Annual Report 69-70_20140305122025

www.nabilbank.com

ANNUAL REPORT 2012/13

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Mahendranagar (1)

Dhangadi (1)

Nepalgunj (1)

Tulsipur (1)

Ghorahi (1)

Butwal (1)

Bhairahawa (1)

Bhalwadi (1)

Narayanghdh (1)

Birgunj (2)

Hetauda (1)

Janakpur (1)

Dharan (1)

Itahari (1)

Biratnagar (1)

Damak (1)

Birtamod (1)

Chandragadi (1)

Baglung (1) Pokhara (2) Beshisahar (1)

Gorkha (1)

Lalitpur (3)

Kathmandu (17)

Dhulikhel (1)

Bhaktapur (1)

Charikot (1)

Khandbari (1)

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PARTNERSHIP ON A LONG JOURNEY

Pioneering modern banking in

the country the Bank has developed

partnership with multitude of

institutions and individuals and has

generated value for all. Partnership

sown 30 years back has grown

manifold, enriching every relationship,

creating manifold benefits and

complementing each other’s progress.

We value and foster every partnership

all along on our long journey ahead.

Nabil Bank Limited

2

OVERVIEW

About Nabil Bank 5

Vision, Mission and Value Statement 6

Financial Highlights 7

Chairman’s Message 11

The Board of Directors 14

CEO's Message 16

Macro-economic Outlook 18

PRODUCT & SERVICES

Lending Products 44

Deposit Products 46

Card Products 47

Remittance Products 49

Bancassurance 49

Investment Banking / Merchant Banking 50

Other products/services 50

INSIDE »

OPERATING &FINANCIAL REVIEW

Analysis of key items of Statementof Financial Position of past 5 years 22

Analysis of key items of Income Statement of past 5 years 25

Achievements of Current Year 28

Value Addition 35

Segmental performance of the Bank 36

Interim position and performance (unaudited) 38

General overview of Nabil Invest 40

24 GOVERNANCE

The Board of Directors 52

Board Committees 54

Internal Controls 58

Employees 60

Corporate Sustainability 64

Corporate Social Responsibility 66

31


3

FINANCIAL STATEMENTS& OTHER INFORMATIONS

Statement of director’s responsibility 70

Disclosure of information under Section 109(4) of Companies Act 2006 71

independent Auditor’s Report 74

Financial Statements with Schedules 75

5

SHAREHOLDERS’INFORMATION

Structure of Share Capital 176

Shareholder’s Profile 177

Stock symbol 177

Annual general meeting 178

Shareholder enquiries and communication 179

Taxation on dividends and shares 180

6

AWARDS 205

OFFICE NETWORKS 206

NABIL INVESTMENTBANKING LIMITED

Directors’ Report 181

Information under section109(4) of Companies Act, 2006 184

Financial Statements with Schedules 186

7

C R I S P

CUSTOMERFOCUSEDNabil introduced the concept of customer care anddelight in the banking industry in Nepal 29 years ago.This paradigm shift in banking helped customers toask the bank for a specific product of their need forthe fullest satisfaction. Nabil accordingly has beenavailing the services to the best suit of customer needwhich manifests our approach to keep our customerat core of our activities in serving them.

OVERVIEW

01

ABOUT NABIL BANK

Nabil’s inception as the first foreign joint

venture bank in the year 1984 was one of

the important years in the history of

Nepalese banking. Founded with the

technical collaboration of then Dubai Bank

Ltd., along with the institutions like Nepal

Industrial Development Bank, Rastriya

Beema Sansthan, and Nepal Stock Exchange

it soon became a great icon for customer

service in the Nepalese financial industry.

Even then when the modern banking was

way too far for general public and technology

was just budding, the then Board of Nabil

and its management team contemplated

about computerizing its operations from

initial days. Reduced transaction time at the

counter and prompt delivery of customer

account statements were the main thrust for

the then Nabil team. Today, this noble

thought has become one of the strong

foundations to grow its business in manifold.

Today it has expanded its service networks to

48 branches, 2 extension counters and 81

ATMs, 1050 rented and owned POS

machines at merchant outlets, 1237

Western Union and 1263 Nabil Remit

agents and various arrangements for using

delivery points of other banks and financial

institutions through Mechi to Mahakali to

deliver services efficiently to its customers.

There are number of customized products

and various units designed to cater diverse

needs of corporate houses and individuals.

Corporate Banking, SME and Micro

Financing, Project and Infrastructure

Financing, Personal Lending and Cards are

there for catering credit needs;

Bancassurance Division for risk as well as

wealth management; Deposit Relationship

Unit for deposits management through

various schemes; and Remittance Unit for

easy transfer of funds domestically and

internationally. Besides, the businesses of

Nabil have also grown multitudinously. The

Bank's balance sheet size has crossed to

NRs.73 billion (NRs.268 million in 1984-

85) and shareholders' fund to NRs.6.6

billion (NRs.28 Million) and are ever growing

steadily. Having said that the journey for

Nabil had not been that too easy. There were

ebbs and flows in its business during its

journey of glorious 29 years; however

despite adversities, it has been able to stay

atop in terms of customer base, geographic

outreach, business portfolio and profitability.

These are all testaments of strong

foundations the predecessors have laid and

the legacies that have been inherited to

sustain in a big way.

The culture the Bank has inculcated, the HR

it has groomed, the structure it has

developed and continuous oversight and

guidance from the Board strongly supports

the bank surging ahead on sustainable

growth path.

S. NO. YEAR BRANCHES CUMULATIVE NUMBER

1 1984/85 *Tripureshwor, Kantipath 2

2 1985/86 Jorpati, New Road 4

3 1987/88 **Power House Chowk 5

4 1988/89 Birgunj 6

5 1991/92 Biratnagar 7

6 1992/93 Lalitpur 8

7 1995/96 Butwal 9

8 1996/97 Bhalwadi, Pokhara 11

7 2000/01 Itahari 12

8 2001/02 Bhairahawa, Lakeside Pokhara, Nepalgunj 15

9 2003/04 Dharan 16

10 2004/05 Maharajgunj 17

11 2007/08 Baglung, Dhangadhi, Mahendranagar, Damak,

Narayangadh, Ghorahi, Tulshipur, Birtamod, Hetauda 26

12 2008/09 New Baneshwar, Halchowk, Thamel, Kaushaltar 30

13 2009/10 Chabahil, Maitidevi, Satdobato, Balaju, Kuleshwar, Khandbari, Charikot 37

14 2010/11 Dhulikhel, Gorkha, Besisahar, Chandragadhi, Teendhara,

Dhapashi, Anamnagar, Sinamangal, Gwarko, Attarkhel 47

15 2011/12 Janakpur 48

* The branch currently located at Tripureshwor was initially established at Durbar Marg which was subsequently relocated at Kamaladiand thereafter to World Trade Centre premises at Tripureswor on 27th May 2007.

** The branch currently at Power House Chowk was initially established at Sugauli which was relocated to Birgunj dry porton 21st March 2001 and thereafter to Power House Chowk, Birgunj on 3rd July 2006.

CHRONOLOGY OF BRANCH EXPANSION IS PRESENTED AS UNDER

Nabil Bank Limited

6

VISION, MISSIONAND VALUE STATEMENT

VISION STATEMENT

At Nabil, our Vision is to be a bank for

all across all geopolitical zones and

socioeconomic stratums of the nation that

can provide myriads of financial solutions

and create values for all our stakeholders, to

stand in the community with our economic

and civic roles. We look forward to emerging

as a first rate bank across all stratums

of the nation.

MISSION STATEMENT

We at Nabil work together up to our vision

and to bring it into reality. Our mission is

therefore to prove that Nabil is driven by the

spirit for realizing those visionary aspirations.

With that end in view, we work in

partnership with our stakeholders and the

community at large. Our roadmap to

reaching where we have set our mind on is

by maneuvering our strategic action plans

through a well-teamed and synergistic

workforce into industrial end products – our

customized services. Our approaches are to

differentiate our products by reengineering

them with the best technologies and

management philosophy keeping in focus our

customers’ satisfaction over and above

everything else at all times. We have set our

goals and objectives to hone the skills of

inspired HR force and tailor our products and

services to that end. With an all inclusive

approach Nabil engages in customizing

ranges of products catering to the entire

gamut of society from financing

megaprojects to underprivileged individuals

and promoting enterprises across all

segments of society by adding values to

nation building endeavours. We are

branching out on a national scale through

our wide-ranging points of representation

representing different geographic and

economic zones along with our broad global

network as a 1st CHOICE PROVIDER OF

COMPLETE FINANCIAL SOLUTIONS.

VALUES STATEMENT

We surge to turn our services and products

into economic values for our treasured

customers, taking care of their financial

needs. We know the world is changing and

to keep pace with that we customize our

services and re-engineer our products in sync

with changing time and technology. We are

always geared up for translating great

aspirations of our stakeholders into economic

and social values. We know our customers

expect unparalleled service standards; our

community looks forward to seeing the bank

emerging as responsible corporate entities

that cherish social and economic harmonies

in the community. We go beyond just making

profits. Our shareholders value financial

returns together with the safety of their

investments.

At Nabil, values for its employees are always

well-defined, for it always knows that staffs

are great movers, therefore recognizing their

financial, corporate and social values get

their spirits always going to the creative end.

Nabil fosters corporate governance, realizing

the values our regulators always cherish

through financial disciplines. Besides, Bank

has set C.R.I.S.P. (Customer Focused, Result

Oriented, Innovative, Synergistic and

Professional) as its values, which it lives by

in day to day operation of the bank’s

business.

01

08/09 09/10 10/11 11/12 12/13

2.22

2.76

3.05

3.99

4.61

Growth Rate of 2012/13:

CAGR (last 5 years):

15%

22.5%

TOTAL OPERATING INCOME

NRs. in Billion

08/09 09/10 10/11 11/12 12/13



31%

24%

NET PROFIT AFTER TAX

NRs. in Billion

2009 2010 2011 2012 2013

37.35

46.41

49.70

55.02

63.61



16%

15%

TOTAL DEPOSIT

NRs. in Billion

GROSS LOANS AND ADVANCES

NRs. in Billion

3.13

3.83

4.57

5.45

6.69

SHAREHOLDER'S FUND

NRs. in Billion

44.87

52.15

58.14

63.20

73.24

TOTAL ASSETS

NRs. in Billion

1.03

1.14

1.34

1.70

2.22



11%

17%



13.23%

22%



16%

15%

28.00

33.03

39.91

42.87

47.65

As of Mid - July

2009 2010 2011 2012 2013As of Mid - July

2009 2010 2011 2012 2013As of Mid - July

2009 2010 2011 2012 2013As of Mid - July

FINANCIAL HIGHLIGHTS

01ANNUAL REPORT 2012/13

7

AVERAGE RETURN ON ASSETS

in Percentage

08/09 09/10 10/11 11/12 12/13

3.25

2.55

2.382.43

2.80

RETURN ON EQUITY

in Percentage

08/09 09/10 10/11 11/12 12/13

32.78

33.93

30.27

29.02

30.25

CREDIT TO DEPOSIT RATIO

in Percentage

08/09 09/10 10/11 11/12 12/13

74.90

73.87

71.17

78.29 77.91

CAPITAL ADEQUACY RATIO

in Percentage

08/09 09/10 10/11 11/12 12/13

11.59

10.70

10.5010.58

11.01

GROSS NPA RATIO NET NPA RATIO

in Percentage

2.13

0.80

1.48

1.772.33

EARNINGS PER SHARE DIVIDEND PER SHARE

in Percentage

95.14

113.44

83.57

CLOSING PRICE IN NEPSE

in NRs.

1,815

4,8992,384

1,252 1,355

MARKET CAPITALIZATION

Nrs. in Billion

31.84*

23.67*

0.380.50

0.190.35 0.45

83.81

65.0070.67

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

35.15

28.62

20.21

As of Mid - July As of Mid - July

As of Mid - JulyAs of Mid - July

85.00

70.00

30.00

60.00

Nabil Bank Limited

8

*For Mid July 2012 and 2013, the market capitalization is computed taking intoaccount the share prices of promoters shares and ordinary shares.

RESULTORIENTEDThe action and activities should bear the sweet fruitand Nabil architects business ideas, designs productsand serve the customer keeping the end result alwaysin mind. All its actions and services are intended toyield desired results.

C R I S P

Nabil Bank Limited

10


11

CHAIRMAN’S MESSAGE

We achieved good growth and we were

successful in maintaining our portfolio

healthy. We made some changes in our

systems and processes to strengthen our

internal control system.

In terms of the financials, we have been able

to maintain the growth rate at the level we

have achieved so far over the last five years.

We have registered growth on every fronts

viz. balance sheet size, shareholder's fund,

deposits and loans and more importantly the

profit. The growth of 23% in shareholder’s

fund after setting aside a cash dividend of

40% against the growth in balance sheet

size of 16% is marvelous. Growth under

loans and deposits of 16% and 11%

respectively is also steady and growth of

31% under net profit is overwhelming. The

reasons behind such growth under

profitability are growth in Net Interest

Income of 18% despite reduction in interest

rates and limited investment opportunities;

and significant reduction of 99.3% in net

loss provisioning. The bank recorded

recovery from some loss category loans

which helped us keep provision expense at

the lowest level in the last five years.

The frequency of online fraud has grown over

the past couple of years. In order to cope up

with the challenges posed by the fraud

perpetrator, more stringent measures have

been put in place to make our system more

robust. In this connection, the Bank has

successfully implemented forceful PIN

change on all new and renewed cards and

implementation of E-secure on all online

payments. The Bank is also consulting with

vendors for implementation of 2 factor

authentication on all online payments. In

addition, we have always encouraged for

good corporate governance. We have

implemented Whistle Blowing Policy to

promote good voices against unnoticed

fraudulence, misappropriation, exploitation,

and / or harassment happening inside the

organization.

The Bank has always made us feel proud by

winning awards. In the year 2012-13 also

the bank was conferred with the Best

Presented Accounts Award . In fact, winning

this award conducted by the Institute of

Chartered Accountants of Nepal

consecutively for the last four years is a

testament of our standard in respect of

accounting system and disclosures practiced

in the Bank. The Merit Certificate awarded

by the South Asian Federation of Accountants

also stamps this fact. Apart from this, the

Ministry of Finance, Government of Nepal

also recognized the bank as the highest

taxpayer among banking and financial

institutions for the year 2067/068. Recently

we were conferred the Peoples' Excellence

Award by the Federation of Nepalese

Chamber of Commerce and Industry. Four

awards from different institutions and for

different reasons give us tremendous pleasure

and motivation to move ahead.

Challenges are there in every leg of our

businesses and we want to stand firm and

move ahead in the search for excellence. We

will not stay with complacency; instead we

will move forward always striving to ensure

safety and security of every ground we cover.

We will maintain the best governance

practices to earn trust from all business

partners, regulators and stakeholders.

Finally, I would like to thank my dear fellow

board members for bestowing me with the

responsibility of chairmanship and showing

upon me the trust for leading this Bank

towards the zenith. I would also like to

express my gratitude to the depositors,

borrowers and business partners for their

trust and cooperation that have made us the

first choice bank. Similarly, I would also like

to thank the regulators for their support and

guidance to implement best corporate

practices. On behalf of the Board I would

like to express appreciation to the employees

and thank them for the incessant dedication

and devotion that they have displayed in

achieving this extraordinary result.

I am very pleased to announce that the year 2012-13 remained satisfactory for all of us.

Krishna Bahadur Manandhar

Chairman

5years

We have beenable to maintainthe growth rateat the level wehave achieved sofar over the last

01

Nabil Bank Limited

12


13

Modern banking in Nepal started after the

inception of Nabil Bank back on 12 July

1984. It has designed its services

specifically for a customer that meets his

requirement and standard. Being associated

with the bank for about 28 years

intermittently on the Board of the Bank, I

too feel privileged to be part of this

institution which changed the definition of

banking. It has always played a pioneer role

in introducing products and services in the

country. It has also given a confidence to

the society that the service it provides is for

all and is there at everyone’s reach.

I being first public director in the joint

venture bank, public aspirations were high

from the organization and that from the

directors too, since other public companies

then had not given returns to the

shareholders. Reminiscing the memory

back then when bank’s 30% public share

were not subscribed fully and today’s craze

for Nabil’s share has huge passage of time

and enormous effort of the bank and

directors. The bank issued public shares

with just 60% call money. My personal

initiation to make the share fully paid up by

keeping the un-called money of 40% gave

positive signal in the share market, which

was at its infancy.

Additionally, the practice of interim dividend

which Nabil Bank started for the first time

created immense confidence in the public

sector. Such a public confidence has given

new dimension in the share market and

today the market creation of this size has

an important role of the Bank and the

directors for constructive role in developing

confidence among the shareholders.

I also feel proud in taking few examples of

the initiatives like introducing Credit Card in

the country, Consumer Finance at a larger

scale, Infra Project Financing with a

dedicated unit, felicitating Public

Shareholder for their silent but valuable

contribution and the like. Similarly I would

like to take few names of key role players in

the success story of Nabil bank. They are

Mr. Sashi Narayan Shah, the first chairman

of the board, late Mr. Kalyan Bikram

Adhikary, the former governor of Nepal

Rastra Bank, Mr. G.S. Srivastav and Mr. S.

C. Kabadkar two Executive Directors of the

bank and my fellow board members and late

Mr. Supriya Gupta a veteran banker and

board member. They deserve deep respect

and an accreditation for the contribution

they have made for this success of the bank.

The results are there when an institution

with dedication and hard efforts take up any

business. Achievements in the year 2012/13

are testimony of this fact that helped in

providing highest return to the shareholders

in banking industry. All the contributors to

this result from customers to regulators to

board members to staff deserve special

thanks who are very much important in

sustainable growth of the bank and keeping

the spirit of shareholders live and high.

Shambhu Prasad Poudyal

Senior Director

Achievementsin the year2012/13 aretestimony ofthis fact thathelped inprovidinghighest returnto theshareholdersin bankingindustry.

SENIOR DIRECTOR’S MESSAGE01

Nabil Bank Limited

14

MR. KRISHNA BAHADURMANANDHARChairman of the Board

REPRESENTSGROUP ‘A’ SHAREHOLDERS

Mr. Manandhar, aged 62, was

appointed as Director of the

Board in April 2011. He was

elected as Chairman in January

2013. His earlier directorship in

the Board of Nabil was during

1999–2002 as representative of

Nepal Rastra Bank. He was

Deputy Governor of Nepal Rastra

Bank during 2005–2010. He has

also held directorship in the

Board of Rastriya Banijya Bank

Ltd. (1998–1999), Securities

Exchange Board of Nepal (2004–

2005) and Purbanchal Grameen

Bikash Bank Ltd. (2004–2005)

as representative of Nepal Rastra

Bank. He holds Master’s Degree

in Economics from Tribhuvan

University, Nepal and Post

Graduate Diploma in

Development Economics from

University of Manchester,

England. His banking experience

spans over three and a half

decade of service in the central

bank.

MR. SHAMBHUPRASHAD POUDYALBoard Member

REPRESENTSGROUP ‘C’ SHAREHOLDERS

Mr. Poudyal, aged 70, has held

directorship in the Bank since

2004. He also held directorship

in the Bank during 1986–1994.

He was the Executive Chairman

of Rastriya Beema Sansthan, a

public sector corporation carrying

out both life and general (non-

life) insurance business and is

one of the largest insurers in the

country. He held the said position

during 1999–2002. He has also

served as a director in the Board

of Unilever Nepal Limited. He

also held Chairman of Board of

Nepal Housing and Development

Finance Co. Ltd. Besides, he has

also been associated with non-

profit making institutions like

Nepal Mountaineering

Association in the capacity of vice

president, Nepal Red Cross

Society (Kathmandu Branch) and

Nepal Family Planning

Association (Kathmandu Branch)

in the capacity of executive

member. He also has 17 years of

banking experience at Nepal

Rastra Bank, the central bank of

Nepal.

MR. DAYARAMGOPAL AGRAWALBoard Member


Mr. Agrawal, aged 48, has held


2004. He also held directorship

in the Bank during 1994–2003.

Mr. Agrawal is an entrepreneur, a

social activist and a media

person. He has been in the

business for the last two decades.

THEBOARDOFDIRECTORS

01


15

MR. KRISHNAPRASHAD ACHARYABoard Member

REPRESENTSGROUP ‘B’ SHAREHOLDERS

Mr. Acharya, aged 40, has held


October 2010. He also held

directorship in the Bank during

2008–2009. He is a Chartered

Accountant qualified from the

Institute of Chartered

Accountants of India. He had

previously served as the General

Manager in Nepal Industrial

Development Corporation (NIDC)

and as the CEO in United

Insurance Company (Nepal) Ltd.

He is presently with Employees’

Provident Fund in the capacity of

Chief Administrator appointed by

the Ministry of Finance,

Government of Nepal.

MR. NIRVANA CHAUDHARYBoard Member


Mr. Chaudhary, aged 31, has

held directorship in the Bank

since November 2010. Mr.

Chaudhary is Managing Director

of Chaudhary Group, a Nepali

business conglomerate. He also

holds directorship in United

Insurance Company. He had

previously held directorship in

United Finance Company.

MR. MOHIUDDIN AHMEDBoard Member


Mr. Ahmed, aged 75, has held


July 2011. In the past also he

held directorship in the Bank

intermittently and represented

Class ‘A’ shareholders. Mr. Ahmed

holds Master’s degree in

International Relations and

Bachelor’s degree in Economics

from the University of Dhaka. He

is a former ambassador of

Bangladesh to Nepal, Senegal,

Sierra Leone, Ghana and

Gambia. He has also represented

his country Bangladesh while in

foreign affair service and has

served in India, Indonesia, and

the United Kingdom in various

capacities. He also held

directorship in Janata Bank,

Bangladesh.

MR. ASHISH SHARMABoard Member

REPRESENTSGROUP ‘C’ SHAREHOLDERS

Mr. Sharma is an MBA from AIT,

Thailand and has been

associated with different business

and social organizations. He is

Chairman of United Insurance

Company, a general insurance

company.

Nabil Bank Limited

16

CEO'S MESSAGE

I am pleased with the results Nabil has achieved in the financial year 2012-13.

The financial statements clearly display the

Bank's strong financial health and financial

performance. Despite negative growth in

interest earnings due to fall in lending rates,

we have managed a growth of 18% on net

interest income. Fee and forex income has

grown by 8% through better positioning of

our portfolio and from new product/services.

Improvement in the health of overall assets

resulted in write back of provisions. We also

took judicious call on top line growth and

managed our portfolio in a balanced manner,

which contributed to our bottom line

positively. These combined efforts helped the

Bank to post net profit growth of 31%.

We followed four-pronged plan that drives

the bank forward in a sustainable manner.

Financial growth, improvement in process

and control, better positioning of products

and services and investment in HR

development; the key pillars complementing

each other in taking the bank to a new

height. Growth of business volume, growth

of customer base, and refinement in

relationships were some of our actions last

year that yielded overall growth in profit,

quality relationship and desired top line

volumes. Business activities were subdued in

light of political stalemate in the country.

Delayed budget formulation and further

delay in release of budget could not propel

the activities for higher growth.

We continue to be committed and driven

towards positioning our systems, processes

and corporate practices at par with

international standards. Some of the work

processes have been centralized that are

intended to enhance control mechanism and

the standards of service. We have

implemented additional measures and

continue to implement latest technologies in

order to mitigate risks of fraud emerging

through technology and to provide security

and safety to our customers. Our focus is to

make the best utilization of technology by

automating processes to improve service

levels and efficiency as well as manage

costs. Through the centralization of core

operation back office functions we are

enabled to scale up our services while at the

same time better equipped to effectively

manage increasing operations risk with larger

volumes and scattered branch network. We

continue to provide in-house and outside

training to employees across all levels to

equip them with the skills necessary to raise

efficiency and effectiveness.

Going forward and amidst challenges in the

country, we plan to build a strong base of

customer, further refining our products and

services, focusing towards automation and

addressing the risk aspects through

introduction of risk assessment culture in the

bank.

Finally, I take this opportunity to thank

regulators and Board members for their

continued support and guidance to maintain

good corporate culture and practices in the

Bank. Also I would like to thank

shareholders, depositors, borrowers and

business partners for the trust and

confidence they have shown on us. Likewise,

I would also thank all the employees, past

and present, for their relentless dedication

and initiative they have taken to make

NABIL what it is today.

Anil Gyawali

Chief Executive Officer31%

Thesecombinedeffortshelped theBank to postnet profitgrowth of

01


17

MACRO-ECONOMIC OUTLOOK

However a mixed result is making difficult to

give a clear picture of the shape of new

Constitution and it is less likely to have an all

parties accepted Constitution where burning

issues like a number of states, their

formation and administration systems are

still not the agreed agenda. Further lingering

in the promulgation of a new Constitution

may lead to poor business sentiments.

DOMESTIC OUTLOOK

Nepal is on the cusp of changeover. It's political system is

to be defined through a new constitution for which

Constituent Assembly Election was held on 19 November

2013, for the second time.

01


19

Nonetheless following the peaceful election,

the nation is keeping high hope towards

parties to bring the Constitution drafting

process to a logical conclusion and pave the

way for faster economic activities.

Maturities shown by the parties in finalizing

the current year's (2013) budget helped

government spending to ride at a normal

pace. The Kathmandu valley which was on

the road expansion spree was the immediate

beneficiary as delayed project soon went

underway after the release of the budget.

However policy issues in the absence of the

legislative body could not be addressed and

consequently it did have some repercussion

on business activities. Considering the

positive sentiment, the government projected

GDP growth rate of 5.5% for year 2014 (mid

July) more than by around 190 basis points

in comparison to preliminary estimates of

3.6% by Central Bureau of Statistics for year

2013 (Mid July). Good rainfall for the

summer crop has favored this projection.

Rising inflation due to depreciation of NPR

with major currencies (except INR), perennial

power crisis, rising labor issues and poor

tourist inflow may cause some dent to the

economy and achievement of projected

growth is a herculean task.

BOP surplus, low interest rate, increased

money supply and easy processes for doing

business are key drivers for the business

growth. Assuming these factors to remain

favorable, the businesses are expected to

grow on incremental basis. The remittance

inflow, which has been key component for

the economy to withstand surplus BOP, is

likely to give further drive as NPR with major

currencies has depreciated further in

comparison to last year. This will eventually

lead to increased consumer spending and

domestic consumption from private sector

including that for private construction. Once

the confidence is instilled in public, the

correction in price of real estate property which

has subdued for almost five years is likely to

take place which has signaled by the price

correction of shares in the recent times. It is

expected to help investors/owners to heave a

sigh of relief as these sectors have undergone

serious phase of distress and have almost

succumbed to bankruptcy. More importantly,

the transactions in these sectors will also

contribute on generating additional government

revenues.

In retrospect, the economy has been facing

problems during the last several years. Post

real estate bust, the economy witnessed

severe instances of volatility in the money

market. The interbank interest rates surged

as high as 10% while at times it remained

passive to trade below 1% as well. Despite

of volatility, the banking sector fared well.

Government owned banks steadily recovered

from the mire of non-performing assets. And

in couple of years henceforth, the net worth

of these institutions is likely to strengthen

further in the positive zone.

However with a limiting spread to 5%,

revised stringent provision for NDF, poor

credit growth, excess liquidity leading to

lending rate reduction and unclear issues of

multiple banking is likely to impact the

earning of banks adversely. In addition,

limited areas of investment to mobilize the

current excess liquidity are barring banks to

recover the cost of deposits. These

conditions have warranted introduction of

instruments to soak up excess liquidity

which however have not been that effective.

Similarly falling rate under money market

investments are also cause for concern.

Short terms rates are at its lowest level.

Some sectors which were affected due to

sharp price drop and resultant impact on

entire business will have some impact on the

NPA and earning in the years ahead as well.

In spite of these adversities, positive

development on the economic front is likely.

The country has geographical advantage of

being located in between China and India,

two of the world’s largest and fastest growing

economies. Nepal itself is rich in terms of

natural resources and youthful work force.

These aspects are likely to keep giving

positive vibe in the business communities

and some activities will keep coming as

business as usual. However this largely

depends on the political development at

home and stability of the situation including

government programs and policies.

Nabil Bank Limited

20

Job creation and the price of properties have

increased which is believed to have

increased the business sentiment. Heavy

dose of quantitative easing which was put in

place for letting go the economic activities in

a normal pace however has been decided to

pull out gradually, starting from January

2014 by reducing the amount of bond

buying ceiling to USD 75 billion per month.

Performance of the large corporate has

improved remarkably. Increased money

supply through bond buying and cheap

interest rate has given growth to public

spending. Debt of the government has

increased remarkably which has even

brought to complete closure of some of the

government agencies in the absence of

budget for couple of weeks. Nonetheless it is

believed to have come back on track and will

function satisfactorily.

China the factory of world has also regained

the confidence although its growth rate has

come down to some extent from the level of

pre-financial crisis era, mainly dragged

down by falling import orders from most of

the advanced economies like US and

Europe. However growing domestic

consumption, investment at abroad and

benefit from these investments are likely to

keep the economy going at a comfortable

level. Most of the world’s large companies

place orders in China for production at

cheaper cost so that they can survive in

competition. These factors are still giving

competitive edge to China. With vast

population and potentials at home, the

economy is poised for better growth than

other major economies.

Japan’s cheap currency policy has given a

drive to its export and is showing signs of

improvement. It is likely to report an inflation

which it got deprived of for about one and a

half decades. Monetary expansion and bond

buying measures by central government have

caused excess money supply which has

boosted spending and led to the inflation.

EU whose existence had come into question

has also sailed successfully through crisis. The

rates however are still at the lower level and

ECB has bailed out most of the member

nations and equally acting as disciplinary

instructor for adopting austerity measures. All

the member countries are having one or the

other problem which make them busy in fixing

the same under the guidance of ECB and IMF.

Austerity measures followed in most of the

economies have given some respite. Stable

energy price, cut on spending and heavy dose

of bail out bid by ECB and IMF dragged down

government bond rate. The sentiment is high

on ECB’s move though it is not timely, at

times. ECB’s move brought the Cyprus back

on track where entire banking business was

closed for couple of weeks in a fear of heavy

withdrawal of deposit from the banks.

INTERNATIONAL OUTLOOK

The global economy is gradually faring well. The United

States has gained substantial confidence post QE Infinity

(USD 85 billion per month) measure which provided much

needed remedy for stimulus that the interest rate even

bringing down to zero level could not help.

