium Business lending and Consumer lending sector, the Bank has standardized products, policies, procedures and services. Standard product policies are reviewed and updated from time to time in accordance with the market scenarios. Sales and credit functions of the Bank are distinct and are independent of each other. This has led to proper identification of credit risk inherent in an exposure. The Bank also has an Independent recovery cell in place for effective monitoring and recovery.

Credit monitoring is a critical element in maintaining the safety and soundness of a


37

bank’s exposure. The resultant Non Performing Loans as a ratio of Risk Assets is a reflection of NIC Bank’s effective monitoring and control standards in its Credit Risk Management.

Market RiskMarket risk is the risk of loss resulting from changes in interest rates, foreign currency exchange rate, equity, and commodity prices. Our exposure to market risk is a function of our trading, asset and liability management activities and our role as a financial intermediary in customer related transactions. The objective of the market risk management is to minimize the impact of losses on earnings and equity capital due to market risk.

The Bank has an ALCO (Asset Liability Management Committee) which meets at least every month to review and asses the Markets Risks and to adopt necessary measures to effectively manage any perceived risk.

Treasury ensures adequate liquidity at all times through systematic funds planning and maintenance of liquid investments as well as by focusing on more stable funding sources e.g. retail deposit. The structural liquidity and interest rate sensitivity gap reports are prepared in line with the central bank guidelines to monitor the liquidity and interest rate risk which are also reported to the central bank on regular basis.

Treasury back office monitors the treasury activities in adherence to regulatory/internal policies guidelines. It is also responsible for processing treasury transactions, tracking the daily fund position and ensuing compliance with all treasury related management and regulatory reporting requirements.

Operational RiskOperations risk has been a major concerned in the banking area, due to not managing operations risk many banks and financial institution have incurred a huge loss. The Basel II Committee defines Operations risk as:

“The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” It is a risk arising from execution of a banking transactions which refers to the risk of unforeseen financial risk/loss that can result from a various factors, including failure to obtain proper internal authorizations, improperly documented transactions, failure of operational and information security procedures, computer systems, software or equipment, fraud, inadequate training and employee errors/lapses and external factors which is not under the Bank’s control as well. Our approach to manage operational risk is to mitigate the risk by maintaining a comprehensive system of internal controls, establishing various systems and procedures to monitor transactions, maintaining proper back-up procedures and undertaking regular contingency planning. Effective operational risk management system would ensure that Bank has sufficient information to make appropriate decisions about additional controls, adjustments to controls, or other risk responses. Bank’s operational risk management policy aims at minimizing losses and customer dissatisfaction due to failure in processes, focusing on flaws in products and their design that can expose the Bank to losses due to fraud, analyzing the impact of failures in technology/systems,


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developing mitigants to minimize the impact and developing plans to meet external shocks that can adversely impact continuity in the Bank’s operations.

Audit and Compliance UnitThe Bank has an independent “Audit and Compliance Unit ” to undertake comprehensive independent audits of all branches, business groups and other functional areas of the Bank in accordance with its approved annual audit plan. This plan allocates audit resources based on an assessment of the operational, credit, market, and liquidity risks in the various businesses/transactions. The reports of internal audits are submitted to Audit Committee for review on periodic basis. Based of the weight of finding the concerned branches are instructed to take corrective and preventive action in other to mitigate these risks.

Besides, the unit also performs surprise audits/checks and review of major risk areas to maintain Bank’s health by mitigating various risks. Periodic offsite audits are also carried out by the unit in order to monitor and control various unforeseen risk of the Bank. The Bank has not observed any major operations lapses/risk/loss so far.

Since the Bank has been certified ISO 9001:2008 for its Quality Management Service (QMS), the Bank has adopted QMS in each area to ensure that the services provided by the Bank is in line with international standard by mitigating all types of risks. In order to maintain the quality in line with ISO 9000:2008, the Audit and Compliance unit also covers QMS audit during its audit which are also ensured by the Auditor of ISO during their annual surveillance audit and confirm whether the transactions are in line with its approved procedures or not.

The Bank has adopted a self audit system at all the branches through independent checks and review of transactions which has further strengthened its Operation Risk Management. The Bank has developed a set of guidelines to all the branches/department/units to perform self-audits of their transactions on daily, monthly and quarterly basis based on the gravity of risk and mitigate such risk, if any in time under advice to the Management.

Capital Adequacy Framework – Basel IICapital risk is also a major risk of the Bank, banks are required to maintain sufficient capital in line with Nepal Rastra Bank guidelines, failing to meet the capital as prescribed by Nepal Rastra Bank is breaching of compliance and various penalties/restriction are imposed. Nepal Rastra Bank issued its final guidelines on Capital Adequacy requirement in July 2007 in order to adopt a more risk sensitive approach to capital requirements in accordance with the Document issued by the Basel Committee on Banking Supervision (popularly known as Basel II).

In line with Nepal Rastra Bank’s instruction, the Bank has been reporting it capital adequacy report on monthly basis. The Capital Adequacy of the Bank is sufficient in line with the new framework. The Bank is reviewing its business and activities in line with the new framework and is confident to meet the requirement thereon.


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Know Your Customer and Anti Money LaunderingThe Bank has been strictly complying with the directives on Anti Money Laundering (AML) and Know Your Customer (KYC) guidelines issued by Nepal Rastra Bank, Financial Information Unit. Reporting on large value cash transactions and suspicious transactions are being done in line with the directives.

In order to meet the international standard on AML and KYC requirements, the Bank is taking measures for preventing money laundering activities. In fact the Bank has been strictly implementing AML and KYC due diligence measures since 2005 much before the directive issued by NRB.

The Bank has developed an Operation Manual on Know Your Customer (KYC) and Anti Money Laundering (AML) policy in line with international standards which have been strictly implemented at all branches. In order to develop awareness among the Bank’s staff in this area, the Bank has been providing in-house trainings on KYC and AML on periodic basis with a test covering 100% banking staff as an ongoing process.

CorporateGovernanceGood Corporate Governance is the key to the integrity of banks, therefore, the Bank is obliged to comply with corporate governance effectively. In line with Nepal Rastra Bank Directives, the Bank has a Corporate Governance Committee comprising of Head Audit and Compliance (Coordinator), Manager Operations, Legal Officer and Manager Human Resources (members). The unit meets once in a month to review the corporate governance status of the Bank. Further the unit also carries out corporate governance test of the Bank on quarterly basis and appropriate recommendations made to the Management.

Information TechnologyThe Bank has always focused on Information Technology with its policy of adopting new and advanced technology. Each and every branch of the Bank is interlinked and transactions take place in real time basis. In line with Bank’s technology policy centralizing data processing, up-gradation of software and hardware will be achieved in the current year in order to enhance processing efficiencies and to establish a reliable disaster recovery mechanism. The Bank has always used technology as a tool for its better and smooth service delivery and with VISA debit card, internet banking, ATMs, Utility payment system etc., the Bank has enhanced its service delivery with a personal touch to the customers. The Bank has brought 25 ATMs in operation in the review year and is planning to install 10 more ATMs in the current year. The Bank is serious about its data resource and system integrity which is guided by the Bank’s IT policy.


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Human ResourcesThe Bank has continuously been following the practice of enriching and up-skilling its human assets so that they deliver value to business. This is rooted on the belief that the Bank’s human resources are the most valuable intangible asset, with potential for continuous appreciation in value. In line with its mission statement of providing promising growth opportunities to its employees, the prime focus of HRD of the Bank has been to develop and implement human resource management policies and strategies that enable the Bank to attract, recruit, develop, retain and maintain a high quality performing and productive workforce in a safe environment.

The Bank is run by professionals and believes in the highest standards of corporate governance. The Bank takes leadership providing programs and policies that are responsive to the diverse needs of staff and which foster a positive work environment that places high value on professional and collaborative work relationships while recognizing the importance of individual contributions. It also plays an important role in developing and implementing communication channels within the Bank as a reliable resource to managers and employees who have questions or issues relating to workplace policies and procedures, particularly in the areas of procedures, rules and regulations, entitlements, discipline and grievances. The Bank in all its activities strives to ensure transparency, fairness, equity and uniformity in the application and administration of all human resources policies, rules and regulations and the optimal utilization of the Bank’s human resources.

The Bank also recognizes that accelerating the learning process within the organization is crucial to enhancing competitiveness. The acquisition of knowledge and its appropriate application to structure value-added solutions at the point of interface with customers is critical. During the year, customized functional in-house training programmed on various aspects was conducted. The Bank conducted 25 in-house trainings covering various aspects like KYC, AML, and Customer Service Excellence etc. Staff members were also nominated to attend external programmes. The Bank makes extensive use of external training resources of reputed training institutions in Nepal and abroad. The strength of the Bank’s HR also lies in its transparent performance management and appraisal system.

In order to enhance the development of human resources and to align it with the strategic goal, the Bank has been following Performance Incentive programme for the last two years, which effectively measures, and rewards employee performance and identifies potential. Under this system employees who excel are rewarded giving the employees’ the motivation to perform better each time. Moreover, job rotation and job enrichment are also put into practice, which have led to enhanced productivity and motivation among the staff.

Staff Year ended 16-Jul-10

Year ended 16-Jul-09

Managerial Staff 65 58Support Staff 233 183Auxiliary staff 29 29Total Staff 327 270Total Staff Cost (NPR in million) 119 84.5Staff Cost to total cost (%) 46.3 43.5Staff Cost to Income (%) 12.36 11.74Staff cost per Employee ( NPR in 000) 364 313.1Net Profit per Employee ( NPR in 000) 1376 1175.7


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Particulars Chief Executive Officer Managers/Officers

Salary 6,098 19,254Allowances 1,742 12,487Dashain Allowance 508 1,431Provident Fund 609 1,925Leave Fare Allowance 508 1,994Vehicle Loan - YesHouse Loan - YesInsurance Coverage Yes YesTotal Number 1 65

Remuneration, allowances and facilities given to Chief Executive Officer (CEO) and managers/Officers of the Bank during the year is as under:

Telephone facility and office car with driver are provided to CEO. The managers are given vehicle facility with fuel as per the Bank policy. Insurance coverage includes accidental insurance and medical insurance. All eligible staffs are paid bonus and provided other facilities as per regulations/staff rules.

CommunityDevelopmentFor the welfare of the community, the Bank has actively been involved in charity and community support under its Corporate Social Responsibility (CSR) obligation.The Bank has promoted an independent and autonomous organization, namely NIC Foundation. The main objective behind it is to bring about positive changes in society through charitable works by helping underprivileged children & communities. The Bank contributes 0.5% of its annual net profit for this purpose. NIC Bank is the only Bank in the banking industry to set aside a fixed proportion of profit for such charitable work.

NIC Foundation has provided scholarships for underprivileged but meritorious & deserving girl children in the age group below 16 years from remote rural areas for the last three years. Likewise, it has facilitated visually challenged students to pursue higher education. NIC Foundation and the Bank have also raised funds to donate ambulances.

NIC Foundation is also providing help to old age homes in Dhankuta, Sunsari and Kathmandu and has helped in the construction of an underground water tank for the Old Age Management/ Social Welfare Trust in Kathmandu.

NIC Foundation believes in generating synergy by collaborating with institutions in bringing positive change in society and has joined hands with partners like Rotary in reaching to a wider and larger part of the community.

The Bank has also set an example by organizing an annual Blood Donation campaign in order to reduce the shortage of blood at blood banks in Kathmandu, Bhaktapur and Biratnagar. The Bank has also donated computers to schools in remote areas and provided financial assistance to an orphanage at Birgunj.


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products

NICHappySavingsAccountAn exclusive savings deposit product with high interest bearing that yields 6.5% interest rate and additional 0.5% interest to senior citizens and women, which is calculated on daily balance. This product was designed to give good financial return and can be opened with minimum balance of NPR. 1000. The deposit in Happy Savings Account has already crossed NPR 1 billion mark within 8 months of the launch.

NICLifeSavingsAccountOne of the pioneer interest bearing savings product of the bank with free annual health check up facility in partnership with Norvic Hospital. This interest bearing account comes with life insurance and accidental insurance cover facilities. Along with these facilities, discount on various services like Safe deposit lockers, travelers cheque, fund transfers etc are also provided in this account. Account holders will also be eligible for a discount on hospitalization charges on comprehensive Cardiac Check-up - all these with a minimum balance of Rs. 10,000 only.

Mero BachatVery simple and easy to operate interest bearing account which can be opened with just NPR. 10. Launched in March 2009, this product has been so much popular that it serves the purpose of savings as well as fulfills the requirement of having account in the bank. As of July 2010, 29,000 customers are already benefited from this account.

Karmashil Bachat KhataVery popular and successful product bundled with various other facilities as well as interest bearing account specially designed for middle level working professionals, employees and students to cultivate the banking habit. Bundles with other feature, this product has been very successful and appreciated by 27,000 customers as of July 2010.

NICSavingsPlusSpecially designed for individuals to meet the needs of banking facility with high return on their savings upto 6.5% interest rate on daily balance. This product offer free issuance of Debit card for 2 years and Free ABBS facility up to NPR. 1 million per day.

NIC Sikshya KoshProper education plays the most important role in making a child’s future. Education today has become very expensive and thus one needs to save today to meet the needs for their child’s future education. NIC Shikshya Kosh allows parents to save every possible paisa today so as to give a lump sum amount with lots of other benefits later on for their child’s future education. Re-launched in the year 2010 with interest rate up to 8%, it’s a runaway success with close to 9,000 depositors as of July 2010.


43

NICShareholdersSavingsAccountThis product was launched in the year 2007 to provide easy access banking service to our bestowing shareholders plus a good return on their savings. This product will facilitate our shareholders to credit their dividend payment directly in their account and now shareholders will no longer be required to queue up to receive dividend payments. The product all features insurance facility to the shareholders.

NIC Business AccountNIC Business Account is an interest bearing current account, launched on October 2007. It encourages business, firms and companies by offering interest on daily balance. This will carry out the need of banking which can be opened with NPR. 1,000 and lot of free discount and banking facilities.

NICUSDSuperSavingsAccountThis deposit product, enhanced with many additional facilities, was launched in 2006 and has gained popularity amongst individuals who earn in foreign currencies.

NIC Super DepositThis innovative time deposit product offers a unique investment opportunity with high returns in a fixed deposit and the flexibility of a savings account.

NIC Social AccountIt is a complete banking to the non-profit making organizations, launched in 2010. It is an interest bearing current account specially designed to avail banking opportunity to NGOs/INGOs, trusts, government and local government offices, hospitals, educational institutes, diplomatic missions, embassies, club/societies/community organizations, etc. This offer provides interest on daily balance with lots of banking facitilities and fulfills the banking requirement for those organizations.

NIC Corporate Super AccountHighly beneficial for institutions and organizations, a high yield interest bearing account on daily balance with unlimited deposit and withdrawal facilities. This account helps the business unit to increase their income by offering attractive interest of up to 6% p.a. on daily balance that can be opened with just NPR. 100,000 with Free ABBS facility.


44

Trade in Bullion

NIC Bank launched NIC Pure Gold, a first-of-its-kind innovative product never before introduced by any bank in Nepal. NIC Bank imports certified 99.5% pure gold from reputed international mints/suppliers.

The Bank was also the first among financial institutions in Nepal to import 99.9% pure silver granules from international mints/suppliers. With the introduction of NIC Silver, NIC Bank is contributing to the silver crafts and jewellery industry by providing an easy access to pure silver granules.

After the encouraging response that we got from the market in gold and silver, once again for the first time in the local bullion industry, the Bank commenced sale of small denomination medallions like 5 grams, 8 grams and 10 grams targeting small buyers.

NiC pure Gold

NIC Bank has also launched NIC Pure Gold, a first of its kind innovative product never before introduced by any bank in Nepal. Although, there is a sizeable demand for gold in Nepal, Nepali consumers are always uncertain of the quality available in the market. With NIC Bank importing certified 99.5%/99.9% pure gold from reputed international mints/suppliers, quality is now assured. The Bank also offers multiple finance option to avail loans to purchase gold and provides custodial service under which buyers may choose to keep the purchased gold safely in the Bank instead of taking the high risk of storing it at home.


45

NiC pure Silver

NIC Bank is also the first in Nepal to import 99.9% pure silver granules from international mints/suppliers. With the introduction of NIC Silver, the Bank is contributing to the silver crafts and jewellery industry by providing an easy access to pure silver granules ensuring quality products.

With the introduction of Pure Gold Medallion in September 2009, NIC Bank is also taking care of the protection of interest of small buyers. The small buyers were facing the difficulties to buy pure gold medallion in small denominations like 5 grams/ 10 grams etc which were not available in purity of 99.9%. in the market as it is claimed. Now with the easy access to get the NIC Pure Gold even in small denomination like 5 grams, 8 grams and 10 grams, it is expected that the small buyers too can invest in gold with assured quality.

NiC pure Gold medallion

Treasury &�Correspondent Banking

NIC Bank operates a full- fledged Treasury Department within the parameters of the foreign exchange rules and regulations issued by Nepal Rastra Bank (NRB) – central bank of Nepal. The bank offers a full range of treasury services, which includes buy/ sell of foreign currencies in both spot and forward market, money market dealings, buy/ sell of government treasury bills/bonds and treasury advisory services. It looks into bank’s liquidity & market risk management, ALM, bank’s balance sheet management, transfer pricing, investment and correspondent banking


46

CorporateSocial Responsibility

NIC Bank’s initiatives of establishing NIC Foundation, a non profit organization, to take up social activities to bring about positive changes in the society have been widely appreciated and recognized. Some of the projects taken by NIC Foundation during the year have enhanced image of the Bank in the community.

