Rastriya Banijya Bank

Sources

Rastriya Banijya Bank (RBB) is the largest commercial bank in Nepal, fully owned by the government and currently under a restructuring process. The bank was established in 1966 to support economic growth and development in Nepal. Since then, the bank has developed and diversified its role to provide various banking services to the community. It has been closely associated with government programs targeting the priority and deprived sectors, while undertaking innovative methodologies to finance self-help groups.

Rastriya Banijya Bank provides various products and services in the form of deposits, remittances, loans, merchant banking and bank guarantees. It has also been lending and investing in rural areas, targeting low-income people under the deprived sector lending requirements. In doing so, it has participated in several government rural credit initiatives including the Intensive Banking Program. RBB has adopted a methodology of providing financial services through self-help groups with the Banking with the Poor program, which focuses on combining its lending practices with the social mobilisation of Self-Help Groups (SHGs) undertaken by NGOs. The program targets poor women, formed into SHGs, who are encouraged to save first, and then determine the interest on loans provided to their members. Unfortunately, the program has faced serious difficulties, due to weak institutional support and insufficient dedication to the program.  This has resulted in poor implementation and incapacity to transform the pilot project into a viable program. However, some positive aspects of the banking with the poor program includes the relative low cost of financial intermediation, in comparison to usual practices, and the good overall participation of the population in the program

In total, RBB has 117 branches that span across 68 districts. Regionally, RBB centers its operations on Katmandu, Biratnagar, Birgunj, Butwal, and Nepalgunj.

RBB provides banking services to a large number of clients including banks, insurance companies, industry trading houses, airlines, hotels and many other sectors in the economy. The bank also provides financial services to the low-income population in rural areas, within the framework of government programs, and seeks to promote economic development and the improvement of living standards.

*Active clients under the deprived sector lending program – 6,900 within the BWTP program (as of January 2004)

**Active savers include individuals as well as institutions

RBB serves both urban and rural populations. In order to address poverty, RBB offers finance to self-help groups (SHGs), which gather clients of its microfinance program. A series of specific operating principles have been set as parameters for the operations of the groups. They are encouraged to use peer pressure as collateral, to provide initial small size loans and to set their own interest rates on loans. SHGs members are encouraged to save first before accessing credit.

The bank reaches out to both rural and urban households, institutions and corporations through its vast network of branches. The bank aims to contribute to economic growth and development of Nepal through a modern network of banking facilities. The bank has 60 branches in mountainous regions, 51 in the Terai region and 21 in the Kathmandu region. Two thirds of the branches are located in rural areas. RBB has the largest deposit base in Nepal with 1.2 million depositors. Approximately 300,000 clients use the banking services for their business and development activities.

The bank launched its Banking with the Poor program as a pilot project in the early 1990s.  This initiative, launched under the priority sector credit program, aimed at reaching the poor by establishing linkages with self-help groups. Despite the difficulties in bringing the program to a larger scale and a more profitable basis, there is considerable potential to transform it into a successful methodology, using the example of the SHG-bank linkages in India.

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RBB faced major difficulties in operating its ‘social’ financial intermediation in a profitable manner. With pilots such as the Banking with the Poor program, the bank failed to ‘test, standardise and replicate a program in an appropriate pace’ (see Sharma paper) and lacked a planning process including: vision, outcomes, goals, and clear measurable outcomes. Along with this, no clear review and knowledge management was carried out with regards to its financing of the priority sector.

The bank has recently transformed its priority sector credit department into a ‘micro and small enterprise division’ and produced a comprehensive manual on small enterprise lending by the bank. The bank plans to undertake appropriate and thorough planning, testing and reviews to implement microfinance program successfully in rural areas. It envisages collaboration with microfinance institutions, while developing its own microfinance activities modelled on the successful BRI Unit Desa system in Indonesia.

Rastriya Banijya Bank plays multiple roles as a: commercial bank, microfinance provider, and investor in the microfinance sector. RBB holds shares in the five public-owned Grameen Bikas banks, along with RMDC. However, as a government-owned body, its key priority is to act as a commercial bank.

• Rastriya Banijya Bank’s website: www.rbb.com.np

• Sharma, G. Innovation in Nepal Microfinance and Benefits for Asia, Paper presented at BWTP workshop. Kathmandu, February 2004.

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