Iran agreeing the proposal to let its nuclear

enrichment facilities to be inspected by

international community and stop further

enrichment of nuclear program, the

sanctions imposed are lifted and it is allowed

to produce and sell its oil. Hard measures

like strike on Iran have been averted which

saved cost of war and human life. This

joyous event brought down the energy price

and countries like India which has heavy

reliance on Iran crude oil is likely to benefit.

Our immediate impact is from the economic

activities that occur in India as our exchange

rate is pegged with Indian currency and we

are heavily reliant on India for our major

imports. Following the slow action on

tapering by US, India could build substantial

forex reserve and contain CAD (current

account deficit). This helped its exchange

rate bring down to some extent and gave a

message that currency free fall has stopped

for the time being. Incentives offered in

export sector and easing out FDI/FII rules

helped boost the sentiment of institutional

investors and consequently bolstered Sensex

to peak up once again to reach at one of the

highest levels.

Taking account of all these events and the

actions adopted in major economies, the

world growth in the year 2013 is expected to

be 3.25% and that in the year 2014 is

projected to be 4%. Major economies are

still favoring low interest rate policy and

increasing money supply so that economic

activities and credit expansion can take place

which ultimately increase the consumption

and business activities. Taking positive note

from WTO Bali summit, Iran deal, US slow

move on tapering, ECB finding solutions for

coming out of crisis, domestic consumption

growth in China, Japan following the model

of cheap currency, currency stability in India

and stable commodity price around the

globe, the world economy growth will be at a

satisfactory level. It will boost up consumer

confidence and economic activities in the

year 2014 are expected to be better than

preceding couple of years.

INNOVATIVEWith the passage of time every aspect undergoes through change. To live up tothe customer delight, Nabil keeps its process and techniques innovating thatserve customer the best. Use of technology gives better mileage to an innovationand Nabil always runs ahead in identifying the need of the customer anddesigning the products that meet the requirements.

C R I S P

ANALYSIS OF KEY ITEMS OF STATEMENTOF FINANCIAL POSITION OF PAST 5 YEARS

The bank has recorded steady growth in its business size, operating avenues and income generation over the past five year

period. The bank has significantly strengthened its delivery channels, IT infrastructure, operating policies and risk

management practices. Tables presented in this section reflect on the bank’s financial position during the past five years.

OPERATINGAND FINANCIALREVIEW

NRs.000

AT MID JULY 2013 2012 2011 2010 2009

CAPITAL & LIABILITIES

1. Share Capital 3,046,052 2,435,723 2,029,769 2,028,774 1,448,621

2. Reserves & Surplus 3,643,093 3,008,278 2,536,748 1,807,933 1,681,620

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

4. Borrowings - 311,080 1,650,599 74,900 1,681,305

5. Deposits 63,609,808 55,023,695 49,696,113 46,410,701 37,348,256

6. Bills Payable 529,598 179,142 415,768 425,444 463,139

7. Proposed Dividend 974,737 811,908 608,931 434,737 338,011

8. Income Tax Liabilities 66,873 51,107 44,104 24,904 80,232

9. Other Liabilities 1,071,100 1,072,481 859,406 644,291 526,214

Total 73,241,260 63,193,414 58,141,437 52,151,684 43,867,398

ASSETS

1. Cash Balance 1,140,212 1,050,659 744,592 635,987 674,395

2. Balance with Nepal Rastra Bank 4,789,295 3,681,980 1,473,986 549,455 2,648,596

3. Balance with Banks/Financial Institutions (46,939) (456,817) 217,971 214,657 49,521

4. Money at Call and Short Notice 1,634,306 826,436 2,452,512 3,118,144 552,888

5. Investment 16,332,043 14,048,966 13,081,206 13,703,024 10,826,379

6. Loans, Advances and Bills Purchased 46,369,835 41,605,683 38,034,098 32,268,873 27,589,933

7. Fixed Assets 872,322 887,543 935,089 779,540 660,989

8. Non Banking Assets - - - - -

9. Other Assets 2,150,186 1,548,964 1,201,984 882,005 864,696

Total 73,241,260 63,193,414 58,141,437 52,151,684 43,867,398

02


23

BALANCE SHEET SIZEThe bank's balance sheet size has increased

robustly from NRs.37.13 billion at 15 July

2008 to NRs.73.24 billion at 15 July 2013.

This is nearly a two-fold increment or an

absolute growth of 97.24% in five years.

The compounded annual growth rate of the

balance sheet size during this period is

14.55%.

DEPOSITSThe deposit, occupying the substantial share

on Capital and Liabilities front, has increased

from NRs.31.92 billion at 15 July 2008 to

NRs.63.61 billion at 15 July 2013 posting

compounding annual growth rate of around

15% per annum. More importantly, the Bank

has been able to improve deposit mix over

the last 5 years. The absolute growth under

fixed deposit (FD) is negligible (NRs.11

billion vs. NRs.8 billion) considering the

growth of total deposit volume. Mix

proportion wise the share of FD has reduced

to 17% from 27%. Following graph displays

the mix proportion in Mid July 2008 and

2013 respectively.

Growth in share of call deposits while

reduction in share of current deposits

(including other non-interest bearing

accounts) may be attributed to the rising

interest sensitivity in depositors along with

their attitude of remaining liquid. By and

large, the deposits have remained stable over

these years and the Bank was able to

manage its deposits successfully even during

the volatility and liquidity crisis.

LOANSBank’s gross loans and advances have

increased from NRs.21.76 billion at 15 July

2008 to NRs.47.65 billion at 15 July 2013,

recording a compounded annual growth rate

of 16.97% through five years. The bank has

maintained steady growth in its lending

volume and has capitalized the opportunities

of booking quality assets.

National economic conditions have not fared

well in recent years, particularly following

the real estate bubble post 2009. New

business ventures have been scarce and

demand for credit has been limited.

Although some sectors, including agriculture,

have been identified as productive sectors

and regulations require the banks to

maintain certain level of exposure in these

sectors, market conditions have not been

favorable. On top of that, there is a cut

throat competition among lenders and hence

resulting in over supply of credit. This has

exposed banks to greater credit risk as

evident from increasing non-performing

assets in general. However, non-performing

assets of commercial banks which was

6.08% at mid July 2008 has reduced

tremendously to 2.60% at mid July 2013.

The reduction is attributed to the

improvement in the quality of lending

portfolios of two government-owned

commercial banks.

Adverse development in operating

environment also had some impact on the

bank’s lending books. Some large borrowers

could not serve debts on time. Consequently

these accounts had to be downgraded and

provisioned to cover for possible losses. The

retail credit segment also witnessed higher

default rate in this period. The bank’s non-

performing assets to gross loan ratio, which

stood at 0.74% at mid July 2008, jumped

to 2.13% at mid July 2013. Meanwhile,

adequate loss provisions have been set aside

to cover for entire non-performing loans.

Recovery effort is also augmented and result

has been encouraging.

SHAREHOLDERS' FUNDThe shareholders' fund of the Bank has been

increasing steadily since inception.

Increment is achieved through retention of

profit in the form of reserves or by issue of

stock dividend. During the journey of 29

years, it has capitalized profits for 12 times

(including proposed bonus shares from

profits of current year) and in the last 5 years

it has done for 4 times. In addition, it has

also retained profits to enhance its equity

base. Total shareholders' fund that stood at

NRs.2.44 billion at 15 July 2008 has since

increased to NRs.6.69 billion at 15 July

2013, recording a compounded annual

growth rate of 22.38%. Additionally the

bank has proposed distribution of cash

dividend totaling NRs.3.17 billion out of net

profit generated in the last five years.

The bank's focus on enhancing shareholder's

fund may be assessed appropriately from the

dividend payout ratio and reserves volume.

3,130

3,837

4,567

5,444

6,689

2009 20132010 2011 2012

SHAREHOLDERS' FUND

N s. in MillionR

34%

30%

29% 30%

33%

SHAREHOLDERS’ FUND ROE IN %

DEPOSIT MIX

CALL

33%

21 billion

CALL

17%

6 billion

INTEREST

FREE

13%

8 billionINTEREST

FREE

18%

6 billion

FIXED

27%

8 billion

SAVINGS

38%

12 billion

FIXED

17%

11 billion

SAVINGS

37%

23 billion

2008 2013

Nabil Bank Limited

24

As obvious from the above table, the Bank

has retained more than 50% of its earnings

during these last 5 years. Growing

businesses and profit may be directly

attributed to the growing shareholder's fund

as its growth gives bank an edge to expand

its businesses by maintaining healthy

capital adequacy ratio. And this relationship

can be established from the fact that the

businesses of Nabil have grown significantly

in these 5 years.

During the year 2012/13, the bank's risk

weighted exposure grew by around

NRs.8,102.28 million, which is 9.23 times

of profit retention of year 2011/12.

Similarly, the RWE in year 2011/12 grew

NRs.6,388.35 million from the last year,

which is 8.77 times of the profit retention

of year 2010/11.

Following table presents the ceiling of

additional risk weighted exposure computed

on the basis of ideal 10% capital adequacy

ratio that the bank can take or could have

taken in subsequent financial year as a

result of profit retention.

DISTRIBUTION OF DIVIDEND

The bank has distributed cash dividend at

the rate of 35%, 30%, 30% and 40% from

profit of financial years ending mid July

2009, 2010, 2011 and 2012 respectively.

Similarly the bank also distributed stock

dividend at the rate of 50%, 40% and 20%

from profit of financial years ending mid

July 2009, 2010 and 2012 respectively.

The Board has proposed distribution of

40% cash dividend and 25% stock

dividend out of profit for financial year

2012-13. The bank maintains its position

of enhancing capital base and rewarding

shareholders with fair return as key factors

of long term success.

PARTICULAR 2008/09 2009/10 2010/11 2011/12 2012/13

Earnings Per Share 113.44 83.81 70.67 83.23 95.14

Cash Dividend Per Share 35.00 30.00 30.00 40.00 40.00

Bonus Share Per Share 50.00 40.00 0.00 20.00 25.00

Profit Retention Per Share 28.44 13.81 40.67 23.23 30.14

Cash Dividend Payout 31% 36% 42% 48% 42%

PARTICULAR 2008/09 2009/10 2010/11 2011/12 2012/13

Cash Dividend 338.01 434.74 608.93 811.91 974.74

Net Profit After Tax 1,031.05 1,139.10 1,337.75 1,689.39 2,218.76

Profit Retention 693.04 704.36 728.81 877.48 1,244.03

Extra Risk Weighted Exposure @ 10% 6,930.42 7,043.62 7,288.15 8,774.84 12,440.25

DIVIDEND PAYOUT

COMPOUNDED ANNUAL GROWTH RATE

EXTRA RISK WEIGHTED EXPOSURE

AT MID JULY 2013 2008 CAGR

Total deposits 63,609,808 31,915,047 14.8%

Net fixed assets 872,322 598,039 7.8%

Gross loans and advances 47,645,530 21,759,460 17.0%

Gross investments (including money at call) 17,966,349 11,918,923 8.6%

Capital fund (per Basel II) 8,339,251 2,363,599 28.7%

Shareholder's fund (excluding proposed dividend) 6,689,145 2,437,199 22.4%

NRs.000

Rs. in Million

2009 20132010 2011 2012

ANNUAL GROWTH RATE

IN NET PROFIT

38%

10%

17%

26%

31%


25

ANALYSIS OF KEY ITEMS OFINCOME STATEMENT OF PAST 5 YEARS

PERIOD ENDING MID JULY 2013 2012 2011 2010 2009

1. Interest Income 5,702,123 6,126,855 5,254,030 4,047,726 2,798,486

2. Interest Expense 2,186,185 3,155,490 2,955,431 1,960,108 1,153,280

Net Interest Income 3,515,938 2,971,364 2,298,600 2,087,618 1,645,206

3. Commission and Discount Income 393,051 366,387 290,855 215,482 179,693

4. Other Operating Income 209,905 201,085 180,570 169,548 144,164

5. Foreign Exchange Income 489,051 447,070 276,103 291,441 251,920

Total Operating Income 4,607,945 3,985,907 3,046,128 2,764,088 2,220,983

6. Staff Expense 646,760 500,713 454,042 366,940 339,898

7. Other Operating Expense 468,781 430,909 401,425 334,186 265,158

8. Foreign Exchange Loss - - - - -

Operating Profit before Loan Loss Provision 3,492,404 3,054,285 2,190,661 2,062,962 1,615,927

9. Provision for Possible Losses 27,451 413,949 109,470 355,829 45,722

Operating Profit 3,464,953 2,640,336 2,081,190 1,707,133 1,570,205

10. Non Operating Income /(Expense) 13,469 13,840 6,981 6,455 2,190

11. Provision for Possible Losses Write Back 24,728 - 7,101 39,792 10,618

Profit from Regular Activities 3,503,149 2,654,176 2,095,273 1,753,379 1,583,013

12. Income/(Expense) from Extra-ordinary Activities (17,454) (3,037) 3,148 34,322 43,522

Profit from All Activities 3,485,695 2,651,139 2,098,421 1,787,701 1,626,534

13. Provision for Staff Bonus 316,256 241,639 190,943 162,518 147,867

14. Provision for Income Tax 950,678 720,109 569,733 486,083 447,615

Net Profit/(Loss) 2,218,762 1,689,392 1,337,745 1,139,099 1,031,053

NET PROFITThe bank’s after tax net profit in the last

five years has been very good both in terms

of volume and growth rate. Annual growth

rate during this period ranged from 10% to

31%. While compounded annual growth

rate achieved during this period is 24.34%.

From volume perspective, the profit in year

2007/08 was mere NRs.746.47 million

which grew tremendously and reached to

NRs.2,218.76 million in year 2012/13.

Nabil's performance in this period could be

regarded as one of the best performances in

the nepalese banking industry.

NET INTEREST INCOMEAND INTEREST RATES

Net interest income of the bank has

increased from NRs.1.22 billion at 15 July

2008 to NRs.3.52 billion at 15 July 2013,

recording a compounded annual growth rate

of 23.57% through five years. This is

almost a three-fold increment or an

absolute growth of 188.13%.

As depicted in the adjacent graph, the bank

has maintained fairly a good amount of net

interest margin throughout the period of 5

years. Starting from the financial year

2008-09 through 20012-13, the share of

02

Nabil Bank Limited

26

net interest margin over total interest

revenue for each of the five years is 59%,

52%, 44%, 48% and 62% respectively.

Interest spread is primarily guided by the

liquidity conditions in the market. There

had been instances when liquidity crunch

was at its peak. Post real estate bubble,

banks and financial institutions faced stiff

challenge to maintain liquidity ratios.

Interbank interest rates rose as high as

12.83% (January 2010) and banks

competed with each other offering high

rates on deposits. Despite increment in the

cost of deposits, banks had to raise rates on

lending slowly without hurting much on the

borrower's repayment capacity, as

significant jump could have hindered banks'

credit quality. This significantly impacted on

net interest margin in general. However,

Nabil managed its asset liability incredibly

during these periods and was still able to

reap the share of 50% net interest margin

over its total interest revenue. On the latter

half of these 5 years period, the interest

rates subsided tremendously with inflow of

deposits. The government funds also got

frozen due to delay in budget sanctioning as

a result of political impasse. The

disbursement of selective proposals also

continued as banks were quite reluctant to

encourage new business. Interbank rate

hovered below 0.5% most of the time after

year 2010/11 with brief rise to 5.77%

during May 2013. Rates on new T-bills also

slumped below 0.5% mark, the lowest

hitting to 0.15% in September 2012. Due

to the surplus of liquidity, the banks had to

curtail interest rates both ways. Moreover

with limited investment opportunities,

banks and financial institutions had the

challenge of maintaining margin amid

growing idle fund. The reduction in cost of

deposit was not sufficient to compensate

the cost of idle fund. As a result, banks had

to take measured steps while reducing

interest rates on loans and advances. Lower

rate credit schemes emerged quite late

(March - May 2013) that gave respite for a

brief period to raise interest rates to some

extent.

Considering the conditions that have

prevailed in these 5 years, the rising volume

of net interest income of Nabil could be

regarded as remarkable. With

implementation of regulatory requirements

for limiting LCY interest spreads to 5%

recently, the shrinking of net interest

income in the days ahead is quite obvious,

which could hinder profitability significantly

thereby pressurizing financial institutions to

enhance their credit volumes which perhaps

would not be in favour of banking industry

at the moment.

FEES, COMMISSIONAND OTHER INCOMEThe income under these headings during

2012/13 has increased by NRs.349 million

in comparison to that of year 2008-09

posting an absolute growth of 137.68%.

The compounded annual growth rate during

this period is 18.90%.

One of the key focus areas has been to

increase the contribution of non-interest

income in the bottom line performance.

Accordingly the bank has been expanding

its fee income streams by further

augmenting on existing avenues and

offering new products. Income from letter of

credit, bank guarantee, remittance, cards

and loan management has been important

contributors of growth. Similarly, new

avenues like bullion, insurance and

electronic channels have also shown

encouraging signs for the future.

FOREIGN EXCHANGE INCOMEThe bank's foreign exchange earning has

increased to NRs.489 million in the year

2012/13 from NRs.196 million in year

2008/09, recording a growth of 148.90%.

The compounded annual growth rate

achieved during this period is 20.01%. The

08-09 09/10 10/11 11/12 12/13

August

Septe

mber

Octo

ber

Nove

mbe

Decem

ber

January

Febru

ary

Marc

h

April

May

June

July

August

Septe

mber

Octo

ber

Nove

mber

Decem

ber

January

Febru

ary

Marc

h

April

May

June

July

August

Septe

mber

Octo

ber

Nove

mber

Decem

ber

January

Febru

ary

Marc

h

April

May

June

July

August

Septe

mber

Octo

ber

Nove

mber

Decem

ber

January

Febru

ary

Marc

h

April

May

June

July

August

Septe

mber

Octo

ber

Nove

mber

Decem

ber

January

Febru

ary

Marc

h

April

May

June

July

12.83%

0.33%

Source: Macroeconomic Statistics prepared by Nepal Rastra Bank

INTERBANK INTEREST (2008 MID JULY TO 2013 MID JULY)

5.77%

2009 20132010 2011 2012

INTEREST EARNING TREND

59%

1,645

1,153

1,960

2,9553,155

2,186

2,090

2,299

2,971

3,516

52% 44% 48% 62%

INTEREST EXPENSE NET INTEREST INCOME

bank has been running its treasury

operations efficiently, ideally capitalizing on

favorable correspondent banking

relationships, tapping market opportunities

and offering innovative treasury services to

its clients.

STAFF EXPENSEThe bank's staff expense has increased to

NRs.647 million in the year 2012/13 from

NRs.263 million in year 2008/09,

recording a sizable growth of 146.0%. The

compounded annual growth rate posted

during this period is 19.73%. The

increased HR workforce due to expansion of

business, promotions and rise in pay /

benefits due to annual appraisal and bi-

annual collective bargaining have been the

major causes for the rise in staff costs.

In addition, the employees have also been

benefited of good amount of bonus. Total

staff bonus which was provisioned NRs.109

million in year 2008/09 years has now

risen to NRs.316 million for the financial

year 2012-13, recording a compounded

annual growth rate of 23.77%.

OTHER OPERATING EXPENSEIn financial year 2012-13, the expense

under this head has increased to NRs.469

Million from NRs.221 Million incurred in

year 2008/09, recording a growth of

112.36%. The compounded annual growth

rate posted during this period is 16.26%.

Managing operating expense is one of the

important aspects for long term

sustainability. The bank has implemented

rigorous process for expense authorization

which includes budgetary planning,

monitoring and variance reporting, and

centralized expense approval structure. The

expense growth is at normal level and

driven by mainly by business expansion and

inflation.

COST TO INCOME RATIOThis is the ratio of gross cost of operation to

gross income from operation. Years

2008/09 through 2010/11 was the period

when Nabil expanded its businesses.

Number of branches / extension counters

grew to 48 from 28, ATM grew to 68 from

32 and number of permanent staffs grew to

657 from 416. As expansion was on initial

days the operating leverage was below than

optimum and obviously cost to income ratio

grew steadily. Apart from this, the rising

demand of deposits to maintain the liquidity

ratios while tightening of credit due to fall

out of real estate also contributed for rising

interest costs while slowing growth rates of

net interest income to some extent.

Post 2010/11, the bank witnessed steady

improvement in cost to income ratio. The

improvement may be attributed to better

net interest margin in years 2011/12 and

2012/13 through better use of resources

and infrastructure. Moreover, the bank has

always maintained its position towards

generating non-interest income in excess of

its non-interest expenses every year. During

the last five years, the compounded annual

growth rate of non-interest income and non-

interest expenses were 19.39% and

18.19% respectively.


27

2009 20132010 2011 2012

COST TO INCOME RATIO

57%

56%

63%

49%

52%

PERIOD ENDING MID JULY 2013 2008 CAGR

Operating Income 4,607,945 1,670,427 22%

- Net Interest Income 3,515,938 1,220,261 24%

- Fees, Commission and Other 602,956 253,679 19%

- Foreign Exchange 489,051 196,487 20%

Operating Expense 1,115,541 483,658 18%

- Staff 646,760 262,908 20%

- Other Operating 468,781 220,751 16%

Net profit after tax 2,218,762 746,468 24%

COMPOUNDED ANNUAL GROWTH RATE OFMAJOR INCOME STATEMENT ITEMS: NRs.000

Nabil Bank Limited

28

DEPOSITS AND LOANSThe deposits and loans have grown by

NRs.8.59 billion and NRs.4.78 billion

respectively achieving growth of 16% and

11% respectively. These growth rates are

slightly behind the national average achieved

as 18% and 22% respectively.

The growth of lending lagging behind the

national average may be attributed to the

bank's cautious approach towards booking

additional risk assets such that portfolio

quality and yield are maintained at the

satisfactory level. In tandem with the lending

growth, the credit risk assets have also

grown by 14% to reach NRs.57.19 billion

from last year's NRs.50.02 billion.

On average basis, the total loans have grown

by NRs.3.1 billion mainly due to growth of

business loans (by NRs.3.7 billion). The

average volume of retail loans however

observed reduction of NRs.559 million.

In the deposit segment, the growth is mainly

on interest free deposits posting growth of

13.9%, savings posting growth of 29.7%

and calls posting growth of 35.1%. Fixed

deposit in contrast recorded decline this year

with negative growth of 23.2%. On average

basis, the total deposits have grown by

NRs.4.2 billion mainly due to the growth of

saving deposits. The savings, call and

current (including margin and matured

deposits) have grown by NRs.5.2 billion,

NRs.2.2 billion and NRs.1.1 billion

respectively, while fixed deposits registered

decline of NRs.4.2 billion.

ACHIEVEMENTS OF CURRENT YEAR

DETAILS OF LOANS AND THEIR YIELD: NRs.000

PERIOD ENDING MID JULY 2013 2012VOLUME* INTEREST YIELD VOLUME* INTEREST YIELD

Business Loan 35,354,284 3,953,057 11.18% 31,667,188 3,955,901 12.49%

Retail Loan 9,478,478 1,227,368 12.95% 10,038,411 1,359,921 13.55%

Total 44,832,762 5,180,425 11.55% 41,705,600 5,315,822 12.75%

*Volume in this table represents daily outstanding average volume.

The deposits and loans

have grown by NRs.8.59 billionand NRs.4.78 billion respectively

02The bank has implemented three years strategic plan beginning with financial year 2012-13. By and large,

the performance of the bank has been satisfactory both in terms of top-line as well as bottom-line.


29

DETAILS OF AVERAGE VOLUME OF DEPOSITS AND THEIR COSTS ARE PRESENTED AS UNDER: NRs.000

*Volume in this table represents daily outstanding average volume

INVESTMENTSThe investments (including money at call)

grew by around NRs.3.1 billion registering

growth of 21% in comparison to last year.

The growth rate achieved by the bank is

higher than the national average (of

commercial banks) which posted a growth

of 19%. The growth in volume of

investments of entire commercial banks for

the year is NRs.35.2 billion. Considering

the bank's cautious approach towards credit

and amid lack of investment opportunities

owing to reluctance of business

communities towards venturing on new

projects, the bank has made efforts to

manage its idle funds through investments

in government securities and placements

despite lower yield.

On average basis, the total investments

have grown by NRs.2.0 billion which is

mainly contributed by FCY placements

(NRs.1.2 billion). The development bonds

(Nepal Government Bonds) and treasury

bills registered average volume growth of

NRs.733 million and NRs.174 million

respectively while other LCY investments

registered reduction of NRs.66 million.

Despite overall volume growth, the

replenishment of high yielding development

bonds after their maturity during the review

year by the low yielding bonds has caused

reduction in overall yield by 70 basis

points. Similarly, lower T-bill rates sustained

from second half of the last financial year

through the review year has contributed on

realizing lower yield of 1.7% as against

7.45% achieved during last year. The

cumulative effect of reduced yield on every

front has affected on overall reduction of

yield to 2.97% from 5.23% achieved last

year.

PERIOD ENDING MID JULY 2013 2012VOLUME* INTEREST COST VOLUME* INTEREST COST

LCY

Current Accounts 5,901,938 - 0.00% 5,114,570 - 0.00%

Savings Accounts 19,203,360 692,442 3.61% 14,432,096 596,273 4.13%

Fixed Accounts 10,878,834 872,138 8.02% 15,104,746 1,629,839 10.79%

Call Accounts 13,896,241 515,498 3.71% 12,093,697 825,383 6.82%

Total LCY Accounts 49,880,373 2,080,078 4.17% 46,745,109 3,051,495 6.53%

FCY

Current Accounts 1,704,459 - 0.00% 1,438,935 - 0.00%

Savings Accounts 1,650,258 7,774 0.47% 1,221,511 7,982 0.65%

Fixed Accounts 1,422,844 15,083 1.06% 1,431,998 24,912 1.74%

Call Accounts 3,672,869 33,775 0.92% 3,263,823 36,666 1.12%

Total FCY Accounts 8,450,430 56,632 0.67% 7,356,267 69,560 0.95%

Total LCY and FCY 58,330,803 2,136,710 3.66% 54,101,376 3,121,055 5.77%

Nabil Bank Limited

30

NET INTEREST INCOMEThe net interest income posted healthy

growth rate of 18.3% during the review

period. The growth was achieved mainly

due to reduction in cost of resources though

there was also reduction in yield on assets.

The bank's weighted average cost of

resources decreased by 207 basis points

from 5.74% to 3.67%. While the cost of

borrowing remained at more or less same

level with slight reduction (to 3.81% from

3.89%) during the review period; the cost

of deposits fell by 211 basis points to

remain at 3.66% from 5.77%. The decline

in cost of deposits has positively

contributed on reduction of total interest

expense by 31.54%, despite growth of

average deposit volume by 7.82%. The

growth of interest expenses of commercial

banks also fell into negative zone posting

decline of 11.88% amid growth in volume

by 17.62% in comparison to last year.

The declining costs of deposits was affected

largely due to liquidity condition. The entire

financial system remained flush in most of

the periods of review year with some

tightness during 7th through 10th month.

After a sustained period of liquidity

abundance, the banks started launching

newer and attractive credit schemes

specially on retail front in order to ease out

idle funds. However, due to the growth of

deposits outperforming the growth of credit,

the interbank rates soon fell below 1%

again. As per monthly statistics published

by Statistics Division of NRB for Mid July

2013 (Ashad end, 2070) the deposits of

INVESTMENTS NRs.000

COST OF RESOURCES NRs.000

PERIOD ENDING MID JULY 2013 2012VOLUME* INTEREST YIELD VOLUME* INTEREST YIELD

Nepal Government Bonds 3,434,354 225,271 6.56% 2,700,713 196,063 7.26%

Nepal Government T Bills 5,714,261 99,131 1.73% 5,540,180 412,618 7.45%

Other Investments - LCY # 117,208 2,655 2.27% 183,826 8,591 4.67%

Other Investments - FCY # 8,278,734 194,641 2.35% 7,071,386 193,761 2.74%

Total 17,544,558 521,698 2.97% 15,496,105 811,033 5.23%

*Volume in this table represents daily average volume # excludes equity investments and dividend income

PERIOD ENDING MID JULY 2013 2012 CHANGES

Aggregate volume of interest

bearing liabilities 59,630,912 54,985,995 8.45%

- average deposits 58,330,805 54,101,374 7.82%

- average borrowings 1,300,108 884,621 46.97%

Interest expense on liabilities 2,186,185 3,155,490 -30.72%

- on deposits 2,136,709 3,121,055 -31.54%

- on borrowings 49,476 34,435 43.68%

Weighted Average Cost 3.67% 5.74% -36.11%

- cost of deposit 3.66% 5.77% -36.50%

- cost of borrowing 3.81% 3.89% -2.24%

MONTHLY WEIGHTED AVERAGE INTER BANK RATE PRIME- IN YEAR 2012 - 13

0.35%

6.72%

0.30% 0.36% 0.54% 0.54%0.72%

4.32%

4.44%

3.62%

1.00%

0.58%

1 2 3 4 5 6 7 8 9 10 11 12

banks and financial institutions climbed to

NRs.1,250 billion as against NRs.1,147

billion in Mid May 2013 while the credit of

banks and FIs surged nominally to reached

NRs.956 billion in Mid July 2013 from

NRs.924 billion in Mid May 2013.


31

MONTHLY INTER BANK TRANSACTION VOLUME - PRIME

1 2 3 4 5 6 7 8 9 10 11 12

80640

2285

5764

1860

1490

7040

8600

3390

4603

1100

1720

N s. in MillionR

YIELD ON EARNING ASSETS NRs.000

PERIOD ENDING MID JULY 2013 2012 CHANGES

Aggregate volume of interest earning assets 62,377,320 57,201,704 9.05%

- average loan and advances 44,832,762 41,705,600 7.50%

- average investments 17,544,558 15,496,105 13.22%

Interest Income on earning assets 5,702,123 6,126,855 -6.93%

- on loans and advances 5,180,425 5,315,822 -2.55%

- on investments 521,698 811,033 -35.67%

Weighted Average Yield 9.14% 10.71% -14.65%

- yield on loans and advances 11.55% 12.75% -9.34%

- yield on investments 2.97% 5.23% -43.19%

Taking stock of liquidity flush, the

management decided to shed off high cost

deposits and prioritized on expanding low

cost current and savings deposit base.

Consequently, bank's deposit mix with low

cost deposits improved by the year-end.

Current and savings segment registered a

growth of 25.09%, thereby increasing its

share to 50% of total deposit. More volatile

call deposit segment also witnessed a

growth of 35.1% as large number of

institutional clients chose to increase their

business with the bank, despite reduction in

interest rate. On the other hand with

downward revision in fixed deposit rates

and maturity of existing higher coupon

deposits, this segment registered a decline

of 23.2%. These all contributed on saving

of interest expense to large extent by around

30.7% (in amount NRs.969 million).