Health Camp organized at Sipadol, Bhaktapur was an exemplary partnership between the Bank, the Foundation and the Community which helped poor and down trodden children and elderly people deprived from the basic medical access to have medical check up from doctors and free medicines provided to them brought a smile of relief.

NIC Foundation has made financial contribution towards relief of Jajarkot epidemic victims to show our concern and give them the feeling that we care for our fellow citizens in bad times.

Scholarships provided by the Foundation to girl students in various schools across the country is an initiative in promoting girl child education.

Financial support to orphanages in Morang, sankhuwashabha and Parsa has assured the innocent children making the orphanage their home in search of care and love that there are organizations like NIC Foundation committed in extending arms of support to help them see better future,neutralize the pain they endured in the past.

NIC Foundation has demonstrated by providing help to Oldage home in Dhankuta, Sunsari and Kathmandu that it cares elderly people and provide them with adequate services they deserve in recognition of their contribution to society they made in their past.


Mr. Parshuram Acharya, Miss Shanti Bhattarai Miss Amrita Budthapa

Scholarship from NIC Foundation to the Visually Challenged

47

NIC Foundation believes in generating synergy by collaborating with institutions in bringing positive change in society and has joined hands with partners like Rotary Fund in reaching to wider and larger part of community. Construction of an underground water tank for the Old Age Management/ Social Welfare Trust, Kathmandu gave the elderly mothers and orphans taking shelter in the Trust enough water to drink and wash improving overall health and hygine in the Trust, and gave the care taker Mrs Dil Shobha Shrestha further encouragement improving conditions of the abandoned elderly mothers. Completing a mountain trail which Mr. Krishnalal of Parbat district had initiated was a challenge as he had exhausted all resources and energy and was hopelessly on the verge of abandoning the project while NIC Foundation stepped in as a rescue and contributed financially to complete the route. This mile stone in NIC Foundation’s projects in bringing about difference in the life of rural citizens of the country.

NIC Foundation believes in generating synergy by collaborating with institutions in bringing positive change in society and has joined hands with partners like Rotary Fund in reaching to wider and larger part of community.

Scholarship from NIC Foundation to the Visually ChallengedFrom Left Top:Mr. Rajendra Aryal, Mr. Sashin Joshi, Mr. Ashok Kumar Agrawal, Mr. Bhanu Dawadi Miss Shanti Bhattarai, Miss Amrita Budthapa and Mr. Parshuram Acharya

Co-ordinator’s of NIC Foundation handing over Cheque to (Care taker of Old Age Management/ Social Welfare Trust)

From Left:Mr. Ashok Kumar Agrawal, Mr. Rajendra Aryal, Mrs. Mrs. Dil Shobha Shrestha

NIC Foundation donating incense making equipment donated to children centre at Dallu

From Left:Mr. Ashok Kumar Agrawal, Mr. Rajendra Aryal

48


Branch managers

49


50

auditor’s Report


51


52


Balance Sheet As at 32 Ashad 2067 (16 July 2010)

capital & liabilities Schedule current Year

nPR Previous Year

nPR

1. Share Capital 1 1,311,552,000 1,311,552,000

2. Reserves and Funds 2 453,400,168 348,701,729

3. Debentures & Bonds 3 200,000,000 200,000,000

4. Borrowings 4 1,723,250,000 660,405,000

5. Deposits 5 15,968,917,926 15,579,930,904

6. Bills Payable 6 17,542,684 265,106,722

7. Proposed Dividend 345,145,263 9,003,789

8. Income Tax Liabilities 32,571,596 10,892,640

9. Other Liabilities 7 256,950,979 365,040,413

total 20,309,330,616 18,750,633,197

assets Schedule current Year

nPR Previous Year

nPR

1. Cash Balance 8 530,610,696 337,349,455

2. Balance with Nepal Rastra Bank 9 589,322,223 970,981,465

3. Balance with Banks/Financial Institutions 10 966,197,190 152,819,629

4. Money at Call and Short Notice 11 100,000,000 -

5. Investments 12 4,946,777,670 3,026,022,185

6. Loans, Advances and Bills Purchased 13 12,732,014,319 13,679,393,779

7. Fixed Assets 14 297,191,956 259,324,965

8. Non-Banking Assets 15 - 703,250

9. Other Assets 16 147,216,562 324,038,469

total 20,309,330,616 18,750,633,197

Contingent Liabilities Schedule 17 Directors’ Declaration Schedule 29 Capital Adequacy Schedule 30 Risk Weighted Assets Schedule 30 (a) Principal Indicators Schedule 31 Principal Accounting Policies Schedule 32 Notes to Accounts Schedule 33 Statement of Loans Availed by Promoters /Shareholders under Promoter’s Group from Other BFIs Schedule 34 Unaudited Financial Results (Provisional) Schedule 35 Comparision of Unaudited and Audited Financial Statement Schedule 36

Schedules 1 to 17, 33 and 34 form integral part of this Balance Sheet.

Prabin Basnet lokmanya Golchha nirmal Kumar agrawal tulsi Ram agrawal Manager Fin. & Ops. Director Director Director Sashin Joshi Ganesh Man Shrestha Rajendra aryal Birendra Kumar Sanghai Jagdish Prasad agrawalChief Executive Officer Prof. Director Director Director Chairman

KathmanduDate: 4th October, 2010 As per our report of even date

Gopal P. Rajbahak, FCA G.P. Rajbahak & Co. Chartered Accountants

53


PRofit and loSS account For the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010)

Schedule 18 to 28, 33 and 34 form integral part of this Profit and Loss Account




Particulars Schedule current Year

nPR Previous Year

nPR

1. Interest Income 18 1,777,165,668 1,283,520,711

2. Interest Expenses 19 1,031,474,076 767,196,816

net interest income 745,691,592 516,323,895

3. Commission & Discount 20 76,064,466 61,895,316

4. Other Operating Incomes 21 49,345,027 44,028,178

5. Exchange Fluctuation Income 22 90,908,819 97,673,440

total operating income 962,009,904 719,920,829

6. Staff Expenses 23 118,858,070 84,544,834

7. Other Operating Expenses 24 137,749,539 109,784,146

8. Exchange Fluctuation Loss 22 - -

operating Profit Before Provision for Possible losses 705,402,295 525,591,849

9. Provision for Possible Losses 25 17,740,842 39,509,378

operating Profit 687,661,453 486,082,471

10. Non - Operating Income/(Expenses) 26 11,458,240 2,489,084

11. Loss Provision Written Back 27 56,204,075 3,913,125

Profit from Regular activities 755,323,768 492,484,680

12. Income/(Expense) from Extra-Ordinary Activities 28 (46,204,075) 7,617,108

Profit from all activities 709,119,693 500,101,788

13. Provision for Staff Bonus 64,465,427 45,463,799

14. Provision for Income Tax 194,810,564 137,203,851

Current Year’s 194,485,541 137,910,184

Deferred Tax 325,023 (739,281)

Previous Year’s - 32,948

net Profit /(loss) 449,843,702 317,434,138

54


PRofit and loSS aPPRoPRiation account Fiscal Year 2066/2067 (2009/2010)

Particularscurrent Year

nPR Previous Year

nPR

income

1. Accumulated Profit upto Previous Year 30,557,473 1,627,085

2. Current Year’s Profit 449,843,702 317,434,138

3. Exchange Equilization Fund - -

total 480,401,175 319,061,223

expenses

1. Accumulated Loss upto Previous Year - -

2. Current Year’s Loss - -

3. General Reserve 89,968,740 63,486,828

4. Contingent Reserve - -

5. Institution Development Fund - -

6. Dividend Equalization Fund - -

7. Employees’ Related Fund - -

8. Proposed Dividend 345,145,263 9,003,789

9. Proposed Issue of Bonus Share - 171,072,000

10. Special Reserve Fund - -

11. Exchange Fluctuation Fund 3,012,954 1,841,092

12. Capital Redemption Reserve - -

13. Capital Adjustment Fund - -

14. NIC Bond 2070 Redemption Reserve 40,000,000 40,000,000

15. Deferred Tax Reserve (325,023) 3,100,041

16. Investment Adjustment Fund 504,620

total 478,306,554 288,503,750

15. Accumulated Profit (Loss) 2,094,621 30,557,473




55


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56


caSh flow StateMent For the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010)

Particulars current Year (nPR) Previous Year (nPR)

(a) cash flow from operating activities 1,561,572,446 374,018,917

1. cash Receipts 1,994,796,541 1,473,516,877

1.1 Interest Income 1,764,870,915 1,257,870,151

1.2 Commission and Discount Income 76,073,364 62,178,848

1.3 Exchange Gain 94,507,235 98,822,592

1.4 Recovery of Loan Written off 10,000,000 10,617,108

1.5 Other Income 49,345,027 44,028,178

2. cash Payments (1,435,121,757) (1,070,081,805)

2.1 Interest Expenses (993,734,013) (722,447,258)

2.2 Staff Expenses (116,889,896) (83,325,094)

2.3 Other Operating Expenses (103,029,447) (84,258,857)

2.4 Payment of Income Tax (172,806,597) (140,977,552)

2.5 Other Expenses (48,661,804) (39,073,044)

cash flow before changes in working capital 1,001,897,663 (29,416,155)

decrease/(increase) in current asset from operating activities (50,607,630) (3,138,079,160)

1. Decrease/(Increase) in Money at Call and Short Notice (100,000,000) 160,000,000

2. Decrease/(Increase) in Other Short Term Investments (1,055,533,082) (653,166,980)

3. Decrease/(Increase) in Loans, Advances and Bills Purchased 930,341,869 (2,453,057,030)

4. Decrease/(Increase) in Other Assets 174,583,583 (191,855,150)

increase/(decrease) in current liabilities from operating activities 1,052,505,293 3,108,663,005

1. Increase /(Decrease) in Deposit/Liabilities 388,987,023 2,495,242,232

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

3. Increase /(Decrease) in Short Term Borrowings 1,062,845,000 325,405,000

4. Increase /(Decrease) in Other Liabilities (399,326,730) 288,015,773

(B) cash flow from investing activities (908,593,897) (136,704,802)

1. Decrease/(Increase) in Long Term Investments (866,378,800) (61,981,459)

2. Decrease/(Increase) in Fixed Assets (60,511,947) (86,295,565)

3. Interest Income from Long Term Investments 15,773,750 10,373,750

4. Dividend Income 2,523,100 1,198,472

5. Others - -

(c) cash flow from financing activities (24,400,573) 32,636,800

1. Increase /(Decrease) in Long Term Borrowings (Bond, Debentures etc.) (15,242,119) (5,280,759)

2. Increase /(Decrease) in Paid in Capital (9,158,455) 37,917,559

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

4. Increase /(Decrease) in Refinance/facilities from Nepal Rastra Bank - -

(d) income/loss from change in exchange rate of cash and Bank Balance (3,598,416) (1,149,152)

(e) current Year’s cash flow from all activities 624,979,561 268,801,763

(f) opening cash and Bank Balance 1,461,150,549 1,192,348,786

(G) closing cash and Bank Balance 2,086,130,110 1,461,150,549




57


ShaRe caPital and owneRShiPAs at 32 Ashad 2067 (16 July 2010)

ShaRe owneRShiPAs at 32 Ashad 2067 (16 July 2010)

Schedule 1

Particulars current Year

nPR Previous Year

nPR

1. Share capital

1.1 authorised capital 1,600,000,000 1,600,000,000

a) 16,000,000 Ordinary Shares of Rs 100 each 1,600,000,000 1,600,000,000

b)…. Non-Redeemable Shares of Rs _ each - -

c)….. Redeemable Shares of Rs _ each - -

1.2 issued capital 1,311,552,000 1,140,480,000

a) 13,115,520 Ordinary Shares of Rs 100 each (Previous year 11,404,800 Ordinary Shares of Rs. 100 each)

1,311,552,000 1,140,480,000

b)…...Non-Redeemable Shares of Rs _ each - -

c)…...Redeemable Shares of Rs _ each - -

1.3 Paid up capital 1,311,552,000 1,140,480,000

a) 13,115,520 Ordinary Shares of Rs 100 each (Previous year 11,404,800 Ordinary Shares of Rs. 100 each)

1,311,552,000 1,140,480,000

b) …….Non-Redeemable Shares of Rs _ each - -

c) …….Redeemable Shares of Rs _ each - -

1.4 Proposed Bonus Share - 171,072,000

1.5 calls in advance - -

Particulars Share capital

this Year Share capital Previous year

% nPR nPR %

a. local ownership 100 1,311,552,000 1,140,480,000 100

1.1 Government of Nepal - -

1.2 ‘KA” Class Licensed Institutions - -

1.3 Other Licensed Institutions - -

1.4 Other Institutions 1 17,837,107 14,256,000 1

1.5 General Public 99 1,293,714,893 1,126,224,000 99

1.6 Others - - -

B. foreign ownership - - -

total 100 1,311,552,000 1,140,480,000 100

58


ShaReholdeRS holdinG MoRe than 0.5% ShaReSAs at 32 Ashad 2067 (16 July 2010)

ReSeRve and fundSAs at 32 Ashad 2067 (16 July 2010)

Schedule 1

Schedule 2

Sn name number of Shares held amount (nPR) % of Shareholding

1 Sushila Devi Sanghai 78,718 7,871,800 0.60

2 Rajani Amatya 82,555 8,255,500 0.63

3 Govinda Lal Sanghai 106,099 10,609,900 0.81

4 Nirmal Kumar Agrawal 229,520 22,952,000 1.75

5 Anuj Agrawal 475,470 47,547,000 3.63

6 Jagdish Prasad Agrawal 513,824 51,382,400 3.92

7 Nikunj Agrawal 552,586 55,258,600 4.21

8 Ashok Kumar Agrawal 555,713 55,571,300 4.24

9 Trilok Chand Agrawal 622,423 62,242,300 4.75

10 Vishal Agrawal 623,537 62,353,700 4.75

11 Basu Dev Golyan 643,672 64,367,200 4.91

12 Pawan Kumar Golyan 655,775 65,577,500 5.00

13 Tulsi Ram Agrawal 667,277 66,727,700 5.09

14 Diwakar Golchha 716,896 71,689,600 5.47

15 Lokmanya Golchha 716,906 71,690,600 5.47

16 Subhash Chandra Sanghai 1,312,931 131,293,100 10.01


nPR Previous Year

nPR

1. General Reserve Fund 310,539,220 220,570,480

2. Capital Reserve Fund 41,873,580 41,873,580

a. Share Premium 41,873,580 41,873,580

3. Capital Redemption Reserve - -

4. Capital Adjustment Fund - -

5. Other Reserve & Fund 85,471,419 45,291,822

a. Contingent Reserve - -

b. Institution Development Fund - -

c. Dividend Equalisation Fund - -

d. Special Reserve Fund - -

e. Assets Revaluation Reserve - -

f. Other Free Reserves - -

g. Bond Redemption Reserve 82,191,781 42,191,781

h. Deferred Tax Reserve 2,775,018 3,100,041

i. Investment Adjustment Reserve 504,620 -

6. Accumulated Profit/Loss 2,094,621 30,557,473

7. Exchange Fluctuation Fund 13,421,328 10,408,374

total 453,400,168 348,701,729

59


deBentuRe & BondAs at 32 Ashad 2067 (16 July 2010)

Schedule 3

Schedule 4


nPR Previous Year

nPR

1. 6% NIC Bond of Rs 1,000 each Issued on 26 June 2006 and Maturing on 25 June 2013 [Redemption Reserve: NPR 82,191,781 (Previous year NPR 42,191,781)]

200,000,000 200,000,000

2. ……………… - -

3. ……………… - -

total 200,000,000 200,000,000

BoRRowinGSAs at 32 Ashad 2067 (16 July 2010)


nPR Previous Year

nPR

a. local

1. Government of Nepal - -

2. Nepal Rastra Bank 1,287,100,000 -

3. Repo Obligations - -

4. Inter-bank and Financial Institutions 436,150,000 660,405,000

5. Other Financial Institutions - -

6. Others - -

total 1,723,250,000 660,405,000

B. foreign

1. Banks - -

2. Others - -

total - -

total (a+B ) 1,723,250,000 660,405,000

60


dePoSitSAs at 32 Ashad 2067 (16 July 2010)

Schedule 5


nPR Previous Year

nPR

1. non-interest Bearing accounts

a. current deposits 1,219,899,614 834,693,910

1. local currency 1,187,504,775 814,947,678

1.1 Government of Nepal 121,687,045 131,244,303

1.2 "KA" Class Licensed Institutions 76,422,976 5,113,719

1.3 Other Licensed Financial Institutions 146,392,130 142,762,827

1.4 Other Organized Institutions 667,634,840 403,868,063

1.5 Individuals 37,413,491 131,958,766

1.6 Others 137,954,293 -

2. foreign currency 32,394,839 19,746,232

2.1 Government of Nepal - -

2.2 "KA" Class Licensed Institutions - -

2.3 Other Licensed Financial Institutions 2,587,587 170,918

2.4 Other Organized Institutions 66,192 10,782,080

2.5 Individuals 29,611,834 8,465,402

2.6 Others 129,227 327,832

B. Margin deposits 121,515,096 102,185,720

1. Employees' Guarantee - 329,400

2. Guarantee Margin 40,626,145 30,672,844

3. Letters of Credit Margin 80,888,951 71,183,476

c. others - -

1. local currency - -

1.1 Financial Institutions - -

1.2 Other Organized Institutions - -

1.3 Individuals - -

2. foreign currency - -

2.1 Financial Institutions - -

2.2 Other Organized Institutions - -

2.3 Individuals - -

total of non-interest Bearing accounts 1,341,414,710 936,879,630

61


dePoSitS contd...As at 32 Ashad 2067 (16 July 2010)

