Disclosure under Basel II capital accord of Nepal Rastra Bank
(As per clause 7.4(b) of the New Capital Accord As at Fourth Quarter End (Asadh, 2066))
1.0 Tier 1 capital and a breakdown of its components;
Core Capital (Tier 1) / 2,832,760,951a / Paid up Equity Share Capital / 931,966,400
b / Proposed Bonus Equity Shares / 465,983,200
c / Statutory General Reserves / 1,195,316,709
d / Retained Earnings / 239,494,642
2.0 Tier 2 capital and a breakdown of its components;
Current PeriodSupplementary Capital (Tier 2) / 357,605,394
a / General loan loss provision / 137,896,614
b / Exchange Equalizations Reserve / 219,708,780
3.0 Detailed information about the Subordinated Term Debts with information on the outstanding amount, maturity, and amount raised during the year and amount eligible to be reckoned as capital funds.
- Not applicable
4.0 Deductions from capital
- Nil
5.0. Total qualifying capital
- NPR 3,190,366,345
6.0. Capital adequacy ratio
14.70%
7.0. Risk weighted exposures for Credit Risk, Market Risk and Operational Risk
RISK WEIGHTED EXPOSURES / As on 15.07.2009A / Risk Weighted Exposure for Credit Risk / 18,758,431,918
B / Risk Weighted Exposure for Operational Risk / 2,690,614,405
C / Risk Weighted Exposure for Market Risk / 254,117,435
Total Risk Weighted Exposures (a+b+c) / 21,703,163,759
8.0 Risk Weighted Exposures under each of 11 categories of Credit Risk
No. / Particulars / RWE as on 15.07.20091 / Claims on govt. and central Bank / -
2 / Claims on other financial entities / 125,689,500
3 / Claims on Banks / 3,210,997,145
4 / Claims on corporate and securities firm / 2,743,934,216
5 / Claims on regulatory retail portfolio / 3,110,871,337
6 / Claim secured by residential properties / 1,526,188,433
7 / Claims secured by commercial real state / 2,068,505,546
8 / Past due Claims / 228,395,096
9 / High risk claims / 1,484,511,278
10 / Other Assets / 786,391,587
11 / Off Balance sheet Items / 3,472,947,780
Total / 18,758,431,918
9.0 Total risk weighted exposure calculation table
S.N. / A. Balance Sheet Exposures / Book Value a / Specific Provision b / Eligible CRM c / Net Value f=c-d-e / Risk Weight e / Risk Weighted Exposures f=d*e1 / Cash Balance / 463,345,996 / - / - / 463,345,996 / 0% / -
2 / Balance With Nepal Rastra Bank / 1,851,132,637 / - / - / 1,851,132,637 / 0% / -
3 / Gold / 178,349,010 / - / - / 178,349,010 / 0% / -
4 / Investment in Nepal Government Securities / 9,998,753,558 / - / - / 9,998,753,558 / 0% / -
5 / All claims on Government of Nepal / 154,043,515 / - / - / 154,043,515 / 0% / -
6 / Investment in Nepal Rastra Bank securities / - / - / - / - / 0% / -
7 / All claims on Nepal Rastra Bank / - / - / - / - / 0% / -
8 / Claims on Foreign Government and Central Bank (ECA Rating 0-1) / - / - / - / - / 0% / -
9 / Claims on Foreign Government and Central Bank (ECA Rating 2) / - / - / - / - / 20% / -
10 / Claims on Foreign Government and Central Bank (ECA Rating 3) / - / - / - / - / 50% / -
11 / Claims on Foreign Government and Central Bank (ECA Rating 4-6) / - / - / - / - / 100% / -
12 / Claims on Foreign Government and Central Bank (ECA Rating 7) / - / - / - / - / 150% / -
13 / Claims On BIS, IMF, ECB, EC and on Multilateral Development Banks (MDBs) recognized by the framework. / - / - / - / - / 0% / -
14 / Claims on Other Multilateral Development Banks / - / - / - / - / 100% / -
15 / Claims on Public Sector Entity (ECA 0-1) / - / - / - / - / 20% / -
16 / Claims on Public Sector Entity (ECA 2) / - / - / - / - / 50% / -
17 / Claims on Public Sector Entity (ECA 3-6) / - / - / - / - / 100% / -
18 / Claims on Public Sector Entity (ECA 7) / 83,793,000 / - / - / 83,793,000 / 150% / 125,689,500
19 / Claims on domestic banks that meet capital adequacy requirements / 269,729,300 / - / 234,175,589 / 35,553,711 / 20% / 7,110,742
20 / Claims on domestic banks that do not meet capital adequacy requirements / 32,177,117 / - / - / 32,177,117 / 100% / 32,177,117
21 / Claims on foreign bank (ECA Rating 0-1) / 11,695,334,028 / - / - / 11,695,334,028 / 20% / 2,339,066,806
22 / Claims on foreign bank (ECA Rating 2) / 389,350,000 / - / - / 389,350,000 / 50% / 194,675,000
23 / Claims on foreign bank (ECA Rating 3-6) / 637,967,481 / - / - / 637,967,481 / 100% / 637,967,481
24 / Claims on foreign bank (ECA Rating 7) / - / - / - / - / 150% / -
25 / Claims on Foreign bank incorporated in SAARC Region operating with a buffer of 1% above their respective regulatory capital requirement / - / - / - / - / 20% / -