The effects of liquidity remained on the

earning side, though the rate of reduction

was not as severe as on the cost side. The

yield on interest earning assets reduced by

157 basis points while the average volume

of earning assets increased by 9.05%.

Demand of fresh credit from the business

communities was low while bank also

discouraged disbursing credits on

unproductive sector. The bank in essence

looked towards strengthening its existing

portfolio and encouraged low risk profile

credit proposals.

FEES, COMMISSION ANDOTHER OPERATING INCOMEThe bank's fees, commission and other

operating income grew satisfactorily posting

overall growth of 6.3%. The major

contributors of this growth are guarantee

commission, LC commission, remittance

commission and remittance commission

(including remittance rebate). The fee

income under loan management, insurance

agency and bullion trade have however

witnessed decline this year. The bank has

given more focus on enhancing non-interest

income by tapping income potentials on

non-funded exposures.

FEES, COMMISSION AND OTHER OPERATING INCOME NRs.000

PERIOD ENDING MID JULY 2013 2012 CHANGESAMOUNT %

Total Fees, Commission and Other Income 602,956 567,472 35,484 6.3%

Major areas:

- Guarantee 72,269 64,505 7,763 12.0%

- Remittance 82,430 76,322 6,108 8.0%

- Letter of Credit 60,880 54,675 6,205 11.3%

- Insurance Agency 11,180 11,975 (795) -6.6%

- Loan Management 118,710 118,921 (211) -0.2%

- Cards Commission 114,088 113,690 398 0.4%

- Remittance Rebate 40,701 33,278 7,423 22.3%

- Bullion Commission 15,631 15,792 (161) -1.0%

- Communication Fees 15,141 13,367 1,774 13.3%

- Cards Issuance and Renewal 30,523 29,740 783 2.6%

- Other income 41,402 24,452 16,950 69.3%

Nabil Bank Limited

32

FOREIGN EXCHANGE INCOMEIn the last few years, there has been

significant rise in the foreign exchange

income. The bank achieved an overall growth

rate of 9.4% mainly due to growth under

trading (18.4%) while it faced decline under

revaluation (16.7%). The achievement may

be considered satisfactory amid high volatility

in exchange rates observed during the second

half of the financial year. The uncertainty of

US dollar rates vis-à-vis INR led the bank not

to take exposure and consequently the bank

could not achieve growth under revaluation it

may have desired.

Last year (2011-12), the foreign exchange

earnings grew significantly by 61.9%

(79.5% in revaluation and 56.6% in

trading) over the previous year's figures and

the rise was attributed to the earnings

through NDF that it started in that year.

NON OPERATING INCOMEThe bank observed decline under this head

mainly due to the loss the bank incurred on

the disposal of low yielding treasury bills

during Mid February through early March

2013. Besides that the bank registered

growth on dividend earning by 23.9%

despite refund of dividend of NRs.6.2

million to Rural Microfinance Development

Centre (RMDC). Similarly it registered

growth on sale of fixed assets by 135.3%.

STAFF EXPENSEThe staff expense grew by 29.2% during

the review year totaling NRs.647 million

from NRs.501 million last year which may

be attributed mainly to rise in pay following

collective bargaining on all levels,

promotion on different levels and

recruitment of 100 staffs in assistant level.

The impact of rise in pay and promotion

significantly impacted salary, allowance and

PF registering growth of NRs.58 million

(15.3%); gratuity provision registering

growth of NRs.55 million (114%) and leave

expenses registering growth of 17 million

(55.1%). Furthermore, the booking of

uniform expenses distributed biennially also

contributed on the growth of staff expense.

FOREIGN EXCHANGE INCOME NRs.000


Total exchange income 489,051 447,070 41,981 9.4%

- Trading income 393,360 332,138 61,223 18.4%

- Revaluation income 95,691 114,933 (19,242) -16.7%

NON OPERATING INCOME NRs.000


Total non operating income / (loss) 13,469 13,840 (371) -2.7%

- dividend income 20,588 16,619 3,969 23.9%

- on sale of investment (8,102) - (8,102) -100.0%

- on sale of fixed assets 983 (2,780) 3,762 135.3%

STAFF EXPENSE NRs.000


Total staff expense 646,760 500,713 146,047 29.2%

Major areas:

- Training expense 8,737 8,935 (197) -2.2%

- Uniform allowance 14,562 - 14,562 100.0%

- Dashain allowance 25,337 25,455 (118) -0.5%

- Gratuity and Pension 103,919 48,570 55,349 114.0%

- Leave provision / encashment 48,409 31,212 17,197 55.1%

- Salary, allowance, provident fund 435,623 377,680 57,943 15.3%

- Other employee benefits 10,173 8,861 1,312 14.8%

The bank achieved

an overall growth rate of

9.4% in foreign exchange.


33

PROVISION FOR POSSIBLE LOSSES NRs.000


Total provision expense 2,723 413,949 (411,226) 99.3%

- on loan impairment 13,610 390,695 (377,085) 96.5%

- on investment impairment (net) (11,525) 23,254 (34,779) 149.6%

- on other assets 639 - 639 -100.0%

INCOME / (EXPENSE) FROM EXTRA ORDINARY ACTIVITIES NRs.000


Net expense (17,454) (3,037) (14,417) -474.7%

- loan written off expense (27,843) (3,006) (24,837) -826.1%

- recovery from written off loan 10,442 16,771 (6,329) -37.7%

- voluntary retirement scheme - (11,717) 11,717 100.0%

- others (53) (5,084) 5,031 99.0%

OTHER OPERATING EXPENSE NRs.000


Total operating expense 468,781 430,909 37,872 8.8%

Major areas:

- House rent 60,879 54,798 6,081 11.1%

- Security service 38,895 39,833 (939) -2.4%

- Contract service 11,232 10,969 264 2.4%

- Asset insurance 10,306 9,679 627 6.5%

- Deposit insurance 15,279 1,227 14,051 1144.8%

- Fuel and lubricants 33,622 25,171 8,451 33.6%

- Water and electricity 15,969 14,359 1,610 11.2%

- Printing and stationery 21,398 21,184 214 1.0%

- Postage, telephone, fax 28,855 25,221 3,634 14.4%

- Repair and maintenance 16,603 16,795 (192) -1.1%

- Consultancy service fees 29,169 25,336 3,832 15.1%

- Fixed assets depreciation 123,904 130,516 (6,612) -5.1%

- Other expenses 62,672 55,821 6,851 12.3%

OTHER OPERATING EXPENSEThe operating expense of the Bank grew by

NRs.38 million (8.8%) during the review

year mainly due to rise in deposit insurance

premium (NRs.14 million; 1,145%), fuel

and lubricants (NRs.8.5 million; 33.6%),

house rent (NRs.6.1 million; 11.1%),

consultancy service fees (NRs.3.8 million;

15.1%) and communication expenses

(NRs.3.6 million; 14.4%). Owing to

national consumer price index of 10% on

non-food and services, the growth rate of

other operating expenses may be deemed

reasonable. In fact, the growth of deposit

insurance was due to the payment of two

installments of semi-annual insurance

premiums, which was actually implemented

only during the second half of last year and

accordingly had paid only one installment

for that year.

PROVISION FORPOSSIBLE LOSSESBooking of loss provision saw significant

turnaround during the review year as the

bank wrote back significant amount of loss

provision on loans set aside for some big

accounts during earlier financial years.

Consequently, current year's incremental net

loss provision on loans was mere NRs.13

million. In addition, due to the improvement

in price of ICICI bond (denominated in US$)

the bank wrote-back loss provision by

around NRs.12 million. The cumulative

impact of both incremental provision on

loans and write back of provisions on

investments is incremental NRs.2.7 million.

INCOME / (EXPENSE) FROMEXTRA ORDINARY ACTIVITIESThe bank witnessed significant rise in

expense (by 474.7%) under this head due

mainly to increment in bad loan write-off

(by 826.1%) in comparison to last year.

Moreover, it also recorded decline in

recovery from written off accounts (by

37.7%) in comparison to last year.

Nabil Bank Limited

34

DETAILS OF LOANSWRITTEN-OFFIn line with bank's Loan Write-off Policy and

NRB Unified Directive, it has written off

NRs.42 million pertaining to business loans

and consumer loans during the review year.

Total written-off amount include interest of

NRs.14 million. In contrast, the bank has

been able to recover NRs.10 million that

include interest of NRs.2.1 million. With

this, the bank still has to recover NRs.398

million (including interest of NRs.164

million) from the written off accounts. As of

balance sheet date, it has relinquished

rights of recovery on loan accounts of

NRs.54.8 million.

NET PROFIT, INCOME TAXAND STAFF BONUSThe impact of growth under various income

heads and decline particularly of loss

provisions has enabled bank to achieve

notable profit figure. The net profit after tax

for the review year 2012/13 is NRs.2.22

billion registering growth of 31.3% in

comparison to last year. The achievement of

Nabil is second highest among 31

commercial banks as per published

unaudited financials. Similarly, the bank's

operating results (operating profit before

provision) is NRs.3.49 billion recording

growth of 14.3% and is highest in the

banking industry.

The income tax provision and staff bonus

also recorded good growths reaching

NRs.946.89 million and NRs.316.26

million from NRs.728.30 million and

NRs.241.64 million of last year

respectively. The provision of income tax

and staff bonus by the Bank is also the

highest in the banking industry.

DETAILS OF LOANS WRITTEN-OFF NRs.000

PRINCIPAL INTEREST TOTAL

Total loan written off (A) 706,762 281,220 987,983

- written off in FY 2012-13 27,843 14,748 42,592

- written off till FY 2011-12 678,919 266,472 945,391

Total recovery from written off loan (B) (456,434) (77,819) (534,253)

- recovered in FY 2012-13 (8,322) (2,120) (10,442)

- recovered till FY 2011-12 (448,112) (75,699) (523,811)

Net not recovered portion (A-B) 250,328 203,401 453,730

- book write off 234,318 164,604 398,923

- actual write off * 16,010 38,797 54,807

Recovery ratio (on total write-off amount) 64.6% 27.7% 54.1%

* The bank has relinquished its recovery rights in view of remote possibility of loan recovery.

The bank's operating

results is

NRs.3.49 billionrecording growth

of14.3% and

is highest in the

banking industry.


35

VALUE ADDITION

Nabil, along with its stakeholders, created

the value of NRs.4.28 billion during the

review financial year, a growth of

NRs.544.16 million (14.5%) against the

last financial year. Value addition from the

financial intermediation occupied 74.5% of

total value addition while the financial

services occupied 25.5% of the total value

addition.

The value created during the review

financial year has been applied in the

interests of all stakeholders. While applying

the value to the stakeholders, the Bank has

addressed the interests of its stakeholders

in a reasonable manner by prioritizing the

long term interests of its business.

Around 22.5% of the total value is applied

to employees in the form of employees’

benefits and bonuses in lieu of the services

rendered while around 22.2% is applied to

the Government towards payment of

APPLICATION OF VALUE ADDITION: NRs.000

PERIOD ENDING MID JULY 2013 2012 CHANGESAMOUNT SHARE % AMOUNT SHARE % AMOUNT %

To Employee 963,015 22.5% 754,069 20.2% 208,947 27.7%

To Governments 952,677 22.2% 728,302 19.5% 224,375 30.8%

To Long term Financier 25,500 0.6% 25,500 0.7% - 0.0%

To Investor 974,737 22.7% 811,908 21.7% 162,829 20.1%

To Provide for maintenance and expansion 1,368,653 31.9% 1,420,640 38.0% (51,987) -3.7%

- Depreciation and Amortisation 123,904 2.9% 130,516 3.5% (6,612) -5.1%

- Provision for Loan and Investment Loss 2,723 0.1% 413,949 11.1% (411,225) -99.3%

- Deferred Tax (1,999) 0.0% (8,193) -0.2% 6,194 -75.6%

- Capital / Retained Earning / Reserves 1,244,025 29.0% 884,368 23.6% 359,657 40.7%

Total Value Addition 4,284,581 100.0% 3,740,418 100.0% 544,163 14.5%

TOTAL VALUE ADDITION NRs.000


Interest Income 5,702,123 6,133,739 (431,616) -7.0%

Interest Expense (2,160,685) (3,129,990) 969,306 -31.0%

Operating Cost (379,893) (308,951) (70,942) 23.0%

Other Income from financial intermediation 31,030 33,390 (2,360) -7.1%

Value addition from financial intermediation 3,192,575 2,728,188 464,387 17.0%

Income from financial services 1,092,007 1,012,231 79,776 7.9%

Total Value Addition 4,284,581 3,740,418 544,163 14.5%

corporate tax (current tax and prior period

tax). The share of corporate tax

demonstrates the significance of Bank’s

contribution towards the development of the

nation. Similarly, around 22.7% of the total

value has been applied towards the

investors in the form of dividend. Bank, in

order to maintain and extend its business

for long term sustainability, retained around

31.9% of the total value created.

The growth of 20.1% of the total value

applied towards the investors reveals the fact

that the Bank is capable of providing

reasonable return and also maintains and

meets enthusiasm and expectation of the

shareholders. Slight reduction of 3.7% on

application towards the business expansion

and maintenance is mainly due to lower

booking of provision for possible losses

during the review year in comparison to last

financial year.

02

Nabil Bank Limited

36

For the purpose of assessing segmental

performance the bank has identified

business segment as its primary segment

and geographical segment as its secondary

segment.

By their nature, the different businesses

carried by the bank can be grouped into

distinct business segments. Product

portfolio under each of these segments has

noticeable variations in their nature and

also in terms of the involved risk and

reward. As such this segmentation

predominantly affects the banks business

risks and its pricing strategies.

Branches and business units can also be

grouped into distinct geographic segments

based on their location. However, this factor

does not predominantly affect the banks

business risks and its pricing strategies. The

bank takes account of social, economic and

political factors while assessing the impact

of geographic location in its businesses.

PRIMARY SEGMENTThe bank has identified four primary

segments based on the nature of business

operations viz. Banking, Treasury, Cards

and Others. Each of these business

segments has a contribution ratio of 74.1%,

17.8%, 3.6% and 4.5% respectively in the

overall net profit of the bank for year ending

mid July 2013. Detail segmental

performance is set out in the table below.

The Bank's business is mainly concentrated

in "Banking" segment. The core business of

deposit mobilization and lending activities

along with other auxiliary banking services

apart from card operations, treasury

operations and other businesses are

reported under the Banking segment.

Treasury segment comprise of entire

treasury operations including the bank's

investment portfolio, foreign currency

transactions and overall fund management.

Card segment comprise of all card related

operations including debit and credit card

issuance, merchant relationships, e-

banking, m-banking and ATM management.

Others segment comprise of bancassurance

business and bullion operations. Interest

earnings and foreign exchange gains/losses

generated while conducting businesses

under distinct segments are presented

under related segment.

SEGMENTAL PERFORMANCE OF THE BANK

NRs.000

BANKING TREASURY CARDS OTHERS TOTAL

Revenue

Interest Income (Including Transfer Pricing) 7,317,474 2,498,884 19,580 - 9,835,938

Fee Income 409,891 13,012 295,307 152,199 870,409

Forex Income 117,064 316,413 26,025 29,550 489,051

Non Operating Income 2,733 10,736 - - 13,469

Total Revenue 7,847,161 2,839,045 340,912 181,749 11,208,867

Expense

Interest Expense (Including Transfer Pricing) 4,097,106 2,217,836 5,058 - 6,320,000

Staff Expense 613,153 7,050 16,225 10,332 646,760

Operating Expense 523,232 5,022 192,579 15,402 736,235

Provision for possible Loss 14,536 (12,262) 450 - 2,723

Non Operating Expense 17,454 - - - 17,454

Total Expense 5,265,480 2,217,646 214,312 25,734 7,723,172

Segment Result 2,581,681 621,399 126,600 156,015 3,485,695

Staff Bonus 316,256

Profit before Tax 3,169,439

Income Tax 950,678

Net Profit for the Year 2,218,762

% Share 74.1 17.8 3.6 4.5 100.0

PRIMARY BUSINESS SEGMENT

02


37

SECONDARY SEGMENTThe bank has identified five secondary

segments based on the geographic locations

of its business viz. Eastern, Central,

Western, Mid-Western and Far-Western. For

year ending mid July 2012 each of these

geographical segments has a contribution

ratio of 10.5%, 79.4%, 5.9%, 2.5% and

1.8% respectively in the overall net profit of

the bank. Detail segmental performance is

set out in the table below.

This regional segmentation follows the name

of five development regions of the county.

For segmentation purpose, all business

transactions of offices and business units

located in a particular development region

are grouped together. As set out in the table

below, Central region has the largest

contribution in overall profitability of the

bank. All strategic business units are located

in the Central region and it has the highest

number of branch offices in comparison to

other geographic regions.

NRs.000

EASTERN CENTRAL WESTERN MID WESTERN FAR WESTERN TOTAL

Revenue

Interest Income (Including Transfer Pricing) 724,505 8,454,761 411,162 153,281 92,230 9,835,938

Fee Income 47,211 771,468 31,009 10,421 10,301 870,409

Forex Income 11,050 470,732 4,559 1,708 1,002 489,051

Non Operating Income - 13,469 - - - 13,469

Total Revenue 782,766 9,710,430 446,730 165,409 103,532 11,208,867

Expense

Interest Expense (Including Transfer Pricing) 324,553 5,760,781 159,844 51,232 23,591 6,320,000

Staff Expense 41,465 547,420 37,648 12,976 7,251 646,760

Operating Expense 45,610 623,523 41,707 15,171 10,223 736,235

Provision for possible Loss 6,439 (6,506) 3,048 (1,253) 994 2,723

Non Operating Expense - 17,454 - - - 17,454

Total Expense 418,067 6,942,671 242,248 78,126 42,059 7,723,172

Segment Result 364,698 2,767,759 204,482 87,283 61,473 3,485,695

Staff Bonus 316,256

Profit before Tax 3,169,439

Income Tax 950,678

Net Profit for the Year 2,218,762

% Share 10.5 79.4 5.9 2.5 1.8 100.0

SECONDARY GEOGRAPHIC SEGMENT

Central region has

the largest contributionin overall profitability of the bank.

Nabil Bank Limited

38

INTERIM FINANCIAL POSITIONDuring the year under review, amid liquidity

flush and limited opportunities for quality

investments, the bank took cautious steps

towards deposit mobilization. Proactive

strategies taken by the bank in deposit

mobilization front played a significant role

in framing the banks financial position and

performance throughout the year.

The quarter to quarter growth rate in

balance sheet size was recorded at 8.1%, -

0.8%, -2.4% and 10.4% respectively in the

1st, 2nd, 3rd and 4th quarters of the year.

These corresponded to absolute change in

volume of NRs. 4,465 million, NRs. 493

million negative, NRs. 1,398 million

negative and NRs.6,012 million

respectively during these quarters.

In the absence of political stability, business

sentiment continued to be on the lower side

throughout the year. Consequently major

additional investments in production and

infrastructure sectors as well as sectors

identified as new ones under government

policies could not accelerate at desired

pace. The bank moved along cautiously

while entertaining new credit proposals.

The focus remained towards business

consolidation, risk reduction and product

pricing that continued from last year.

INTERIM POSITION AND PERFORMANCE (UNAUDITED)

NRs.in Million

AT QUARTER ENDING MID OCT 12 MID JAN 13 MID APR 13 MID JUL 13Q1 Q2 Q3 Q4

Capital and Liabilities

Paid up capital 2,436 2,437 2,437 2,437

Reserve and surplus 3,605 4,121 4,536 5,225

Debenture and bond 300 300 300 300

Borrowings - 2,925 1,450 -

Deposits 59,489 58,996 57,598 63,610

- domestic currency 50,787 51,243 49,243 54,278

- foreign currency 8,702 7,753 8,355 9,332

Income tax liability 247 119 34 67

Other liabilities 3,956 3,511 3,500 2,892

Total 70,033 72,409 69,854 74,531

Assets

Cash and bank balance 6,029 3,553 4,452 5,883

Money at call and short notice 976 1,927 942 1,634

Investments 17,650 18,698 16,701 16,348

Loans and advances 42,417 45,455 45,100 47,646

- Real estate loan 4,633 4,722 4,371 4,436

- Home loan (upto 100 Million) 2,465 2,576 2,753 3,270

- Margin loan - - - -

- Term loan 6,434 6,582 6,432 6,948

- Working capital loan 22,402 24,897 24,247 24,555

- Others loan 6,484 6,678 7,297 8,436

Fixed assets 870 863 876 872

Non banking assets - - - -

Other assets 2,090 1,912 1,783 2,148

Total 70,033 72,409 69,854 74,531

INTERIM FINANCIAL POSITION

02


39

INTERIM FINANCIALPERFORMANCEAmid liquidity flush scenario, interest rate

on bank deposits across the industry

witnessed a continuous decline throughout

the year. The bank's interest expense also

decreased, thereby reducing the overall cost

of fund and increasing net interest spread.

Weighted average interest spread for the

year increased to 5.48% level from 4.95%

level in the previous year.

The quarter to quarter growth rate in net

interest income was recorded at -8.9%,

7.2%, 0.2% and 14.9% respectively in the

1st, 2nd, 3rd and 4th quarters of the year.

These corresponded to absolute change in

net interest income of NRs.78.6 million

negative, NRs.58 million, NRs.2 million

and NRs.129 million respectively during

these quarters. Total net interest income for

the year was recorded at 18.1% or

NRs.537.7 million higher than that of

previous year.

Apart from interest earnings, improvement

under headings like possible loss

provisioning, foreign exchange gains and

other operating income enabled the bank to

post year end net profit at a level

significantly higher than that of previous

year. Significant net write back of loss

provisions by NRs.119 million and

NRs.173 million was made during the 1st

and 4th quarters.

Quarterly net profit after tax increased at

0.1%, -11.1%, -19.5% and 63.7%

respectively in each of 1st, 2nd, 3rd and

4th quarters respectively. These

corresponded to absolute change in net

profit after tax of NRs.0.7 million,

NRs.65.7 million negative, NRs.102.0

million negative and NRs.268.4 million

respectively. Year end net profit after tax

was recorded at 31.6% or NRs.533.9

million higher than that of previous year.

NRs.in Million

FOR QUARTER ENDING MID OCT 12 MID JAN 13 MID APR 13 MID JUL 13Q1 Q2 Q3 Q4 TOTAL

Interest Income 1,435 1,390 1,380 1,497 5,702

Interest Expense (632) (530) (518) (507) (2,186)

Net Interest Income 802 860 862 991 3,516

Fees,Commission and Discount 116 117 100 60 393

Other Operating Income 40 29 32 109 210

Foreign Exchange Gain 106 124 113 147 489

Total Operating Income 1,064 1,130 1,107 1,307 4,608

Staff Expenses (145) (123) (122) (256) (647)

Other Operating Expenses (115) (107) (116) (131) (469)

Operating Profit Before Provision 804 900 869 920 3,492

Provision for Possible Losses (163) (91) (226) (12) (493)

Operating Profit 641 809 643 907 3,000

Non Operating Income / (Expenses) 2 1 (1) 16 18

Write Back of Provision for Possible Loss 282 12 11 185 491

Profit from Regular Activities 925 821 653 1,109 3,508

Extra Ordinary Income / (Expenses) 0 1 6 (24) (17)

Profit before Bonus and Taxes 925 822 659 1,085 3,491

Provision for Staff Bonus (84) (75) (60) (98) (317)

Provision for Tax (252) (224) (178) (297) (951)

Net Profit 589 523 421 690 2,223

INTERIM FINANCIAL PERFORMANCE

Nabil Bank Limited

40

Nabil Investment Banking Ltd. (“Nabil

Invest” in short), a subsidiary of Nabil Bank,

was incorporated on 07th of February 2010

as a public limited company as per the

Companies Act 2006. It is a Merchant

Banker licensed by Securities Board of Nepal

under the Securities Businessperson

(Merchant Banker) Rules, 2064. Nabil Bank

as at the Balance Sheet date holds 74.29%

controlling interest in the total paid up

capital of Nabil Invest. The financial year of

the subsidiary has a common financial year

with that of Nabil Bank (parent company)

that ended on July 15, 2013.

The principal activities of Nabil Invest are to

provide merchant banking and investment

banking services that include management

of public offerings, portfolio management,

underwriting of securities, administration

and record keeping of securities of its clients

(RTS), management of mutual fund,

depository participants, and corporate

advisory. In the review financial year

2012/13, the major activities performed by

the Company are as under:

� Management of IPOs of equity capital of

2 “A” Class Financial Institution

(Total NRs.2.09 billion);

� Management of new fund offer of

Mutual Fund Units of Nabil Balance

Fund 1 (NRs.750 million);

� Management of debenture issue of 2 "A"

Class Financial Institutions

(NRs.1.10 billion);

� Management of assets of the customers

under Investment Management Service

(NRs.617 million as at 15th July 2013);

� Finalization of Product Paper and

Standing Instruction Manual for loan

syndication and merger & acquisitions;

� Being appointed as a fund manager and

depository of Nabil Balance Fund 1;

� Acquired three additional RTS

businesses and is rendering RTS related

services to a total of 6 companies

including the unit holders of Nabil

Balanced Fund I.

� Actions initiated to relocate head office

from Chabahil to Naxal, Kathmandu.

The office has been successfully relocated

on November 21, 2013;

� In a position to render depository

participant services from the office at

Anamnagar Kathmandu (now at Naxal)

from the review year.

The Nabil Invest had been rendering its

services from its registered office located at

Chabahil, Kathmandu. For this purpose, the

Company had established its office in the

building taken in lease by Nabil Bank on cost

to cost sharing basis. Moreover, the company

had also occupied space at Anamnagar

branch to provide administration and record

keeping of securities of its clients. These

offices have since been relocated to Naxal

Narayan Chaur from November 21, 2013.

The Bank has deputed its staff – Mr. Pravin

Raman Parajuli as the CEO of Nabil Invest

under Management Service Agreement. The

Bank also provides various administrative

services necessary for service operations of

the subsidiary under Service Level

Agreement. The administrative services

include general administration, accounting,

finance and planning, information

technology, cheque clearing, human resource

administration, legal advisory and fund

management service.

The transactions between Bank and its

subsidiary during the review year 2012/13

have been presented in point 13.5 of

Schedule 33 “Notes to Accounts” of financial

statements annexed herewith.

GENERAL OVERVIEW OF NABIL INVEST02


41

FINANCIAL POSITIONAND PERFORMANCE OFNABIL INVESTThe balance sheet of the Company expanded

by 12% or NRs.31 million as at Mid July

2013 in comparison to last year. The growths

under both equity and liability remained more

or less same. The reserves and surplus during

the review year has increased by 86.2% to

reach NRs.24 million.

NRs.000BALANCE SHEET

AT MID JULY 2013 2012 2011 2010

Capital and Liabilities

Share Capital 105,000 105,000 105,000 70,000

Reserves & Surplus 24,165 12,975 7,457 (528)

Accounts Payable 119,287 109,208 7,218 2,628

Provision for Staff Bonus 2,822 1,436 1,065 -

Deferred Tax Liability - 47 60 -

Other Liabilities and Provisions 32,765 24,427 694 17

Total 284,039 253,093 121,494 72,117

Assets

Cash and Bank Balance 110,536 128,243 26,337 70,000

Investments 98,383 107,000 83,400 -

Advance Tax (Net of Tax Liability) 3,599 4,527 4,453 -

Fixed Assets (net of accumulated depreciation) 6,139 6,952 6,169 1,941

Deferred Tax Assets 155 - - -

Other assets 65,228 6,371 1,135 176

Total 284,039 253,093 121,494 72,117

Nabil Bank as at the Balance Sheet date

holds74.29% controlling interest in

the total paid up capital of Nabil Invest.

Nabil Bank Limited

42

NRs.000

PERIOD ENDING MID JULY 2013 2012 2011 2010

Gross Income 51,696 28,522 19,480 -

IPO Fees 12,424 3,601 305 -

Interest Income 22,455 14,633 12,979 -

Other Income 16,817 10,288 6,196 -

Gross Expenses (20,650) (12,728) (7,768) (705)

Interest Expenses (3,588) (71) - -

Personnel Expenses (5,603) (4,296) (1,574) (222)

General Operating Expenses (9,466) (6,647) (4,927) (483)

Depreciation Charge (1,992) (1,714) (1,267) -

Operating Profit 31,046 15,794 11,712 (705)

Provision for Staff Bonus (2,822) (1,435) (1,065) -

Profit before tax 28,224 14,359 10,647 (705)

Tax Expense (7,056) (3,590) (2,662) 176

- Current Tax (7,258) (3,603) (2,425) -

- Deferred Tax 202 13 (237) 176

Profit after tax 21,168 10,769 7,985 (529)

Opening Retained Earning 12,975 7,456 (529) -

Dividend Payout (10,500) (5,250) - -

Deferred Tax Reserve (155) - - -

Closing Retained Earning 23,488 12,975 7,456 (529)

INCOME STATEMENT

For review year 2012/13, the net profit of

the Company increased by 96.6% or

NRs.10.4 million compared to that of

previous year. This growth may be attributed

to the significant growth posted on income

side in comparison to expenses. The gross

income of the Company increased by 81.2%

or NRs.23.1 million, while the gross

expenses increased by 62.2% or NRs.7.9

million. As set out in the table below the

income from IPO management and other

management services have grown

substantially. Also the company's effective

fund management enabled it to earn good

amount of interest from the bank placements

amidst declining rates of bank deposit.

The Company has proposed distribution of

15% cash dividend from the current year's

profit.

SYNERGISTICValue creation of sums greater than the value of all its parts is only possible whenentire components work in sync and create synergy. Nabil has fostered theculture of working together for better and faster result from the activities therebycreating harmony among all the stakeholders. In our drive to take the bank atopcoheres all in togetherness for common good of the stakeholders.

C R I S P

PRODUCTSAND SERVICES

03

03LENDING PRODUCTS

CORPORATE BANKINGNabil Corporate Banking is constituted to

incorporate myriad corporate products with

the concept of a one window solution.

Nabil has a wealth of experience and

knowledge to this end and therefore focuses

on presenting itself as a financial

intermediary to bridge the gap between

those who have surpluses of funds and

those who desperately crave for them. We

understand their enterprises better having

co-worked with each other.

The guiding principle is to reach out the

bank’s finances to the larger clientele bases

no matter where they come from. With this

objective in mind, we at Nabil have

diversified our loan products making it

more inclusive keeping in focus our diverse

customer bases and their varied needs: viz.,

working/fixed capital loans, import/export

loans, hire purchase, mortgage, discounting

and purchasing bills. Nabil keeps itself busy

architecting new and inventive loan

products to maximally deliver especially

customized services and products through

national and international undertakings.