Schedule 5


nPR Previous Year

nPR

2. interest Bearing accounts

a. Savings deposits 3,715,846,822 3,993,715,640

1. local currency 3,641,308,885 3,916,310,119

1.1 Institutions 24,555,214 469,159,247

1.2 Individuals 3,331,589,861 3,413,010,633

1.3 Others 285,163,810 34,140,239


2.1 Institutions - 10,614,010

2.2 Individuals 74,196,976 65,668,671

2.3 Others 340,961 1,122,840

B. fixed deposits 7,554,059,836 7,580,059,764

1. local currency 7,232,544,253 7,118,281,894

1.1 Institutions 5,457,391,249 6,104,194,119

1.2 Individuals 1,255,984,774 965,965,744

1.3 Others 519,168,230 48,122,031


2.1 Institutions 108,256,500 -

2.2 Individuals 213,259,083 461,777,870

2.3 Others - -

c. call deposits 3,357,596,558 3,069,275,870

1. Local Currency 3,302,445,225 2,928,941,402

1.1 “KA” Class Licensed Institutions 38,430,641 331,701,782

1.2 Other Licensed Financial Institutions 1,201,221,778 899,638,440

1.3 Other Institutions 1,658,310,565 1,086,883,919

1.4 Individuals 399,872,619 259,905,307

1.5 Others 4,609,621 350,811,954


2.1 “KA” Class Licensed Institutions - -

2.2 Other Licensed Financial Institutions - -

2.3 Other Institutions 4,288,694 84,571,844

2.4 Individuals 50,862,640 55,762,624

2.5 Others - -

d. certificate of deposits - -

1. Institutions - -

2. Individuals - -

3. Others - -

total of interest Bearing accounts 14,627,503,216 14,643,051,274

total deposits (1+2) 15,968,917,926 15,579,930,904

62


BillS PaYaBle As at 32 Ashad 2067 (16 July 2010)

caSh Balance As at 32 Ashad 2067 (16 July 2010)

otheR liaBilitieS As at 32 Ashad 2067 (16 July 2010)

Schedule 6

Schedule 8

Schedule 7


nPR Previous Year

nPR

1. Local Currency 10,639,595 238,022,636

2. Foreign Currency 6,903,089 27,084,086

total 17,542,684 265,106,722

Particulars current Year NPR

Previous Year NPR

1. Local Currency ( Including Coins) 525,592,283 325,224,644

2. Foreign Currency 5,018,413 12,124,811

total 530,610,696 337,349,455


nPR Previous Year

nPR

1. Pension/Gratuity Fund - -

2. Employees' Provident Fund - -

3. Employees' Welfare Fund - -

4. Provision for Staff Bonus 64,465,427 45,463,799

5. Interest Payable on Deposits 83,409,857 57,702,670

6. Interest Payable on Borrowing [Includes payable on NIC Bond NPR 4,201,264 (Previous year NPR 7,410,507)]

16,922,546 12,918,734

7. Unearned Discount and Commission 611,500 602,602

8. Sundry Creditors 67,667,923 144,682,883

9. Branch Adjustment Account - -

10. Deferred Tax Liability - -

11. Dividend Payable 1,841,318 1,995,983

12. Others 22,032,408 101,673,742

a. Provision for Leave Encashment 5,235,015 4,466,842

b. Payable to Others 16,797,393 97,206,900

total 256,950,979 365,040,413

63


Balance at nePal RaStRa BanK As at 32 Ashad 2067 (16 July 2010)

Balance with BanKS/financial inStitutionS As at 32 Ashad 2067 (16 July 2010)

MoneY at call and ShoRt notice As at 32 Ashad 2067 (16 July 2010)

Schedule 9

Schedule 10

Schedule 11

Particulars local currency

nPR foreign currency current Year

nPR Previous Year

nPR inR others total

1. nepal Rastra Bank 589,322,223 - - - 589,322,223 970,981,465

a. Current Account 589,322,223 - - - 589,322,223 970,981,465

b. Other Account - - - - - -

Particularslocal currency

nPR foreign currency current Year

nPR Previous Year

nPR inR others total

1. local Banks 710,235,306 - 449,504 449,504 710,684,810 28,031,521

a. Current Account 710,235,306 - 449,504 449,504 710,684,810 28,031,521


2. foreign Banks - 131,502,769 124,009,611 255,512,380 255,512,380 124,788,108

a. Current Account - 131,502,769 124,009,611 255,512,380 255,512,380 124,788,108


total 710,235,306 131,502,769 124,459,115 255,961,884 966,197,190 152,819,629

Note: Balance with Nepal Rastra Bank and with Banks/Financial Institutions as per confirmations and statements received from respective banks is NPR 1,676,785,809 and the differences are reconciled.


nPR Previous Year

nPR

1. Local Currency 100,000,000 -

2. Foreign Currency - -

total 100,000,000 -

64


inveStMentS As at 32 Ashad 2067 (16 July 2010)

inveStMentS in ShaReS, deBentuReS and BondSAs at 32 Ashad 2067 (16 July 2010)

Schedule 12

Schedule 12 (A)

ParticularsPurpose

current YearnPR

Previous YearnPRtrading

nPRothers

nPR

1. Nepal Government’s Treasury bills - 2,893,428,383 2,893,428,383 1,973,614,670

2. Nepal Government’s Savings Bonds - - - -

3. Nepal Government’s Others Securities - 1,085,472,252 1,085,472,252 221,389,015

4. Nepal Rastra Bank Bonds - - - -

5. Foreign Securities - 291,162,330 291,162,330 -

6. Local Licensed Institutions - 230,000,000 230,000,000 20,000,000

7. Foreign Banks - 418,923,205 418,923,205 784,427,000

8. Corporate Shares - 27,791,500 27,791,500 26,591,500

9. Corporate Bonds & Debentures - - - -

10. Other Investments - - - -

total investment - 4,946,777,671 4,946,777,670 3,026,022,185

Less : Provision - - - -

net investment - 4,946,777,671 4,946,777,670 3,026,022,185


ProvisionPrevious Year

nPRcost Price Market value

1. investment in Shares 27,791,500 - 26,591,500

1.1 Rural Microfinance Development Centre Ltd. (252,310 Ordinary Shares of Rs. 100 each)

25,231,000 not listed - 25,231,000

1.2 Credit Information Centre Ltd. (12,355 Ordinary Shares of Rs. 100 each)

1,235,500 not listed - 1,235,500

1.3 Nepal Clearing House Ltd. (25,000 Ordinary Shares of Rs. 100 each - Rs. 5 paid up)

125,000 not listed - 125,000

1.4 National Banking Traninig Institute (12,,000 Ordinary Shares of Rs. 100 each )

1,200,000 not listed - -

2. investment in debentures and Bonds - - -

2.1 ……………………..

2.2 ……………………..

2.3 ……….……………..

total investment 27,791,500 - 26,591,500

3. Provision for loss - - -

3.1 Upto Previous Year - - -

3.2 Adjustment This Year - - -

total Provision - - -

27,791,500 - 26,591,500

Credit Information Centre Ltd. has not declared dividend for the past three years.

65


inveStMentS (held foR tRadinG) As at 32 Ashad 2067 (16 July 2010)

inveStMentS (held foR MatuRitY) As at 32 Ashad 2067 (16 July 2010)

Schedule 12.1

Schedule 12.2

Particulars Par valuelast Market

Price (a)

current Market Price (b)

current YearGain/(loss)

(a-b)

Previous YearGain/(loss)

Remarks

1. Nepal Government’s Treasury Bills - - - - -

2. Nepal Government’s Savings Bonds - - - - -

3. Nepal Government’s Others Securities - - - - -

4. Nepal Rastra Bank Bonds - - - - -

5. Foreign Securities - - - - -

6. Shares of Domestic Licensed Institutions - - - - -

7. Debenture & Bonds of Domestic Licensed Institutions

- - - - -

8. Shares, Debentures & Bonds of Domestic Institutions

- - - - -

9. Placement in Foreign Banks - - - - -

10. Interbank Lending - - - - -

11. Other Investments - - - - -

total investment - - - - -

ParticularsPar value

(a)

cumulative loss(b)

current Year loss amount

(c)

current YearGain/(loss)

(a-b-c)


Remarks

1. Nepal Government's Treasury Bills 2,893,428,383 - - - -

2. Nepal Government's Savings Bonds - - - - -

3. Nepal Government's Others Securities 1,085,472,252 - - - -


5. Foreign Securities 291,162,330 - - - - Bond



- - - - -


- - - - -

9. Placement in Foreign Banks 418,923,205 - - - -

10. Other Investments 230,000,000 - - - -

total investment 4,918,986,170

66


inveStMentS (availaBle foR Sale) As at 32 Ashad 2067 (16 July 2010)

Schedule 12.3

Particulars Par valuelast Market

Price(a)

current Market Price

(b)

current YearReserve

adjustment amount

(a-b)


Remarks

1. Nepal Government's Treasury Bills - - - - -

2. Nepal Government's Savings Bonds - - - - -

3. Nepal Government's Others Securities - - - - -


5. Foreign Securities - - - - -



- - - - -


27,791,500 - - 504,620 - Share not listed

9. Placement in Foreign Banks - - - - -

10. Other Investments - - - - -

total investment 27,791,500 - - 504,620 - -

67

NIC BANK I 13th Annual Report 2009/10c

la

SS

ific

at

ion

of

lo

an

S, a

dv

an

ce

S a

nd

Bil

lS

Pu

Rc

ha

Se

d a

nd

PR

ov

iSio

nS

As

at 3

2 A

shad

206

7 (1

6 Ju

ly 2

010)

Sche

dule

13

Part

icul

ars

adv

ance

sB

ills

Purc

hase

d an

d d

isco

unte

d

cur

rent

Yea

r n

PR

Pr

evio

us Y

ear

nP

R

dom

esti

c

fore

ign

nP

R

tota

la

dvan

ces

nP

R

loca

ln

PR

fore

ign

nP

R

tota

l B

ills

Purc

hase

d &

d

isco

unte

d

dep

rive

do

ther

s

insu

red

nP

Rn

on in

sure

dn

PR

nP

R

1.

Perf

orm

ing

loan

-

440

,127

,099

1

2,37

3,47

4,53

5 -

12,8

13,6

01,6

34

6,6

00,0

00

16,

609,

811

23,

209,

811

12,

836,

811,

445

13,

786,

671,

603

A.

Pass

loan

s -

440

,127

,099

1

2,37

3,47

4,53

5 -

12,

813,

601,

634

6,6

00,0

00

16,

609,

811

23,

209,

811

12,

836,

811,

445

13,

771,

077,

435

B.

Rest

ruct

ured

Loa

n -

- -

- -

- -

- -

15,

594,

168

2.

non

Per

form

ing

loan

-

10,

166,

098

82,

326,

548

- 9

2,49

2,64

6 -

- -

92,

492,

646

129

,178

,432

2.

1 S

ub S

tand

ard

- -

18,

647,

708

- 1

8,64

7,70

8 -

18,

647,

708

2,4

22,0

97

2.

2 D

oubt

ful

- -

19,

170,

414

- 1

9,17

0,41

4 -

- -

19,

170,

414

61,

131,

299

2.

3 L

oss

- 1

0,16

6,09

8 4

4,50

8,42

5 -

54,

674,

524

- -

- 5

4,67

4,52

4 6

5,62

5,03

6

tot

al l

oans

(a

) -

4

50,2

93,1

97

12,

455,

801,

083

-

12,9

06,0

94,2

80

6,6

00,0

00

16,

609,

811

23,

209,

811

12,

929,

304,

091

13,

915,

850,

035

3.

loan

los

s Pr

ovis

ion

3.

1 P

ass

Loan

s

- 4

,401

,271

1

23,7

34,7

45

- 1

28,1

36,0

16

66,

000

166

,098

2

32,0

98

128

,368

,114

1

37,7

10,7

75

3.

2. R

estr

uctu

red

Loan

-

- -

- -

- -

- -

1,9

49,2

71

3.

3 S

ub S

tand

ard

- -

4,6

61,9

27

- 4

,661

,927

-

- -

4,6

61,9

27

605

,524

3.

4 D

oubt

ful

- -

9,5

85,2

07

- 9

,585

,207

-

- -

9,5

85,2

07

30,

565,

650

3.

5 L

oss

- 1

0,16

6,09

8 4

4,50

8,42

5 -

54,

674,

524

- -

- 5

4,67

4,52

3 6

5,62

5,03

6

tot

al P

rovi

sion

s (B

) -

1

4,56

7,36

9 1

82,4

90,3

05

-

197

,057

,674

6

6,00

0 1

66,0

98

232

,098

1

97,2

89,7

72

236

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,256

4.

Prov

isio

n up

to P

revi

ous

Year

4.1

Pas

s Lo

ans

- 4

,223

,959

1

33,0

65,7

49

155

,700

1

37,4

45,4

08

2,0

00

263

,367

2

65,3

67

137

,710

,775

1

13,5

04,5

78

4.2

Res

truc

ture

d Lo

ans

-

- 1

,949

,271

-

1,9

49,2

71

- -

- 1

,949

,271

2

,088

,628

4.3

Sub

Sta

ndar

d -

- 6

05,5

24

- 6

05,5

24

- -

- 6

05,5

24

2,4

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76

4.4

Dou

btfu

l -

- 3

0,56

5,65

0 -

30,

565,

650

- -

- 3

0,56

5,65

0 5

,880

,214

4.5

Los

s -

399

,498

6

5,22

5,53

8 -

65,

625,

036

- -

- 6

5,62

5,03

6 7

6,77

4,41

3

tot

al P

rovi

sion

upt

o Pr

evio

us Y

ear

(c)

- 4

,623

,457

2

31,4

11,7

32

155

,700

2

36,1

90,8

89

2,0

00

263

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2

65,3

67

236

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2

00,6

55,9

09

wri

te b

ack

from

last

yea

r pr

ovis

ion

(d)

- -

- -

- -

- -

(56

,204

,075

) (

3,00

0,00

0)

Add

ition

al P

rovi

sion

durin

g th

is ye

ar

- -

- -

- -

- -

17,

037,

592

38,

800,

347

Net

Cha

nge

this

year

-

- -

- -

- -

- (

39,1

66,4

84)

35,

800,

347

net

loa

n (a

-B)

- 4

35,7

25,8

28

12,

273,

310,

778

- 12

,709

,036

,606

6

,534

,000

1

6,44

3,71

3 2

2,97

7,71

3 1

2,73

2,01

4,31

9 1

3,67

9,39

3,77

9

68


SecuRitieS aGainSt loanS, advanceS and BillS PuRchaSed As at 32 Ashad 2067 (16 July 2010)

Schedule 13 (A)


nPR Previous Year

nPR

(a) Secured 12,929,304,091 13,915,850,035

1. Collateral of Movable/Immovable Assets 11,250,324,803 12,264,712,298

2. Guarantee of Local Licensed Institutions 300,968,599 333,500,543

3. Guarantee of Government of Nepal 139,158,500 63,051,814

4. Guarantee of Internationally Rated Banks - -

5. Export Documents 3,824,100 2,066,649

6. Fixed Deposit Receipts 185,385,365 256,001,836

(a) Own FDR 185,340,365 190,207,081

(b) FDR of other Banks 45,000 65,794,755

7. Government Bonds 4,975,582 -

8. Counter Guarantees - -

9. Personal Guarantee - -

10. Other Securities 1,044,667,142 996,516,895

(B) unsecured - -

total 12,929,304,091 13,915,850,035

69


fix

ed

aS

Se

tS

As

at 3

2 A

shad

206

7 (1

6 Ju

ly 2

010)

Sche

dule

14

Par

ticu

lars

a

sset

s c

urre

nt Y

ear

nP

R

Pre

viou

s Ye

ar

nP

R

Bui

ldin

g n

PR

v

ehic

les

nP

R

Mac

hine

ry

nP

R

offi

ce e

quip

men

t n

PR

o

ther

s n

PR

1. a

t c

ost

a.

Pre

viou

s Ye

ar’s

bala

nce

19,

778,

322

44,

516,

815

11,

684,

040

77,

480,

345

25,

079,

118

178

,538

,640

1

42,6

07,7

79

b.

Add

ition

s th

is ye

ar

317

,015

2

4,09

5,67

0 4

,597

,147

3

2,96

0,42

4 1

0,20

6,95

0 7

2,17

7,20

6 4

2,10

8,08

6

c.

Rev

alua

tion/

Writ

ten

back

this

year

-

- -

- -

-

d.

Thi

s ye

ar s

old

- (1

1,64

2,01

5) (5

59,3

24)

(4,1

23,4

23)

(770

,008

) (

17,0

94,7

70)

(5,6

91,5

00)

e.

Thi

s ye

ar w

ritte

n off

-

- -

- -

-

(485

,724

)

tot

al c

ost

(a+b

+c+d

+e)

20,

095,

337

56,

970,

470

15,

721,

863

106

,317

,346

3

4,51

6,06

0 2

33,6

21,0

76

178

,538

,641

2. d

epre

ciat

ion

a.