26 / Claims on Domestic Corporates / 3,680,088,427 / 8,032,662 / 928,121,549 / 2,743,934,216 / 100% / 2,743,934,216
27 / Investment on Foreign Corporates (ECA rating 0-1) / - / - / - / - / 20% / -
28 / Investment on Foreign Corporates (ECA rating 2) / - / - / - / - / 50% / -
29 / Investment on Foreign Corporates (ECA rating 3-6) / - / - / - / - / 100% / -
30 / Investment on Foreign Corporates (ECA rating 7) / - / - / - / - / 150% / -
31 / Regulatory Retail Portfolio (Not Overdue) / 4,159,696,473 / 37 / 11,867,986 / 4,147,828,450 / 75% / 3,110,871,337
32 / Claims fulfilling all criterion of regulatory retail except granularity / - / - / - / - / 100% / -
33 / Claims secured by residential properties / 2,513,718,369 / 1 / - / 2,513,718,368 / 60% / 1,508,231,021
34 / Claims not fully secured by residential properties / - / - / - / - / 150% / -
35 / Claims secured by residential properties (Overdue) / 22,183,744 / 4,226,332 / - / 17,957,412 / 100% / 17,957,412
36 / Claims secured by Commercial real estate / 2,106,505,547 / 38,000,001 / - / 2,068,505,546 / 100% / 2,068,505,546
37 / Past due claims (except for claim secured by residential properties) / 165,053,790 / 12,790,393 / - / 152,263,398 / 150% / 228,395,096
38 / High Risk claims / 1,089,396,648 / 45 / 181,272,918 / 908,123,685 / 150% / 1,362,185,528
39 / Investment in equity and other capital instruments of institutions listed in the stock exchange / 3,000,000 / - / - / 3,000,000 / 100% / 3,000,000
40 / Investment in equity and other capital instruments of institutions not listed in the stock exchange / 103,925,500 / 24,375,000 / - / 79,550,500 / 150% / 119,325,750
41 / Other Assets / 1,667,132,771 / 880,741,184 / - / 786,391,587 / 100% / 786,391,587
Total / 41,264,676,912 / 968,165,655 / 1,355,438,042 / 38,941,073,214 / 15,285,484,139
S.N. / B. Off Balance Sheet Exposures / Gross Book Value a / Specific Provision b / Eligible CRM c / Net Value d=a-b-c / Risk Weight / RWE f=d*e
1 / Revocable Commitments / - / - / - / - / 0% / -
2 / Bills Under Collection / 151,110,615 / - / 151,110,615 / 0% / -
3 / Forward Exchange Contract / 1,332,125,612 / - / - / 1,332,125,612 / 10% / 133,212,561
4 / LC Commitments With Original Maturity Up to 6 months (domestic counterparty) / 2,867,156,012 / - / 1,015,360,238 / 1,851,795,774 / 20% / 370,359,155
Foreign Counterparty ECA Rating 0-1 / - / - / - / - / 20% / -
Foreign Counterparty ECA Rating 2 / - / - / - / - / 50% / -
Foreign Counterparty ECA Rating 3-6 / - / - / - / - / 100% / -
Foreign Counterparty ECA Rating 7 / - / - / - / - / 150% / -
5 / L C Commitments With Original Maturity Over 6 months (domestic counterparty) / 253,722,792 / - / 253,722,792 / - / 50% / -
Foreign Counterparty ECA Rating 0-1 / - / - / - / - / 20% / -
Foreign Counterparty ECA Rating 2 / - / - / - / - / 50% / -
Foreign Counterparty ECA Rating 3-6 / - / - / - / - / 100% / -
Foreign Counterparty ECA Rating 7 / - / - / - / - / 150% / -
6 / Bid Bond and Performance Bond (domestic counterparty) / 658,457,102 / - / 55,224,268 / 603,232,834 / 50% / 301,616,417
Foreign Counterparty ECA Rating 0-1 / 511,988,672 / - / 409,590,938 / 102,397,734 / 20% / 20,479,547
Foreign Counterparty ECA Rating 2 / 996,562,778 / - / 498,281,389 / 498,281,389 / 50% / 249,140,695
Foreign Counterparty ECA Rating 3-6 / 337,251,628 / - / - / 337,251,628 / 100% / 337,251,628
Foreign Counterparty ECA Rating 7 / - / - / - / - / 150% / -
7 / Underwriting commitments / - / - / - / - / 50% / -
8 / Lending of Bank's Securities or Posting of Securities as collateral / - / - / - / - / 100% / -
9 / Repurchase Agreements, Assets sale with recourse / - / - / - / - / 100% / -
10 / Advance Payment Guarantee / 589,260,692 / - / 331,779,662 / 257,481,029 / 100% / 257,481,029
11 / Financial Guarantee / 117,698,852 / - / 30,449,544 / 87,249,308 / 100% / 87,249,308
12 / Acceptances and Endorsements / 1,016,660,739 / - / 17,220,557 / 999,440,182 / 100% / 999,440,182
13 / Unpaid Portion of Partly paid shares and Securities / - / - / - / - / 100% / -
14 / Irrevocable credit commitments (short term) / 1,215,235,221 / - / 116,715,068 / 1,098,520,153 / 20% / 219,704,031
15 / Irrevocable Credit commitments (Long Term) / - / - / - / 50% / -
16 / Other Contingent Liabilities / 594,055,568 / - / 100,965,275 / 493,090,292 / 100% / 493,090,292
17 / Claim Received on Guarantee (As per directive 13/065/66) / 9,807,337 / - / 7,845,870 / 1,961,467 / 200% / 3,922,935