INFRASTRUCTURE ANDPROJECT FINANCINGInfrastructural development is

indispensable for economic growth and to

elevate the living standards of the residents

thereby contributing the nation get to an

economic pinnacle. Considering the leading

role of the Bank like ours in the industry,

we have formed an exclusive unit consisting

of high spirited team having major focus of

contributing with finances to unleash

potential projects like hydroelectricity,

cement, roads, rails, telecommunication,

airports, oil and gas explorations etc. that

remain inertly powerless for want of

financing. Moreover, these mega projects

foster and promote many other small

ancillary projects augmenting overall

business clime in the nation. Needlessly to

say, these economic activities breed an

array of employment opportunities and give

an impetus to the overall economic

development of the nation.

Nabil is always

concerned about how

it can create values for

its customers – the

best in the market.

It at different intervals

designs products and

services in sync with

time, technology

and market.


45

SME BANKINGNepal, being a small economy, development

and economic growth largely depends on the

contribution of small and medium scale

business enterprises (SME) which are

abundant in the country. Therefore, prime

interest of the nation lies on the growth of

SME sector and wellbeing of majority of the

people associated with it. This sector is

pedestal for the country’s total economic

growth as they also stand auxiliary to big

corporate projects. Understanding the

endless potentials within SME, the Bank has

set up a separate hub at New Baneshwor,

Kathmandu with exclusive services related to

SME Banking. The services include a wide

array of financing in the form of cash credits,

overdrafts, time loans, import loans for

working capital requirement of business; and

term loans to finance purchase of capital

goods, like fixed assets, plants, equipments,

machineries, premises, vehicles etc as

required for business establishment and

expansions. Hence, it encompasses all

financial needs of SME customers associated

with manufacturing, trading and service

sectors across the country.

MICROFINANCEMicrofinance is indeed a product specially

designed to extend financial support to the

socio-economically disadvantaged people of

the nation to develop entrepreneurship

within themselves to uplift their living

standard. Nabil always feels accountable for

the community of poor and marginalized

people, and observes enormous potentials at

the bottom of the socio-economic pyramid

too. Nabil sees the enterprising poor not as a

burden of society and has been coming up

with specially designed credit lines with a

motive to eliminate poverty in the nation,

through direct financing, and also through

indirect financing in partnership and

coordination with various development

banks, microfinance institutions, FINGOs

(Financial Intermediary Non Government

Organizations) and Cooperatives. Hence, in

line with the government’s policies &

priorities and the central bank’s directives as

well, Nabil sees micro finance sector under

utmost priority. It also has invested equity in

number of microfinance and rural

development banks of the country for further

contribution in the sector.

PERSONAL LENDINGThis product has the exclusivity of tailoring

personal financial needs of our customers

hailing from diverse socioeconomic zones.

This meticulously and professionally

engineered varied product range covers the

following:

Nabil Housing

We always are attentive to our customers’

needs and expectations and owning a home

is a dream of the many who qualify for

credibility but for want of funds cannot

realize their aspirations. We at Nabil have an

understanding of our customers’ financial

needs and have come up with a Nabil

Housing scheme with features of competitive

interest rates, extended loan tenures, with

flexible repayments and partial payment

facilities. Our customers can avail

themselves of whether it is purchase of land,

construction, refurnishing or refurbishing,

extension or purchase of a ready-made

house or purchase of home appliances.

Nabil Properties

This is an all inclusive scheme to cater to

diverse financial needs of our customers and

the arrangement is done by mortgaging idle

properties in order to finance varied needs

like education, marriage, travel, equity

infusion and of course beyond that. The loan

application is easy, and the process is

simple, and the sanction and delivery of

loans are prompt. This is especially and

resiliently packaged keeping in focus our

customers’ familial needs and hopes and the

loans can be extended up to 15 years.

Nabil Auto

Understanding our customers’ passion for

travel we have pioneered varied schemes for

auto loans with flexible repayment options

for a large variety of vehicles with diverse

schemes. Facilities to withdraw cash by

pledging vehicles in the bank’s name are

also available under the Cash for Car

scheme. The bank has revised the terms of

NabilAuto to cater to the entire need of the

customer that ranges from brand new

commercial and personal vehicles to used

personal vehicles to commercial vehicles.

Nabil Sikshya

Keeping in focus the growing numbers of

students we at Nabil have tailored trouble-

free and convenient education loans to the

students aspiring to pursue higher education

with the option of repayment in installments

or in full. This facility is not limited to

meeting the tuition fees of the students but it

is tailored to meet their other expenses like

boarding costs, travelling expenses,

consultancy fees and the like. Nabil is

recognized as one of the two banks for

financing higher education in Australia.

Personal Overdraft

This is a quick solution to our customers’

immediate and contingent fund requirements

with the loan processes simplified and

expedited featuring convenient payback

facilities together with reinstating credit

lines.

Nabil Bank Limited

46

DEPOSIT PRODUCTS

Nabil values its customers’ needs and

expectations and at different intervals comes

up with diverse deposit products with

competitive interest rates in the market

keeping in tone with their specific needs.

The fundamentals that make Nabil the bank

of choice for our customers are as follows:

� Nabil has a large network nationally and

internationally with good reputation.

� Nabil has a substantial capital base.

� Nabil harvests the trust and loyalty of its

customers and now with completion of

29 years of unabated banking in the

nation speaks up amply about this fact.

� Nabil is a technically savvied bank; and

its information technology is advanced

and thus it has an instantaneous global

connection.

� It is always keeping abreast of the latest

technical knowhow comes up with varied

deposit schemes.

Nabil has now the

following deposit products:

NABIL LOK BACHAT

With this scheme the customer can open a

deposit account with a minimum balance of

NRs.500 and can enjoy interest earnings

once his or her deposit crosses NRs.15,000.

The Lok Bachat scheme is reengineered to

inculcate banking habits across

socioeconomic stratums of society and for

small savers as well. Additionally,

prospective investors who need bank

accounts compulsorily for investing in an

initial purchase offer for share subscriptions

by an amount above a certain sum also can

avail of the option Nabil Lok Bachat offer.

NABIL BACHAT

This premier scheme provides a good return

on their deposits with a variety of services.

The minimum balance to open this account

is NRs.500 and the customers earn interests

once the minimum balance reaches

NRs.50,000 and above at all times. With

this scheme our customers can avail

themselves of Visa Electron Debit Cards, Any

Branch Banking Services (ABBS), Internet

Banking Service – ‘Nabil Net’, Issuance of

Balance Certificates all free of charges.

NABIL BAL BACHAT

It is about encouraging saving habits of

minors (aged below 16 years). Indeed

parents want to see their children’s future

secured and to help our customers to that

end, the Bank has a special scheme for

children. The customers can open account

by depositing a minimum balance of

NRs.500 and earn interest once the balance

reaches NRs.15,000 and above at all times.

NABIL JESTHA MUDDATI AND NABIL

FIXED DEPOSITS

This scheme puts citizen aged 50 years and

above in focus and caters to meeting their

personal expenses and securing their savings

with a competitive interest rate. In addition

to this we have an exclusive scheme of Fixed

deposits on which the interest is paid on a

monthly basis.

NABILNARI BACHAT

Under this exclusive scheme female

accountholders are offered Visa Electron

Debit Cards exclusively designed and

dedicated for women offered by Nabil Bank

only in Nepal.

NABIL EDU SAVE

This product is designed to meet the specific

needs of students with double features: a

deposit product and other loan product. The

account can be opened with a minimum

balance of NRs.500 that attracts a host of

exclusive facilities, competitive interest rates,

and instant access to online banking

services, privileged education loans, free

check books, special discounts on Bank

drafts, Swift Transfer and much more.

CALL DEPOSITS

Nabil offers specially structured call deposit

schemes to our valued customers designed

considering their specific deposit needs.

PRIVILEGE LOUNGE

Specially tailored services in a queue free and

pleasant environment, our customers get a

special attention from a dedicated team of

Relationship Managers geared up to serve our

customers for their various banking services

and financial requirements and advices.

OTHER PRODUCTS AND SERVICES

Being pioneer of modern banking service

provider, we have taken digital culture at

next the level by providing entirely new

digital experience in the context of Nepalese

banking industry in the form of:

� Electronic online A/c opening form – In

this form of A/c opening request, customer

simply needs to fill up online form attached

with recent photo ID and submit it online

into their desired branch location. Our basic

motto towards launching this is to give new

dimension to online banking and

conventional A/c opening approach.

� Nabil Business A/c – Unlike other current

A/c we are not only targeting customers by

offering freebies & discounted rate on trading

activities but also providing electronically

processed transaction through the use of

high end technology in a smart & easy way.

� Smart Fixed Deposit – This is a paperless

fixed deposit opening scheme, which has

various smart features.

03


47

CARD PRODUCTS

Nabil is one of the principal members of

internationally renowned payment agencies:

Visa Worldwide Inc., MasterCard Worldwide

Inc., Union Pay International (CUP) and

SmartChoice Technologies (P) Ltd. (SCT) and

employs with state-of-art technology. Nabil

provide online services, issues credit, debit

and prepaid payment cards under both Visa

and MasterCard brands that are accepted

directly for purchase of goods/services, cash

withdrawals and online payment

transactions through 3D secured e-

commerce payment solution. The rupee

cards are accepted over 500,000 merchant

outlets and 100,000 ATMs in Nepal and

India while the USD cards are accepted over

millions of merchant outlets and ATMs

worldwide. Nabil also accepts payment of

Visa, MasterCard, CUP and SCT brands of

cards issued by banks all around the world

through its wide network of ATMs &

merchant members across Nepal.

NABIL MASTERCARD INTERNATIONAL

CREDIT AND NABIL MASTERCARD

INTERNATIONAL PREPAID CARDS

Nabil MasterCard International credit card is

accepted at merchant outlets and ATMs

worldwide (except India) against the FCY

accounts maintained in Nabil. It is

exceptionally convenient mode of payment

and serves as a single currency across

borders while travelling to countries other

than India. Also, it offers interest free credit

period of 15 to 45 days. Nabil MasterCard

International Prepaid card is a convenient

mode of availing travel quota facilities

provisioned by foreign exchange regulations

of NRB. Carrying Nabil MasterCard

International Prepaid card is hassle free and

most preferred mode of payment unlike

Cash, Drafts or Traveler’s Cheques.

NABIL VISA AND MASTERCARD RUPEE

CREDIT CARDS

Nabil Visa and MasterCard Rupee Credit

cards are accepted for purchase of

goods/services, cash withdrawals and online

payment transactions through 3D secured e-

commerce payment solution throughout

Nepal and India. It offers a flexible

repayment option at the choice of

cardholders with interest free credit period of

15 to 45 days.

NABIL INSTALLMENT

Nabil installment is a supplementary service

introduced by Nabil Cards & e-Banking

Division for its rupee credit cardholders

because of its simplicity and easy access.

Nabil installment offers easy Equated

Monthly Installments (EMIs) at 0% interest

with minimum 6 to maximum 18 months

tenure for its credit cardholders for purchase

of goods with minimum purchase amount of

NPR 20,000/- to maximum NPR 200,000/-

from its selected merchant locations.

NABIL VISA ELECTRON DEBIT/

PREPAID CARDS

Nabil Visa Electron Debit and Prepaid cards

are the most reliable and convenient mode of

payment duly acknowledged by our valued

customers. Free from the hassles of limits,

interests, late payment fees and other

penalties any customer maintaining a bank

account with Nabil can subscribe to Nabil

Visa Electron Debit card. To simplify the

process further, NabilKoolCash known as

Nabil Visa Prepaid card can be availed

instantly at any of our branch without having

to open bank account with Nabil. Nabil Visa

Electron debit and prepaid cards are

accepted at merchant outlets and ATMs all

over Nepal and India.

NABIL ESECURE

Nabil Visa and MasterCard card members

(debit and credit) can now enjoy internet

shopping experience with their cards through

3D secured ecommerce payment solution

called Nabil eSecure. With Nabil eSecure,

card members can make payments for

internet transactions at merchant's website

easily after one time registration to Nabil

eSecure services and the transactions are

protected by card member chosen

passwords. Railway tickets, airlines tickets,

goods/services, hotel reservations, tour

packages and many more can be

conveniently and safely purchased with the

help of hassle free Nabil eSecure.

MOBILE COMMERCE

The utility of e-Commerce is growing

exponentially. With the intention of providing

all modern banking services to its customers,

Nabil has launched Mobile Banking service

called Nabil M-Bank. Nabil initiated mobile

recharging service through SMS for NTC

prepaid numbers. It offers Menu based

mobile commerce solution which allows our

valued customers to use their mobile set in a

simpler form in order to perform non

financial transactions like Balance Enquiry,

Mini Statement, Cheque Book Request, Full

Statement Request and Pin Change and

financial transactions such as Third Party

Fund Transfer (within Nabil Bank), payment

of Nabil Credit Card Bill, Purchase of NTC

Prepaid Mobile (Namaste) Recharge Card,

Purchase of NTC CDMA Mobile (Sky Phone)

Recharge Card, Payment of NTC Post Paid

Mobile Bill, Payment of NTC Landline Bill,

Payment of ADSL Bill and Merchant

Payment. The entire range of the above

services could be availed from both Ncell

and NTC mobile services.

03

Nabil Bank Limited

48

NABILNET

Through Nabil’s Internet Banking facility

“NabilNet” customers can bring the Bank

right to their homes and offices. Customers

ranging from individuals, NGO’s, INGO’s,

development agencies, and corporate houses

etc. can enjoy a host of services like

transferring funds, viewing account balances,

downloading and printing account

statements, payment of credit card bills,

payment of NTC/Ncell postpaid bills,

payment of NTC ADSL bills. Nabilnet is

highly secured and in order to make the

environment more secure it has initiated

publicizing awareness programs through

newspapers and is constantly updating its

products and services to serve bank’s valued

customers.

ATMS

Nabil has a large domestic network of 81

ATMs in the Kathmandu valley and outside

at locations like Birtamod, Damak, Itahari,

Khandbari, Dharan, Biratnagar, Birgunj,

Hetauda, Charikot, Narayangadh, Gorkha,

Beshisahar, Pokhara, Baglung, Butwal,

Bhalwari, Bhairahawa, Ghorahi, Tulsipur,

Nepalgunj, Dhangadhi, Janakpur,

Chandragadhi and Mahendranagar. These

ATMs serve customers 24 hours a day, 365

days a year. Nabil ATMs also accept credit

and debit card products of Visa, MasterCard,

China Union Pay and SCT. Further extension

of ATMs in various locations inside and

outside Kathmandu valley is still under

Nabil’s immediate business plan.


49

REMITTANCE PRODUCTS

Nabil’s remittance products are a top-

quality and has a diverse and selected

service range designed to cater to the

different and exclusive requirements of our

valued customers capitalizing on its large

international network and branches at

different parts of the country.

WESTERN UNION

Nabil is one of the 8 principal agents and

the only bank agent for Western Union

Money Transfer Services in Nepal. Since

1999 Nabil is associated with Western

Union and now through 1,237 authorized

subagents located at different parts of the

country, Nabil ensures its services reach one

and all no matter what geographic regions

our customers come from.

NABIL REMIT

NABILREMIT is a project designed to cater

to domestic remittance services for money

transfers from one place to another in Nepal

and the bank has selected 1,263

NABILREMIT agents established in different

parts of the country that delivers domestic

money transfer services and the location

numbers have been increasing day by day.

DRAFT AND SWIFT TRANSFERS

Drafts and SWIFT transfers are some of our

expedited services our customers are

facilitated at branches through our different

renowned correspondent banks in India and

abroad. Nabil has been providing account

opening facilities to the Nepalese

expatriates and migrants in Qatar, UAE &

Bahrain.

This arrangement between the Bank and

insurance companies to sell insurance

products to the Bank’s customers benefits

mutually both at the same time. The Bank

acts as an agent for selling diverse

products/schemes under life and non-life

providing speedy and professional services

to the customer. Nabil, as always

pioneering in innovative products, has

commenced this product in 2010 through

arrangements with several insurance

companies with a distribution model

through its branches. Bancasurrance

Division coordinates with the insurers for

expeditious settlement of claims in

compliance with the standard procedures.

03

03BANCASSURANCE

Nabil Bank Limited

50

OTHER PRODUCTS/SERVICES

ANY BRANCH BANKING

SERVICES (ABBS)

In today’s world, technology is paramount

and its role in a service industry like banking

is growing all the more in the twenty first

century. Nabil, realizing this fact has made

all its services and products technology

savvy. The objectives are always to ensure

Nabil’s products and services are accessible

to its customers no matter where they are

regionally located. With its IT connectivity

and core-banking software, Finacle, Nabil’s

uninterrupted 24 hours’ services and

products are reachable from all points of

representations be it branches or ATMs or

merchant establishments from Mechi to

Mahakali 365 days a year. Nabil’s customers

opening their accounts at one branch can

operate it from any Nabil branch across the

country hassle free. Since Nabil’s branch

network is extensive, customers are

privileged to enjoy their transactional needs

with ease and convenience.

EXTENDED BANKING HOURS

Nabil has been extending "365 days banking

services" and "extended counter services"

from select branches to cater to the banking

needs of customers busy during regular

banking hours/days. Kantipath and Pulchowk

branches offer 365 days banking services

and extended counter services while many

more within and outside Kathmandu Valley

offer extended counter services.

BULLION OPERATIONS

Nabil has been importing gold and silver on

consignment basis and has now become one

of the credible names to cater the demand of

the domestic market. The Bank not only

caters its own clients but also renders

services to other Gold Importing Banks.

Further, in near future, the Bank is also

planning to sell gold and silvers in the small

quantity to its retail customers.

NABIL TREASURY

Nabil Bank offers complete solution for

foreign exchange transaction need of its

customers. The bank is well equipped with

network of correspondents to offer real time

and competitive spot and forward rates. The

bank undertakes all FX activities as

permitted by the regulation to support its

customer business need.

INVESTMENT BANKING / MERCHANT BANKING

Nabil Bank Limited with its mission to be

the “1st Choice Provider of Complete

Financial Solutions” ventured into capital

market related activities and incepted its

Subsidiary Company – “Nabil Investment

Banking Ltd. (Nabil Invest)” with CG Finco

Pvt. Ltd. as its Institutional Shareholder.

Nabil Invest is licensed by Securities Board

of Nepal (SEBON) to provide Merchant

Banking Services. Nabil Invest in its short

span of operation has established itself as

one of the leading Merchant Bank and

targets to establish itself as a leading

Investment Bank introducing innovative

products and services in the Nepalese

capital market with strict adherence to

prevailing rules and regulations.

Nabil Invest renders its clients wide array of

services and also targets to introduce

innovative products/services which the market

demands over a period of time. The service

Nabil Invest currently renders includes

Management of Public Offers/Further Public

Offers/Right Issues, Underwriting, Registrar to

Securities (RTS), Portfolio Management

Services, Trusteeship Services, Depository

Participant (DP) services in a Central

Depository Services (CDS), Fund Manager &

Depository in Nabil Mutual Fund and

Corporate Advisory Services like Investment

Advisory, Valuation, Loan Syndication,

Mergers & Acquisitions etc.

03

03

PROFESSIONALThe experienced team with service attitude in the Bank over a stretch of 29 yearsdisplays unrelenting professionalism the Bank practices. We have always honoredand valued the need of the customer and it has necessitated us to be perfect withspeed and accuracy while serving them. It has always fostered partnerships thatgive the chances of win-win to both parties which thereby have led toproliferation of business activities in the country.

C R I S P

GOVERNANCE04

04THE BOARD OF DIRECTORS

STRUCTURE OF THE BOARDNabil Bank Ltd. has a unitary Board

Structure with seven members. The Board is

headed by the chairman with six member

directors. All the Board members are Non-

Executive directors. Individual directors

exercise their authority in the Board

meetings and the Board acts in the collective

interests of shareholders.

The core objective of the Board has always

been to form policies and guide management

for long term sustainability of the bank with

reasonable returns to shareholders and

enhance shareholder value. The Board

decides on corporate strategies, approves

capital and operational plan and consistently

reviews the management’s performance

ensuring that corporate objectives are always

kept in focus.

The directors are from diverse business and

service backgrounds with varieties of

knowledge, experiences and expertise. The

entire board comprise of non-executive

directors who, jointly or severally, do not take

part in day to day management of banks

business operations. The Board members

bring about an external perspective on

company affairs and provide constructive

suggestions to the CEO. The Board sets

strategic path for the organization, identifies

business objectives, reviews management’s

performance and provides guidance to the

management towards achieving the targeted

goals and objectives.

The Board is collectively responsible for long-

term sustainability of the Bank. To this end,

the Board exercises its authority within the

framework of regulatory provisions,

Companies Act, Bank and Financial

Institutions Act, Memorandum and Articles

of Association and other relevant laws and

regulations. The Board delegates executive

responsibility for running the Bank’s business

to the Chief Executive Officer. The CEO

heads the executive management team and

is empowered to further delegate authority

and assign responsibility through the

organization structure.

The Board, considering the job requirement

and in compliance to regulatory provisions,

can constitute committees of the Board

ascribing specific responsibilities and

delegating any of its authorities and powers

to such committees. However, the Board

keeps certain approving authority to itself

including, but not limited to, the approval of

strategic plans, performance targets, policy

documents, annual budgets, annual financial

statements and the authority or the

delegation of authority to approve credit and

market risk limits.

Total thirteen board meetings were held

during the year. The following table shows

attendance of individual directors at the

meetings.

BOARD MEETING ATTENDANCE RECORD FOR YEAR 2012/13

ATTENDANCE SITTING FEES.

K B Manandhar 13/13 NRs.114,000

S P Poudyal 13/13 NRs.108,000

D G Agrawal 13/13 NRs.104,000

K P Acharya 11/13 NRs.88,000

N Chaudhary 12/13 NRs.96,000

M Ahmed1 6/13 NRs.48,000

A Sharma 10/13 NRs.72,000

S P Shrestha2 2/2 NRs.20,000

Total NRs.650,000

1 In five meetings he was represented by his alternate director Mr. J P Kanoria.2 Mr. Shrestha resigned from the Board in October 2012.


53

INFORMATION TO THE BOARDNabil has a culture of open and relevant

communication between the Board of

Directors and the Bank’s Executive

Management. The Board receives reports

and presentations from conveners of board

committees and the CEO. Such reports

include key issues related to credit

exposures, risk portfolio, liquidity, financial

performance, business expansion, audit and

compliance. The Board regularly reviews

management performance against approved

budget targets and goals.

All Board Committees have a Member

Secretary from senior management team

who is engaged in the concerned area of

business within the Bank. For effective

discussions of the items in agenda, other

members from the bank’s management,

whose responsibilities relate to the matter in

agenda, are also invited as required.

Individual directors are provided with the

agenda and accompanying reports and

documents well in advance of the Board and

Committee meetings. Board members have

timely access to adequate information so as

to enable them to conduct appropriate

review of the agenda and actively participate

in discussions during the meetings. They

may seek independent professional advice

wherever they feel so is needed.

Directors can also make offsite visits to

branches to obtain a better understanding of

local business conditions, participate in

business promotion and corporate social

responsibility related activities and interact

with customers and employees.

DIRECTOR’S APPOINTMENTAND INDUCTIONAppointment, retirement and re-election of

directors are conducted as per the provisions

laid out in prevailing Companies Act, Bank

and Financial Institutions Act, Articles of

Association of the bank and other relevant

laws and regulations. One professional

director is appointed from the roaster of

professional experts published by the central

bank. Position of professional director was

vacant during the year. None of the directors

has service contract with the bank.

Upon appointment the directors are

administered Oath of Secrecy and Fidelity.

Newly appointed directors are inducted on the

Board as per provisions and procedures laid out

in the Companies Act, Banking and Financial

Institutions Act and other relevant laws and

regulations. Throughout their directorship, the

directors have access to adequate information

and opportunities of interaction with other

directors and senior executives to obtain an

understanding of the bank’s business,

strategies, operations and risk culture.

CHANGES IN THE BOARDThe Board has always balanced a reasonable

mix of professional expertise, experience and

vision in its composition. In the context of

change in local and global business

environment, our businesses are exposed to

new kinds of risks. The evolution and

emergence of risks calls for immaculate

planning and thorough understanding of the

risks and the challenges in risk management.

It also necessitates the Board to step ahead

judiciously and prudently, for which the

Board needs to keep itself well equipped

with the required set of skills and acumen at

all times. The Board has consistently

demonstrated adequate knowledge and

expertise in its decisions.

The Banks 28th Annual General Meeting

held on 17th October 2012 re-elected Mr.

SP Poudyal and elected Mr. Ashish Sharma

as director representing Group “C”

Shareholders.

Similarly, Mr. D.G. Agrawal was appointed as

director representing Group “A”. Prior to this

he represented Group “C” shareholders in

the Bank’s board.

RELATIONS WITHSHAREHOLDERSThe Board has always encouraged active

participation of shareholders in every Annual

General Meeting. The meeting has always

been a very important platform for the Board

to interact with many shareholders, both

individual and institutional, communicating

the objectives and strategic plans, clarifying

on shareholders concerns and sharing the

collective vision.

Directors, most of whom represent

institutional shareholders, engage in regular

dialogues with institutional shareholders,

continuously conveying on business

strategies and apprising them of the bank’s

performance based on mutual understanding

of organizational objectives.

Nabil Bank Limited

54

AUDIT COMMITTEEATTENDANCE RECORD


- D G Agrawal1 8/8 NRs.72,000

- K P Acharya 2/8 NRs.16,000

- A Sharma2 4/4 NRs.32,000

- K B Manandhar3 4/4 NRs.40,000

Total NRs.160,000

BOARD COMMITTEES

Pursuant to Section 5 of NRB Unified

Directive No. 6 banks and financial

institutions are only allowed to constitute

board committees for Audit, Risk

Management and Human Resource

Management. Any other committee can only

be constituted for specific purpose and for

specified time duration. Following board

committees were in function during the year:

1. Board Audit Committee (BAC)

2. Risk Management Committee (RMC)

BOARD AUDIT COMMITTEE (BAC)Audit Committee of the Bank is formed in line

with provisions of NRB Directives and the

Company Act. The Committee has been

functioning and discharging its duties and

responsibility in line with the provisions laid down

in Section 5 of NRB Directives 6/2069, Section

6 of NRB Directive 7/2069 and Sections 164

and 165 of the Company Act 2063.

Internal Auditors and Statutory Auditors have

direct access to the Audit Committee.

Currently director Mr. D G Agrawal is the

Convener and directors Mr. A Sharma and

Mr. K P Acharya are members of the Audit

Committee. Bank’s Head of Internal Audit is

the Secretary of the Committee.

ROLE OF AUDIT COMMITTEE

The committee’s role is extensive and

strongly supports the board in dealing with

aspects of good corporate governance,

internal control, risks management, financial

reporting, legal and regulatory compliance

and ethical conduct of business.

The Committee’s major responsibilities

include:

1. Reviewing the Banks’ overall system

of internal controls.

2. Reviewing observations and

recommendations made in reports of

auditors (statutory, regulatory and

internal).

3. Reviewing the bank’s financial

statements, ensuring its accuracy and the

required level of compliance in relation to

financial reporting standards.

4. Reviewing compliance in relation to

bank’s internal policy and prevailing

regulatory and legal provisions.

5. Reviewing risk management systems and

security position of the bank in respect of

exposure to credit risk, operations risk

and market risk.

6. Advising and recommending the Board on

management actions required for

achieving the desired level of effectiveness

and compliance in response to above

reviews.

7. Recommending to the Board on

appointing statutory auditor, auditor’s

remuneration and reviewing that the

auditor’s actions in course of bank’s audit,

do not contravene with applicable laws and

provisions.

COMMITTEE ACTIVITIES

BAC meetings reviews and discusses a

number of internal audit reports, statutory

audit report and regulator’s inspection report

of the Bank. The committee updates the

Board of its actions by sending copies of its

minutes, which are discussed in Board

meetings. BAC issues recommendations for

strengthening bank’s system of internal

controls and its effectiveness in practice.

A number of agenda items were discussed in

the meetings and numerous

recommendations were given by the BAC for

strengthening overall risk management

systems of the Bank. For effective

discussions of the agenda, members from

senior management team of the bank were

also invited to BAC meetings on need basis.

DIRECTORS AUDIT RISKCOMMITTEE MANAGEMENT

COMMITTEE

D G Agrawal

K P Acharya

N Chaudhary

A Sharma

CONVENER MEMBER

MEMBERSHIP OFTHE BOARD COMMITTEES

Committee Secretary attended all eight meetingsheld during the year.

1 Mr. D G Agrawal attended first four meetings as a memberand remaining four meetings, beginning March 2013,as Convener.

2 Mr. A Sharma attended four meetings beginning March2013 as a member.

3 Mr. K B Manandhar attended four meetings as Conveneruntil October 2012 immediately before assuming theposition of chairman of the Board.

04


55

AGENDA DISCUSSED DURING

MEETINGS

1. Report on Past Dues Corporate Loans &

Retail Lending for 12 months.

2. Status Report on Nostro Accounts for 12

months.

3. Audit Report on Reconciliation of Nostro

Accounts – 2 reports.

4. Audit Report on Administration

Department – 1 report

5. Audit Report on NPA Management – 1

report

6. Audit Report on Center Processing Center

– 1 report

7. Audit Report on Central Accounts

Department – 1 report

8. Audit report on import L/C at CTO –

Teendhara – 2 reports

9. Audit report on Operations of Branches -

45 reports.

10.Preliminary audit report of newly opened

Branch – 1 report

11. Audit report on Corporate & SME

Banking of Branches - 34 reports.

12. Audit report on PLU of Branches - 35

reports.

13.Audit report on Export L/C at CTO – 1

report.

14. Audit report on Guarantee Business at

CTO – 1 report.

15. Audit report on Bancassurance Unit – 1

report.

16. Audit report on Nabil Investment

Banking – 1 report.

17. Audit report on Global Markets –

Treasury – 1 report.

18. Audit report on Corporate &

Infrastructure Accounts – 1 report.

19. Audit report on PLU – Lalitpur – 1 report

20. Semi-Annual verification of Cash and

Cash Value Items of all Branches.

OTHERS

21. Review of Compliances and Branch

Responses on Audit reports - 109

reports.

22. Investigations & Inspections on Specific

Events.

23. Memorandum on Response to

Preliminary Audit Report (PAR) for the FY

2068/69.