Upt

o Pr

evio

us Y

ear

1,1

50,6

84

17,

143,

885

5,8

05,1

10

45,

662,

963

13,

485,

985

83,

248,

627

70,

671,

373

b.

For

this

year

9

32,2

27

6,3

34,0

96

1,5

98,8

69

10,

289,

894

3,6

42,5

63

22,

797,

649

16,

790,

730

c.

Dep

reci

atio

n on

rev

alua

tion/

writ

ten

back

-

- -

- -

-

-

d.

Dep

reci

atio

n ad

just

men

t/W

ritte

n off

(9

,147

,708

) (5

38,0

79)

(3,8

19,4

27)

(738

,387

) (

14,2

43,6

01)

(4,2

13,4

63)

tot

al d

epre

ciat

ion

2,0

82,9

12

14,

330,

273

6,8

65,9

00

52,

133,

430

16,

390,

161

91,

802,

676

83,

248,

640

3. w

ritt

en d

own

val

ue (

1-2)

1

8,01

2,42

5 4

2,64

0,19

7 8

,855

,963

5

4,18

3,91

6 1

8,12

5,89

9 1

41,8

18,4

00

95,

290,

001

4. l

and

116

,903

,586

1

26,4

92,5

51

5. c

apit

al c

onst

ruct

ion

(to

be c

apit

alis

ed)

4,8

69,2

25

7,2

02,9

20

6. l

ease

hold

ass

ets

(net

of a

mor

tisa

tion

) 3

3,60

0,74

5 3

0,33

9,49

3

tot

al (

3+4+

5+6)

1

8,01

2,42

5 4

2,64

0,19

7 8

,855

,963

5

4,18

3,91

6 1

8,12

5,89

9 2

97,1

91,9

56

259

,324

,965

70


non BanKinG aSSetS As at 32 Ashad 2067 (16 July 2010)

otheR aSSetS As at 32 Ashad 2067 (16 July 2010)

Schedule 15

Schedule 16

name & address of Borrower date of assuming

non Banking assets

Gross non Banking assets

nPR

Provisions net non Banking assets

nPR

Previous Year nPR % nPR

1. Ganapati Rice Mills 13/04/2006 740,000 100 740,000 - 185,000

2. N.B. Corner 07/06/2009 691,000 100 691,000 - 518,250

total 1,431,000 1,431,000 - 703,250


nPR Previous Year

nPR

1. Stock of Stationery 5,329,655 4,107,724

2. Income Receivable on Investments 35,547,932 37,870,533

3. Accrued Interest on Loans - -

Accrued Interest on Loans 27,459,592 16,381,079

Less: Interest Suspense (27,459,592) (16,381,079)

4. Commision Receivable 8,204,630 -

5. Sundry Debtors 16,302,713 123,519,677

6. Staff Loans and Advances 42,431,252 27,677,430

7. Prepayments 19,289,305 6,944,308

8. Cash-in-Transit - -

9. Other Transit Items ( including cheques) - -

10. Drafts Paid Without Notice - -

11. Expenses not Written off 10,486,655 10,428,636

12. Branch Adjustment Accounts 444 525

13. Deferred Tax Asset 2,775,018 3,100,041

14. Others (Including gold, silver) 6,848,958 110,389,595

a. Coin and Valuable 55,199 55,199

b. Purchased Asset - Bullion (Gold) - 110,308,461

c. Purchased Asset - Silver 3,640,000 -

d. Purchased Asset - Gold Coin 3,127,824 -

c. Stock of Gold Coins 25,935 25,935

e. Others - - 351,281

Less: Provision - - (351,281)

total 147,216,562 324,038,469

71


otheR aSSetS (additional StateMent)As at 32 Ashad 2067 (16 July 2010)

continGent liaBilitieSAs at 32 Ashad 2067 (16 July 2010)

Schedule 16 (A)

Schedule 17

Particularsthis Year nPR Previous Year

nPR upto 1 year 1 to 3 years above 3 years total

1. Accrued Interest on Loans 27,007,186 116,675 335,731 27,459,592 16,381,079

2. Draft Paid without Notice - - - - -

3. Branch Adjustment Account 444 - - 444 525

4. Local/Foreign Agency Accounts - - - - -


nPR Previous Year

nPR

1. Claims on Bank but not Accepted by the Bank 8,943,000 8,943,000

2. Letters of Credit (Full Amount) 1,059,419,575 1,342,578,965

a. Letter of Credit With Maturity Less than 6 Months 1,038,366,623 1,077,494,666

b. Letter of Credit With Maturity More than 6 Months 21,052,952 265,084,299

3. Rediscounted Bills - -

4. Unmatured Guarantees/Bonds 330,650,047 311,335,319

a. Bid Bonds 33,694,100 31,426,320

b. Performance Bonds 296,955,947 279,908,999

c. Other Guarantee/Bonds - -

5. Unpaid Shares in Investment 2,375,000 2,375,000

6. Forward Exchange Contract Liabilities - -

7. Bills under Collection 57,579,262 75,876,655

8. Acceptances and Endorsements 84,088,952 211,327,133

9. Underwriting Commitments - -

10. Irrevocable Loan Commitments 3,576,293,480 2,554,430,074

11. Guarantees issued against Counter Guarantee of In’lly Rated Foreign Banks - -

12. Advance Payment Guarantees 43,053,332 112,855,805

13. Financial Guarantees - -

14. Contingent Liabilities on Income Tax 32,022,857 14,091,677

15. ………………….. - -

total 5,194,425,504 4,633,813,628

72


inteReSt incoMeFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

Schedule 18


nPR Previous Year

nPR

a. on loans, advances and overdrafts 1,599,538,166 1,135,067,342

1. Loans and Advances 1,229,131,143 874,904,815

2. Overdrafts 370,407,023 260,162,527

B. on investment 153,935,158 136,335,431

1. Nepal Government’s Securities 129,570,541 111,738,420

a. Treasury Bills 111,236,810 101,722,529

b. Development Bonds 18,333,731 10,015,891

c. National Savings Certificates - -

2. Foreign Securities 11,792,953 -

a. USD Bond 11,792,953 -

b. ……………… - -

3. Nepal Rastra Bank’s Bonds - -

4. Debentures and Bonds - -

5. Interest on Interbank Placements 12,571,664 24,597,011

a. Bank/ Financial Institutions 12,571,664 24,597,011

b. Other Institutions - -

c. on agency Balances 57,261 1,036,891

1. Local Banks/Financial Institutions - -

2. Foreign Banks 57,261 1,036,891

d. on Money at call and Short notice 21,526,155 9,966,298

1. Local Banks/Financial Institutions 21,526,155 9,966,298

2. Foreign Banks - -

e. on others 2,108,928 1,114,749

1. Certificates of Deposit - -

2. Inter Banks/Financial Institutions Loan - -

3. Others 2,108,928 1,114,749

total 1,777,165,668 1,283,520,711

73


inteReSt exPenSeSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

coMMiSSion and diScountSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

Schedule 19

Schedule 20


nPR Previous Year

nPR

a. on deposit liabilities 942,287,309 715,161,580

1. Fixed Deposits 584,005,310 462,832,830

1.1 Local Currency 568,464,202 445,556,918

1.2 Foreign Currency 15,541,108 17,275,912

2. Savings Deposits 163,742,820 133,009,998

2.1 Local Currency 163,069,072 131,836,367

2.2 Foreign Currency 673,748 1,173,631

3. Call Deposits 194,539,179 119,318,752

3.1 Local Currency 193,561,387 117,253,241

3.2 Foreign Currency 977,792 2,065,511

4. Certificate of Deposits - -

B. on Borrowings 89,186,767 52,035,236

1. Debentures & Bonds 12,032,876 12,000,000

2. Loan from Nepal Rastra Bank 56,885,112 4,573,170

3. Inter Bank/Financial Institutions Borrowings 20,268,779 35,462,066

4. Other Organized Institutions - -

5. Other Loans - -

c. on others - -

1 ……………… - -

2 ……………… - -

total 1,031,474,076 767,196,816


nPR Previous Year

nPR

a. Bills Purchased and discounted 569,365 530,523

1. Local 135,851 69,461

2. Foreign 433,515 461,062

B. commission 34,253,607 29,663,034

1. Letters of Credit 14,650,122 12,134,286

2. Guarantees 6,418,186 6,140,208

3. Collection Fees 3,701,032 3,093,501

4. Remittance Fees 5,029,896 4,832,997

5. Credit Cards - -

6. Share Underwriting /Issues - -

7. Government Transactions - -

8. Agency Commission 4,454,371 3,462,042

9. Exchange Fee* - -

c. others 41,241,494 31,701,759

total 76,064,466 61,895,316

*Income from exchange fee is not segregated and is included under Trading Gains (Schedule 22)

74


otheR incoMeFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

exchanGe Gain/loSSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

Staff exPenSeSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

Schedule 21

Schedule 22

Schedule 23


nPR Previous Year

nPR

1. Rental on Safe Deposit Lockers 1,026,593 768,722

2. Issue and Renewal of Credit Cards - -

3. Issue and Renewal of ATM Cards 1,654,970 284,207

4. Telex/ T. T. 3,550,825 3,594,966

5. Service Charges 28,092,444 32,819,205

6. Renewal Fees 9,340,205 5,154,443

7. Others 5,679,990 1,406,635

total 49,345,027 44,028,178


nPR Previous Year

nPR

A. Revaluation Gain 12,051,816 7,364,366

B. Trading Gain (including exchange fee) 78,857,003 90,309,074

total 90,908,819 97,673,440


nPR Previous Year

nPR

1. Salary 53,895,954 39,758,090

2. Allowances 37,115,065 27,330,439

3. Contribution to Provident Fund 4,269,431 3,160,310

4. Training Expenses 980,459 904,029

5. Uniform 1,166,310 1,195,486

6. Medical - -

7. Insurance 1,776,545 1,428,266

8. Pension and Gratuity Expenses 7,558,337 3,213,888

9. Others 12,095,969 7,554,326

total 118,858,070 84,544,834

75


otheR oPeRatinG exPenSeSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

Schedule 24


nPR Previous Year

nPR

1. House Rent 19,508,517 15,962,010

2. Electricity and Water 11,597,650 9,104,800

3. Repairs and Maintenance 4,824,186 3,653,263

a. Building 396,498 104,166

b. Vehicles 784,047 648,497

c. Others (Office Equipment and Furniture) 3,643,641 2,900,600

4. Insurance 3,977,907 3,427,364

5. Postage, Telex, Telephone, Fax 11,288,199 10,307,222

6. Office Equipment 342,317 282,909

7. Travelling Allowance and Expenses 6,115,794 5,333,465

8. Printing and Stationery 5,424,919 4,320,038

9. Books and Periodicals 119,486 107,898

10. Advertisements 5,266,662 4,410,347

11. Legal Fees & Expenses 823,116 1,393,573

12. Donations 2,317,871 1,977,529

13. Expenses Relating to Board of Directors 2,810,443 2,143,078

a. Meeting Fees 914,000 738,000

b. Other Expenses 1,896,443 1,405,078

14. Annual General Meeting Expenses 1,075,359 859,086

15. Expenses Relating to Audit 460,414 639,150

a. Audit Fees 150,000 140,000

b. Other Expenses 310,414 499,150

16. Commission on Remittances 1,032,106 1,224,666

17. Depreciation on Fixed Assets 22,797,649 16,790,731

18. Amortization of Preliminary Expenses - -

19. Share Issue Expenses - -

20. Technical Services Fees - -

21. Entertainment 1,498,879 1,206,653

22. Written off Expenses 11,414,664 8,441,964

23. Security Expenses 13,072,083 9,347,381

24. Credit Guarantee Premium - -

25. Commission and Discount - -

26. Others Expenses 11,981,318 8,851,020

a. Other Fees and Taxes 2,837,956 2,543,256

b. Membership Fees 781,389 768,204

c. Anniversary Expense 158,022 2,028,416

d. Other Expenses 8,203,951 3,511,144

total 137,749,539 109,784,146

76


PRoviSion foR PoSSiBle loSSeSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

non-oPeRatinG incoMe/(exPenSeS)For the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

loSS PRoviSion wRitten BacK Fiscal Year 2066/2067 (2009/2010)

Schedule 25

Schedule 26

Schedule 27


nPR Previous Year

nPR

1. Increase in Loan Loss Provision 17,037,592 38,800,347

2. Increase in Provision for Loss on Investment - -

3. Provision for Non Banking Assets 703,250 357,750

4. Provision for Other Assets - 351,281

total 17,740,842 39,509,378


nPR Previous Year

nPR

1. Profit (Loss) on Sale of Investments - -

2. Profit (Loss) on Sale of Assets (Includes Gain on sale of Land Rs.4,885,542)

8,935,140 1,290,612

3. Dividend 2,523,100 1,198,472

4. Subsidies Received from Nepal Rastra Bank - -

a. Reimbursement of Losses of Specified Branches - -

b. Interest Subsidy - -

c. Exchange Counter - -

d. …………. - -

5. Others - -

total 11,458,240 2,489,084


nPR Previous Year

nPR

1. Loan Loss Provision Written Back 56,204,075 3,000,000

2. Provision For Non Banking Assets Written Back - 913,125

3. Provision For Investment Written Back - -

4. Provision For Other Assets Written Back - -

total 56,204,075 3,913,125

77


incoMe/(exPenSeS) fRoM extRaoRdinaRY activitieSFor the period from 1 Shrawan 2066 to 32 Ashad 2067 (16 July 2009 to 16 July 2010 )

detailS of loan wRite offS Fiscal Year 2066/2067 (2009/2010)

Schedule 28

Schedule 28 (A)


nPR Previous Year

nPR

1. Recovery of Loan Written off 10,000,000 10,617,108

2. Voluntary Retirement Scheme Expenses - -

3. Loan Write Offs {28 (A)} (56,204,075) (3,000,000)

4. Other Expense/Income - -

5. ……….. - -

total (46,204,075) 7,617,108

S. n loan typeamount

written off nPR

type ofSecurity

Basis ofvaluation

loan approved by name/

designation authority

initiations made for Recovery

Remark

1 Working Capital Loan (34,970,000) Land & Building Panchakrit Valuation/Property Valuation by Authorized Valuator

K.R. Iyer; then CEO

Borrower, Shareholders and

Directors of the unit blacklisted. Recovery suit filed with Debt Recovery Tribunal.

-

2 Project Loan

3 Fixed Assets Loan (21,234,075) Land & Building Panchakrit Valuation/Property Valuation by Authorized Valuator

K.R. Iyer; then CEO

Borrower, Shareholders and

Directors of the unit blacklisted. Recovery suit filed with Debt Recovery Tribunal.

-

4 Personal Loan

5 Other Loan

total (56,204,075)

78


StateMent of loanS & advanceS extended to diRectoRS/chief executive/ -PRoMoteRS/eMPloYeeS and ShaReholdeRS holdinG MoRe than 1 PeRcent ShaReS

As at 32 Ashad 2067 (16 July 2010)

Schedule 29

The Statement of amount included under total amount of Bills purchases ,Loans, Advances and Overdraft, provided to Directors, Chief Executives, Promoters, Employees, Shareholders holding more than 1% shares and to the individual member of their undivided family or against the guarantee of such persons or to the Organisation or Companies in which such individuals are managing agent are as follows

Note: Loans given to employees as per Employees’ Rules and to Directors and Promoters against Fixed Deposits/Government Securities have not been presented above.

name of Promoter/director/chief

executive

last Year’s Balance this Year’s Recovery this Year’sadditions

nPR

Balance as at 32 ashad 2067

PrincipalnPR

interestnPR

PrincipalnPR

interestnPR

interestnPR

additionsnPR

(A) Directors - - - - - - -

1

2

3

(B) Chief Executive - - - - - - -

1

2

3

(C) Promoters - - - - - - -

1

2

3

(D) Employees - - - - - - -

1

2

3

(E) Shareholders holding more than 1% Shares

- - - - - - -

1

2

3

total - - - - - - -

79


caPital adequacY taBleAs at 32 Ashad 2067 (16 July 2010)

Schedule 30 (A)

Particulars current Year Previous Year

1. 1 RiSK weiGhted exPoSuReS

a Risk Weighted Exposure for Credit Risk 14,466,352,141 15,021,347,498

b Risk Weighted Exposure for Operational Risk 851,163,538 647,081,764

c Risk Weighted Exposure for Market Risk 87,781,060 73,184,667

adjustment under Pillar ii

Add: 3% of the total RWE due to non compliance of Disclosure Requirement (6.4 a10) - -

Add: ..... of the total deposit due to insufficient Liquid Assets (6.4 a6) - -

Add: 1% of the total Risk Weighted exposure as per NRB inspection 154,052,967.39

total Risk weighted exposures (a+b+c) after adjustment 15,559,349,706 15,741,613,929

1.2 caPital current Year Previous Year

core capital (tier i) 1,750,459,218 1,649,007,425

a Paid up Equity Share Capital 1,311,552,000 1,140,480,000

b Irredeemable Non-cumulative preference shares - -

c Proposed Bonus Equity Shares - 171,072,000

d Share Premium 41,873,580 41,873,580

e Statutory General Reserves 310,539,220 220,570,480

f Retained Earnings 2,094,621 30,557,473

g Un-audited current year cumulative profit - -

h Bond Redemption Reserve 82,191,781 42,191,781

i Deferred Tax Reserve 2,775,018 3,100,041

j Capital Adjustment Reserve - -

k Dividend Equalization Reserves - -

l Other Free Reserve - -

m Less:

Goodwill - -

Miscellaneous Expenditure not written off 567,002 837,930

Investment in equity in licensed Financial Institutions - -

Investment in equity of institutions with financial interests - -

Investment in equity of institutions in excess of limits - -

Investments arising out of underwriting commitments - -

Reciprocal crossholdings - -

Other Deductions - -

adjustment under Pillar - ii

Less : Shortfall in Provision (6.4 a 1) - -

Less : Loans and facilities extended to related parties and restricted lending (6.4 a 2) - -

Supplementary capital (tier ii) 260,102,281 305,927,368

a Cumulative and/or Redeemable Preference Share - -

b Subordinated Term Debt 117,808,219 157,808,219

c Hybrid Capital Instruments - -

d General loan loss provision 128,368,114 137,710,775

e Exchange Equalization Reserve 13,421,328 10,408,374

f Investment Adjustment Reserve 504,620 -

g Assets Revaluation Reserve - -

h Other Reserves - -

total capital fund (tier i and tier ii) 2,010,561,500 1,954,934,793

1.3 caPital adequacY RatioS current Period Previous Period

Capital to Total Risk Weighted Exposures (Tier I) 11.25% 10.48%

Capital to Total Risk Weighted Exposures (Tier I and Tier II) 12.92% 12.42%

amount in nPR

80


RiSK weiGhted exPoSuRe foR cRedit RiSKAs at 32 Ashad 2067 (16 July 2010)

Schedule 30 (B)

assets current Year Previous Year

a. Balance Sheet exposures Book value

(a) Specific

Provision (b) eligible cRM (c)

net value d=a-b-c

Risk weighted

(e)

Risk weighted exposure f=d*e

Book valueRisk weighted

exposure

Cash Balance 530,610,696 - - 530,610,696 0% - 337,349,455 -

Balance With Nepal Rastra Bank 589,322,223 - - 589,322,223 0% - 970,981,465 -

Gold/Silver 6,793,759 - - 6,793,759 0% - 110,334,396 -

Investment in Nepalese Government Securities 3,978,900,635 - 3,978,900,635 0% - 2,195,003,685 -

All other Claims on Government of Nepal 165,707,962 - - 165,707,962 0% - 85,992,373 -

Investment in Nepal Rastra Bank securities - - - - 0% - - -

All other claims on Nepal Rastra Bank - - - - 0% - - -

Investment in Foreign Government Securities (ECA Rating 0-1) - - - - 0% - - -

Investment in Foreign Government Securities (ECA Rating -2) - - - - 20% - - -

Investment in Foreign Government Securities (ECA -3) - - - - 50% - - -

Investment in Foreign Government Securities (ECA-4-6) - - - - 100% - - -

Investment in Foreign Government Securities (ECA -7) - - - - 150% - - -

Claims On BIS, IMF, ECB, EC and on Multilateral Development Banks recognized by the framework

- - - - 0% - - -

Claims on Other Multilateral Development Banks - - - - 100% - - -

Claims on Public Sector Entity (ECA 0-1) - - - - 20% - - -

Claims on Public Sector Entity (ECA 2) - - - - 50% - - -

Claims on Public Sector Entity (ECA 3-6) - - - - 100% - - -

Claims on Public Sector Entity (ECA 7) 202,500,000 - - 202,500,000 150% 303,750,000 40,732,938 61,099,407

Claims on domestic banks that meet capital adequacy Requirements

1,083,062,987 - 3,182,000 1,079,880,987 20% 215,976,197 142,731,814 20,136,536

Claims on domestic banks that do not meet capital Adequacy Requirements

20,709,730 - - 20,709,730 100% 20,709,730 11,094,223 11,094,223

Claims on foreign bank (ECA Rating 0-1) 465,908,111 - - 465,908,111 20% 93,181,622 553,343,904 110,668,781

Claims on foreign bank (ECA Rating 2) - - - - 50% - 2,066,649 1,033,324

Claims on foreign bank (ECA Rating 3-6) 304,832,213 - - 304,832,213 100% 304,832,213 15,616,670 15,616,670

Claims on foreign bank (ECA Rating 7) - - - - 150% - - -

Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above their respective regulatory capital requirement

208,527,474 - - 208,527,474 20% 41,705,495 355,871,204 71,174,241

Claims on Domestic Corporates 6,534,407,363 158,112,636 6,376,294,726 100% 6,376,294,726 7,022,170,586 6,953,670,586

Claims on Foreign Corporates (ECA 0-1) - - - - 20% - - -

Claims on Foreign Corporates (ECA 2) - - - - 50% - - -

Claims on Foreign Corporates (ECA 3-6) - - - - 100% - - -

Claims on Foreign Corporates (ECA 7) - - - - 150% - - -

Regulatory Retail Portfolio (Not Overdue) 2,955,022,603 - 21,743,427 2,933,279,176 75% 2,199,959,382 2,140,319,566 1,603,289,675

Claims fulfulling all criterion of regulatory retail except granularity

- - - - 100% - - -

Claims secured by residential properties 1,115,970,458 - 1,115,970,458 60% 669,582,275 2,253,895,138 1,352,337,083

Claims not fully secured by residential properties - - - - 150% - - -

Claims secured by residential properties (Overdue) 5,305,244 1,326,311 - 3,978,933 100% 3,978,933 7,921,468 5,320,879

Claims secured by Commercial real estate 357,436,551 - - 357,436,551 100% 357,436,551 473,047,197 473,047,197

Past due claims (except for claim secured by residential Properties)

87,187,402 67,595,347 - 19,592,055 150% 29,388,083 152,023,166 101,691,137

High Risk claims 1,455,558,181 - 5,333,218 1,450,224,963 150% 2,175,337,444 1,637,382,652 2,417,649,159

Investments in equity and other capital instruments of institutions listed in the stock Exchange

- - - 100% - - -

Investments in equity and other capital instruments of institutions not listed in the stock Exchange

27,791,500 - - 27,791,500 150% 41,687,250 26,591,500 39,887,250

Other Assets (as per attachment) 408,062,028 - - 408,062,028 100% 408,062,028 449,519,361 449,519,361

total 20,503,617,119 68,921,658 188,371,282 20,246,324,179 13,241,881,928 18,983,989,411 13,687,325,508

amount in nPR

81


RiSK weiGhted exPoSuRe foR cRedit RiSK contd...As at 32 Ashad 2067 (16 July 2010)

Schedule 30 (B)

B. off Balance Sheet exposures

current Year Previous Year

Book value (a)

Specific Provision (b)

eligible cRM (c)

net value d=a-b-c

Risk weighted

(e)

Risk weighted exposure f=d*e

Book valueRisk weighted

exposure

Revocable Commitments - - - - 0% - - -

Bills Under Collection 57,579,262 - - 57,579,262 0% - 75,876,655 -

Forward Exchange Contract Liabilities - - - - 10% - - -

LC Commitments With Original Maturity Up to 6 months (Domestic Counterparty)

1,038,366,623 - 70,847,059 967,519,565 20% 193,503,913 1,077,494,666 205,379,939

ECA Rating 0-1 - - - 20% - - -

ECA Rating 2 - - - 50% - - -

ECA Rating 3-6 - - - 100% - - -

ECA Rating 7 - - - - 150% - - -

LC Commitments With Original Maturity Over 6 months (Domestic Counterparty)

21,052,952 - 995,107 20,057,845 50% 10,028,923 265,084,299 129,641,150

ECA Rating 0-1 - - - - 20% - - -

ECA Rating 2 - - - - 50% - - -

ECA Rating 3-6 - - - - 100% - - -

ECA Rating 7 - - - - 150% - - -

Bid Bond and Performance Bond (Domestic Counterparty) 262,113,752 - 33,195,706 228,918,046 50% 114,459,023 243,858,594 106,651,789

ECA Rating 0-1 63,075,000 - - 63,075,000 20% 12,615,000 49,102,500 9,820,500

ECA Rating 2 3,135,500 - - 3,135,500 50% 1,567,750 - -

ECA Rating 3-6 - - - - 100% - 10,234,225 10,234,225

ECA Rating 7 2,325,795 - 117,000 2,208,795 150% 3,313,193 8,140,000 12,210,000

Underwriting commitments - - - - 50% - - -

Lending of Bank's Securities or Posting of Securities as Collateral

- - - - 100% - - -

Repurchase Agreements, Assets sale with recourse (including repo/reverse repo)

- - - - 100% - - -

Advance Payment Guarantee 43,053,332 3,967,300 39,086,032 100% 39,086,032 112,855,805 107,573,005

Financial Guarantee - - - - 100% - - -

Acceptances and Endorsements 84,088,952 - 84,088,952 100% 84,088,952 211,327,133 211,327,133

Unpaid portion of Partly paid shares and Securities 2,375,000 - - 2,375,000 100% 2,375,000 2,375,000 2,375,000

Irrevocable Credit commitments( Short Term) 3,552,267,231 - 3,552,267,231 20% 710,453,446 2,537,834,880 507,566,976

Irrevocable Credit commitments( Long Term) 24,026,249 - 24,026,249 50% 12,013,125 16,595,194 8,297,597

Other Contingent Liabilities 40,965,857 - 40,965,857 100% 40,965,857 23,034,677 23,034,677

Unpaid Guarantee Claims - - - 200% - - -

total 5,194,425,504 - 109,122,171 5,085,303,334 1,224,470,213 4,633,813,627 1,334,111,990

total Rwe for credit Risk (a) +(B) 25,698,042,623 68,921,658 297,493,453 25,331,627,513 14,466,352,141 23,617,803,038 15,021,347,498

Adjustment under Pillar II - - - - - - - -

Add: 10% of loan and facilities in excess of Single Obligor Limits (6.4 a 3)

- - - - - - - -

Add: 1% of the contract (sale) value in case of the sale of credit with recourse (6.4 a 4)

- - - - - - - -

total Rwe for credit Risk (after Bank's adjustments of Pillar ii)

25,698,042,623 68,921,658 297,493,453 25,331,627,513 - 14,466,352,141 23,617,803,038 15,021,347,498

amount in nPR

82


eliGBle cRedit RiSK MitiGantSAs at 32 Ashad 2067 (16 July 2010)

Schedule 30 (C)

credit exposures deposits

with Bank (a)

deposits with other

banks/fi (b)

Gold (c)

Govt.& nRB

Securities (d)

G’tee of Govt. of

nepal (e)

Sec/G’tee of

other Sovereigns

(f )

G’tee of domestic

banks (g)

G’tee of

MdBs (h)

Sec/G’tee of foreign Banks

(i)

total

Balance Sheet exposures

Cash Balance - - - - - - - - - -

Balance With Nepal Rastra Bank - - - - - - - - - -

Gold/Silver - - - - - - - - - -

Investment in Nepalese Government Securities - - - - - - - - - -

All other Claims on Government of Nepal - - - - - - - - - -

Investment in Nepal Rastra Bank securities - - - - - - - - - -

All other claims on Nepal Rastra Bank - - - - - - - - - -

Investment in Foreign Government Securities (ECA Rating 0-1) - - - - - - - - - -

Investment in Foreign Government and Central Bank (ECA-2) - - - - - - - - - -


Investment in Foreign Government and Central Bank (ECA-4-6) - - - - - - - - - -


Claims on Other Multilateral Development Banks - - - - - - - - - -

Claims on Public Sector Entity (ECA 0-1) - - - - - - - - - -

Claims on Public Sector Entity (ECA 2) - - - - - - - - - -

Claims on Public Sector Entity (ECA 3-6) - - - - - - - - - -

Claims on Public Sector Entity (ECA 7) - - - - - - - - - -

Claims on domestic banks that meet capital adequacy requirements

3,182,000 - - - - - - - - 3,182,000

Claims on domestic banks that do not meet capital adequacy requirements

- - - - - - - - - -

Claims on foreign bank (ECA Rating 0-1) - - - - - - - - - -

Claims on foreign bank (ECA Rating 2) - - - - - - - - - -

Claims on foreign bank (ECA Rating 3-6) - - - - - - - - - -

Claims on foreign bank (ECA Rating 7) - - - - - - - - - -

Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above their respective regulatory capital requirement

- - - - - - - - - -

Claims on Domestic Corporates 155,937,636 - - 2,175,000 - - - - - 158,112,636

Claims on Foreign Corporates (ECA 0-1) - - - - - - - - - -

Claims on Foreign Corporates (ECA 2) - - - - - - - - - -

Claims on Foreign Corporates (ECA 3-6) - - - - - - - - - -

Claims on Foreign Corporates (ECA 7) - - - - - - - - - -

Regulatory Retail Portfolio (Not Overdue) 18,791,080 2,240,466 711,882 - - - - - - 21,743,427

Claims fulfilling all criterion of regulatory retail except granularity - - - - - - - - - -

Claims secured by residential properties - - - - - - - - - -

Claims not fully secured by residential properties - - - - - - - - - -

Claims secured by residential properties (Overdue) - - - - - - - - - -

Claims secured by Commercial real estate - - - - - - - - - -

Past due claims (except for claim secured by Residential Properties)

- - - - - - - - - -

High Risk claims 5,333,218 - - - - - - - - 5,333,218

Investments in equity and other capital instruments of institutions not listed in the stock exchange

- - - - - - - - - -

Investment in Equipment - - - - - - - - - -

Investments in equity and other capital instruments of institutions listed in the stock exchange

- - - - - - - - - -

Other Assets (as per attachment) - - - - - - - - - -

total 183,243,934 2,240,466 711,882 2,175,000 - - - - - 188,371,282

amount in nPR

83


eliGBle cRedit RiSK MitiGantS contd...As at 32 Ashad 2067 (16 July 2010)

Schedule 30 (C)

credit exposures deposits

with Bank (a)

deposits with other

banks/fi (b)

Gold (c)

Govt.& nRB

Securities (d)

G’tee of Govt. of

nepal (e)

Sec/G’tee of

other Sovereigns

(f )

G’tee of domestic

banks (g)

G’tee of

MdBs (h)

Sec/G’tee of foreign Banks

(i)

total

off Balance Sheet exposures

Revocable Commitments - - - - - - - - - -

Bills Under Collection - - - - - - - - - -

Forward Exchange Contract Liabilities - - - - - - - - - -

LC Commitments With Original Maturity Up to 6 months (domestic counterparty)

70,623,959 - - 223,100 - - - - - 70,847,059

Foreign Counterparty (ECA Rating 0-1) - - - - - - - - -

Foreign Counterparty (ECA Rating 2) - - - - - - - - -

Foreign Counterparty (ECA Rating 3-6) - - - - - - - - - -

Foreign Counterparty (ECA Rating 7) -

LC Commitments With Original Maturity Over 6 months (domestic counterparty)

995,107 - - - - - - - - 995,107


Foreign Counterparty (ECA Rating 2) - - - - - - - - - -

Foreign Counterparty ECA Rating 3-6 - - - - - - - - - -


Bid Bond and Performance Bond (domestic) 32,919,706 - - 276,000 - - - - - 33,195,706




Foreign Counterparty (ECA Rating 7) 117,000 - - - - - - - - 117,000

Underwriting commitments - - - - - - - - - -

Lending of Bank's Securities or Posting of Securities as collateral

- - - - - - - - - -

Repurchase Agreements, Assets sale with recourse - - - - - - - - - -

Advance Payment Guarantee 3,643,700 - - 323,600 - - - - - 3,967,300

Financial Guarantee - - - - - - - - - -

Acceptances and Endorsements - - - - - - - - - -

Unpaid portion of Partly paid shares and Securities - - - - - - - - - -

Irrevocable Credit commitments - - - - - - - - - -

Other Contingent Liabilities - - - - - - - - - -

total 108,299,471 - - 822,700 - - - - - 109,122,171

Grand total 291,543,405 2,240,466 711,882 2,997,700 - - - - - 297,493,453

amount in nPR

84


oPeRationS RiSKAs at 32 Ashad 2067 (16 July 2010)

MaRKet RiSKAs at 32 Ashad 2067 (16 July 2010)

Schedule 30 (D)

Schedule 30 (E)

Particulars 65/66 64/65 63/64

Net Interest Income 516,323,895 425,404,683 304,444,089

Commission and Discount Income 61,895,316 43,373,395 36,017,034

Other Operating Income 44,028,178 48,554,195 26,583,726

Exchange Fluctuation Income 97,673,440 39,657,785 44,276,889

Additional Interest Suspense during the period 3,467,391 - 10,627,060

Gross income (a) 723,388,220 556,990,058 421,948,798

alfa (b) 15% 15% 15%

fixed Percentage of Gross income [c=(a×b)] 108,508,233 83,548,509 63,292,320

capital Requirement for operational risk (d) (average of c) 85,116,354 - -

Risk weight (reciprocal of capital requirement of 10%) in times (e) 10 - -

equivalent Risk weight exposure [f=(d×e)] 851,163,538 - -

Pillar ii adjustments - - -

If Gross Income for all the last three years is negative (6.4 a 8) - - -

Total Credit and Investment (net of Specific Provision) - - -

Capital Requirement for operational risk (5%) - - -

Risk Weight (reciprocal of capital requirement of 10%) in times - - -

Equivalent Risk Weight Exposure [g] - - -

equivalent Risk weigh exposure [h=f+g)] 851,163,538 - -

S.no. currency open Position (fcY) exchange Rate open Position (nPR) Relevant open Position