Total / 10,651,093,620 / - / 2,837,155,601 / 7,813,938,019 / 3,472,947,780
Total RWE for Credit Risk (A) +(B) / 51,915,770,532 / 968,165,655 / 4,192,593,643 / 46,755,011,234 / 18,758,431,918
10.0 Amount of NPAs (both Gross and Net)
10.1 Restructure/Reschedule Loan
- Nil
10.2Substandard loan
- Gross value Rs. 34,422,042, Net values Rs. 25,816,531
10.3 Doubtful Loan
- Gross value Rs. 11,851,308 Net value Rs 2,175,654
10.4 Loss Loan
- Gross value Rs. 44,768,306 Net value: NIL
11.0 NPA Ratio
11.1 Gross NPA to Gross Advances
· 0.66%
11.2 Net NPA to Net Advances
· 0.20%
12.0 Movement of NPA
- Year on year downward movement of Rs. 37,678,126.
13.0 Write off of loans & Interest suspense
- Loans Write off during the year is Rs. 39,126,089 and interest suspense balance as on year end is Rs 117,646,865.
14.0 Movement in Loan loss provisions and interest suspense
- Year on year downward movement in Loan Loss Provisions of Rs. 44,440,535
- Year on year upward movement in Interest suspense of Rs. 2,166,234.
15.0 Detail of additional Loan Loss provision
- Provisions due to growth in the volume have been added. No major additional provisions have been made.
16.0 Segregation of investment portfolio into Held for trading, Held to maturity and Available for sale category
17.0 Summary of the bank’s internal approach to assess the adequacy of its capital to support current and future activities, if applicable; and
Board and Senior Management Oversight
Bank management is responsible for understanding the nature and level of risk taken by the bank and relating the risk to the capital adequacy level. The Credit Risk Committee reviews the Credit Risk, analyze the trend, assess the exposure impact on capital and provide a summery report to Management Committee.
In respect of operational risk, the Consumer Banking, Wholesale Banking and each Support Function Business Operational Risk Manager provide operational loss data to Country Operational Risk Assurance Manager who in turn analyze the trend and provide a summery report to Management Committee. Finance & Strategic Planning checks the capital charge on operational risk.
With regard to market risk, the Financial Markets Operation maintains net open position of all currency on daily basis and provides data to Head Financial Markets who reviews and analyze the trend, assess the exposure impact on capital and provide a summery report to Management Committee. The net open position report is also discussed at the ALCO.
Management Committee reviews the summery reports received from CRC, CORAM and the HFM and provides a synopsis to the Board along with its view on the risks exposure and the adequacy of capital, for review and noting.
Sound Capital Assessment
In order to ensure a sound capital assessment process, all three risks that have direct impact on the capital adequacy level are managed in a structured manner with clear roles and responsibilities. For managing the Credit Risk the Country Underwriting Standards, Country Credit Policy, Credit Policy Manual, and Product Development Documents have been prepared and implemented. Any exception to the standard get escalated to and approved by the appropriate authorities as stipulated in the standards, policy, manual and the PDD with audit trail.
Operational Risk Management & Assurance Framework (ORMAF) has been implemented for managing operational risks. In line with ORMAF, the 3 lines of defense ensure effective management of all risks including the credit, operational and market risk. In the 3 lines of defense, business is put in the first line which is primarily responsible for the risk. Similarly compliance and assurance are in the second and third line of defense which provides independent assurance to the Board and Senior Management on the effectiveness of the risk management.
The market risks are managed in line with the Liquidity, Market Risk and the Credit Policy of the Bank.
Comprehensive assessment of risks
Credit risk
The credit risk of individual borrowers or counterparties as well as at the portfolio level is assessed. The credit review assessment cover risk rating systems, portfolio analysis, large exposures and the risk concentrations. All Corporate and Institutional borrowers including SME borrowers, at individual and group level, are assigned internal credit rating that supports identification and measurement of risk and integrated into overall credit risk analysis.