24. Memorandum on Submission of Annual

Financial Statements of the Bank for FY

2068/69 (2011-12).

25. Memorandum on NRB Inspection Report

2069.

26. Memorandum on Revised SIMs, SIM on

CAS & NPA Management, SIM of

Corporate Communication Corporate

Social Responsibility unit.

27. Memorandum on Third Party Process

Audit undertaken by Paladion Networks

Pvt. Ltd. of M/s Electra Card Services

(ECS).

28. Memorandum on Reappointment of

Statutory Auditor for FY 2069/70

(CSC & Co.).

29. Memorandum on Disclosure of

information, (in regard to Audit

Committee) in line with stipulation of the

Company Act 2063, in Directors’ Report

of the Bank for FY 2068-69.

30. Memorandum in relation to updates on

various investigations and inspections.

31. Certification of Unaudited Financial

Results as on 4th Quarter of FY 2068/69

(2011/12), 1st, 2nd and 3rd Quarters of

FY 2069/70 (2012/13).

32. Certification of Capital Adequacy Ratio

and Risk Weighted Assets of the Bank on

a monthly basis.

33. Half yearly review of Investment

Portfolio of the Bank as of 15.07.2012

and 13.01.2013.

34. Memorandum on Annual Audit Plan for

FY 2069/70.

35. Memorandum on Audit Programme for

1st, 2nd, 3rd and 4th Quarters of FY

2069/70.

36. Memorandum on Budget for FY

2070/71 (2013/14).

37. Memorandum on review of Stress

Testing conducted by the management

for Jestha end 2069 (FY 2068/69) and

1st, 2nd and 3rd Quarters of FY

2069/70.

RECOMMENDATIONS ISSUED

TO MANAGEMENT

1. Monthly review on past due loan

accounts and appropriate measures were

advised to the Management to deal with

and keep a watch on overdue loan

accounts.

2. Monthly review on status on old and

unreconciled items in the nostro

accounts of the Bank and appropriate

directions were given to the Management

for timely reconciliation.

3. Review of various investigations/

inspections carried out by Internal Audit

Department on the instruction of the

Audit Committee / Management and

suggested various precautionary

measures to be adopted by the Bank

Management.

4. Review the compliance of the branches in

regard to NRB directives, Bank’s credit

policy, internal rules & guidelines and

compliance of prevailing laws of the

country.

5. Review and discussions made on the

NRB inspection report of the Bank and

advised appropriate measures to be

taken by the Management for full

compliance of the irregularities pointed

out in the report.


preliminary statutory audit report along

with the Management response and

annual financial statements of the Bank

and suggested appropriate measures to

the Management for compliance and

recommended the Board for adoption of

annual accounts of the Bank.


risks mitigation (such as business,

operations, regulatory, external etc.),

internal check and control and security

position in respect of Corporate

/ Infrastructure & Project Financing,

Branch Operations, PLU Business, CTO,

SME & Micro Lending, Treasury and

Correspondent Banking, CVD verification,

Nabil Investment Banking, Remittance

Business Unit, NPA Management,

Central Accounts and Administration,

Reconciliation of Nostro Accounts of the

Bank.

Nabil Bank Limited

56


- K P Acharya 5/5 NRs.48,000

- N Chaudhary 5/5 Nrs.40,000

- D G Agrawal1 2/2 NRs.16,000

- K B Manandhar1 1/1 NRs.8,000

Total NRs.112,000

Committee Secretary attended all five meetingsheld during the year.

1 Regulatory requirement requires the Convener of BAC tobe a member of RMC. Accordingly, in November 2012 Mr.K B Manandhar attended one RMC meeting and beginningApril 2013 Mr. D G Agrawal attended two RMC meetings incapacity of Convener of BAC.

RISK MANAGEMENTCOMMITTEE (RMC)

Directors’ Risk Management Committee is

constituted in line with the spirit of Risk

Management Guidelines (RMG) of Nepal

Rastra Bank and the NRB Unified Directives.

The RMG highlights on risk governance and

identifies the need of a strong risk

management framework, well defined risk

management processes and effective risk

assessment and measurement mechanism.

Besides, representation in the committee

from management, director Mr. K P Acharya

is the Convener and directors Mr. N

Chaudhary and Mr. D G Agrawal are

members of RMC. Bank’s Chief Risk Officer

is the Committee Secretary.

ROLE AND RESPONSIBILITIES

The Committee oversees overall risk

governance framework of the Bank. It

ensures that proper risk management policy

and procedures are in place and effectively

practiced at all levels within the Bank. In

doing so it ensures that Internal Audit

reviews the overall business operations to

assess whether or not the Bank’s policies

and procedures are adequate and

implemented. It reviews the effectiveness of

Management Information System and

Internal Control Systems of the Bank.

The Committee, on an ongoing basis, defines

and reviews risk appetite of the bank in

relation to overall business risk with specific

focus on credit risk, market risk, operation

risk, liquidity risk and price risk. RMC

advises the Board on the overall risk

tolerance levels of the bank throughout the

strategic implementation process. Risk

appetite of the Bank is determined based on

the following:

� strength of capital base

� quality and growth of earning assets base

� brand reputation and

perceived customer value

� balanced approach to

business risks and returns

� risks diversification

A major role of the committee is to assess

business and profit risks of all lines of

businesses of the bank. RMC ensures that

managerial and operational level officials of

the Bank, responsible in risk management

and decision making processes, possess

adequate knowledge of their specific job area

and of the corporate risk culture. The

activities of ALCO like portfolio assessment,

returns from the business, asset quality,

growth in overall business vis-à-vis market

growth (competitor's position) are also

reviewed by the Committee and necessary

instructions are issued to the management

and necessary recommendations are made

to the board as deemed appropriate.

Quarterly stress report and monthly report

comprising overall position of the bank,

changes in the market condition are

reviewed and necessary instructions are

issued to the management. If the need is felt

for any recommendation to the board, the

same is also appropriately done. The

Committee also reviews trends in portfolio

quality and the adequacy of provisioning for

possible credit losses.

RISK GOVERNANCE

Bank practices risk governance applying the

principles of good governance to the

identification, assessment, management and

communication of risk. The Bank equally

takes account of participation, transparency,

and accountability within the procedures and

structures by which risk related decisions are

made and implemented.

Within the bank, RMC is responsible for

overseeing the risk governance structure and

monitoring the effectiveness of risk

management and internal control systems.

As advised by RMC, the management

ensures presence of strong risk governance

culture in the bank which guides its risk

strategies. Chief Risk Officer, member

secretary of RMC, ensures that emerging

risks and changing behavior of key risks are

brought forward for discussions in the

committee meetings. Invitees who head

major functional and business areas

participate in RMC meetings and highlight

the key risks faced in their specific areas.

This helps the Board, together with RMC, to

ensure that a strong risk management frame

work is maintained. Following is the

attendance record of board members in the

RMC:


57

COMMITTEE ACTIVITIES

The Committee discussed on the following

agenda in its meeting.

1. Review of risk management practices

implemented in the Bank including

regulatory compliance.

2. Review of authority delegated by the

Board to the management.

3. Review of performance and business risk.

4. Stress testing reports of the Bank.

5. Status of non-performing loan accounts

and recovery strategies pursued.

6. Minutes of Asset Liability Committee

(ALCO) meetings.

7. Revision of following documents:

a. Credit Policy Guidelines – revision

2013

b. Product Paper for Mortgage Loans –

SME, Corporate and Infrastructure

c. Product Paper for Education Loan

d. Product Papers for Retail Loans –

Housing, Mortgage and Personal

Overdraft

8. Internal Credit Risk Rating Model of the

Bank.

9. Credit Concentration reports, including top

exposures at borrower, group and sector

level.

The committee took note of the following

and issued appropriate instructions to the

management.

1. Budget achievements and capital strength

of the Bank.

2. Development in market conditions and

likely impact on the Bank’s earning.

3. Recovery efforts and strategy pursued to

regularize in large non-performing loan

accounts.

4. Requirement of regular reporting

mechanism on Risk Management to the

RMC.

5. Stress testing scenarios and satisfactory

liquidity and capital position of the Bank.

6. Need to analyze concentration risk in

deposit portfolio.

7. Satisfactory conduct of ALCO.

8. Scheduling RMC meetings before Board

meetings, to the extent practical, such

that RMC can apprise the Board of its

feedback on various risks related reports.

9. Need to review the Deprived Sector

lending norms such that our business

model is sustainable and the target end

user benefits the most from our lending.

10. Need to cover review of specific risks

which otherwise may not be routinely

covered in ALCO meetings or in standard

performance reviews. Succession

planning, for example, has been identified

as one such area.

Following each meeting, the Committee

instructs necessary actions to the

management and reports to the Board,

informing of its decisions.

The Bank equally takes account of

participation, transparency, and

accountability within the procedures and

structures by which risk related

decisions are made and implemented.

Nabil Bank Limited

58

INTERNAL CONTROLS

Within NABIL, effective implementation and

monitoring of internal control system is the

responsibility of the Board. In doing so the

Board acts through the Board’s Audit

Committee which reviews the reports from

internal auditors, statutory auditors and NRB

Inspection Team and provides the Board with

independent assurance on the effectiveness

of control environment.

Every aspect of our business involves some

degree of risk. Risk and reward are

inherently linked and each of our decisions

involves a trade-off between these two

elements. While we accept the need to take

risk for achieving business objectives, we are

also aware of the need to mitigate adverse

consequences of taking risks. For this we

have implemented key procedures designed

in such ways to provide effective internal

controls across the organization. Such

procedures for continuous assessment,

identification, evaluation and management of

key risks have been in place throughout the

entire financial year.

Following were the key internal control

procedures in place during the year:

� The Board has delegated the authority to

operate bank’s business and assigned

responsibilities for regular functioning of

the Bank to CEO.

� The CEO is empowered to further

delegate the authority and assign

responsibility including specific business

targets to managers. The functional

responsibility line is clearly defined in the

organization structure.

� The primary responsibility for effective

practice of internal control procedures

rests on branches, strategic business

units and operational managers. Internal

Auditors, as per their approved annual

work plan, conduct detail inspection and

verification on effectiveness of internal

control procedures at all branches and

operational units at least once each year.

� It is the management’s responsibility to

ensure that Internal Auditor’s

recommendations are implemented within

an appropriate and reasonable time

frame. Bank’s Audit Policy specifies 60

days period for closure of each audit

report from the date of its issue. This

involves review of each audit report and

the response of branch / unit audited

thereon, at the levels of concerned

functional / business heads, Internal Audit

department and Audit Committee. Closure

of audit report is approved by the CEO

upon full satisfaction that the audit

irregularities have been duly addressed

and complied with.

� Executive committee headed by CEO

comprise of SBU heads and heads of

other functional departments. Weekly

Xcom meeting reviews the Bank’s

performance and the developments in it

operating environment at length. It also

discusses measures to be taken for

improvement of operating system and

procedures. The issues related to Asset

and Liability management including risks

are discussed at ALCO that takes place

every month.

� Credit marketing unit and Credit risk unit

are independent. Credit marketing unit

conducts marketing activities and forward

credit proposal for approval. Then

onwards credit risk unit independently

analyze each credit proposal in light of

inherent and external risks involved in the

business. Under co-signing / dual

approval arrangement both marketing and

risk units have to approve each credit

proposal within their authority.

� Credit Administration and Support unit,

directly reporting to CRO and independent

from credit marketing and credit risk

functions, is assigned with specific

responsibilities of conducting periodic on-

site inspection of credit customers,

examining credit documentation and

ensuring all the terms of credit approvals

are complied with throughout the life of a

credit account.

� The Board has delegated foreign currency

dealing and investment decision limits to

CEO. The CEO has further delegated the

authority to Chief Investment Officer,

Head of Treasury and individual dealers.

Treasury back office, having reporting line

to COO, is responsible to ensure that

treasury front office operates within the

authorized limits and is in compliance to

the Bank’s investment policy.

� The CEO has approved a number of

Standard Instruction Manuals (SIM)

which, in essence, are standardized detail

procedural guidelines for specific areas of

banking business. Activities at all level

confirm to the procedures in SIM.

� Standard budgeting and variance

reporting mechanism is in place with

regard to Bank’s performance review on

monthly basis. Finance Department and

Xcom members under one’s area review

the variances and progress against

budgets. A Monthly Business Letter is

04


59

prepared for information and perusal of

the board which discusses business

developments on four facets viz. financial;

product/service and customer

care/process and control and activities on

human resource. The report among other

includes market developments, overall

economic issues that may have impact on

the business and other miscellaneous

issues.

� Financial Administration Bylaws specifies

centralized functional control over all

expenses of the Bank. All expenses within

the budget are approved by CEO upon

recommendation of management level

Financial Directive Committee. All

expenses in excess of budget are

approved by CEO on urgent basis and are

periodically placed before the Board for

its post ratification.

� IT Policy specifies centralized functional

control over all IT operations including

defining access authority in Core Banking

Software, MIS and hardware facilities

including data center. Access authority to

any staff is given at the request of

department head and approval from

Senior Manager - Operations. All

decisions on procuring IT equipment and

services are reviewed by IT Department

for technical feasibility beforehand.

� The Bank publishes notice, keep the

same in website, periodically for public

awareness in order to safeguard from

fraudulent activities through our internet

banking platform. Similar instructions are

regularly issued to all employees.

� Compliance unit, reporting directly to the

CRO, operates as guided by the Bank’s

Know Your Customer and Anti Money

Laundering policies. Reporting

mechanism requires branches to confirm

compliance to these policies. Transactions

above a threshold limit are periodically

reported to the Compliance unit which

scans and ensures compliance is

maintained at transaction level. All

statutory reporting requirements like

suspicious transaction report (STR) and

any other specific report are submitted to

concerned authority including NRB as per

the reporting provisions.

� Standardized mechanisms are in place for

business and operational units to

periodically report on business volumes

and outstanding balances with specific

reporting requirements on exceptional

transactions, overdue transactions, foreign

currency transactions, un-reconciled

balances, etc. Report generation is

automated in MIS. Reports are reviewed

at different levels within the management

and appropriate instructions are issued to

concerned operation managers.

� Mechanisms are in place to comply with

all regulatory reporting requirements.

Such requirements, among other things,

include periodic reporting on capital

adequacy (as per Basel II), balance of

payment, cash reserve requirement, credit

portfolio, foreign currency assets, deposit

portfolio, gap reporting (ALM), statutory

liquidity ratio and monthly provisional

statements of financial position and

income Statements. Functional managers

are accountable for complying with the

reporting requirements.

� The Audit Committee ensures that

required disclosures are made properly in

the financial statements. The Committee

obtains reasonable assurance from

statutory auditors on the reliability of

financial information presented in the

annual financial statements and

recommends the Board for its adoption.

� CFO ensures that quarterly interim

financial statements of the Bank are filed

with the regulatory authority, the Security

Exchange Board of Nepal and published

in national daily newspaper for public

information within the prescribed time

periods.

� Centralized functional control is exercised

over all transactions involving tax

deductions at source. All such

transactions are administered and

authorized directly under Senior Manager

- Operations. Payroll tax is

administered by Human Resource

department. Tax deducted at source is

timely deposited with Large Tax Payers

Office. Responsibilities are clearly defined

and distributed to COO, CFO and H-HR as

appropriate.

The Audit Committee has been reviewing the

effectiveness of Internal Control Systems and

has been reporting to the Board on regular

basis.

Nabil Bank Limited

60

EMPLOYEES

Good management of human resources iscritical for implementing business strategiesand meeting corporate goals. To this end,careful attention and devotion from supervisorlevel staff is indispensable. In ourorganizational set up all senior staff membersenjoin to act as HR managers in their areas ofoperations by implementing policies andguidelines of the Bank, by nurturing talent,sharing knowledge and putting in place strongethical practices while conducting Bank’sbusinesses. On the other hand, the HRDepartment is responsible for monitoring andensuring that Bank’s HR policies areinterpreted consistently across the Bank.

Employee Bylaws acts as a framework thatguides Human Resource Managementpractices within the Bank. This document isapproved by the Board and also by theregulatory authority. Principles of ethical workculture, open communication, objective careerdevelopment, transparency in remunerationand pay - performance correlation support HRpractices employed within the Bank.

The good practices that the bank has adoptedconsistently have never been affected by thegrowing size of HR strength. As at 15th July2013 the Bank has employed 742permanent employees and 528 contractemployees. Contract employees include 525outsourced staff (clerical staff - 104 andsupport staff - 421) and 3 staff under directcontract with the Bank (support staff - 2 andCEO). The following table provides level wisepermanent employees head count:

Over the years we have witnessed that

employees are the ones shaping a high

performance culture. We encourage

managers to promote open communication

at all levels, both vertical and lateral.

Communication strengthens sharing of

knowledge, ideas and viewpoints. Issues

affecting individual job areas and the overall

financial performance of the Bank are

regularly communicated to our staff.

Our core corporate values CRISP – Customer

Focused, Result Oriented, Innovative,

Synergistic and Professional are embedded in

our daily work culture. Operating in a service

industry we believe every action of ours

should create some value to our customers.

The Bank has implemented a staff Code of

Conduct which follows this very essential

theme and is abided by all staff in action.

The strength of our HR rests in its diversity

and fair treatment. Our culture respects

individual differences and learning aptitudes.

We do not allow discrimination on any

grounds be it social, religious, hierarchical or

gender. Any kind of discrimination or any

form of harassment is dealt with as per

disciplinary provisions in the Employee By-

Laws. At Nabil, employees perceive that

their views are heard, their concerns are

attended and their career progression is

based on objective performance assessment.

Towards this end, the Bank has

implemented point scoring based appraisal

rating system that endeavors objective

assessment of employees' performance

through 12 dimensions. Moreover, appraisal

allows appraisee staffs to put their comment

on appraisal.

We have a recognized Staff Union in the

Bank. The management and the union

execute a collective bargaining exercise once

every two years. Collective Bargaining

exercises have been harmonious throughout

and has never resulted disruption in normal

banking operations and customer service.

RECRUITMENT ANDDEVELOPMENTThe Bank employs a fair recruitment policy.

All new appointments and promotions are

planned and approved as part of the annual

HR budget. Fresh appointments are made at

support, assistant and management trainee

levels. However, the Board has the authority

to make appointments at other levels in

order to bring in appropriate set of skills in

existing or new areas of businesses. Based

on the requirements of business expansion

the Bank may outsource its staff requirement

to external party. All appointed staff, whether

permanent or contracted, will adhere to

employment standards as stipulated by the

Employees Bylaws of the Bank.

Staff placements are assigned as best suited

for one's abilities and growth potential.

Performance appraisal system is fair and

career progression is based on objective

assessment of one’s performance and team

work. Placement transfer, job rotation, job

enrichment, succession planning and cross

functional teams are some of the tools we

employ for employee development.

Individual training and development needs

form an important component of annual

performance appraisal of all staff.

STAFF CATEGORY MALE FEMALE TOTAL

Senior Manager* 7 - 7

Middle Manager 37 6 43

Officers 135 39 174

Assistants 241 160 401

Support Staffs 102 14 116

Total 523 219 742

* employees bearing corporate title AGM and above excluding CEO

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61

REMUNERATION AND BENEFITSThe quality of our Human Capital defines the

scale of our business success. Our business

stands on trust, relationships and ethical

conduct. Our strategy is in being proactive to

attract, recruit, develop and retain the best

people. We need to constantly ensure that

we have the required set of skills, knowledge

and expertise in our Human Pool. We believe

staff commitment and motivation towards

the job is achieved over time, which is

affected by multiple factors among which

financial benefits is a very important one.

Market forces constantly pose a challenge to

our HR strategy and retaining the best brains

is not easy. Remuneration is one of the major

factors affecting one’s decision about joining,

continuing or leaving an organization and we

appreciate this fact. However, our

experiences over the years suggest that other

important factors do affect in making the

choice of employment. Accordingly we

attract the best people who wish to work in

an organization having solid corporate

values, ethical work culture, reputed brand

performance and the one offering excellent

work experience and career development

opportunities. Our remuneration policy

covers the following:

� Salary structure comprises of fixed basic

pay and variable incremental pay.

� Salary structure is maintained based on

documented position grades of individual

employee as per his her annual

performance appraisal ratings. The grade

earned in annual performance appraisal

ratings has an incremental impact in the

basic pay.

� Salary structure is reviewed every two

years with reference to national economic

scenario, bank’s business performance

and market practice. Any one or both the

basic and variable component may be

revised as appropriate.

� The bonus element of annual pay is tied

up to the overall performance of the Bank

at the end of each financial year. This

instills a winning spirit in our employees,

drives business performance and coincide

their own interests with the interest of our

shareholders.

� Bank’s contribution to employees Gratuity

Fund and Provident Fund is

proportionately linked to the number of

years in employment and the last drawn

salary at the time of making such

contribution.

Besides, our employees receive the benefit of

housing loan, vehicle loan and personal loan

facilities at concessional rates as per their

individual eligibility in line with the

Integrated Staff Loan Policy approved by the

Board.

TAX ON REMUNERATIONINCOMEAll pay and benefits paid to the employees

are taxed at source as per the provisions of

Income Tax Act 2002.

Payment to employees in the form of salary,

allowances, leave encashment, overtime

payment, incentives, commission, bonus,

gifts, retirement benefits etc. constitute their

taxable income from employment. In line

with the provisions in Income Tax Act

(amended by Finance Ordinance 2013),

employees’ taxable income is taxed applying

the tax rates presented in the table below:

The Act allows certain deductions from

taxable income, the most relevant in case of

our employees being contribution to

approved retirement fund up to

NRs.300,000 or 1/3rd of total assessable

income whichever is lower and life insurance

premium expenses of self and spouse upto

NRs.20,000. Additionally, donation up to

NRs.100,000 or 5% of total assessable

income, whichever is lower, is also available

for deduction.

The Act offers female employees the benefit

of 10% tax rebate on their total tax liability

for a given year. Similarly, in case of

physically disabled employees the base slab

for 1% taxation is raised by additional 50%

to NRs.300,000 for single and

NRs.375,000 for couple.

TAXATION ON RETIREMENTBENEFITS (GRATUITY ANDPROVIDENT FUND)Income Tax Act 2002 applies the following

tax rates in payment of post-retirement

benefits i.e. when the Gratuity and Pension

Fund is paid to the employee upon his / her

retirement from the employment.

Prior to pronouncement of Income Tax Act

2002, the fund accumulated in gratuity and

provident fund was tax free. All such amount

held in gratuity and provident fund and

contributed by employer before the Act came

into effect will not be taxed at the time of

making payment to concerned employees.

CONTRIBUTION TO NATIONALLEVEL WELFARE FUNDThe prevailing Bonus Act 1974 (2030 B.S.)

requires the bank to deposit 30% of the

residuary amount, after distribution of bonus

from the allocated amount for staff bonus, at

National Level Welfare Fund (NLWF)

operated by the Government of Nepal.

Remaining 70% is to be deposited at

Welfare Fund established in accordance with

Section 37 of the Labour Act 1992 (2048

B.S.).

The Bank has deposited a total of NRs.258

million with NLWF in respect of staff bonus

allocated for up to Financial Year 2011/12.

In respect of undistributed staff bonus for

current financial year (2012/13), the Bank

will be depositing NRs.64.93 million at

NLWF.

TAX RATE ANNUAL INCOME SLAB NRS.

SINGLE COUPLE

1%# 200,000 250,000

15% 200,001 – 300,000 250,001 – 350,000

25% 300,001 – 2,500,000 350,001 – 2,500,000

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

TAX RATE ACCUMULATED FUND NRS.

Tax Free Higher of 500,000 or50% of Total Fund

5% Balance Amount

TAX ON REMUNERATION INCOME

# Social Security Tax.* The Act provisions 40% surcharge on tax calculated on taxable income above NRs.2,500,000 applying tax rateof 25% resulting effective tax rate of 35% for that slab.

SeniorManagementTeam

ABOVE LINE: LEFT TO RIGHTDeepak Shrestha, Head - Corporate Banking and InfrastructureMohan Subba, Head - TreasuryRajesh Kumar Upadhyaya, Head - Information TechnologyJyoti Bahadur K.C., Head - Central Trade OperationsGyanendra Pratap Shah, Sr. Relationship Manager, Corporate BankingAnil Gyawali, Chief Executive OfficerYagya Prasad Sharma, Branch Magager, BirgunjBinaya Nath Neupane, Senior Credit AnalystRajendra Bahadur Malla, Head - PLU CreditPraveen Raman Parajuli, CEO- Nabil Investment BankingAnil Kumar Khanal, Chief Risk Officer

BELOW LINE: LEFT TO RIGHTKrishna Dutta Bhattarai, Chief Finance OfficerBinaya Kumar Regmi, Chief Operating OfficerSanjay Nepal, Sr. Relationship Manager, Corporate BankingSaroj Pyakurel, Head - PLUNamita Dixit, Sr. Relationship Manager, Infrastructure & Project FinancingNeelam Tuladhar, Head - Branches and Distribution NetworkNeena Thapa, Head- Credit Risk ManagementGyaneshwor Acharya, Head – SMERamesh Prasad Lohani, Head- Deposit Relation Management

Nabil Bank Limited

64

CORPORATE SUSTAINABILITY

The banking institutions play an important

role in the economic development of a nation.

Banks collect scattered deposits and make it

available to the entrepreneurs seeking fund for

business activities. In doing so they provide

safety of the depositors, fair return to them

and equally support to establish, operate and

expand business ventures which otherwise

would not have been possible for the want of

funding. This has manifold benefits to the

nation which ignites production, distribution

and consumption in the country. The whole

economic system achieve much needed

multiplier effect through banks as they

promote capital formation, employment

generation, international trade and

government revenue.

Myriad of risks continually pose a threat to

the success of the Bank. At times, a bank

goes out of the scene if its business model

adopted is not sustainable. This requires

forward looking on the part of management,

where a business approach should be

considered on long term sustainability basis

which creates long term value to all the

stakeholders and equally by managing risks.

At Nabil we have always kept a longer term

perspective on our business. We also consider

aspects that are important in protecting social

values and environmental balances. We have,

long before, recognized that our business

goals are inseparable from the society and

environment where we operate in. The results

of our operations must be sowed back into

the environment and communities. This

approach has helped us achieve long term

shareholders’ value by profiting from positive

public perception, sustainable branding,

higher employee satisfaction and overall

productivity.

We ensure that our business goals continue to

remain sustainable through the following

initiatives.

TRANSPARENCY ANDGOOD GOVERNANCEThe transparency and good governance

practices are topmost priority for any

institution and the financial sector which runs

its business through the trust of public needs

to keep it at helm. The debacle of many big

enterprises pre and post financial crisis across

the globe has rightly portrayed the greater

importance of good governance practices. And

recent downfall of some of the financial

institutions in Nepal itself has given a good

lesson to all of us to embrace good

governance practices.

In Nabil, we have always thrived on

disclosing our business affairs transparently to

the public, regulators and to all its

stakeholders. The disclosure requirements

provisioned by the Nepal Rastra Bank through

guidelines and circulars, Companies Act,

Securities Exchange Act and Rules, Banks

and Financial Institutions Act, and Nepal

Accounting Standards are duly complied with

and are performed consistently at all times. In

addition, the information are adequately

provided to the statutory auditors, bank's

internal auditors and NRB Inspection team so

as to enable them to make fair assessment on

our operation and to form an independent

opinion in respect of bank's financial position

and performance. The Bank has always

considered the suggestions and feedbacks

from the auditors with highly positive and has

implemented recommendations as

appropriately. The bank firmly believes that

good corporate practices and transparency are

key ingredients for its long term sustainability

and thus is determined to inculcate a culture

of living up with high professional and ethical

standards across all levels.

CONTRIBUTION TONATIONAL ECONOMYOur commitment of arranging finances to

national priority projects like those in

renewable energy sector and to export based

industries is high. We have also prioritized

financing on sectors that use local materials,

generate employment and replace imports.

Toward this end, the Bank, through the

separate division - Infrastructure and Project

Financing, has accounted big volume lending

in large sized national priority projects viz.,

hydro projects and cement industries. Retail

consumer loans that keep the domestic

economy vibrant and stable also occupies a

significant portion in our total lending

portfolio.

The recognition we hold from the national

treasury as one of the highest contributors in

the form of payments in taxes gives us a great

satisfaction. The proliferation of commercial

activities we have facilitated through

extending credit and arranging foreign trade

also generate significant tax revenues to the

government. And Nabil's regular contribution

to the government has been a feature in the

banking industry for last several years. In the

review year alone, we set aside a current tax

provision of NRs.947 million and deposited

NRs.937 million in the government's coffer.

Apart from this we also contributed NRs.6.7

million to the government in the form of

properties and vehicle taxes. Within our

national economy Nabil desires to function as

a great multiplier.

Contribution to government in any form is

extremely essential to build the nation and we

cherish this responsibility for our own

satisfaction and longevity.

SPREADING FORMALBANKING CHANNELSIt is a well accredited fact that middle and

low income group constitute major portion of

our communities. As a leading commercial

bank we acknowledge we have a role in

bringing this segment into the formal banking

ambit. To maintain a focus on this segment

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65

we have constituted a separate SME and

Microfinance division. This division is

specialized in catering to the specific financial

requirements of fresh entrepreneurs and the

growth aspirants.

Our SME project is implemented through all

our branch offices. With our focused approach

relationship managers in the branches share

best business practices and management

skills with the customers and motivate them

for achieving better and higher in order to

ensure success of such entrepreneurial

ventures. As a financing partner our

contribution has increased economic activities

at local level generated employment, fostered

investment and increased consumptions.

Our Microfinance project is operated through

selected partner organizations (MFIs) viz.

microfinance institutions, cooperatives and

non-governmental organizations working as

financial intermediaries. We have also

invested on promoter equity in selected MFIs

and extended our managerial expertise

through representation on their Board. We

have also extended credit to Youth Self

Employment Project of the government. Our

target end users are economically

disadvantaged population and they receive

micro credit through our partner organizations

to which we are extending credit in bulk to

these MFIs. These initiatives are intended for

self-employed income generating activities or

small businesses with which the aspirants

having skills and energy do not deprive of

financial need and make their living standard

up-graded.

Personal Lending Unit in the bank is well

equipped to take care of the funding

requirement against personal needs like

home, vehicle, and education etc. Financing

these activities give a kind of satisfaction and

make the life of common people easier and

disciplined. Buying a house with own money

for a salaried person may need him to wait for

decades, whereas bank can meet the

requirement of the person to own a house and

extend the credit for a period as high as 15-

20 years, who on installment can pay off the

loan gradually and enjoy a decent life with

comfort and ease.