1 INR 83,633,788 1.60 133,876,786 133,876,786

2 USD 455,724 74.70 34,042,557 34,042,557

3 GBP (14,809) 114.97 (1,702,593) 1,702,593

4 AUD 13,720 65.59 899,830 899,830

5 DKK 300 12.74 3,822 3,822

6 SGD 518 53.80 27,868 27,868

7 EURO (2,150) 96.40 (207,285) 207,285

8 XAG 80,000 45.50 3,640,000 3,640,000

9 UAE 80 19.99 1,599 1,599

10 SRL 2,670 19.58 52,279 52,279

11 HKD 210 9.51 1,997 1,997

12 CNY 300 10.96 3,288 3,288

13 THB (900) 2.11 (1,899) 1,899

14 JPY 1,280,926 0.86 1,100,315 1,100,315

total open Position (a) 175,562,120

fixed Percentage (b) 5

capital charge for Market Risk [c=(a×b)] 8,778,106

Risk weight (reciprocal of capital requirement of 10%) in times (d) 10

equivalent Risk weight exposure [e=(c×d)] 87,781,060

amount in nPR

amount in nPR

85


net liquid aSSetS to total dePoSit RatioAs at 32 Ashad 2067 (16 July 2010)

Schedule 30 (F)

Particulars amount Rs.

total deposit and Borrowing (a) 17,892,167,926

Total Deposit (as per NRB Ni.Fa. 9.1) 15,968,917,926

Total Borrowings (as per NRB Ni. Fa. 9.1) 1,923,250,000

liquid assets (B) 6,506,480,744

Cash (9.1) 530,610,696

Bank Balance (9.1) 1,555,519,413

Money at call and short notice (9.1) 100,000,000

Investment in government Securities (9.1) 3,978,900,635

Placement upto 90 days 341,450,000

Borrowings payable upto 90 days ( c ) 500,000,000

net liquid assets (d) = (B-c) 6,006,480,744

net liquid assets to total deposit 37.61

Shortfall in Ratio -

amount to be added to Risk weighted exposures -

amount in nPR

86


foRM no. 4 exhiBit of claiMS with cRedit RiSK MitiGantSAs at 32 Ashad 2067 (16 July 2010)

S.n. counterparty category facility outstanding nature

eligible cRM

Gross amount

haircut net

amount

1 Metropolis College Claims on Domestic Corporates Overdraft 496,847 Deposits With Bank 496,847 - 496,847

2 Harish Kumar Poddhar Claims on Domestic Corporates Overdraft 7,600 Deposits With Bank 7,600 - 7,600

3 Hulas Wires Ind. Ltd Claims on Domestic Corporates Overdraft 49,982,207 Deposits With Bank 49,982,207 - 49,982,207

4 Raj Kumar Golchha Claims on Domestic Corporates Overdraft 4,166,305 Deposits With Bank 4,166,305 - 4,166,305

5 Anita Devi Chaudhary Claims on Domestic Corporates Overdraft 49,966 Deposits With Bank 49,966 - 49,966

6 Hem Trading Claims on Domestic Corporates Overdraft 7,022,252 Deposits With Bank 7,022,252 - 7,022,252

7 Laxmi K. Poudel Chhetri High Risk Claims Loan against FD 50,000 Deposits With Bank 50,000 - 50,000

8 Manik Raj Bhusal High Risk Claims Loan against FD 225,000 Deposits With Bank 225,000 - 225,000

9 Shobhakhar Kandel High Risk Claims Loan against FD 180,000 Deposits With Bank 180,000 - 180,000

10 Rekha Sunar High Risk Claims Loan against FD 300,000 Deposits With Bank 300,000 - 300,000

11 Nirmal Kr Agrawal High Risk Claims Overdraft 3,690,640 Deposits With Bank 3,690,640 - 3,690,640

12 Mahabir Churi Bhandar High Risk Claims Overdraft 51,473 Deposits With Bank 51,473 - 51,473

13 Pravin/Satya Narayan Agrawal High Risk Claims Overdraft 476,246 Deposits With Bank 476,246 - 476,246

14 Moti Lal Tamang High Risk Claims Overdraft 359,859 Deposits With Bank 359,859 - 359,859

15 Lal Prasad Shrestha Claim on domestic banks that meet capital adequacy requirement Loan against FD 1,700,000 Deposits With Bank 1,700,000 - 1,700,000

16 Bed Bdr Gharti Claim on domestic banks that meet capital adequacy requirement Loan against FD 400,000 Deposits With Bank 400,000 - 400,000

17 Tejendra Prasad Sapkota Claim on domestic banks that meet capital adequacy requirement Loan against FD 1,082,000 Deposits With Bank 1,082,000 - 1,082,000

18Ashwins Medical College & Hospital

Claims on Domestic Corporates Overdraft 90,869,184 Deposits With Bank 90,869,184 - 90,869,184

19 Krishna Man Joshi Claims on Regulatory Retail Portfolio Auto Loan 1,430,725 Deposits With Bank 1,430,725 - 1,430,725

20 Bhudeo Trading P. Ltd. Claims on Domestic Corporates Overdraft 2,803,634 Deposits With Bank 2,803,634 - 2,803,634

21 Maha Prasad Adhikari Claims on Regulatory Retail Portfolio Overdraft 1,348,554 Deposits With Bank 1,348,554 - 1,348,554

22 Mahesh Ram Bhandary Claims on Regulatory Retail Portfolio Overdraft 1,188,116 Deposits With Bank 1,188,116 - 1,188,116

23 Raju Karki Claims on Regulatory Retail Portfolio Overdraft 936,377 Deposits With Bank 936,377 - 936,377

24 Durga Polythine & Plastic Claims on Domestic Corporates Fixed Term Loan 539,642 Deposits With Bank 539,642 - 539,642

25 Sangita Satyal Claims on Regulatory Retail Portfolio Overdraft 81,413 Deposits With Bank 81,413 - 81,413

26 Dilip Kumar Shrestha Claims on Regulatory Retail Portfolio Overdraft 359,809 Deposits With Bank 359,809 - 359,809

27 Sabita Aryal Claims on Regulatory Retail Portfolio Overdraft 249,792 Deposits With Bank 249,792 - 249,792

28 Durga Bhandary Claims on Regulatory Retail Portfolio Overdraft 261,157 Deposits With Bank 261,157 - 261,157

29 Bhisma Raj Dhungana Claims on Regulatory Retail Portfolio Overdraft 259,353 Deposits With Bank 259,353 - 259,353

30 Amrit Ratna Tuladhar Claims on Regulatory Retail Portfolio Overdraft 159,920 Deposits With Bank 159,920 - 159,920

31 Vikash Saraf Claims on Regulatory Retail Portfolio Overdraft 165,146 Deposits With Bank 165,146 - 165,146

32 Hari Prasad Dhungana Claims on Regulatory Retail Portfolio Overdraft 139,161 Deposits With Bank 139,161 - 139,161

33 Cheerful Holiday Pvt. Ltd Claims on Regulatory Retail Portfolio Overdraft 699,202 Deposits With Bank 699,202 - 699,202

34 Kanta Singh Claims on Regulatory Retail Portfolio Overdraft 1,727,872 Deposits With Bank 1,727,872 - 1,727,872

35 Sanju Upadhyay Claims on Regulatory Retail Portfolio Overdraft 363,530 Deposits With Bank 363,530 - 363,530

36 Maheshwor Lal Shrestha Claims on Regulatory Retail Portfolio Overdraft 49,630 Deposits With Bank 49,630 - 49,630

37 Antu Hill Travels (P). Ltd. Claims on Regulatory Retail Portfolio Overdraft 3,812 Deposits With Bank 3,812 - 3,812

38 Akendra Raj Chalise Claims on Regulatory Retail Portfolio Overdraft 367,651 Deposits With Bank 367,651 - 367,651

39 Biddhya Laxmi Kasaju Claims on Regulatory Retail Portfolio Overdraft 8,999,858 Deposits With Bank 8,999,858 - 8,999,858

183,243,933 total of deposit with own Bank

183,243,933 - 183,243,933

1 Multiple Trading Concern Claims on Regulatory Retail Portfolio Overdraft 2,800,582 Deposit with other BFIs 2,800,582 560,116 2,240,466

2,800,582 deposits with other Banks/fi

2,800,582 560,116 2,240,466

1 Nepal Co-Oper.Fin.Soc.Ltd Claims on Domestic Corporates Overdraft 2,175,000 Other Claims on Nepal Rastra Bank

2,175,000 - 2,175,000

2,175,000 total claims on nRB 2,175,000 - 2,175,000

1 Rajib Bhattarai Claims on Regulatory Retail Portfolio Overdraft 68,088 Gold/Silver 68,088 - 68,088

2 Amit Agrawal Claims on Regulatory Retail Portfolio Overdraft 307,000 Gold/Silver 307,000 - 307,000

3 Bimal Dhakal Claims on Regulatory Retail Portfolio 251,277 Gold/Silver 251,277 - 251,277

4 Shiva Ohm Shrestha Claims on Regulatory Retail Portfolio 85,517 Gold/Silver 85,517 - 85,517

711,882 total of Gold/Silver 711,882 - 711,882

Grand total 188,931,398 188,931,398 560,116 188,371,282

amount in nPR

87


foRM no.5 otheR aSSetSAs at 32 Ashad 2067 (16 July 2010)

Summary of categorydeposits with

Bank Gold/Silver

deposits with other Banks/fi

claims on nRB total

High Risk Claims 5,333,218 - - - 5,333,218

Claims on Domestic Corporates 155,937,636 - - 2,175,000 158,112,636

Claim on domestic banks that meet capital adequacy requirement 3,182,000 - - - 3,182,000

Claims on Regulatory Retail Portfolio 18,791,080 711,882 2,240,466 - 21,743,427

total 183,243,934 711,882 2,240,466 2,175,000 188,371,282

amount in nPR

S. no. assets Gross amount Specific Provision net Balance

1 Cash and Cash Items in Transit - - -

2 Expense not Written off 9,919,653 - 9,919,653

3 Fixed Assets 297,191,956 - 297,191,956

4 Interest Receivable on Other Investment 9,337,221 - 9,337,221

5 Interest Receivable on Loan 27,459,592 27,459,592 -

6 Non Banking Assets 1,431,000 1,431,000 -

7 Reconciliation Account 444 - 444

8 Draft Paid Without Notice - - -

9 Sundry Debtors 10,880,088 - 10,880,088

10 Advance payment and Deposits 32,971,758 - 32,971,758

11 Staff Advance 42,431,252 - 42,431,252

12 Stationery 5,329,655 - 5,329,655

13 Other - - -

total 436,952,620 28,890,592 408,062,028

88


PRinciPal indicatoRSAs at 32 Ashad 2067 (16 July 2010)

Schedule 31

description indicatorsfY

2005/06fY

2006/07fY

2007/08fY

2008/09fY

2009/10

1. Net Profit/Gross Income Percent 30.68 38.57 44.49 44.09 46.76

2. Earnings Per Share NPR 16.10 24.01 25.75 27.83 34.30

3. Market Value Per Share NPR 496 950 1,284 1,126 626

4. Price Earning Ratio Ratio 30.81 39.56 49.86 40.46 18.25

5. Dividend (including bonus) on Share Capital Percent 10.53 21.05 21.05 15.79 26.32

6. Cash Dividend on Share Capital Percent 0.53 1.05 1.05 0.79 26.32

7. Interest Income/Loans and Advances & Investment Percent 8.04 7.81 8.31 8.46 10.65

8. Staff Expenses/Total Operating Expenses Percent 44.23 45.94 47.02 43.51 46.32

9. Interest Expenses/Total Deposits and Borrowings Percent 4.38 4.26 4.32 5.63 6.90

10. Exchange Gain/Total Income Percent 3.88 5.32 3.77 6.56 4.53

11. Total Cost/Total Revenue Percent 32.67 29.09 28.06 26.99 26.67

12. Staff Bonus/Total Staff Expenses Percent 30.20 42.04 49.28 53.77 54.24

13. Staff Cost Per Employee NPR 274,061 290,584 310,662 313,129 363,480

14. Net Profit Per Employee NPR 581,853 838,492 1,047,664 1,175,682 1,375,669

15. Total Credit/Deposits Percent 78.54 90.67 87.62 89.32 80.97

16. Total Operating Expenses/Total Assets Percent 0.99 1.02 1.01 1.04 1.26

17. Capital Adequacy (On Risk Weighted Assets)

Core Capital Percent 9.94 9.21 10.50 10.48 11.25

Supplementary Capital Percent 3.60 3.00 2.61 1.94 1.67

Total Capital Fund Percent 13.54 12.20 13.11 12.42 12.92

18. Liquidity (CRR) Percent 6.10 5.02 5.09 6.50 37.61

19. Gross Non-Performing Credit/Total Credit Ratio 2.60 1.11 0.86 0.93 0.72

20. Net Non-Performing Credit/Total Credit Ratio 0.06 0.06 0.11 0.23 0.18

21. Weighted Average Interest Rate Spread Percent 2.74 2.87 3.44 2.83 3.75

22. Return on Total Assets Percent 1.05 1.44 1.81 1.88 2.30

23. Return on Equity Percent 14.12 20.68 22.57 24.23 27.09

24. Book Net Worth NPR’000 766,462 918,496 1,303,427 1,660,254 1,764,952

25. Number of Shares Nos. 6,600,000 6,600,000 9,438,771 11,404,800 13,115,520

26. Number of Staff Nos. 166 189 232 270 327

89


Schedule 32

1. General informationNepal Industrial & Commercial Bank Ltd (NIC Bank) is a limited liability company domiciled in Nepal. Its registered office is at Biratnagar, Nepal and has a corporate office at Kathmandu, Nepal. Shares of the Bank are listed with Nepal Stock Exchange Ltd. and provide full commercial banking services as authorized by Nepal Rastra Bank (NRB). The accompanied financial statements have been approved for publication by the Board of Directors of the Bank in its meeting held on 3rd October 2010.

2. Basis of Preparation The financial statements are presented in Nepalese rupees (NPR) and are prepared on historical cost convention applying accrual basis of accounting except otherwise stated and prepared in accordance with the Nepal Accounting Standards (NAS), Generally Accepted Accounting Principles (GAAP), Banks & Financial Institutions Act (BAFIA) 2063, Nepal Rastra Bank (NRB) directives and the Company Act 2063.

3. interest incomeInterest income on loans and advances are recognized on cash basis as required by NRB Directive. However NAS requires revenue to be recognized on accrual basis. Interest income on investments is accounted for on accrual basis.

4. commission income Commission income is accounted for on cash basis. However, commission receivable on Letters of Credit and Guarantees exceeding NPR 50,000 with a maturity period exceeding one year from the date of transaction is accounted for on accrual basis and prorated over the tenure of the transaction.

5. dividend incomeDividend on equity shares are recognized on cash basis, at net of withholding taxes.

6. foreign exchange transactionsForeign currency assets and liabilities, including bullion, are translated into NPR at the mid-rate prevailing on the Balance Sheet date.

Gain or loss realized on the foreign exchange transactions, including bullion, is recognized on the date of transaction and included under Exchange Gain/ (Loss) as the case may be as Trading Gain/(Loss).

Gains/losses arising due to fluctuation in exchange rates of different foreign currencies including bullion is accounted for on a daily basis and shown as Revaluation Gain/(Loss). 25% of such revaluation gain is transferred to Exchange Fluctuation Reserve through Profit and Loss Appropriation Account as per NRB directives.

7. interest expenseInterest on deposit liabilities and borrowings from other banks are accounted for on accrual basis.

SiGnificant accountinG PolicieS

8. loans and advances including Bills PurchasedLoans and advances, overdrafts and bills purchased include overdrafts, term loans, working capital loans, consumer loans and loans given to Priority and Deprived Sectors and other loans extended to customers as per the Bank’s policy. These assets are graded as pass, substandard, doubtful and loss assets as per NRB directives. Loans and advances are presented net of loan loss provisions.

9. loan write offThe Bank has “Management of Deteriorating Credits and Write off Policy” approved by the Board of Directors, to provide a framework for efficient management of deteriorating credits as well as Non- Performing Assets which also provides a transparent and effective write-off policy. Specific loans that meet the criteria stipulated in the policy are written off without prejudice to Bank’s right of recovery.

10. Staff loansLoans and advances granted to staff in accordance with the Bank’s policy are presented under Other Assets. 11. loan loss ProvisionThe provision for possible losses on loans and advances are provided at the rates ranging from 1% to 100% of the outstanding on the balance sheet date according to the grading of such assets as per NRB directives.

12. investmentsInvestments in Treasury Bills and Government Development Bonds are those, which the Bank purchased with the positive intent and ability to hold till maturity. Such securities are carried at their acquisition cost or at amortized cost if acquired at a premium over the face value. Investments in shares are valued at the lower of cost or market value.

All investments are subject to periodic review by the Board of Directors of the Bank as required by NRB directives.

13. fixed assets and depreciation a. Fixed assets are stated at cost less accumulated depreciation. b. Assets with a value of less than NPR 5,000 are charged off to

revenue irrespective of their useful life in the year of purchase. c. Depreciation is charged to Profit & Loss Account on Written-

down-Value method over the estimated useful life of the relevant assets. The rates of depreciation based on the estimated useful life are as follows:

nature of assets depreciation Rate (%)

Buildings 5

Vehicles 15-20

Office Equipment 25

Computers and Accessories 25

Furniture 25

90


d. Depreciation is charged from the month subsequent to the month when assets were accounted for. In case of disposal depreciation is charged up to the previous month of such disposal.