All these drives must have brought the larger

mass into banking net and have increased

their contribution accounted in the national

economy.

ENVIRONMENTAL INITIATIVEEnvironment is one of the crucial aspects that

we need to look it seriously in order to

preserve, protect and improve if possible for

the generations to come. Global warming,

climate change, drying up of water resources,

extinction of many species of flora/fauna and

seasonal odds have now become regular

headlines across the globe which perhaps is

the outcome of adverse human actions.

To neutralize the impacts of our adverse

actions, we are committed towards facilitating

for development of clean and renewable

energy projects. Some of the initiatives we

have undertaken as of date amply speak of

our priorities. By mid-July 2013 we have

arranged a total financing commitment of

NRs.5.95 billion for construction of a number

of hydropower projects. Projects where we

have participated as financing partners hold a

combined installed capacity of 148.93

Megawatt of clean energy. In our daily

business operations we have reduced

consumption of paper, water and fossil fuel

energy through application of technological

developments and energy efficient

equipments. Investments in Core Banking

System, Management Information System and

various application software have helped us

reduce paper consumption to a greater extent.

Up-gradation in our e-banking channels

including mobile, internet and cards have

allowed our customer to execute a number of

banking transactions without visiting our

offices thereby saving significant time and

energy which would otherwise have been

consumed. We believe our small steps will

pave the way for great leap for entire mankind

as we go along with the concept.

HUMAN RESOURCEMANAGEMENTHuman resources are the drivers of bank’s

success. Employees, as stakeholders, are core

to every activities as their serving attitude and

perfect job knowledge creates value for the

customer and ultimately for the bank. We

encourage a learning culture throughout the

organization and motivate them through

enrollment in various training programs for

upgrading their job skills, personality

development and emotional intelligence.

We equally implement excellent

compensation and benefits to the employees

instilling in them the vital feeling of social and

financial security for them, their children and

their families. During the review period, Nabil

incurred a cash remuneration of NRs.638

million towards its employees while it also set

aside NRs.316.3 million as bonus. Apart

from cash remuneration, the bank has also

provisioned loan facilities at concessional

rates to all the staffs and vehicle facilities to

managerial level staffs. The Bank has also

prioritized in providing required infrastructure

and internal ambience so that employees

could discharge their duties at comfort

thereby delivering results with efficiency and

with increased productivity.

Nonetheless, at the end of the day whatever

we compensate, it is the talent, the skill, the

maturity and dedication of staff that

determines the result. We promote this

culture in the bank and provide opportunities

to instill it in all the employees. Till date, the

bank's employees by and large have set a

high standard of efficiency and thus we have

been reaping the benefits for years. Moreover,

financial industry has also been the

beneficiary of resource pool which comprised

of many individuals who at some point of

time had been associated with Nabil as a

staff member.

The results of our “Employee Survey 2013”

indicated very high degree of employee

commitment and expressed satisfaction over

the career development. Employees also

expressed high ratings for their present job

experience and organizational leadership. The

Bank understands these as essential drivers of

success and long term sustainability.

Nabil Bank Limited

66

CORPORATE SOCIAL RESPONSIBILITY

The basis of the very existence of a corporate

body lies in creating values and then sharing

the values with its stakeholders. In a broader

perspective, stakeholders do not only entail

shareholders but encompass a larger

spectrum that include employees,

depositors, borrowers, creditors, regulators,

business partners and the general public.

The institutions like banks interact

extensively with these stakeholders and it is

very common to expect sharing of fair values

by the stakeholders. Nabil reveres such

expectation and feels a moral duty to share

created value fairly with the stakeholders.

The sharing of value generally happens to be

the compensation of value received which

could take form of capital or services.

However at times we share our value with

our stakeholders, particularly the

philanthropic institutions or individuals

working for noble cause, with no such

expectation of value in exchange or in

monetary terms. Such contribution has been

an essential part of Nabil's business which is

evident through its involvement and

partnerships with various institutions on

different occasions from the last so many

years.

During the year 2012-13, the Bank entered

into a three years partnership with the

International Centre for Integrated Mountain

Development (ICIMOD) for improving

facilities at the ICIMOD Knowledge Park at

Godavari. The ICIMOD is engaged in

betterment of the livelihoods of people

residing in hilly and mountainous areas

through knowledge sharing and cooperation

thereby enabling sustainable and resilient

mountain development. With improvement

in facilities, the immediate beneficiaries like

farmers, researchers, students and

development practitioners are likely to get

immense benefit from the park. The Bank

has contributed NRs.1.35 million to ICIMOD

and for this it has recognized the Bank as its

Gold Partner.

In addition, the Bank has also made

contribution of NRs.100K for environmental

awareness event organized by Alternative

Energy Promotion Centre (AEPC). As a part

of Government's program to disseminate and

promote clean cooking solutions to 3 million

households by 2017, the AEPC organized

the "Clean Cookstove Market Place 2013"

event during Mid of July 2013. The event,

which consisted of seminar, expo and field

visit was participated by international

entrepreneurs, national entrepreneurs,

investors, bankers, development partners

and policy makers. Such events are stepping

stones towards achieving broader goals

formulated specifically for the protection of

environment and Nabil is privileged for being

part of such noble objectives by any means.

Apart from this, the Bank also provided

NRs.200K for organizing an orientation

program on "Zero Budget Natural Agriculture

Farming" by the Commercial Agriculture

Alliance (CAA). CAA is a non-profit making

company incorporated to promote

commercial agriculture in Nepal by

developing alliance with the agricultural

stakeholders. Commercial agriculture is

something that Nepal should look seriously

for future since majority of its citizens still

rely heavily on agriculture for their livelihood

and more importantly Nepal has not become

independent on food as of date. Recent

figures on import and export figures (NRs.

20 billions vs. NRs.10 billions in year 2012-

13) of agricultural produce substantiates this

fact. We believe such programs will

ultimately help in educating concerned

stakeholders and motivate for doing

commercial farming on large scale.

Furthermore, the Bank has contributed

NRs.300K for constructing Traffic Police

Office Building at Durbar Marg and

NRs.120K to bear the educational cost of

one girl child at Shree Gargi Kanya Gurukul

Pratisthan. The shuttle service to the doctors

volunteering their service at free health

camps organized weekly at Indrawati

Community Health Centre, Sipaghat Dhat

Khola, Sindhupalchowk, Nepal were also

continued during the year.

These all speak plenty about Nabil’s selfless

commitment towards society it is part of. As a

matter of creating a strong bond with the

society, Nabil will strive on doing everything it

is capable of. It would be of great delight

doing something commendable towards the

society, whether explicit or implicit, through

creation of values in partnership with one and

all for the community. In the days to come,

the Bank's major CSR objectives would be

directed towards regeneration of environment

and economic prosperity of deprived and

disadvantaged groups of the nation.

04


67

Nabil Bank and ICIMODpartner to promotesustainable greentechnologies and biodiversityconservation. Mr. AnilGyawali, CEO of Nabil Bank(R) handing over cheque toDr. David Molden. DirectorGeneral of ICIMOD

Nabil Bank providedfinancial assistance to

Traffic Police forconstruction of their officebuilding at Durbarmarg. Mr.Anil Gyawali, CEO of Nabil

Bank(2nd from Right)handing over a cheque toMr. Sitaram Hachhethu,

coordinator of Traffic PoliceBuilding Construction

Committee (3rd from Left)

Nabil Bank's token supportto Shree Gargi KanyaGurukul Pratisthan foreducating girls. Mr. AnilGyawali, CEO of Nabil Bank(2nd from Right) handingover a cheque to Mrs. AngurBaba Joshi, Senior SocialWorker & Founder Patron(3rd from Left)

Director, Mr. Shambhu PrasadPoudyal and Nabil Union President,Mr. Purna B Bhat with Nabil Unionofficials and staff members duringa program organized for handingover relief materials and cashcollected for Far Western RegionFlood Victims.

Staff members participatingin blood donation programorganized by Nabil Union.

Nabil Bank Limited

68

Nabil Cricket Team during Soaltee Crown PlazaSuper Six Cricket Tournament.

Nabil Badminton team during a tournament.


69

05

05STATEMENT OF DIRECTOR’S RESPONSIBILITY

The statement of directors’ responsibilitieswhich should be read in conjunction with theAuditor’s Report addressed to the shareholdersof the Bank is introduced in order todistinguish the respective responsibilities ofthe Board from that of auditors in relation tothe preparation and presentation of financialstatements of the Bank. The Board ofDirectors are responsible for preparing AnnualReport, the separate financial statements ofthe Bank and the consolidated financialstatements of the Bank and its subsidiary(ies)in accordance to the prevailing laws andregulations of Nepal.

Section 108 together read with Section 109 ofthe Companies Act 2006 of Nepal prescribesthe ultimate responsibilities of the Board ofDirectors to prepare the financial statements ofthe Company to its shareholders forpresentation in AGM. Further, Section 2(4) ofDirective 20 of NRB Unified Directive 2013prescribes preparation and presentation ofconsolidated financial statements of the Bankand its subsidiary(ies) in addition to thepreparation of separate financial statements inline with Directive 4.

Though the accounting standard forconsolidation of financial statements has notbeen implemented yet in Nepal, the Banktakes the guidance of IFRS 10 "ConsolidatedFinancial Statements" for its preparation. NAS

1 Presentation and Preparation of FinancialStatements and Section 109(2) of CompaniesAct 2006 require companies to preparefinancial statements that achieve fairpresentation of its financial position, financialperformance and cash flows of the relevantperiod.

In preparing the consolidated and separatefinancial statements, the directors arerequired to:�select suitable accounting policies and then

apply them consistently;�make judgements and estimates that are

reasonable and prudent; and�state whether they have been prepared in

accordance with NAS.

The directors are required to prepare thefinancial statements on the going concernbasis unless it is not appropriate. Since thedirectors are satisfied that the Group and theBank have the resources to continue inbusiness for the foreseeable future and thereare no indicators that casts the Bank’s and itssubsidiary’s going concern assumption indoubt, the financial statements is continued tobe prepared on the going concern basis. It isfundamental that the directors are alsoresponsible for keeping adequate accountingrecords that are sufficient to show and explainthe parent company’s transactions anddisclose with reasonable accuracy at any time

the financial position of the parent companyand enable them to ensure that its financialstatements comply with the NAS. Section 1(7)of Directive 6 of NRB Unified Directives 2012specifies the requirement of maintainingrecords of transactions up-to-date at all times.Moreover, it restricts the directors toadd/modify official accounting records in thepersonal capacity. Further, the directors havegeneral responsibility for taking such steps asare reasonably open to them to safeguard theassets of the Group and to prevent and detectfraud and other irregularities. As such, theBank and its subsidiary have implementedpolicies, procedures and mechanisms that areintended to mitigate the risks that may arisedue to control lapses. Any fraud detectedduring the relevant financial period is reportedin Notes to Accounts along with the impact ofsuch frauds in the financial statements. TheBank has constituted Audit Committee thatcomprises of three non-executive directors andthe Head Internal Audit who is the secretary ofthe Committee.

The Audit Committee functions independentlyand reports directly to the Board of Directors.

On behalf of the BoardKrishna Bahadur ManandharChairman

FINANCIALSTATEMENTS ANDOTHER INFORMATION


71

a. Business review of last year - This has

been disclosed under sections “C.

Achievement of Current Year” under “02.

Operating and Financial Review” of the

Director’s Report.

b. Any impact that caused to the business of

the Company due to national and

international condition – Nepal being import

based economy, depreciation of NPR in

comparison to foreign currencies has

contributed to push inflation rates further as

national consumer price index surged to 9.9%

in comparison to 8.3% of last year. This has

adversely affected national economy as well as

the entire banking industry. Huge trade deficit,

suppressed GDP growth and intense

competition are some of the impediments in

robust growth of the business.

Prolonged power crisis, rising cost of

petroleum products due to significant

depreciation of NPR and effects of rising

inflation all have contributed to increasing cost

of operations.

c. Current year’s (2013/14) achievement

until the date of preparation of Report from

the Directors and Board of Directors’ view on

future activities of the Company:

The adverse impact of political deadlock,

excessive liquidity in some period and liquidity

crunch during some period and challenges of

limited investment opportunities in the review

year 2012/13 is likely to continue in the

financial year 2013/14. In the absence of new

policies and attractive programs that will lure

growth in investments, the possibilities on

growth of business activities is also not likely.

Similarly, policy changes on multiple banking

facilities, interest spread on investments and

deposits are also likely to bring challenges to

the banking community. There is also a

likelihood of adverse impact on the income

deriving from Non Deliverable Forwards.

Further, due to higher number of banks and

financial institutions, the banks' operations

and expansions are also likely to become more

competitive and challenging than ever.

In the mean time, your Bank has managed to

achieve very good result in the first four

months. The Bank's operating profit (before

loss provision) in the first four months is

NRs.1,216.6 million, which is higher by

NRs.106 million or 9.02% in comparison to

the profit during the same period of review

year 2012/13. In addition, the growth under

deposit is 10.6% or NRs.6.76 billion than the

Mid July, 2013 while growth under loans and

advances is 3.5% or NRs.1.65 billion than the

Mid July 2013. The major challenges during

the year 2013/14 for the Bank are to maintain

the quality of asset, manage liquidity and raise

loans and advances to expand the income.

Despite challenges in economic and social

outlook, the Bank shall endeavor to maintain

the growth rate of earlier years in the current

financial year as well.

In line with the mission of becoming "First

Choice Provider of Complete Financial

Solutions" the Bank like in the earlier years

shall utilize the resources spread across the

nation effectively to give optimum return to the

investors, thereby creating direct and indirect

employment and also assisting in the nation

building through the contribution to the

national coffer to achieve Bank's broader

goals. The Bank will always make a persistent

effort to contribute in the sectors prioritized by

the nation. In this connection, the Bank in

addition to enhancing the quality of the

services, it shall also increase investments in

productive sectors, agriculture sector and

energy sector. Further, the Bank shall also

formulate strategies to initiate on

implementing technology based services and

penetrate newer markets.

d. Industrial and professional relations of the

Company – The Bank maintains cordial

relationships with all its stakeholders including

the staff members. The Bank has been imparting

the feeling of belongingness by maintaining

harmony amongst employees of all hierarchy. It

has always encouraged the management and the

employees’ union to interact for improvement of

Bank’s systems and processes. Such an open

culture where every individual employee senses

his/her role on attaining Bank’s common

objective is believed to be an essential ingredient

for corporate success. The Bank has put in all

efforts to drive all employees to work together in

the unison with common mission to make the

Bank as “1st Choice Provider of Complete

Financial Solutions”.

e. Changes in the Board of Directors and the

reason thereof – Disclosed in “A.5 Changes in

the Board” under “05. Governance”.

f. Main factors that affect business activities:

1. Increased Competition

2. Adverse political environment that affect

stability in the business

3. Lack of investment growth opportunities

g. Any remarks and observation stated in the

Independent Auditors’ Report and Board of

Directors’ response thereon – No material

remarks.

h. Amount recommended for distribution of

dividend – NRs.40 per share cash dividend

and NRs.25 per share stock dividend (at the

rate of 1 share for every 4 shares).

DISCLOSURE OF INFORMATIONUNDER SECTION 109(4) OF COMPANIES ACT 2006

05

Nabil Bank Limited

72

i. Details of shares forfeited (number of share,

face value, amount received by the Company

prior to forfeiture, amount received by the

Company after putting such forfeited shares

into subscription and amount refunded on

account of forfeited shares) - The bank has

not forfeited any shares.

j. Review of the progresses made by the

Company and its subsidiary(s) in the current

fiscal year 2012/13 and the position of the

same at the end of fiscal year – Disclosed in “C.

Achievement of Current Year” and “H. Financial

position and performance of Nabil Invest” under

“02. Operating and Financial Review”.

k. Main activities carried out by the Company

and its subsidiary(s) in last fiscal year and

any significant changes in the business

activities of the Company and its subsidiary

during the same period:

Nabil Bank – Commercial banking activities

like credit disbursement, investment, deposit

mobilization, remittance, card and other

financial services.

Subsidiary company – Merchant banking

activities like IPO management, wealth

management, securities underwriting, mutual

fund scheme management, depository

participant's service and share registrar service.

No changes in the transactions of the Bank

and its subsidiary company except launching

of Mutual Fund Scheme - Nabil Balance Fund

- 1 during year 2012/13.

l. Any information given to the Company by

its principal shareholder (who holds 5% or

more shares of the Company) during the

financial year – No such information provided

by the principal shareholders.

m. Shares held by the directors and officials

of the Company and information received by

the Company on their involvement in trading

of shares:

SHARES HELD BY THE DIRECTORS AND OFFICIALSOF THE COMPANY AND THEIR INVOLVEMENT IN TRADING:

DESIGNATION SHAREHOLDER NO. DIRECTOR AND OFFICIALS OWNERSHIP

Director 2663 Mr. Shambhu Prashad Poudyal 3930

Director 90 Mr. Dayaram Gopal Agrawal 2343

Director 14990 Mr. Krishna Prasad Acharya 84

CEO 464 Mr. Anil Gyawali 4047

Manager 8258 Mr. Kanhaiya Lal Rajwant 70

Manager 5076 Mr. Rajeshwor Lal Shrestha 192

Manager 5761 Mr. Yagya Prasad Sharma 246

Manager 4852 Mr. Yugesh Lal Bijukchhe 490

Manager 2174 Ms. Neena Thapa 662

Manager 4866 Mr. Deepak Shrestha 742

Manager 4804 Mr. Binaya Regmi 891

Manager 4733 Mr. Rajendra Bahadur Malla 4077

Manager 4821 Mr. Iswar Man Shrestha 4552

Manager 4773 Mr. Babu Ratna Bajracharya 596

Manager 8898 and 11391 Mr. Jaya Krishna Shrestha (248 and 706 units) 954

SHARES ACQUIRED DURING 2012/13

Officer 5367 Mr. Kamal Prasad Lacaul 623

Officer 5817 Mr. Prakash Basukala 202

Officer 17242 Mr. Rajeev Shrestha 26

Officer 18058 Mr. Niraj Rajbhandari 93

Officer 13694 Mr. Purna Dev Karanjit 98

Shares disposed during 2012/13

Officer 15011 Mr. Keshab Raj Subedi 100


73

n. Information provided on personal interest

of Board of Directors and their relatives

(nearest kin) regarding contract or agreement

done with the Company during the year –

There is no record of such event/transaction.

o. Buyback of share by the Company, reason

thereof for buyback, number of share bought

back, face value of share and amount paid

during the buyback – The Bank has not

bought back any share.

p. Information on existence of Internal control

system and if there is, its detail – Disclosed in

point “C. Internal Control” under “05.

Governance”.

q. Details of management expenses incurred

during the year – Disclosed in Schedule 23

“Personnel Expense” and Schedule 24 “Office

Operating Expense” of financial statement.

r. Name list of members in the audit

committee, remuneration, allowance and

benefits they have received, the details of

activities of the committee and the details of

any recommendation by them:

As of 15th July 2013, the committee had

following members

1. Director D G Agrawal – Convenor

2. Director K P Acharya – Member

3. Mr. Ashish Sharma – Member

Apart from sitting fee and per diem for

outstation visit of foreign directors, all directors

receive NRs.15,000 (net of TDS) on monthly

basis for newspaper/communication allowance

which was approved by 25th AGM held on

22nd September 2009.

Details of committee activities and the

recommendation are presented in point B.2.3

and B.2.4 under “05. Governance”.

s. Dues payable to the Company by any

director, MD, CEO, principal shareholders

(holding share more than 5%) or their

relatives or firms or institutions in which they

have their involvement (interest) – Disclosed

in Schedule 29 of the financial statement.

t. Remuneration, allowances and benefits

paid to director, MD, CEO and officials –

Disclosed in Point 9 “Related Parties

Disclosures” of Schedule 33 “Notes to

Accounts” of the financial statement.

u. Uncollected dividend by the shareholder –

NRs.41,097,769.

v. Information on asset bought or sold as per

Section 141 – N/A

w. Details of related party transaction as per

Section 175 (transactions between

associated companies) – Disclosed in Point 13

“Related Parties Disclosures” of Schedule 33

“Notes to Accounts” of the financial statement.

x. Any other details to be disclosed in the

Report from the Directors in accordance with

Companies Act, 2006 or other prevailing laws

– Disclosed in appropriate part of this Report

and financial statements.

y. Any other pertinent details – Disclosed in

appropriate part of this Report and financial

statements.


75

CAPITAL & LIABILITIES THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Share Capital 3,046,051,750 2,435,723,280

2. Reserves & Surplus 3,661,043,984 3,017,916,565

3. Non Controlling Interest 33,213,885 30,336,486

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

5. Borrowings - 311,080,000

6. Deposits 63,506,102,707 54,905,676,208

7. Bills Payable 529,597,845 179,142,358

8. Proposed Dividend 974,736,560 811,907,760

9. Income Tax Liabilities 66,872,707 51,106,490

10. Other Liabilities 1,225,973,710 1,207,599,073

Total 73,343,593,148 63,250,488,220

ASSETS THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Cash Balance 1,140,212,319 1,050,668,504

2. Balance with Nepal Rastra Bank 4,789,295,130 3,681,980,327

3. Balance with Banks/Financial Institutions (32,108,638) (438,602,825)

4. Money at Call and Short Notice 1,634,306,157 826,435,677

5. Investment 16,344,425,612 14,069,965,792

6. Loans, Advances and Bills Purchased 46,369,834,571 41,605,682,634

7. Fixed Assets 878,461,243 894,495,291

8. Non Banking Assets - -

9. Other Assets 2,219,166,754 1,559,862,820

Total 73,343,593,148 63,250,488,220

Consolidated Balance Sheetas at 15 July 2013 (31 Ashadh 2070)

Anil GyawaliChief Executive Officer

K. B. ManandharChairman

S. P. PoudyalDirector

K. P. AcharyaDirector

As per our report of even date.D. G. AgrawalDirector

Krishna BhattaraiChief Financial Officer

N. ChaudharyDirector

Ashish SharmaDirector

CA. L. D. MahatPartnerCSC & Co.Chartered Accountants

M. AhmedDirector

DATE: 06th September 2013PLACE: Nabil Centre, Durbar Marg, Kathmandu

Nabil Bank Limited

76

PARTICULARS THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Interest Income 5,721,105,506 6,138,866,625

2. Interest Expense 2,186,300,942 3,152,940,354

Net Interest Income 3,534,804,564 2,985,926,271

3. Commission and Discount 405,474,783 367,676,396

4. Other Operating Income 222,385,463 207,295,626

5. Exchange Income 489,051,079 447,070,485

Total Operating Income 4,651,715,889 4,007,968,778

6. Staff Expense 652,362,895 505,008,894

7. Other Operating Expense 475,903,506 432,880,991

8. Exchange Loss - -

Operating Profit before Provision for Possible Losses 3,523,449,488 3,070,078,893

9. Provision for Possible Losses 27,450,911 413,948,680

Operating Profit 3,495,998,577 2,656,130,213

10. Non Operating Income /(Expense) 6,058,572 9,939,751

11. Provision for Possible Losses Write Back 24,727,701 -

Profit from Regular Activities 3,526,784,850 2,666,069,964

12. Income/(Expense) from Extra-ordinary Activities (17,454,214) (3,036,749)

Profit from All Activities 3,509,330,636 2,663,033,215

13. Provision for Staff Bonus 319,077,852 243,074,316

14. Provision for Income Tax 958,123,456 723,698,440

Current Tax 954,532,945 731,904,979

Prior Period Tax 5,791,658 -

Deferred Tax (2,201,147) (8,206,539)

15. Share of Non-Controlling Interest in the Profit of Susbsidiary 5,443,068 2,769,072

Net Profit/(Loss) 2,226,686,260 1,693,491,387

Consolidated Profit and Loss AccountFor the period 16 July 2012 to 15 July 2013 (1 Shrawan 2069 to 31 Ashadh 2070)










M. AhmedDirector



77










M. AhmedDirector



Income

1. Accumulated Profit up to Last Year (Restated Balance) 562,584,391 498,933,103

2. Current Year's Profit 2,226,686,260 1,693,491,387

3. Exchange Equalization Fund - -

4. Capital Adjustment Reserve - -

5. Deferred Tax Reserve - -

6. Investment Adjustment Reserve - -

7. Dividend Equalisation Fund - -

8. Contingent Reserve 400,000 226,430

Total 2,789,670,651 2,192,650,920

Expense

1. Accumulated Loss up to Last Year - -

2. Current Year's Loss - -

3. General Reserve 444,000,000 340,000,000

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

5. Institution Development Fund - -

6. Dividend Equalization Fund - -

7. Employees Related Reserve - -

8. Proposed Cash Dividend 974,736,560 811,907,760

9. Proposed Stock Dividend (Bonus Shares) 609,210,350 405,953,880

10. Special Reserve Fund - -

11. Exchange Fluctuation Fund 24,000,000 28,800,000

12. Capital Redemption Reserve - -

13. Capital Adjustment Fund - -

14. Deferred Tax Reserve 2,154,126 8,193,129

15. Investment Adjusment Reserve 12,191,027 34,211,760

Total 2,067,292,063 1,630,066,529

16. Accumulated Profit/(Loss) 722,378,588 562,584,391

Consolidated Profit & Loss Appropriation AccountFiscal Year 2012/13 (2069/2070)

Nabil Bank Limited

78Co

nsol

idat

edSt

atem

ento

fCha

nges

inEq

uity

Fortheperiod

16July2012to15July2013(1Shrawan

2069to31Ashadh2070)

PARTICULARS

SHARECAPITAL

ACCUMULATED

GENERAL

PROPOSED

CAPITAL

SHARE

CONTINGENT

DIVIDEND

CAPITAL

EXCHANGE

INTEREST

DEFERRED

INVESTMENT

TOTAL

PROFIT/(LOSS)

RESERVE

BONUSSHARE

RESERVE

PREM

IUM

RESERVE

EQUALIZATION

ADJUSTMENT

EQUALIZATION

SPREAD

TAX

ADJUSTMENT

AMOUNT

FUND

FUND

RESERVE

FUND

RESERVE

RESERVE

RESERVE

Balanceason16

July2012

2,029,769,400

569,468,654

2,176,500,000

405,953,880

-74,000

13,273,570

--126,300,000

2,578,00042,575,441

94,031,164

5,460,524,109

Chan

ges

inAc

coun

ting

Polic

y-

--

--

--

--

--

--

-

Bon

usSh

are

issu

ed40

5,95

3,88

0-

-(4

05,9

53,8

80)

--

--

--

--

--

Frac

tion

Shar

eAd

just

men

t

from

Cash

Div

iden

d1,

118,

120

--

--

--

--

--

--

1,11

8,12

0

Erro

radj

ustm

ent

-(6

,884

,263

)-

--

--

--

--

--

(6,8

84,2

63)

Chan

ges

inTa

xAc

coun

ting

Polic

y-

--

--

--

--

--

--

-

Adju

stm

ents

inFi

xed

/Oth

erAs

sets

--

--

--

--

--

--

--

Ref

und

ofD

ivid

end

Inco

me

aspe

rthe

Inst

ruct

ion

ofN

RB

--

--

--

--

--

--

--

RestatedOpeningBalance

2,436,841,400

562,584,391

2,176,500,000

--

74,000

13,273,570

--126,300,000

2,578,00042,575,441

94,031,164

5,454,757,966

Surp

lus

onR

eval

uatio

nof

Prop

ertie

s-

--

--

--

--

--

--

-

Def

icit

onR

eval

uatio

nof

Prop

ertie

s-

--

--

--

--

--

--

-

Curre

ncy

Tran

slat

ion

Diff

eren

ce-

--

--

--

--

--

--

-

Net

Gai

nsan

dLo

sses

not

reco

gnis

edin

the

Inco

me

Stat

emen

t-

--

--

--

--

--

--

-

Net

Prof

itfo

rthe

perio

d-

2,22

6,68

6,26

0-

--

--

--

--

--

2,22

6,68

6,26

0

Adjustments:

--

--

--

--

--

--

--

Issu

ance

ofSh

are

Capi

tal

--

--

--

--

--

--

--

Def

icit

onR

eval

uatio

nof

Prop

ertie

s-

--

--

--

--

--

--

-

Surp

lus

onR

eval

uatio

nof

Prop

ertie

s-

--

--

--

--

--

--

-

Cash

Div

iden

d-

(974

,736

,560

)-

--

--

--

--

--

(974

,736

,560

)

Prop

osed

Stoc

kD

ivid

end

-(6

09,2

10,3

50)

-60

9,21

0,35

0-

--

--

--

--

-

Gen

eral

Res

erve

Fund

-(4

44,0

00,0

00)

444,

000,

000

--

--

--

--

--

-

Cont

inge

ntR

eser

ve-

(1,0

00,0

00)

--

--

1,00

0,00

0-

--

--

--

Equi

vale

ntam

ount

ofm

edic

alex

pens

e

unde

rHos

pita

lizat

ion

Sche

me

-40

0,00

0-

--

-(4

00,0

00)

--

--

--

-

Div

iden

dEq

ualiz

atio

nFu

nd-

--

--

--

--

--

--

-

Capi

talA

djus

tmen

tFun

d-

--

--

--

--

--

--

-

Exch

ange

Fluc

tuat

ion

Res

erve

-(2

4,00

0,00

0)-

--

--

--

24,0

00,0

00-

--

-

Inte

rest

Spre

adR

eser

ve-

--

--

--

--

--

--

-

Def

erre

dTa

xR

eser

ve-

(2,1

54,1

26)

--

--

--

--

-2,

154,

126

--

Inve

stm

entA

djus

tmen

tRes

erve

-(1

2,19

1,02

7)-

--

--

--

--

-12

,579

,096

388,

069

ClosingBalance

2,436,841,400

722,378,588

2,620,500,000

609,210,350

-74,000

13,873,570

--150,300,000

2,578,00044,729,567

106,610,2606,707,095,735


79


(a) Cash Flow from Operating Activities 1,634,682,264 3,504,297,743

1. Cash Received 6,507,803,903 6,960,784,041

1.1 Interest Income 5,399,592,282 5,866,808,864

1.2 Commission and Discount Income 350,245,632 419,236,920

1.3 Income from Foreign Exchange Transaction 512,714,664 447,070,485

1.4 Recovery of Loan Written Off 10,441,593 16,770,964

1.5 Other Incomes 234,809,732 210,896,808

2. Cash Payment (4,357,987,973) (4,709,192,637)

2.1 Interest Expenses (2,186,417,719) (3,154,542,659)

2.2 Staff Expenses (880,256,345) (508,569,523)

2.3 Office Operating Expenses (348,020,879) (304,303,047)

2.4 Income Tax Paid (943,240,498) (724,976,186)

2.5 Other Expenses (52,532) (16,801,222)

Cash Flow before changes in Working Capital 2,149,815,930 2,251,591,404

(Increase)/Decrease in Current Assets (9,135,643,762) (2,412,117,132)

1. (Increase)/Decrease in Money at Call and Short Notice (807,870,480) 1,626,076,101

2. (Increase)/Decrease in Other Short Term Investment (2,873,822,930) 173,944,342

3. (Increase)/Decrease in Loans, Advances and Bills Purchase (4,805,605,359) (3,965,286,395)

4. (Increase)/Decrease in Other Assets (648,344,993) (246,851,180)

Increase/(Decrease) in Current Liabilities 8,620,510,096 3,664,823,471

1. Increase/(Decrease) in Deposits 8,600,426,499 5,221,899,862

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

3. Increase/(Decrease) in Short Term Borrowings (313,080,000) (1,315,519,178)

4. Increase/(Decrease) in Other Liabilities 333,163,597 (241,557,213)

(b) Cash Flow from Investment Activities 776,650,153 (1,058,810,249)

1. (Increase)/Decrease in Long-term Investment 611,411,009 (1,188,558,463)

2. (Increase)/Decrease in Fixed Assets (108,879,254) (88,247,024)

3. Interest income from Long term Investment 269,042,367 197,670,874

4. Dividend Income 13,178,465 20,324,364

5. Other (8,102,434) -

(c) Cash Flow from Financing Activities (807,979,612) (609,991,078)

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

2. Increase/(Decrease) in Share Capital* 1,118,120 -

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

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

5. Dividend Paid (809,097,732) (609,991,078)

(d) Income/(Loss) from change in exchange rate in Cash & Bank balance - -

(e) Current Year's Cash Flow from All Activities 1,603,352,805 1,835,496,416

(f) Opening Cash and Bank Balance 4,294,046,006 2,458,549,590

(g) Closing Cash and Bank Balance 5,897,398,811 4,294,046,006

Consolidated Cash Flow Statement(For the period from 16 July 2012 to 15 July 2013)

*Increment in share capital by virtue of issuance of bonus shares have not been reflected.However, fraction share adjusted with Cash Dividend is disclosed as increment.

Nabil Bank Limited

80

Balance Sheetas at 15 July 2013 (31 Ashadh 2070)










M. AhmedDirector


CAPITAL & LIABILITIES SCHEDULE THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Share Capital 1 3,046,051,750 2,435,723,280

2. Reserves & Surplus 2 3,643,092,761 3,008,277,828

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

4. Borrowings 4 - 311,080,000

5. Deposits 5 63,609,808,199 55,023,695,253

6. Bills Payable 6 529,597,845 179,142,358

7. Proposed Dividend 974,736,560 811,907,760

8. Income Tax Liabilities 66,872,707 51,106,490

9. Other Liabilities 7 1,071,099,849 1,072,481,023

Total 73,241,259,671 63,193,413,992

ASSETS SCHEDULE THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Cash Balance 8 1,140,212,319 1,050,658,504

2. Balance with Nepal Rastra Bank 9 4,789,295,130 3,681,980,327

3. Balance with Banks/Financial Institutions 10 (46,938,948) (456,816,781)

4. Money at Call and Short Notice 11 1,634,306,157 826,435,677

5. Investment 12 16,332,043,012 14,048,965,792

6. Loans, Advances and Bills Purchased 13 46,369,834,571 41,605,682,634

7. Fixed Assets 14 872,322,039 887,543,274

8. Non Banking Assets 15 - -

9. Other Assets 16 2,150,185,391 1,548,964,565

Total 73,241,259,671 63,193,413,992

Schedules 1 to 17 form integral part of the balance sheet

Contingent Liabilities Schedule 17

Directors' Declaration Schedule 29

Table of Capital Fund Schedule 30(A1)

Credit Risk Schedule 30(B)

Credit Risk Mitigation Schedule 30(C)

Operation Risk Schedule 30(D)

Market Risk Schedule 30(E)

Principal Indicators Schedule 31

Principal Accounting Policies Schedule 32

Notes to Accounts Schedule 33

Statement of Promoters' Loan Schedule 34

Comparison of Unaudited and Audited Financial Statement Schedule 35


81

Profit and Loss AccountFor the period 16 July 2012 to 15 July 2013 (1 Shrawan 2069 to 31 Ashadh 2070)

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










M. AhmedDirector


PARTICULARS SCHEDULE THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Interest Income 18 5,702,122,918 6,126,854,828

2. Interest Expense 19 2,186,184,871 3,155,490,469

Net Interest Income 3,515,938,047 2,971,364,359

3. Commission and Discount 20 393,050,514 366,387,194

4. Other Operating Income 21 209,905,066 201,084,866

5. Exchange Income 22 489,051,079 447,070,485

Total Operating Income 4,607,944,706 3,985,906,904

6. Staff Expense 23 646,759,675 500,712,844

7. Other Operating Expense 24 468,781,187 430,909,132

8. Exchange Loss 22 - -

Operating Profit before Provision for Possible Losses 3,492,403,844 3,054,284,928

9. Provision for Possible Losses 25 27,450,911 413,948,680

Operating Profit 3,464,952,933 2,640,336,248

10. Non Operating Income /(Expense) 26 13,468,572 13,839,751

11. Provision for Possible Losses Write Back 27 24,727,701 -

Profit from Regular Activities 3,503,149,206 2,654,175,999

12. Income/(Expense) from Extra-ordinary Activities 28 (17,454,214) (3,036,749)

Profit from All Activities 3,485,694,992 2,651,139,250


14. Provision for Income Tax 950,677,628 720,108,902

Current Tax 946,885,251 728,302,031

Prior Period Tax 5,791,658 -

Deferred Tax (1,999,281) (8,193,129)

Net Profit/(Loss) 2,218,761,843 1,689,391,847

Nabil Bank Limited

82

Profit & Loss Appropriation AccountFiscal Year 2012/13 (2069/2070)










M. AhmedDirector



Income

1. Accumulated Profit up to Last Year (Restated Balance) 552,945,653 493,393,905

2. Current Year's Profit 2,218,761,843 1,689,391,847

3. Exchange Equalization Fund - -

4. Capital Adjustment Reserve - -

5. Deferred Tax Reserve - -

6. Investment Adjustment Reserve - -

7. Dividend Equalisation Fund - -

8. Contingent Reserve 400,000 226,430

Total 2,772,107,496 2,183,012,182

Expense

1. Accumulated Loss up to Last Year - -

2. Current Year's Loss - -

3. General Reserve 444,000,000 340,000,000

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

5. Institution Development Fund - -

6. Dividend Equalization Fund - -

7. Employees Related Reserve - -

8. Proposed Cash Dividend 974,736,560 811,907,760

9. Proposed Stock Dividend (Bonus Shares) 609,210,350 405,953,880

10. Special Reserve Fund - -




14. Deferred Tax Reserve 1,999,281 8,193,129

15. Investment Adjusment Reserve 12,191,027 34,211,760

Total 2,067,137,218 1,630,066,529



83

PARTICULARS

SHARECAPITAL

ACCUMULATED

GENERAL

PROPOSED

CAPITAL

SHARE

CONTINGENT

DIVIDEND

CAPITAL

EXCHANGE

INTEREST

DEFERRED

INVESTMENT

TOTAL

PROFIT/(LOSS)

RESERVE

BONUSSHARE

RESERVE

PREM

IUM

RESERVE

EQUALIZATION

ADJUSTMENT

EQUALIZATION

SPREAD

TAX

ADJUSTMENT

AMOUNT

FUND

FUND

RESERVE

FUND

RESERVE

RESERVE

RESERVE

Balanceason16

July2012

2,029,769,400

559,829,916

2,176,500,000

405,953,880

-74,000

13,273,570

--126,300,000

2,578,00042,575,441

94,031,164

5,450,885,371

Chan

ges

inAc

coun

ting

Polic

y-

Bon

usSh

are

issu

ed40

5,95

3,88

0(4

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53,8

80)

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men

t

from

Cash

Div

iden

d1,

118,

120

1,11

8,12

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(6,8

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63)

(6,8

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--

RestatedOpeningBalance

2,436,841,400

552,945,653

2,176,500,000

--

74,000

13,273,570

--126,300,000

2,578,00042,575,441

94,031,164

5,445,119,228

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Prof

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218,

761,

843

2,21

8,76

1,84

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Adjustments:

-

Issu

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are

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-

Def

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609,

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--

Gen

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Res

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(24,

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erve

(12,

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027)

12,1

91,0

27-

ClosingBalance

2,436,841,400

704,970,278

2,620,500,000

609,210,350

-74,000

13,873,570

--150,300,000

2,578,00044,574,722

106,222,1916,689,144,511

Stat

emen

tofC

hang

esin

Equi

tyFortheperiod


2069to31Ashadh2070)

Nabil Bank Limited

84


(a) Cash Flow from Operating Activities 1,647,367,834 3,480,247,625

1. Cash Received 6,475,748,293 6,942,481,055

1.1 Interest Income 5,392,441,338 5,858,317,820

1.2 Commission and Discount Income 350,245,632 419,236,920

1.3 Income from Foreign Exchange Transaction 512,714,664 447,070,485

1.4 Recovery of Loan Written Off 10,441,593 16,770,964

1.5 Other Incomes 209,905,066 201,084,866

2. Cash Payment (4,339,373,075) (4,892,143,360)

2.1 Interest Expenses (2,186,301,648) (3,157,092,774)

2.2 Staff Expenses (873,217,310) (695,216,492)


2.4 Income Tax Paid (936,910,692) (721,299,612)

2.5 Other Expenses (52,532) (16,801,222)

Cash Flow before changes in Working Capital 2,136,375,218 2,050,337,695

(Increase)/Decrease in Current Assets (9,076,787,611) (2,406,880,684)

1. (Increase)/Decrease in Money at Call and Short Notice (807,870,480) 1,626,076,101

2. (Increase)/Decrease in Other Short Term Investment (2,873,822,930) 173,944,342

3. (Increase)/Decrease in Loans, Advances and Bills Purchase (4,805,605,359) (3,965,286,395)


Increase/(Decrease) in Current Liabilities 8,587,780,227 3,836,790,614

1. Increase/(Decrease) in Deposits 8,586,112,946 5,327,582,319

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

3. Increase/(Decrease) in Short Term Borrowings (311,080,000) (1,339,519,178)

4. Increase/(Decrease) in Other Liabilities 312,747,281 (151,272,527)

(b) Cash Flow from Investment Activities 764,268,229 (1,039,939,081)

1. (Increase)/Decrease in Long-term Investment 602,271,209 (1,164,958,463)



4. Dividend Income 20,588,465 16,619,364

5. Other (8,102,434) -


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

2. Increase/(Decrease) in Share Capital* 1,118,120 -

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

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

5. Dividend Paid (806,007,732) (601,036,078)


(e) Current Year's Cash Flow from All Activities 1,606,746,451 1,839,272,466

(f) Opening Cash and Bank Balance 4,275,822,050 2,436,549,584

(g) Closing Cash and Bank Balance 5,882,568,501 4,275,822,050

Cash Flow Statement(For the period from 16 July 2012 to 15 July 2013)

*Increment in share capital by virtue of issuance of bonus shares have not been reflected.However, fraction share adjusted with Cash Dividend is disclosed as increment.


85

*Others include promoters shares divested by NIDC, which is freely traded in stock exchange, NEPSE.

*Share Capital at the face includes paid up capital and proposed bonus shares.


1. Share Capital

1.1 Authorized Capital 2,500,000,000 2,100,000,000

a) 25,000,000 Ordinary Shares of Rs. 100 each 2,500,000,000 2,100,000,000

b) ………...Non-redeemable Preference Shares of Rs……….. each

c) …………Redeemable Preference Shares of Rs……….. each

1.2 Issued Capital 2,436,841,400 2,029,769,400




1.3 Paid Up Capital 2,436,841,400 2,029,769,400




1.4 Proposed Bonus Shares 609,210,350 405,953,880

1.5 Calls in Advance - -

1.6 Total (1.3 + 1.4 + 1.5) 3,046,051,750 2,435,723,280

Share Capital and Ownership(As at 15 July 2013)

Share Ownership

Schedule 1

PARTICULARS % THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Local Ownership 50.00 1,218,420,700 1,014,884,700

1.1 Government of Nepal - - -

1.2 "Ka" Class Licensed Institutions - - -

1.3 Other Licensed Institutions 5.07 123,514,400 124,846,400

1.4 Other Entities 10.00 243,719,400 202,996,800

1.5 General Public 30.00 731,052,400 608,930,800

1.6 Others* 4.93 120,134,500 78,110,700

2. Foreign Ownership 50.00 1,218,420,700 1,014,884,700

Total 100.00 2,436,841,400 2,029,769,400

Nabil Bank Limited

86


1. General Reserve 2,620,500,000 2,176,500,000

2. Capital Reserve 74,000 74,000

a. Share Premium 74,000 74,000



5. Other Reserve and Fund 167,248,483 152,458,175

a. Contingent Reserve 13,873,570 13,273,570

b. Institution Development Fund - -

c. Dividend Equalization Fund - -

d. Special Reserve Fund - -

e. Assets Revaluation Reserve - -

f. Deferred Tax Reserve 44,574,722 42,575,441

g. Other Free Reserve (Interest Spread Reserve) 2,578,000 2,578,000

h. Other Reserve (Investment Adjustment Reserve) 106,222,191 94,031,164



Total 3,643,092,761 3,008,277,828

Reserves & Surplus(As at 15 July 2013)

Schedule 2

Details of Shareholders Holding ≥ 0.5% SharesS.N. PARTICULARS THIS YEAR

% Rs.

1 NB International Limited 50.00 1,218,420,700

2 Rastriya Beema Sansthan 9.67 235,581,800

3 Nepal Industrial Development Corporation 5.07 123,514,400

4 Mr. Arjun Bandhu Regmi 0.90 21,825,100

5 Mr. Nirvana Kumar Chaudhary 0.89 21,717,300

6 Mr. Barun Chaudhary 0.85 20,704,700

7 Mrs. Sarika Chaudhary 0.78 19,062,200

8 Nepal Trust 0.59 14,447,200

9 Mr. Rahul Chaudhary 0.59 14,428,100


87


1. 8.5% Bond of Rs. 1000 each 300,000,000 300,000,000

Issued in July / August 2008 with maturity in July / August 2018

(Redemption Reserve till date:Rs…….)

2. ……….% Bond/Debentures of Rs……..…each - -

Issued on …………… with maturity on ……….

(Redemption Reserve till date:Rs…….)

Total (1+2) 300,000,000 300,000,000

Debentures & Bonds(As at 15 July 2013)

Schedule 3


A. Local

1. Government of Nepal - -

2. Nepal Rastra Bank (SLF) - -

3. Repo Liability - -

4. Inter-Bank and Financial Institutions - 311,080,000

5. Other Organized Institutions - -

6. Others - -

Total - 311,080,000

B. Foreign

1. Banks - -

2. Others - -

Total - -

Total (A+B) - 311,080,000

Debentures & Bonds(As at 15 July 2013)

Schedule 4

Nabil Bank Limited

88


1. Interest Free Deposits

A. Current Deposits 7,271,123,319 6,572,215,166

1. Local Currency 5,322,049,977 5,139,289,623

1.1 Nepal Government - 9,916,978

1.2 "Ka" Class Licensed Institutions 106,574,321 170,855,227

1.3 Other Licensed Financial Institutions 297,511,499 284,707,641

1.4 Other Organized Institutions 4,687,122,966 3,992,576,131

1.5 Individuals 230,841,191 681,233,646

1.6 Others - -

2. Foreign Currency 1,949,073,342 1,432,925,543

2.1 Nepal Government - -

2.2 "Ka" Class Licensed Institutions 15,886,470 12,681,359

2.3 Other Licensed Financial Institutions - -


2.5 Individuals 85,861,660 87,065,028

2.6 Others - -

B. Margin Deposits 959,008,907 682,910,236

1. Employees 5,965,754 4,377,307

2. Guarantee 310,454,309 268,782,546

3. Letter of Credit 370,394,782 400,272,273

4. Others 272,194,062 9,478,110

C. Others 221,716,407 162,252,012

1. Local Currency 202,526,407 158,371,112

1.1 Financial Institutions - 10,000,000

1.2 Other Organized Institutions 14,019,708 13,260,399

1.3 Individual 188,506,699 135,110,713

2. Foreign Currency 19,190,000 3,880,900

2.1 Financial Institutions - -

2.2 Other Organized Institutions 19,190,000 -

2.3 Individual - 3,880,900

Total (A+B+C) 8,451,848,633 7,417,377,414

Deposits(As at 15 July 2013)

Schedule 5

Contd.


89


2. Interest Bearing Deposits

A. Savings Deposits 23,336,146,029 17,994,746,591

1. Local Currency 21,371,962,963 16,651,890,755

1.1 Institutions 458,262,370 505,997,148

1.2 Individuals 20,913,700,593 16,145,893,607

1.3 Others - -


2.1 Institutions 686,618,636 418,825,972

2.2 Individuals 1,277,564,430 924,029,864

2.3 Others - -

B. Fixed Deposits 10,786,028,419 14,044,887,821

1. Local Currency 9,073,217,949 12,805,029,718

1.1 Institutions 3,012,297,969 3,149,951,635

1.2 Individuals 6,060,919,980 9,655,078,083

1.3 Others - -


2.1 Institutions 1,658,739,350 1,110,872,953

2.2 Individuals 54,071,120 128,985,150

2.3 Others - -

C. Call Deposits 21,035,785,118 15,566,683,427

1. Local Currency 17,369,596,157 12,142,966,918

1.1 "Ka" Class Licensed Institutions - -

1.2 Other Licensed Financial Institutions 236,819,553 220,332,060


1.4 Individuals 1,780,255,497 2,042,695,528

1.5 Others - -


2.1 "Ka" Class Licensed Institutions 1,200,450 659,281

2.2 Other Licensed Financial Institutions - 70,748


2.4 Individuals 17,237,850 16,965,022

2.5 Others - -

D. Certificate of Deposit - -

1. Organized Institutions - -

2. Individuals - -

3. Others - -

Total (A+B+C+D) 55,157,959,566 47,606,317,839

Total Deposits (1+2) 63,609,808,199 55,023,695,253

Deposits(As at 15 July 2013)

Schedule 5Contd.

Nabil Bank Limited

90


1. Local Currency 315,681,009 70,813,386


Total 529,597,845 179,142,358

Bills Payable(As at 15 July 2013)

Schedule 6


1. Local Currency (Including Coins) 1,092,489,614 1,013,649,263


Total 1,140,212,319 1,050,658,504

Cash Balance(As at 15 July 2013)

Schedule 8


1. Gratuity Fund 76,931,147 78,441,012

2. Employees Provident Fund - -

3. Employees Welfare/ Leave Fund 81,653,026 64,892,721


5. Interest Payable on Deposits 64,854 38,399

6. Interest Payable on Borrowings 3,712,957 3,856,189

7. Unearned Discount and Commission 90,663,827 109,805,125

8. Sundry Creditors 450,816,230 488,594,009

9. Branch Reconciliation Account - -

10. Provision for Audit Expense 1,100,000 1,002,000

11. Deferred Tax Liabilities - -

12. Dividend Payable 41,097,769 35,197,741

13. Others 8,804,518 49,015,326

Total 1,071,099,849 1,072,481,023

Other Liabilities(As at 15 July 2013)

Schedule 7


91


1. Local Currency - -

2. Foreign Currency 1,634,306,157 826,435,677

Total 1,634,306,157 826,435,677

Money at Call and Short Notice(As at 15 July 2013)

Schedule 11

Balance with Nepal Rastra Bank(As at 15 July 2013)

Schedule 9

PARTICULARS LOCAL CURRENCY FOREIGN CURRENCY THIS YEAR Rs. PREVIOUS YEAR Rs.INR CONVERTIBLE FCY TOTAL

1. Nepal Rastra Bank 4,789,946,137 - (651,007) (651,007) 4,789,295,130 3,681,980,327

a. Current Account 4,789,946,137 - (651,007) (651,007) 4,789,295,130 3,681,980,327

b. Other Account - - - - - -

Note: Balance as per the confirmation statements is Rs.3,972,779,186.71

Balance with Banks / Financial Institutions(As at 15 July 2013)

Schedule 10

PARTICULARS LOCAL CURRENCY FOREIGN CURRENCY THIS YEAR Rs. PREVIOUS YEAR Rs.INR CONVERTIBLE FCY TOTAL

1. Local Licensed Institutions 57,747,347 - - - 57,747,347 53,031,610

a. Current Account 57,747,347 - - - 57,747,347 53,031,610


2. Foreign Banks - 138,902,725 (243,589,020) (104,686,295) (104,686,295) (509,848,391)

a. Current Account - 138,902,725 (243,589,020) (104,686,295) (104,686,295) (509,848,391)


Total 57,747,347 138,902,725 (243,589,020) (104,686,295) (46,938,948) (456,816,781)

Note: Balance as per the confirmation statements is Rs.1,755,994,457.05. Reconcilation is presented in Schedule 33 "Notes to Accounts" point 2.2.

Nabil Bank Limited

92

Investments(As at 15 July 2013)

Schedule 12

PARTICULARS PURPOSE THIS YEAR Rs. PREVIOUS YEAR Rs.TRADING OTHERS

1. Nepal Government Treasury Bills - 4,603,923,845 4,603,923,845 4,494,594,116

2. Nepal Government Saving Bonds - - - -

3. Nepal Government Other Securities - 3,310,078,588 3,310,078,588 3,498,498,924

4. Nepal Rastra Bank Bonds - - - -

5. Foreign Bonds - 239,654,168 239,654,168 220,280,173

6. Local Licensed Institutions - 431,775,000 431,775,000 1,080,450,000

7. Foreign Banks - 7,445,826,591 7,445,826,591 4,578,658,390

8. Organized Institutions' Shares - 210,034,800 210,034,800 201,284,800

9. Organized Institutions' Bonds and Debentures - - - -

10. Other Investments: - - - -

10.1. NCM Mutual Fund (100,000 units @ Rs.10 & 100,000 units - - - 1,257,000

issued subsequently @ Rs. 2.57. Since Matured & realized)

10.2. Nabil Balance Fund - Scheme 1 105,000,000 105,000,000 -

(10,500,000 units of Rs. 10 each)

10.3. SWIFT Investment (denominated in €) - 2,041,186 2,041,186 1,759,054

Total Investment - 16,348,334,178 16,348,334,178 14,076,782,457

Provision - 16,291,166 16,291,166 27,816,665

Net Investment - 16,332,043,012 16,332,043,012 14,048,965,792


93Investment in Shares, Debentures and Bonds(As at 15 July 2013)

Schedule 12(A)

PARTICULARS COST PRICE MARKET VALUE PROVISION THIS YEAR Rs. PREVIOUS YEAR Rs.

1. Investment in Shares 210,034,800 481,197,805 4,518,248 205,516,552 197,503,308

1.1 Rural Microfinance Development Centre Limited Not Listed - 50,720,000 50,720,000

(507,200 ordinary shares of Rs. 100 paid up)

1.2 Nirdhan Utthan Bank Limited 16,711,200 77,532,000 - 16,711,200 16,711,200

[276,900 ordinary shares of Rs. 100 paid up

(Including Bonus Shares 109,788)]

1.3 Chhimek Laghu Bitta Bikash Bank Limited 7,380,100 96,580,533 - 7,380,100 7,380,100


(Including Bonus Shares 115,202)

1.4 Deprosc MicroFinance Development Bank Limited 9,726,700 50,045,515 - 9,726,700 9,726,700


(Including Bonus Shares 39,844)

1.5 Sudur Paschimanchal Grameen Bikash Bank Limited 1,500,000 Not Listed 1,500,000 - -


1.6 Purbanchal Grameen Bikash Bank Limited (Refer Note 2) 3,000,000 28,950,000 1,573,694 1,426,307 2,272,600


1.7 Madhya Paschimanchal Grameen Bikash Bank Limited 3,500,000 Not Listed 1,444,555 2,055,445 1,945,908


1.8 Sanakisan Bikash Bank Limited 6,070,800 Not Listed - 6,070,800 6,070,800


1.9 Swabalamban Bikash Bank Limited 12,490,500 51,841,056 - 12,490,500 12,490,500



1.10 NADEP Laghubitta Bittiya Sanstha Ltd. 2,000,000 Not Listed - 2,000,000 2,000,000

(400,000 ordinary shares of Rs. 5 each)

1.11 Mahila Sahayatra MicroFinance Bittiya Sanstha Ltd. 4,000,000 Not Listed - 4,000,000 4,000,000


1.12 Jeevan Laghu Bittiya Bikas Bank Ltd. 10,000,000 Not Listed - 10,000,000 1,250,000


1.13 Karja Suchana Kendra Limited 1,235,500 Not Listed - 1,235,500 1,235,500



1.14 National Banking Training Institute 1,200,000 Not Listed - 1,200,000 1,200,000


1.15 Nepal Clearing House Limited 2,500,000 Not Listed - 2,500,000 2,500,000


1.16 Nabil Investment Banking Limited 78,000,000 Not Listed - 78,000,000 78,000,000

(780,000 ordinary shares of Rs. 100 each)

1.17 Visa Inc. (6,166 units of Class C Common Stock) - 112,557,170 - - -

1.18 MasterCard Incorporated - 63,691,531 - - -

(1114 units Class B Common Stock)

2. Investment in Debentures and Bonds 239,654,168 227,881,250 11,772,918 227,881,250 196,245,000

2.1 ICICI Bank Bonds 239,654,168 227,881,250 11,772,918 227,881,250 196,245,000

(Bonds of face value USD 2,500,000

at coupon rate 6.375% maturing on 30 April 2022)

3. Investment in Derivatives Instruments - - - - 441,000,000

3.1 Index Linked Deposit (denominated in US $) - - - - 441,000,000

3.2 Credit Linked Deposit (denominated in US $) - - - - -

Total Investment 449,688,968 709,079,055 16,291,166 433,397,802 834,748,308

4. Provision for Loss

3.1 Up to Previous Year 27,816,665 - - 4,562,809

3.2 Addition/(Writeback) This Year (11,525,499) - - 23,253,856

Total Provision 16,291,166 - - 27,816,665

Note: 1. Sudur Paschimanchal Grameen Bikash Bank Limited, Madya Paschimanchal Grameen Bikash Bank Limited, Sana Kishan Bikash Bank, National Banking TrainingInstitute, Nepal Clearing House Limited have not declared and distributed cash dividend in the last three years.

2. Shares of Purbanchal Grameen Bikash Bank Ltd. was last traded on 25th November 2009.

Nabil Bank Limited

94

Held for Trading Investments(As at 15 July 2013)

Schedule 12.1

PARTICULARS COST PRICE MARKET PRICE AS AT PROFIT / LOSS REMARKS

15-JUL-2013 15-JUL-2012 THIS YEAR PREVIOUS YEAR

1. Nepal Government Treasury Bills - - - - -

2. Nepal Government Saving Bonds - - - - -

3. Nepal Government Other Securities - - - - -

4. Nepal Rastra Bank Bonds - - - - -

5. Foreign Bonds - - - - -

6. Shares of Local Licensed Institutions - - -

7. Debentures and Bonds of Local

Licensed Institutions - - - - -

8. Shares, Debentures and Bonds of

Local Organised Institutions - - - - -

9. Placement in Foreign Banks - - - - -

10. Inter Bank Lending - - - - -

11. Other Investments - - - - -

Total Investments - - - - -

Held to Maturity Investments(As at 15 July 2013)

Schedule 12.2

PARTICULARS COST PRICE IMPAIRED AMOUNT TILL PROFIT / LOSS REMARKS

15 JULY 2013 15 JULY 2012 THIS YEAR PREVIOUS YEAR

1. Nepal Government Treasury Bills 4,603,923,845

2. Nepal Government Saving Bonds -

3. Nepal Government Other Securities 3,310,078,588

4. Nepal Rastra Bank Bonds -

5. Foreign Bonds (denominated in $) 239,654,168 11,772,918 24,035,173 12,262,255 (23,253,856)

6. Shares of Local Licensed Institutions -


Licensed Institutions -


Local Organised Institutions -

9. Placement in Foreign Banks 7,445,826,591 - N/A

10. Other Investments 431,775,000

Total Investments 16,031,258,192 11,772,918 24,035,173 12,262,255 (23,253,856)


95

Available for Sale Investments(As at 15 July 2013)

Schedule 12.3

Note: Other Investments include investment in units of Nabil Balance Fund - Scheme 1 and shares in SWIFT. The Market Value of SWIFT is not available while Market Value ofNabil Balance Fund - Scheme 1 is considered as Rs.10.06 per unit last traded on 15.07.2013 before the Balance Sheet date.

PARTICULARS COST PRICE MARKET PRICE AS AT THIS YEAR LAST YEAR REMARKS

15-JUL-2012 (A) 13-JUL-2013 (B) INVESTMENT PROFIT/ LOSS

ADJUSTMENT

RESERVE (B -A)

1. Nepal Government Treasury Bills -

2. Nepal Government Saving Bonds -

3. Nepal Government Other Securities -

4. Nepal Rastra Bank Bonds -

5. Foreign Bonds -

6. Shares of Local Licensed Institutions 127,099,300 192,707,273 205,516,552 -


Licensed Institutions -


Local Organised Institutions 82,935,500 - - -

9. Placement in Foreign Banks -

10. Other Investments 107,041,186 115,135,517 281,878,701 -

Total Investments 317,075,986 307,842,790 487,395,253 - -

Nabil Bank Limited

96Cl

assi

ficat

ion

ofLo

ans,

Adva

nces

and

Bill

sPu

rcha

sed

&Pr

ovis

ioni

ng(Asat15July2013)

Schedule13

*Lo

anto

borr

ower

avai

ling

OD

faci

lity

and

outs

tand

ing

at1

5th

July

20

13

amou

ntin

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Rs.

1,3

75,9

66.0

5is

insu

red

atD

CG

C.Th

elo

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not

ade

priv

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ctor

loan

and

henc

eac

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ingl

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unde

r"L

oans

and

Adv

ance

s-

Oth

er".

PARTICULARS

LOANS&ADVANCES

BILLS

PURCHASED&DISCOUNTED

THISYEARRS.

PREVIOUSYEARRS.