14. non-Banking assetsNon-Banking Assets (NBA) is valued at the lower of principal outstanding or distress value of the assets acquired. Provisions for NBA are made in accordance with NRB directives

15. Software expensesSoftware applications purchased by the Bank are capitalized at acquisition cost and amortized over a period of five years from the date of acquisition.

16. leasehold improvementExpenses incurred on improvement and renovation of leased property is amortized over a period of five years from the date of such improvements irrespective of the life of lease exceeding 5 years.

17. Retirement BenefitsThe Bank has schemes of retirement benefits, viz Provident Fund and Gratuity. Periodic contributions made to Provident Fund are recognized at the time of contribution to the approved fund. Provision for Gratuity is made on accrual basis and is transferred to the approved retirement fund, independent from the Bank, for eligible employees.

18. Staff accumulated leave Accumulated leave payable to staff is recognized on accrual basis as per the service rules of the Bank.

19. Stationery StockStationery purchased are stated at cost and charged to revenue at the time of consumption.

20. income taxesProvision for taxation has been made with reference to taxable profit for the financial year determined in accordance with the provisions of Income Tax Act 2058.

Deferred Tax is recognized and provided for on timing differences between taxable income and accounting income. Deferred tax assets are not recognized unless there is virtual/reasonable certainty that there will be sufficient future taxable income available to realize such assets.

21. dividend and Proposed Bonus SharesDividend is provided as proposed by the Board of Directors pending approval by NRB and Annual General Meeting.

91


1. Proposed dividendThe Board of Directors has proposed distribution of cash dividend of 26.31579% (including tax) of issued capital.

2. Provisions for Staff BonusProvision for staff bonus has been provided at 10% of profit before tax as per the Bonus Act, 2030.

3. Staff housing fundAs the terms of service of the staff has a provision for extending housing loans to eligible staff, a separate housing fund has not been created under the Labour Act 2049.

4. General ReserveAs required by BAFIA, 2063, 20% of the current year’s net profit amounting to NPR 89,968,740 has been transferred to General Reserve through Profit and Loss Appropriation Account.

5. exchange fluctuation ReserveAs required by NRB directive, 25% of Revaluation Gain amounting to NPR 3,012,954 has been transferred to Exchange Fluctuation Reserve through Profit and Loss Appropriation Account.

6. Paid up Share capital Paid up share capital of the Bank has moved over the years as follows:

financial Year cumulative no. of Shares Remarks

1999/00 4,930,441 Opening Share Capital at Rs 100 Paid Up

2000/01 4,997,295 Due Share Amount Collection





2005/06 6,000,000 Issuance of 20% Bonus Shares of F/Y 2004/05


2007/087,920,000 Issuance of 20% Bonus Shares of F/Y 2006/07

9,438,771 Issuance of 20% Right Share of F/Y 2006/07

2008/099,504,000 Sale of unsubscribed portion of Right Share issued of FY 2006/07

11,404,800 Issuance of 20% Bonus Shares of F/Y 2007/08


7. deferred taxa. component of deferred tax Amount in NPR

as atashad 31, 2067

as atashad 31, 2066

deferred tax asset

On employee’s separation and retirement 3,730,505 3,142,618

On fiscal allowance on fixed assets - 627,841

total 3,730,505 3,770,459

deferred tax liability

On fiscal allowance on fixed assets 437,402 -

On other temporary differences 518,085 670,418

total 955,487 670,418

deferred tax assets – net 2,775,018 3,100,041

noteS to accountSSchedule 33

92


Deferred tax asset for the current year has decreased by NPR 325,023 over the previous year and the same has been adjusted to profit and loss account.

b. explanation of the relationship between tax expense and accounting profit

Amount in NPR

current Year (2066-67) Previous Year (2065-66)

Accounting Profit 644,654,266 454,637,989

Tax at the applicable rate of 30% 193,396,280 136,391,397

Tax effect of expenses/income that are not deductible/included in determining taxable profit

Fine and Penalties - 8,522

Donation 695,361 563,259

Dividend Income 756,930 -

Others - 105,384

Reduction in Deferred Tax Asset due to reduction in tax rate - 112,417

Movement in Other Timing difference (38,007) (10,076)

Additional income tax of earlier year - 32,948

total tax expenses 194,810,564 137,203,851

8. Related Parties disclosuresa. Key Management PersonnelKey Management Personnel include Chief Executive Officer and members of the Board of Directors of the Bank as follows:

Mr. Jagdish Prasad Agrawal - ChairmanMr. Tulsi Ram Agrawal - DirectorMr. Birendra Kumar Sanghai - DirectorMr. Nirmal Kumar Agrawal - DirectorMr. Rajendra Aryal - DirectorMr. Lokmanya Golchha - DirectorMr. Ganesh Man Shrestha - Professional Director (w.e.f. 01.11.2009)Mr. Sashin Joshi - Chief Executive OfficerMr. Niraj Shrestha - Company Secretary and General Manager Business Banking

• Compensation to Key Management Personnel of the BankShort-term employee benefit paid to the Chief Executive Officer NPR 8,450,640 (Previous Year NPR 7,914,259).

In addition to the above, a company vehicle, phone, bonus, and other facilities have been provided to the Chief Executive Officer in terms of his appointment and Bank rules and regulations.

• Transaction with Key Management Personnel of the BankThe following provides transaction between the Bank and Key Management Personnel of the Bank during the year and the status of their out-standing balances as on 32 Ashad 2067 ( July 16, 2010). Amount in NPR

Particulars current Year (2009-10) Previous Year (2008-09)

Meeting Fees Paid 914,000 702,300

Incidental Expenses 1,782,076 1,303,779

Loans & Advances Outstanding

From Directors* 3,690,640 3,966,525

From Promoters* 59,808,092 66,875,395Note: - Loans are against Bank’s Fixed Deposits.

Other than the above, there are no transactions with Directors, Promoters and other key management personnel or their relatives that have a potential conflict of interests with the Bank at large.

93


9. income tax Matters The bank has filed tax returns with the Large Tax Payers’ Office, Inland Revenue Department for the financial years up to 2008/09 under self-assessment procedures.

Inland Revenue Office has completed assessment/reassessment of Bank’s tax liability up to financial year 2005/06 wherein an additional demand of NPR 12,442,997.55 has been raised by the tax authorities. The Bank has disputed the claim of the tax authorities against which, Bank has filed appeals with the respective authorities. Matter is still pending with the authorities.

10. contingent liabilityA claim of NPR 8,943,000 made against the Bank in 2003/2004 in respect of underwriting commitment of shares of Himalayan Distillery Limited, has not been accepted by the Bank. The Bank has contested the claim in a writ petition with the Supreme Court. The case is in under sub-judice.

11. transactions in BullionThe bank deals in bullion (Gold/Silver) either on its own account or holds stock on consignment basis on behalf of suppliers as per the arrange-ment. The stock held on own account are included under other assets. The customs duty allocable to the consignment stock is included under other assets.

12. Summary of disbursement, recovery of loans and advances and principal and interest written off Amount in ‘000 NPR

Particulars current Year (2009-10) Previous Year (2008-09)

Loans Disbursed 33,708,291 33,208,108

Loans Recovered 34,694,838 30,757,594

Loans Written Off 56,204 3,000

Interest Written Off - 1,376

13. Summary of changes in deposit liabilities Amount in NPR


2009-10Previous Year

2008-09changes

Current and Margin Accounts 1,341,414,710 936,879,630 404,535,080

Savings Account 3,732,556,185 3,993,715,640 (261,159,455)

Call Deposits 3,340,887,196 3,069,275,870 271,611,326

Fixed Deposits 7,554,059,836 7,580,059,764 (25,999,928)

total 15,968,917,927 15,579,930,904 388,987,023

14. Summary of concentration of exposure: Amount in ‘000 NPR

loans & advances and Bills deposits & Borrowings contingent

current Year Previous Year current Year Previous Year current Year Previous Year

Total Amount Outstanding 12,929,304 13,915,850 17,692,168 16,240,336 5,187,144 4,633,814

Highest Exposure to a Single Unit 254,075 274,400 1,448,294 2,024,136 504,929 643,118

Concentration of exposure 3.91% 2.49% 8.19% 12.46% 0.41% 5.72%

15. weighted average interest Spread:

Particulars current YearRate (%)

Previous YearRate (%)

Average Yield on Advances and Investments 10.65 8.46

Average cost of Deposits & Borrowings 6.90 5.63

Net Spread 3.75 2.83

94


16. Particulars of amortized expenses yet to be expensed off Amount in NPR

Particulars opening addition amortization/adjustment closing

Software 6,599,965 3,698,006 2,500,169 7,797,802

VISA Membership Fee 1,690,741 - 368,889 1,321,852

Leasehold Assets 30,339,493 12,043,709 8,782,457 33,600,745

License Fees 1,300,000 - 500,000 800,000

Bond Related Cost 293,942 - 132,038 161,904

Right Share Related Cost 543,988 - 138,890 405,098

17. classification of assets and liabilities based on Maturity NPR in Million

S.no. assets 1-90 days 91-180 days 181-270 days271 days -1 year

over 1 year total

1 Cash Balance 531 - - - - 531

2 Bank Balance 1,244 - - - 311 1,556

3 Investment in Foreign Banks 261 2 - 6 441 710

4 Call Money 100 - - - - 100

5 Investment In GON Securities 829 1,001 171 893 1,086 3,979

6 Investment in NRB Bonds - - - - - -

7 Inter-Bank Lending 80 - 150 - - 330

8 Advance & Bill Purchase 1,672 1,053 1,834 4,942 3,429 12,929

9 Accrued Interest Receivable 27 - - - - 27

10 Reverse Repo - - - - - -

11 Receivable Under Commitments - - - - - -

12 Paid For Services under s.n. 22,23,24 - - - - - -

13 Others 137 - - - 335 473

total assets 4,881 2,056 2,155 5,840 5,602 20,535

liability

14 Current Deposits 244 122 122 122 610 1,220

15 Margin Deposits 61 24 24 12 - 122

16 Call Deposits 674 337 337 337 1,685 3,371

17 Saving Deposits 1,306 - - - 2,426 3,733

18 Fixed Deposits 1,185 2,200 864 1,773 1,502 7,524

19 Debentures - - - - 200 200

20 Borrowings - - - - - -

a) Call/Short notice - - - - - -

b) Inter-Bank/Financial Institutions 500 436 - - - 936

c) Refinance - 787 - - - 787

d) Others - - - - - -

21 Other Liabilities and Provisions - - - - - -

Sundry Creditors 65 - - - - 65

Bills Payable 18 - - - - 18

Interest Payable 100 - - - - 100

Provisions 295 - - - - 295

Others 51 - - - - 51

22 Payable Under Commitments - - - - - -

23 Unutilized Facilities 3,552 - - - 24 3,576

95


24 Letter of Credit 966 72 21 - - 1,059

25 Repurchase - - - - - -

26 Paid Under s.n. 11 - - - - - -

27 Others - - - - 2,113 2,113

total liabilities 9,018 3,979 1,369 2,244 8,560 25,171

net financial assets (4,137) (1,924) 787 3,596 (2,958) (4,636)

cumulative net financial assets (4,137) (6,061) (5,274) (1,678) (4,636) -

18. Borrowing by Bank against the collateral of own assets: nil

19. details of non Banking assets

Particular amount in nPR

opening Balance as on 16.07.2009 1,431,000

Addition During This Year -

Sales During This Year -

outstanding as on 16.07.2010 1,431,000

20. Rounding off/Previous Years figures

Previous years figures are regrouped or rearranged, wherever necessary in order to facilitate comparison. All figures are rounded off to the nearest rupee.

96


StateMent of loanS availed BY PRoMoteRS/ ShaReholdeRS claSSified undeR PRoMoteR’S GRouP fRoM otheR BanKS and financial inStitutionS BY PledGinG ShaReS

undeR theiR owneRShiP

Schedule 34

S. n.

Promoters/ Shareholders

classified under Promoters Group

Shares Registered in the name of Promoters

Statement of loans

Remarkstotal no of.

Shares

% on total paid up capital

name of Banks / financial institutions Providing loans

loan amount (Present o/S)

no. of Shares Pledged

1 Vishal Agrawal 6,23,537 4.75%

Global Bank Ltd 45,879,707 50,000

Nepal Investment Bank 22,464,147 1,57,368

Clean Energy Development Bank Ltd. 39,966,752 1,10,000

2 Basu Dev Golyan 6,43,672 4.91% 34,852,353 97,103

3 Basu Dev Golyan 6,43,672 4.91%Himalayan Bank Ltd. 64,371,728

115,874

4 Pawan Kumar Golyan 6,55,775 5.00% 203,769

5Subhash Chandra Sanghai

13,12,931 10.01% Himalayan Bank Ltd. 148,320,000 649,339

6 Ashok Kumar Agrawal 5,55,713 4.23% Himalayan Bank Ltd. 109,300,000 341,154

7 Anuj Kumar Agrawal 4,75,470 3.63% Himalayan Bank Ltd. 32,140,000 181,406

8 Basu Dev Golyan 6,43,672 4.91%Nepal Bank Ltd. 117,500,000

292,058

9 Pawan Kumar Golyan 6,55,775 5.00% 214,762

10 Pawan Kumar Golyan 6,55,775 5.00% Prime Commercial Bank Ltd. 119,420,755 96,000

11 Jay Shree Golchha 36,568 0.28%Prime Commercial Bank Ltd. 51,115,967

5,300

12 Diwakar Golchha 7,16,896 5.47% 1,74,871

13 Jay Shree Golchha 36,568 0.28%Vibor Bikash Bank Ltd. 47,860,861

2,132

14 Sanjay Golchha 24,012 0.18% 14,000

15Trilok Chandra Agrawal

6,22,423 4.75% Nepal Bank Ltd. 87,800,000 58,632

16Trilok Chandra Agrawal

6,22,423 4.75% NCC Bank Ltd. 98,786,832 2,89,030

17 Lokmanya Golchha 7,16,906 5.47% NCC Bank Ltd. 99,993,855 2,13,397

18 Diwakar Golchha 7,16,896 5.47% NCC Bank Ltd. 15,000,000 81,520

97


unaudited financial ReSultS (quaRteRlY)As at 4th Quarter ended on 32 Ashad 2067 (16 July 2010) of Fiscal Year 2066/2067 (2009/2010)

Schedule 35

S. n. Particularsthis quarter ended

16.07.2010Previous quarter ended

13.04.2010

corresponding Previous Year quarter ended

15.07.2009

1 total capital and liabilities (1.1 to 1.7) 20,309,420 17,985,814 18,750,828

1.1 Paid Up Capital 1,311,552 1,311,552 1,140,480

1.2 Reserves and Surplus 801,417 667,399 527,990

1.3 Debentures and Bonds 200,000 200,000 200,000

1.4 Borrowings 1,723,250 1,470,625 660,405

1.5 Deposits (a+b) 15,968,918 13,843,915 15,579,931

a. Domestic Currency 15,485,318 13,381,211 14,880,667

b. Foreign Currency 483,600 462,704 699,264

1.6 Income Tax Liability 31,732 26,670 13,171

1.7 Other Liabilities 272,551 465,654 628,851

2 total assets (2.1 to 2.7) 20,309,420 17,985,814 18,750,828

2.1 Cash and Bank Balance 2,086,232 1,489,182 1,461,151

2.2 Money at Call and Short Notice 100,000 50,000 -

2.3 Investments 4,946,839 2,038,611 3,026,492

2.4 Loans and Advances 12,732,014 13,947,251 13,679,394

a. Real Estate Loan 1,470,317 1,614,184 1,496,681

b. Home/Housing Loan 1,025,626 1,047,147 1,084,024

c. Margin Type Loan 648,227 788,396 812,013

d. Term Loan 1,011,576 890,916 755,627

e. Overdraft Loan/TR Loan/WC Loan 4,516,395 5,167,412 5,352,041

f. Others 4,059,874 4,439,195 4,179,007

2.5 Fixed Assets 297,257 257,758 259,325

2.6 Non Banking Assets - - 703

2.7 Other Assets 147,078 203,012 323,763

3 Profit and loss account up to this quarter up to Previous quarter up to corresponding Previous Year quarter

3.1 Interest Income 1,777,227 1,255,231 1,284,115

3.2 Interest Expense (1,031,905) (735,889) (767,003)

a. net interest income(3.1-3.2) 745,321 519,341 517,112

3.3 Fees, Commission and Discount 75,911 52,879 61,928

3.4 Other Operating Income 49,277 36,167 45,227

3.5 Foreign Exchange Gain/Loss (Net) 90,904 72,264 97,673

B. total operating income (a+ 3.3+3.4+3.5) 961,413 680,652 721,941

3.6 Staff Expenses (118,858) (78,414) (84,545)

3.7 Other Operating Expenses (135,275) (92,467) (108,152)

c. operating Profit Before Provision (B. - 3.6-3.7) 707,280 509,770 529,243

3.8 Provision for Possible Loss (17,741) (16,734) (39,509)

d. operating Profit (c. - 3.8) 689,539 493,036 489,734

3.9 Non Operating Income/Expenses (Net) 11,458 7,773 1,291

3.10 Write Back of Provision for Possible Loss 56,204 - 3,913

e. Profit from Regular activities (d.+3.9+3.10) 757,201 500,809 494,937

3.11 Extraordinary Income/Expenses (Net) (46,204) - 7,617

f. Profit before Bonus and taxes (e.+3.11) 710,997 500,809 502,555

3.12 Provision for Staff Bonus (64,636) (45,528) (45,687)

3.13 Provision for Tax (193,646) (136,584) (140,222)

G. net Profit/loss (f. -3.12-3.13) 452,715 318,697 316,646

4 Ratios at the end of

this Year at the end of Previous Year

at the end of corresponding Previous Year quarter

4.1 Capital Adequacy 15.45% 13.11% 12.42%

4.2 Non Performing Loans (NPL) To Total Loans 0.72% 1.10% 0.90%

4.3 Total Loan Loss Provision to Total NPL 213.30% 161.09% 183.00%

4.4 Cost of Funds (Deposit + Borrowings) 6.90% 6.58% 5.63%

other Key indicators

1 Average Yield (Loans + Investments) 10.65% 10.03% 8.46%

2 Net Interest Spread 3.75% 3.45% 2.83%

3 Return on Equity (ROE) 27.13% 21.47% 24.23%

4 Return on Assets (ROA) 2.32% 2.31% 1.88%

5 CD Ratio 73.65% 92.51% 84.19%

6 Home Loans & Real Estate Loans to Total Loans 19.60% 19.08% 18.87%

7 Real Estate Loans to Total Loans 11.55% 11.57% 10.94%

Rs. in ‘000

98


coMPaRiSion of unaudited and audited financial StateMentAs of 16.07.2010 Fiscal Year 2066/2067 (2009/2010)

Schedule 36

Rs. in ‘000

S.n. Particularsas per unaudited

financial Statement

as per auditedfinancial

Statement

varianceReasons for

variancein amount in %

1 total capital and liabilities (1.1 to 1.7) 20,309,420 20,309,331 (89) -

1.1 Paid Up Capital 1,311,552 1,311,552 - -

1.2 Reserves and Surplus 801,417 453,400 (348,017) (43.43) Change in current year’s profit and declaration of cash dividend

1.3 Debentures and Bonds 200,000 200,000 - -

1.4 Borrowings 1,723,250 1,723,250 - -

1.5 Deposits (a+b) 15,968,918 15,968,918 - -

a. Domestic Currency 15,485,318 15,485,318 - -

b. Foreign Currency 483,600 483,600 - -

1.6 Income Tax Liability 31,732 32,572 840 2.65 Change in income tax provision for the year and deferred tax.

1.7 Other Liabilities 272,551 619,639 347,088 127.35 Cash Dividend and provision for community partnership.

2 total assets (2.1 to 2.7) 20,309,420 20,309,331 (89) -

2.1 Cash and Bank Balance 2,086,232 2,086,130 (102) -

2.2 Money at Call and Short Notice 100,000 100,000 - -

2.3 Investments 4,946,839 4,946,778 (61) - Adjustment of Amortization of Premium on government bond.

2.4 Loans and Advances 12,732,014 12,732,014 - -

a. Real Estate Loan 1,470,317 1,470,317 - -

b. Home/Housing Loan 1,025,626 1,025,626 - -

c. Margin Type Loan 648,227 648,227 - -

d. Term Loan 1,011,576 1,011,576 - -

e. Overdraft Loan/TR Loan/WC Loan 4,516,395 4,516,395 - -

f. Others 4,059,874 4,059,874 - -

2.5 Fixed Assets 297,257 297,192 (65) (0.02) Miscellaneous Petty adjustments made

2.6 Non Banking Assets - - - -

2.7 Other Assets 147,078 147,217 139 0.09 Miscellaneous Petty adjustments made

3 Profit and loss account

3.1 Interest Income 1,777,227 1,777,166 (61) - Adjustment of Amortization of Premium on government bond.

3.2 Interest Expense (1,031,905) (1,031,474) 431 (0.04) Miscellaneous Petty adjustments made

a. net interest income(3.1-3.2) 745,321 745,692 371 0.05

3.3 Fees, Commission and Discount 75,911 76,064 153 0.20 Miscellaneous Petty adjustments made

3.4 Other Operating Income 49,277 49,345 68 0.14 Miscellaneous Petty adjustments made

3.5 Foreign Exchange Gain/Loss (Net) 90,904 90,909 5 0.01 Miscellaneous Petty adjustments made

B. total operating income (a+ 3.3+3.4+3.5) 961,413 962,010 597 0.06

3.6 Staff Expenses (118,858) (118,858) - -

3.7 Other Operating Expenses (135,275) (137,750) (2,474) 1.83 Adjustment of Community Partnership Calculation based on PAT.

c. operating Profit Before Provision (B. - 3.6-3.7) 707,280 705,402 (1,877) (0.27)

3.8 Provision for Possible Loss (17,741) (17,741) - -

d. operating Profit (c. - 3.8) 689,539 687,661 (1,877) (0.27)

3.9 Non Operating Income/Expenses (Net) 11,458 11,458 - -

3.10 Write Back of Provision for Possible Loss 56,204 56,204 - -

e. Profit from Regular activities (d.+3.9+3.10) 757,201 755,324 (1,877) (0.25)

3.11 Extraordinary Income/Expenses (Net) (46,204) (46,204) - -

f. Profit before Bonus and taxes (e.+3.11) 710,997 709,120 (1,877) (0.26)

3.12 Provision for Staff Bonus (64,636) (64,465) 171 (0.26) Actual move on profit.

3.13 Provision for Tax (193,646) (194,811) (1,165) 0.60 Change in income tax provision for the year and deferred tax.

G. net Profit/loss (f. -3.12-3.13) 452,715 449,844 (2,872) (0.63)

99


diScloSuRe aS PeR caPital adequacY fRaMe woRK (BaSel ii)

1. capital structure and capital adequacy

Capital structure and Capital Adequacy of the Bank has been presented in Schedule 30 (A) and the supporting sheets are available in schedule 30 (B), 30 (C), 30 (D), 30 (E), 30 (F) and Form no 4 & 5.

detail information of Subordinated term debts:

nic Bond 2070

Face Value : NPR 1,000 each, Total Value : NPR 200 MillionIssue date : 26th June 2006 Maturity date : 25th June 2013Redemption Reserve For FY 2066/67 : NPR 40,000,000For FY 2065/66 : NPR 40,000,000 For FY 2064/65 : NPR 2,191,781

total nPR 82,191,781 Summary of Bank’s Internal Approach to assess Capital Adequacy

Bank management is responsible for understanding and assessing the nature as well as level of risk taken by the bank and relating the risk to the capital adequacy level.

The Credit Risk Management unit reviews the Credit Risk, analyzes the trend, and assesses the exposure impact on capital, which is vital in Credit decision-making. Also for managing Credit Risk Credit Policy, Credit Policy Manual and Product Papers have been developed for building risk awareness culture throughout the Organization.

In respect of Operational Risk, Operations In-charges and Operation Managers of respective Branches and Departments provide operational loss data to Operation Manager, Corporate via regular reporting requirements stipulated by Operational Monitoring & Reporting Framework. These data are further analyzed, reported and appropriate action taken as per requirement.

With regard to Market Risk, Treasury maintains net open position of all currency on daily basis. Head Treasury reviews / analyzes the trend and assesses the exposure impact on capital. The net open position report is discussed at the ALCO for discussion and further set up of strategy.

2. Risk exposure

Risk weighted exposures for Credit Risk, Market Risk and Operational RiskNPR in 000’

Risk weighted exposures current Year Previous Year

a. Risk Weighted Exposure for Credit Risk 14,466,351 15,021,347

b. Risk Weighted Exposure for Operational Risk 851,164 647,082

c. Risk Weighted Exposure for Market Risk 87,782 73,185

adjustment under Pillar ii

1% of Total Risk Weighted Exposure as per NRB Inspection 154,053

total Risk weighted exposures (a + b + c) 15,559,350 15,741,614

100


Risk weighted exposures under each of 11 categories of credit Risk

NPR in 000’


Claims on Government and Central Bank - -

Claims on Other Official Entities - -

Claims on Banks 676,406 229,724

Claims on Corporate and securities firms 6,680,045 7,014,770

Claims on Regulatory Retail Portfolio 2,199,959 1,603,290

Claims secured by Residential Properties 669,582 1,352,337

Claims secured by Commercial real estate 357,436 473,047

Past due Claims 33,367 107,012

High Risk Claims 2,217,025 2,457,536

Other Assets 408,062 449,519

Off Balance- Sheet Items 1,224,470 1,334,112

total 14,466,351 15,021,347

non Performing assets NPR in ‘000


Gross nPas net nPas Gross nPas net nPas

Restructured / Reschedule Loans - - 15,594 13,645

Sub Standard Loans 18,648 13,986 2,422 1,817

Doubtful Loans 19,170 9,585 61,131 30,566

Loss 54,675 - 65,625 -

total nPas 92,493 23,571 144,772 46,028

Ratio of non Performing asset


Gross NPA to gross advances 0.72% 1.04%

Net NPA to net advances 0.19% 0.34%

101


Movement of non performing assetsNPR in 000’


Opening NPA 144,772 114,876

Addition during the Year 37,135 67,896

NPA recovery during the Year 89,414 38,000

Closing NPA 92,493 144,772

write off loan and interest Suspense: NPR in 000’


Write off Loan 56,204 3,000

Write off Interest - 1,376

Movements in llP and interest Suspense: NPR in 000’


Movements in Loan Loss Provisions (39,166) 35,800

Movements in Interest Suspense 11,079 3,467

Additional LLP during the Year 17,038 38,800

Segregation of investment Portfolio NPR in ‘000’


Held for Trading - -

Held for Maturity 4,918,987 2,999,431

Available for Sale 27,792 26,592

102


3. Risk Management function

The Bank has been building robust Risk Management Capabilities in order to achieve an effective Risk Management framework and contain the risks associated with the business; a fully functional risk management unit is responsible for identifying, reporting, controlling and managing credit, operational and market risk.

credit Risk

For Credit Risk Management a separate risk management unit (segregated from the sales function of business) has been created and directly reports to Chief Executive Officer. A dedicated sub unit within the risk management for management of non-performing / problem assets works towards implementing risk grading / credit scoring processes in order to achieve better management of credit risk and to achieve better efficiency in credit processing.

operational Risk

Effective Operational Risk Management systems aims to minimizing losses and customer dissatisfaction due to failure in processes, focusing on flows in products and their design that can expose the Bank to losses due to fraud, analyzing the impact of failures in technology / system, developing plans to meet external shocks that can adversely impact continuity in the Bank’s operations. Bank has introduced a “Comprehensive Operational Risk Monitoring and Reporting Framework” as well as “Output checking” at all branches covering all transactions on daily basis to minimize Operational Risk.

Market Risk

Bank has an ALCO (Asset Liability Management Committee) which meets periodically to discuss product pricing for deposits and advances and maturity profiles of assets and liabilities, articulating interest rate, view of bank, funding policy, transfer pricing policy and balance sheet management.

The Audit and Compliance function is also independent from Bank Management; this unit focuses on development of internal procedures and check and control systems / procedures. The Internal Audit and Compliance unit undertakes a comprehensive audit of all business groups and other functions, in accordance with the approved audit plan. In order to mitigate above risks, further this unit function is also independent with separate reporting lines, with audit function reporting directly to Board Audit committee.

The Bank has been working continuously towards risk diversification of its assets base so as to achieve better portfolio mix and to protect/enhance the overall risk on its loan book. The strategic focus of mapping business is gradually reducing high-risk assets and increasing low risk exposures.

103

approval of financial Statements for the fY 2066/67 by nepal Rastra Bank

Nepal Rastra Bank, vide its letter ref no. Bai. Su. Bi./offside/AGM/20/2067/068 dated 2067/07/10 (27 October, 2010) has approved the Balance Sheet, Profit and Loss and all related annexure of the annual audited accounts for the fiscal year 2066/67 (2009/010) including payment of cash dividend with the following remarks:

• The Bank shall rectify the shortcomings raised by Statutory Auditor and take corrective action not to repeat the same.

Management Response

Noted and agreed. The Bank has already rectified the shortcomings and corrective action has been taken accordingly.


We are at :corporate office Registered office

279 Kamaladi Sadak, Kathmandu, NepalP.O.Box: 7367Phone: 01-4262277Fax 01-4241865

Main Road-03. Biratnagar, NepalP.O.Box: 232Phone: 021-521921Fax: 021-522748

Kathmandu valley

Kamaladi BranchKamaladi Ganeshsthan, Kathmandu, NepalPhone: 01-4262277Fax 01-4241865

new Road BranchNew Road, Kathmandu, NepalPhone: 01-4227305Fax: 01-4227507SWIFT: NICE NP KA

BRANCHES OPENEDAFTER 16TH JULY, 2010

Battisputali BranchBattisputali, Kathmandu Metropolitan - 9, Nepal Phone/Fax: 01-4484713

Pulchowk BranchPulchowk, LalitpurPhone: 01-5555662Fax : 01-5550044

new Baneshwor BranchNew Baneshwor-10, Kathmandu, NepalTelephone: 01-4784563, 01-4784564Fax: 01-4784565

Bhaktapur BranchSuryavinayak, BhaktapurPhone: 01-6226996Fax : 01-6619121

Kirtipur BranchNaya Bazar, Kirtipur Municipality - 17,Kathmandu, NepalPhone: 01-4330237/01-4331164Fax: 01-4330760

thamel Branch Bhagwanbahal-29, Thamel, Kathmandu, Nepal Telephone: 01-4423241/43 Fax: 01-4419836

Samakhushi BranchAddress: Kathmandu Metropolitan - 29, Samakhushi, Kathmandu, NepalPhone: 01-4387055/01-4387056Fax: 01-4387061

Satdobato BranchSatdobato, LalitpurPhone: 01-5002517/01-5002518Fax: 01-5002516

thankot BranchThankot-08, Thankot Buspark, Kathmandu, NepalTelephone: 01-4312204Fax: 01-4311232

teku BranchBuddha Bari, Teku, Kathmandu Metropolitan - 12,NepalPhone: 01-4104551Fax 01-4104555

Pepsicola chowk BranchPepsicola Chowk, Old SinamangalKathmandu-35Phone: 01-4992785Fax 01-4992789

outside Kathmandu valley

Biratnagar BranchMain Road, Biratnagar, NepalPhone: 021-521921Fax: 021-522748

Pokhara BranchP. O. Box: 587, Mahendra PoolPokhara, NepalPhone: 061-539645Fax: 061-533809

BRANCHES OPENEDAFTER 16TH JULY, 2010

dharan BranchMahendra Path, Dharan, NepalPhone: 025-526521 Fax: 025-520333

Birtamod BranchBhadrapur Road, Birtamod, NepalPhone: 023-540977Fax: 023-540811

hariwan BranchHariwan VDC-09.Krishna Chowk, Sarlahi,NepalTelephone No: 046-530630/32

Birgunj BranchAdarsh Nagar, Birgunj, NepalPhone: 051-527638

Janakpur BranchRam Mandir Chowk, Janakpur, Nepal. Phone: 041-525856

Gaur BranchGaur Minicipality-01, Rautahat, NepalTelephone: 055-521417/1

damak BranchRajmarg Chowk, Damak, Jhapa, Nepal Phone: 023-585156Fax: 023-585157

Butwal BranchShrawan Path, Butwal, Rupandehi, NepalPhone: 071-543238Fax: 071-543250

arghakhanchi BranchHall Line, Newroad Tole, Sandhikharka VDC-06, Arghakhanchi, NepalTelephone: 077-420803, 077-420804Fax: 077-420001

nepalgunj BranchSurkhet Road, Nepalgunj, NepalPhone: 081-526604 Fax: 081-524416

Surkhet BranchBirendra Chowk, Birendra Nagar, Surkhet, Nepal Phone: 083-524092 Fax: 083-524093

lahan BranchGanesh Chowk, Lahan, Siraha, NepalPhone: 033-561012/033-561013 Fax: 033-561014

dhangadhi BranchDhangadhi Municipality - 3, Godawari Road,Chauraha, Kailali, NepalPhone: 091-527061, 091-527062Fax No.: 091-527060

Gaighat BranchTriyuga Municipality - 02,Gaighat, Udayapur, NepalPhone: 035-420934/ 420935Fax: 035-420933

narayanghat BranchBharatpur Municipality - 04, Sahid Chowk, Narayanghat, Chitwan, NepalPhone: 056-533941/056-533942Fax: 056-533940

Malangawa BranchMain Chowk, Malangawa Municipality - 08,Malangawa, Sarlahi, NepalPhone: 046-521441Fax: 046-521443

Mahendranagar BranchLine No. 05, Campus Road, Bhimdutta (Mahendra Nagar) Municipality- 04,Kanchanpur, Nepal Phone: 099-520384Fax:099-520386

NIC BANK I 13th Annual report 2009/10

ALWAYS WITH

YOUALWAYS WITH

YOU

NIC BANK I 13th Annual Report 2009/10NIC BANK

Corporate O�ce: 279 Kamaladi Sadak, Kathmandu, Nepal, P.O.Box: 7367, Phone: 01-4262277, Fax 01-4241865Registered O�ce: Main Road-03. Biratnagar, Nepal, P.O.Box: 232, Phone: 021-521921, Fax: 021-522748

Annual Report 2009 10 English

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Transcript of Annual Report 2009 10 English