DOMESTIC

FOREIGN

TOTAL

DOMESTIC

FOREIGN

TOTAL

DEPRIVEDSECTOR

OTHER

INSURED

UNINSURED

1.Pe

rfor

min

gLo

ans

-1,6

95,4

92,0

04

43

,09

5,4

89

,43

81

,78

0,4

79

,68

44

6,5

71

,46

1,1

26

38

,14

1,4

98

20

,75

0,5

55

58

,89

2,0

53

46

,63

0,3

53

,17

94

1,8

67

,70

8,6

55

1.1

Pass

-1,6

95,4

92,0

04

43

,09

5,4

89

,43

81

,78

0,4

79

,68

44

6,5

71

,46

1,1

26

38

,14

1,4

98

20

,75

0,5

55

58

,89

2,0

53

46

,63

0,3

53

,17

94

1,8

67

,70

8,6

55

2.N

on-P

erfo

rmin

gLo

ans

-29,9

51,6

00

98

2,7

81

,00

88

96

,41

81

,01

3,6

29

,02

66

9,1

42

1,4

78

,53

01

,54

7,6

72

1,0

15

,17

6,6

98

1,0

00

,05

9,1

38

2.1

Res

truc

ture

d/R

esch

edul

ed-

--

--

--

--

17

,20

4,2

34

2.2

Sub-

Stan

dard

--

20

4,9

61

,93

3-

20

4,9

61

,93

3-

--

20

4,9

61

,93

31

62

,44

0,6

68

2.3

Dou

btfu

l-

-1

04

,42

2,4

37

-1

04

,42

2,4

37

--

-1

04

,42

2,4

37

36

,78

4,4

73

2.4

Loss

-29,9

51,6

00

67

3,3

96

,63

88

96

,41

87

04

,24

4,6

56

69

,14

21

,47

8,5

30

1,5

47

,67

27

05

,79

2,3

28

78

3,6

29

,76

3

A.To

talL

oan

(1+

2)

-1,7

25,4

43,6

04

44

,07

8,2

70

,44

61

,78

1,3

76

,10

24

7,5

85

,09

0,1

52

38

,21

0,6

40

22

,22

9,0

85

60

,43

9,7

25

47

,64

5,5

29

,87

74

2,8

67

,76

7,7

93

3.Lo

anLo

ssPr

ovis

ion

3.1

Pass

-16,9

54,9

20

43

1,9

76

,82

91

7,8

04

,79

74

66

,73

6,5

46

38

1,4

15

20

7,5

06

58

8,9

21

46

7,3

25

,46

74

20

,43

3,0

13

3.2

Res

truc

ture

d/

Res

ched

uled

--

--

--

--

-4

,30

1,0

58

3.3

Sub-

Stan

dard

--

51

,28

9,3

28

-5

1,2

89

,32

8-

--

51

,28

9,3

28

40

,61

0,1

67

3.4

Dou

btfu

l-

-5

2,3

20

,15

7-

52

,32

0,1

57

--

-5

2,3

20

,15

71

8,3

92

,23

7

3.5

Loss

*-

29,9

51,6

00

67

2,3

64

,66

48

96

,41

87

03

,21

2,6

82

69

,14

21

,47

8,5

30

1,5

47

,67

27

04

,76

0,3

54

77

8,3

48

,68

4

B.To

talP

rovi

sion

ing

-46,9

06,5

20

1,2

07

,95

0,9

78

18

,70

1,2

15

1,2

73

,55

8,7

13

45

0,5

57

1,6

86

,03

62

,13

6,5

93

1,2

75

,69

5,3

06

1,2

62

,08

5,1

59

4.Pr

ovis

ioni

ngup

topr

evio

usye

ar

4.1

Pass

9,9

55

14,2

49,5

97

37

7,2

93

,36

42

8,0

78

,15

44

19

,63

1,0

70

41

1,8

02

39

0,1

41

80

1,9

43

42

0,4

33

,01

33

84

,88

2,1

71

4.2

Res

truc

ture

d/R

esch

edul

ed-

-4

,30

1,0

58

-4

,30

1,0

58

--

-4

,30

1,0

58

2,7

13

,67

1

4.3

Sub-

Stan

dard

-127,0

02

40

,48

3,1

65

-4

0,6

10

,16

7-

--

40

,61

0,1

67

42

,55

3,2

05

4.4

Dou

btfu

l-

554,5

02

17

,83

7,7

35

-1

8,3

92

,23

7-

--

18

,39

2,2

37

52

,32

9,6

08

4.5

Loss

1,7

60,3

60

29,9

51,6

00

74

5,0

13

,17

71

,31

8,1

92

77

8,0

43

,32

93

5,1

19

27

0,2

36

30

5,3

55

77

8,3

48

,68

43

88

,91

1,6

80

C.To

talP

revi

ous

Year

'sPr

ovis

ion

1,7

70,3

15

44,8

82,7

01

1,1

84

,92

8,4

99

29

,39

6,3

46

1,2

60

,97

7,8

61

44

6,9

21

66

0,3

77

1,1

07

,29

81

,26

2,0

85

,15

98

71

,39

0,3

35

D.W

ritte

nB

ack

This

Year

1,7

70,3

15

--

10

,69

5,1

31

12

,46

5,4

46

--

-1

2,4

65

,44

6-

E.Add

ition

This

Year

-2,0

23,8

19

23

,02

2,4

79

25

,04

6,2

98

3,6

36

1,0

25

,65

91

,02

9,2

95

26

,07

5,5

93

39

0,6

94

,82

4

F.ChangesThisYear

(1,770,315)

2,023,819

23,022,479

(10,695,131)

12,580,852

3,636

1,025,659

1,029,295

13,610,147

390,694,824

NetLoan

(A-B)

-1,678,537,084

42,870,319,468

1,762,674,887

46,311,531,439

37,760,083

20,543,049

58,303,132

46,369,834,571

41,605,682,634


97

Schedule 13 (A)Securitywise Loans, Advances and Bills Purchased(As at 15 July 2013)

PARTICULARS THIS YEAR RS. PREVIOUS YEAR RS.

A. Secured 47,490,639,601 42,711,024,657

1. Movable/Immovable Assets 43,574,303,618 38,291,102,150

2. Guarantee of Local Licensed Institutions - -

3. Government Guarantee - -

4. Internationally Rated Bank Guarantee 96,220,588 -

5. Export Documents 202,322,469 92,457,261

6. Fixed Deposit Receipts 281,380,615 423,402,074

a. Own 281,380,615 393,924,741

b. Other Licensed Institutions - 29,477,334

7. Government Securities 581,625,331 76,563,975

8. Counter Guarantee - -

9. Personal Guarantee 5,388,619 8,086,337

10. Other Securities 2,749,398,362 3,819,412,861

B. Unsecured 154,890,276 156,743,136

Total 47,645,529,877 42,867,767,793

Note: Unsecured Loans, Advances and Bills Purchased represent credit card loans.

Nabil Bank Limited

98Fi

xed

Asse

ts(Asat15July2013)

Schedule14

PARTICULARS

ASSETS

THISYEARRS.

PREVIOUSYEARRS.

BUILDING

VEHICLES

MACHINERY

OFFICEEQUIPMENT

SOFTWARE

OTHERS

1.C

ost

Pric

e

a.Pr

evio

usYe

arB

alan

ce282,1

33,6

42

206,2

58,3

95

-5

52

,04

3,1

05

69

,13

7,5

23

-1

,10

9,5

72

,66

51

,09

5,3

75

,93

5

b.Add

ition

durin

gth

eYe

ar836,4

09

28,8

26,0

00

35

,30

5,0

32

1,7

09

,77

0-

66

,67

7,2

11

77

,32

9,4

58

c.R

eval

uatio

n/W

rite

Bac

kTh

isYe

ar-

--

d.So

lddu

ring

the

Year

(13,7

21,9

19

)(7

,10

8,3

07

)-

(20

,83

0,2

26

)(2

1,5

54

,18

0)

e.W

rite

offd

urin

gth

eYe

ar(1

1,6

42

,16

8)

(3,2

32

,22

3)

-(1

4,8

74

,39

1)

(41

,57

8,5

48

)

TotalCost(a+b+

c+d+

e)282,970,051

221,362,476

-568,597,662

67,615,070

-1,140,545,259

1,109,572,665

2.D

epre

ciat

ion

a.U

pto

Prev

ious

Year

66,0

88,0

23

89,4

38,4

62

-3

33

,54

8,6

19

30

,72

9,9

06

-5

19

,80

5,0

10

45

5,7

42

,31

1

b.Fo

rTh

isYe

ar10,8

33,6

46

25,4

96,6

34

57

,46

4,0

36

13

,81

2,4

63

-1

07

,60

6,7

79

11

4,2

81

,25

9

c.R

eval

uatio

n/W

rite

Bac

kTh

isYe

ar-

--

d.D

epre

ciat

ion

onSo

ldAss

ets

(9,5

75,4

77

)(5

,56

6,8

75

)-

(15

,14

2,3

52

)(1

2,1

55

,94

0)

e.D

epre

ciat

ion

onW

riten

Off

Ass

ets

(10

,64

7,3

43

)(3

,23

2,2

23

)-

(13

,87

9,5

66

)(3

8,0

62

,62

0)

TotalDepreciation

76,921,669

105,359,619

-374,798,437

41,310,146

-598,389,871

519,805,010

3.B

ook

Valu

e(W

DV*

)(1

-2)

206,0

48,3

82

116,0

02,8

57

-1

93

,79

9,2

25

26

,30

4,9

24

-5

42

,15

5,3

88

58

9,7

67

,65

5

4.La

nd-

--

--

24

1,5

17

,14

92

41

,51

7,1

49

24

1,5

17

,14

9

5.Pe

ndin

gC

apita

lizat

ion

49,4

47,3

81

--

--

49

,44

7,3

81

6,5

53

,64

8

6.Le

aseh

old

Ass

ets

--

--

-3

9,2

02

,12

13

9,2

02

,12

14

9,7

04

,82

2

Total(3+4+5+6)

255,495,763

116,002,857

-193,799,225

26,304,924

280,719,270

872,322,039

887,543,274

*W

ritte

ndo

wn

valu

e.


99

Non Banking Assets(As at 15 July 2013)

Schedule 15

NAME & ADDRESS DATE OF ACQUISITION TOTAL AMOUNT OF LOSS PROVISION THIS YEAR'S NET PREVIOUS YEAR

OF BORROWER / PARTY OF NON BANKING NON BANKING % AMOUNT NON-BANKING

ASSETS ASSETS ASSETS

-

GRAND TOTAL - - -

Schedule 16Other Assets(As at 15 July 2013)


1. Stock of Stationery 7,553,837 6,963,113

2. Income receivable on Investment 125,808,564 152,535,579

3. Accrued Interest on Loan 382,296,328 - 371,152,257

Less: Interest Suspense Account (382,296,328) (371,152,257)

4. Commission Receivable - -

5. Sundry Debtors 889,159,544 363,405,605

6. Staff Loans & Advances 875,339,586 813,596,213

7. Pre - Payments 32,516,964 31,639,720

8. Cash in Transit - -

9. Other Transit items (including Cheques) - -

10. Drafts paid without notice - -

11. Expenses not written off - -


13. Deferred Tax Assets 44,574,722 42,575,441

14. Others 175,232,174 138,248,894

Total 2,150,185,391 1,548,964,565

Nabil Bank Limited

100

Schedule 16 (A)Other Assets (Additional Statement)(As at 15 July 2013)

Schedule 17Contingent Liabilities(As at 15 July 2013)


1. Claims on Institution but not accepted by the Institution 22,916,755 16,386,500

2. Letter of Credit (Full Amount) 5,450,366,800 5,622,522,137

a. Maturity up to 6 Months 3,566,950,915 5,510,153,931

b. Maturity more than 6 Months 1,883,415,885 112,368,206

3. Rediscounted Bills - -

4. Guarantees/Bonds 4,015,235,762 3,912,222,111

a. Bid Bonds 193,130,923 109,362,913

b. Performance Bonds 3,822,104,839 3,802,859,198

c. Other Guarantees/Bonds - -

5. Unpaid portion of Partly paid shares 39,250,000 39,250,000

6. Forward Exchange Contract Liabilities 7,750,100,520 4,224,977,742

7. Bills under Collection 381,079,757 231,357,521

8. Acceptance & Endorsement 1,006,152,586 682,166,582

9. Underwriting Commitment - -

10. Irrevocable Loan Commitment 4,558,539,994 3,380,746,197

11. Guarantee issued against Counter Guarantee of Internationally Rated Banks 1,416,358,619 5,764,500,481

12. Advance Payment Guarantee 1,756,223,528 444,652,570

13. Financial Guarantee - -

14. Income Tax 14,987,477 772,031

Total 26,411,211,798 24,319,553,872

PARTICULARS THIS YEAR PREVIOUS YEAR UP TO 1 YEAR

1 TO 3 YEAR ABOVE 3 YEARS TOTAL

1. Accrued Interest on Loan 268,538,836 58,538,569 55,218,923 382,296,328 371,152,257

2. Drafts Paid without notice - -



101

Schedule 18Interest Income(For the period from 16 July 2012 to 15 July 2013)


A. Loans, Advances and Overdraft 5,123,174,284 5,259,587,989

1. Loans & Advances 3,389,931,080 3,454,903,905

2. Overdraft 1,733,243,204 1,804,684,084

B. Investment 341,139,732 628,420,372

1. Government Securities 324,402,324 608,680,845

a. Treasury Bills 99,131,426 412,618,279

b. Development Bonds 225,270,898 196,062,566

c. National Saving Certificates - -

2. Foreign Securities 14,093,687 12,865,214

a. Development Bank of Singapore Bond - -

b. ICICI Bank Bond 14,093,687 12,865,214

3. Nepal Rastra Bank Bonds - -

4. Debenture & Bonds - -

a. Bank/Financial Institutions - -

b. Other Organizations - -

5. Interbank Investment 2,643,721 6,874,313

a. Bank/Financial Institutions 2,643,721 6,874,313

b. Other Organizations - -

C. Agency Balances 401,667 54,175

1. Local Banks/Financial Institutions - -

2. Foreign Banks 401,667 54,175

D. Money at Call and Short Notice 45,107 2,969,609

1. Local Banks/Financial Institutions 11,235 1,716,789

2. Foreign Banks 33,872 1,252,820

E. Others 237,362,128 235,822,683

1. Certificate of Deposits - -

2. Inter-Bank/Financial Institutions Loan - -

3. FCY Placements 180,111,282 179,588,691

4. Staff Loan 57,250,846 56,233,992

Total 5,702,122,918 6,126,854,828

Nabil Bank Limited

102

Schedule 19Interest Expense(For the period from 16 July 2012 to 15 July 2013)


A. Deposits 2,136,709,080 3,121,055,418

1. Fixed Deposits 887,220,630 1,728,977,624

1.1 Local Currency 872,137,876 1,704,065,707

1.2 Foreign Currency 15,082,754 24,911,917

2. Savings Deposits 700,215,856 530,028,570

2.1 Local Currency 692,442,281 522,046,670


3. Call Deposits 549,272,594 862,049,224

3.1 Local Currency 515,497,508 825,382,960


4. Certificate of Deposits - -

B. Borrowings 49,475,791 34,435,051

1. Debentures & Bonds 25,500,000 25,500,000

2. Loan from Nepal Rastra Bank - -

3. Inter Bank /Financial Institutions Borrowing 23,975,791 8,935,051

4. Other Organized Institutions - -

5. Others - -

C. Others - -

Total 2,186,184,871 3,155,490,469

Schedule 20Commission & Discount(For the period from 16 July 2012 to 15 July 2013)


A. Bills Purchase & Discount 1,971,080 2,939,727

1. Local 459,269 767,068

2. Foreign 1,511,811 2,172,659

B. Commission 331,755,164 311,286,271

1. Letters of Credit 60,880,350 54,675,012

2. Guarantees 72,268,559 64,505,196

3. Collection Fees 2,087,571 2,093,617

4. Remittance Fees 82,430,457 76,322,396

5. Cards 114,088,227 113,690,050

6. Share Underwriting/Issue - -

7. Government Transactions - -

8. Agency Commission - -

9. Exchange Fee - -

C. Others 59,324,270 52,161,196

Total 393,050,514 366,387,194


103

Schedule 21Other Income(For the period from 16 July 2012 to 15 July 2013)


1. Safe Deposit Lockers Rental 7,332,091 6,221,644

2. Issue & Renewals of Credit Cards 5,671,682 5,239,723

3. Issue & Renewals of Debit Cards 24,851,810 24,500,317

4. Telex / T. T. / Communication Fees 15,141,047 13,366,841

5. Service Charges 129,941,913 129,675,292

6. Renewal Fees - -

7. Others 26,966,523 22,081,049

Total 209,905,066 201,084,866

Schedule 22Exchange Gain/ (Loss)(For the period from 16 July 2012 to 15 July 2013)


a. Revaluation 95,690,898 114,932,879

b. Trading (except Exchange Fees) 393,360,181 332,137,606

Total Gain/(Loss) 489,051,079 447,070,485

Schedule 23Personnel Expense(For the period from 16 July 2012 to 15 July 2013)


1. Salary 215,423,061 188,078,674

2. Allowances 203,343,659 175,189,788

3. Contribution to Provident Fund 16,856,445 14,411,528

4. Training Expenses 8,737,232 8,934,625

5. Uniform 14,562,204 -

6. Medical 518,738 310,394

7. Insurance 8,356,175 7,332,709

8. Pension and Gratuity Contribution 103,918,643 48,569,949

9. Others 75,043,518 57,885,177

Total 646,759,675 500,712,844

Nabil Bank Limited

104

Schedule 24Office Operating Expense(For the period from 16 July 2012 to 15 July 2013)


1. House Rent 60,878,932 54,798,007

2. Electricity & Water 15,968,729 14,358,884

3. Repair & Maintenance 5,427,040 6,460,664

a. Building 2,506,321 3,643,552

b. Vehicles 2,920,719 2,817,112

c. Others - -

4. Insurance 10,306,216 9,679,225

5. Postage, Telex, Telephone & Fax 28,854,697 25,220,647

6. Office Equipment and Furniture Repair 11,176,046 10,334,251

7. Travelling Allowances & Expenses 6,936,318 4,214,400

8. Printing & Stationery 21,397,806 21,183,711

9. Books & Periodicals 754,918 684,340

10. Advertisements 8,725,960 9,345,385

11. Legal Expenses 1,204,140 1,246,115

12. Donations 15,000 57,800

13. Expenses relating to Board of Directors 2,456,413 3,244,132

a. Meeting Fees 922,000 1,076,000

b. Other Expenses 1,534,413 2,168,132

14. Annual General Meeting Expenses 1,433,948 1,193,788

15. Expenses relating to Audit 1,100,000 1,002,000

a. Audit Fees 1,100,000 1,002,000

b. Other Expenses - -

16. Commission on Remittances - -

17. Depreciation on Fixed Assets 123,903,510 130,515,883

18. Amortization of Pre-Operating Expenses - -

19. Share Issue expenses - -

20. Technical/Consultancy Services Fee 29,168,505 25,336,243

21. Entertainment - -

22. Written Off Expenses - -

23. Security Expenses 38,894,664 39,833,365

24. Deposit & Credit Guarantee Premium 15,278,517 1,227,414

25. Commission & Discount - -

26. Others 84,899,828 70,972,878

a. Fuel Expenses 33,621,994 25,170,699

b. Tea/ Coffee/ Snacks 5,808,531 5,248,254

c. Contract Service Expense 11,232,073 10,968,519

d. Prize Expense - -

e. Customer Relations and Sponsorship 5,434,985 4,749,372

f. Membership Fees 1,034,300 1,909,050

g. Janitorial 8,429,279 7,455,298

h. Others 19,338,666 15,471,686

Total 468,781,187 430,909,132


105

Schedule 25Provision for Possible Losses(For the period from 16 July 2012 to 15 July 2013)


1. Loans and Advances 26,075,593 390,694,824

2. Investments 736,756 23,253,856

3. Non-Banking Assets

4. Other Assets 638,562 -

Total 27,450,911 413,948,680

Schedule 26Non-Operating Income/(Loss)(For the period from 16 July 2012 to 15 July 2013)


1. Profit/(Loss) on Sale of Investments (8,102,434) -

2. Profit/(Loss) on Sale of Fixed Assets 982,541 (2,779,613)

3. Dividend 20,588,465 16,619,364

4. Subsidies Received from Nepal Rastra Bank - -

a. Compensation Agreement for Losses of Specified Branches - -

b. Interest Indemnity - -

c. Exchange Counter - -

5. Others - -

Total Non-Operating Income/(Loss) 13,468,572 13,839,751

Schedule 27Provision for Possible Losses / Write Back(For the period from 16 July 2012 to 15 July 2013)


1. Loans and Advances 12,465,446 -

2. Non-Banking Assets - -

3. Investments 12,262,255 -

4. Other Assets - -

Total 24,727,701 -

Nabil Bank Limited

106

Schedule 28Income/(Expense) from Extra-Ordinary Activities(For the period from 16 July 2012 to 15 July 2013)


1. Recovery of Write off Loan 10,441,593 16,770,964

2. Voluntary Retirement Scheme Expenses - (11,717,325)

3. Bad Loan Written Off [28 (a)] (27,843,275) (3,006,491)

4. Other Income/(Expense) (52,532) (5,083,897)

Total (17,454,214) (3,036,749)

Schedule 28 (A)Details of Loans Written Off(For the period from 16 July 2012 to 15 July 2013)

TYPES OF LOAN WRITTEN OFF TYPE OF BASIS OF LOAN EFFORTS MADE REMARKSAMOUNT (Rs.) SECURITY SECURITY APPROVED FOR RECOVERY OF LOANS

1 Working Capital Loan

2 Project Loan 14,465,210

3 Fixed Capital Loan 6,503,311

4 Personal Loan 259,989 Notice publication,

regular follow ups and blacklisting

5 Credit Card Loan 622,863

6 Others 5,991,901

Total Loan 27,843,275


107Schedule29

Stat

emen

tofL

oans

and

Adva

nces

exte

nded

toD

irect

ors/

Chie

fExe

cutiv

e/Pr

omot

ers/

Empl

oyee

san

dSh

areh

olde

rsw

ithm

ore

than

1%Sh

ares

(Asat15July2013)

NAMEOFPROMOTER/DIRECTOR/CHIEFEXECUTIVEOFFICER

OUTSTANDINGUPTO

LAST

YEAR

RECOVEREDIN

CURRENTYEAR

ADDITIONAL

OUTSTANDINGASOF15JULY

2013

PRINCIPAL

INTEREST

PRINCIPAL

INTEREST

LENDINGIN

CY

PRINCIPAL

INTEREST

A.Directors

--

--

--

-

1.…

……

……

……

……

……

……

.-

--

--

--

2.…

……

.……

……

……

……

...…

.-

--

--

--

3.…

……

……

……

……

……

……

.-

--

--

--

B.ChiefExecutiveOfficer

--

--

--

-

1.…

……

……

……

……

……

……

.-

--

--

--

2.…

……

.……

……

……

……

...…

.-

--

--

--

3.…

……

……

……

……

……

……

.-

--

--

--

C.Promoters

--

--

--

-

1.…

……

……

……

……

……

……

.-

--

--

--

2.…

……

.……

……

……

……

...…

.-

--

--

--

3.…

……

……

……

……

……

……

.-

--

--

--

D.FamilyMembersofEmployees

55,905,656

1,063,040

5,051,637

3,689,960

1,909,457

52,763,476

4,198

1Su

bash

Cha

ndra

/Cha

ndra

Pras

ad/N

anda

Kum

arB

hatt

arai

18

,98

3,0

85

63

6,0

96

31

,62

36

36

,09

6-

18

,95

1,4

62

-

2R

ames

hM

ahar

jan

/Ram

Mah

arja

n4

60

,15

14

,27

53

6,2

39

55

,19

6-

42

3,9

12

4,1

98

3La

xmiS

hres

tha

/Pad

amPr

asad

Shre

stha

2,0

56

,60

21

1,7

03

1,3

35

,26

62

14

,78

9-

72

1,3

36

-

4Sh

anta

Gya

wal

i/Vi

nod

Kum

arG

yaw

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47

6,0

38

4,4

08

55

,59

35

8,0

28

-4

20

,44

6-

5Pr

akas

hD

ahal

2,2

24

,16

51

0,6

88

30

3,6

92

30

,03

52

,25

4,2

00

-

6G

anja

/Kal

yani

Dah

al1

,16

4,3

12

-1

27

,77

51

61

,31

82

55

,53

11

,29

2,0

68

-

7Sh

ulav

Aus

adha

laya

2,2

08

,07

0-

--

32

8,2

17

2,5

36

,28

7-

8D

ipen

dra

Giri

96

8,2

86

15

8,6

27

37

6,6

56

11

2,2

64

-5

91

,63

0-

9G

itaAdh

ikar

i/D

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amAdh

ikar

i1

,78

7,4

09

20

,37

28

52

,25

42

04

,71

1-

93

5,1

55

-

10

Mun

aP

yaku

rel/

Dili

pK

umar

Pya

kure

l-

-8

95

,67

48

95

,67

4-

11

Ush

aK

hana

l/R

ajar

amK

hana

l8

00

,00

09

,11

81

16

,12

11

65

,61

74

00

,00

01

,08

3,8

79

-

12

Dur

gaR

ajya

Laxm

i7

39

,08

47

,37

19

6,9

64

96

,43

3-

64

2,1

20

-

13

Moh

anPr

asad

Pand

ey/S

obha

Path

ak1

2,3

06

,29

89

4,5

17

1,3

07

,98

63

43

,38

3-

10

,99

8,3

11

-

14

Sanj

ayTr

ipat

hee

11

,43

2,1

56

10

5,8

65

70

8,7

67

1,2

94

,31

1-

10

,72

3,3

89

-

15

Tara

Neu

pane

&R

amC

hand

raN

eupa

ne3

00

,00

0-

6,3

92

44

,12

3-

29

3,6

08

-

E.Shareholders

--

--

--

-

1.…

……

……

……

……

……

……

.-

--

--

--

2.…

……

.……

……

……

……

...…

.-

--

--

--

3.…

……

……

……

……

……

……

.-

--

--

--

Total

55,905,656

1,063,040

5,051,637

3,689,960

1,909,457

52,763,476

4,198

Not

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Loan

give

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ies

not

pres

ente

dab

ove.

Nabil Bank Limited

108

PARTICULARS AS AT 15 JULY 2013 AS AT 15 JULY 2012

1.1 Risk Weighted Exposures

a. Credit Risk 57,191,503,224 50,021,684,138

b. Operation Risk 5,011,133,921 4,088,674,543

c. Market Risk 89,170,240 79,167,220

Total Risk Weighted Exposures Before Adjustment 62,291,807,385 54,189,525,901

Adjustment under Pillar - II

ADD: 2% of the total RWE added under Supervisory Review as per 6.4.a.9 for

Overall Risk Management" of Capital Adequacy Framework 2007, NRB Unified Directive 1,245,836,148 1,083,790,518

ADD:.. % of the total RWE due to non compliance to Disclosure Requirement

Add: … % of the total deposit due to insufficient Liquid Assets

Total Risk Weighted Exposures 63,537,643,533 55,273,316,419

1.2 Capital As at 15 July 2013 As at 15 July 2012

Core Capital (Tier 1) 6,340,748,750 5,139,280,637

a. Paid up Equity Share Capital 2,436,841,400 2,029,769,400

b. Irredeemable Non-cumulative preference shares

c. Share Premium 74,000 74,000

d. Proposed Bonus Equity Shares 609,210,350 405,953,880

e. Statutory General Reserves 2,620,500,000 2,176,500,000

f. Retained Earnings 704,970,278 559,829,916

g. Un-audited current year cumulative profit

h. Capital Redemption Reserves

i. Capital Adjustment Reserves

j. Dividend Equalization Reserves - -

k. Debenture Redemption Reserves

l. Deferred Tax Reserve 44,574,722 42,575,441

m. Other Free Reserves 2,578,000 2,578,000

n. Less: Goodwill

o. Less: Fictitious Assets

p. Less: Investment in equity of licensed Financial Institutions

q. Less: Investment in equity of institutions with financial interests (78,000,000) (78,000,000)

r. Less: Investment in equity of institutions in excess of limits

s. Less: Investments arising out of underwriting commitments

t. Less: Reciprocal crossholdings

u. Less: Other Deductions

Adjustment Under Pillar - II

Less: Shortfall In Provision

Less: Loans & Facilities extended to Related Parties & Restricted Lending

Supplementary Capital (Tier 2) 1,023,765,936 947,460,587

a. Cumulative and/or Redeemable Preference Share

b. Subordinated Term Debt 300,000,000 300,000,000

c. Hybrid Capital Instruments

d. General loan loss provision 453,370,175 413,855,853

e. Exchange Equalization Reserves 150,300,000 126,300,000

f. Investments Adjustment Reserves 106,222,191 94,031,164

g. Assets Revaluation Reserves

h. Other Reserves 13,873,570 13,273,570

Total Capital Fund (Tier 1 and Tier 2) 7,364,514,686 6,086,741,224

1.3 Capital Adequacy Ratio As at 15 July 2013 As at 15 July 2012

Tier 1 Capital to Total Risk Weighted Exposures 9.98% 9.30%

Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 11.59% 11.01%

Table of Capital Fund(As at 15 July 2013)

Schedule 30(A1)


109

Cred

itR

isk

(Asat15July2013)

Schedule30(B)

ASAT

15JULY

2013

ASAT

15JULY

2012

PARTICULARS

BOOKVALUE

SPECIFIC

ELIGIBLE

NETVALUE

RISK

RISKWEIGHTED

NETVALUE

RISKWEIGHTED

PROVISION

CRM

WEIGHT

EXPOSURE

EXPOSURE

A.BalanceSheetExposures

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Bal

ance

With

Nep

alR

astr

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ank

4,7

89

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5,1

30

--

4,7

89

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5,1

30

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1,9

80

,32

7-

Gol

d-

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stm

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ondo

mes

ticba

nks

that

mee

tca

pita

lade

quac

yre

quire

men

ts1

,41

0,6

33

,23

7-

-1

,41

0,6

33

,23

72

0%

28

2,1

26

,64

71

,44

6,0

38

,03

82

89

,20

7,6

08

Cla

ims

ondo

mes

ticba

nks

that

dono

tm

eet

capi

tala

dequ

acy

requ

irem

ents

37

6,4

29

,06

0-

-3

76

,42

9,0

60

10

0%

37

6,4

29

,06

04

4,4

08

,51

14

4,4

08

,51

1

Cla

ims

onfo

reig

nba

nk(E

CA

Rat

ing

0-1

)2

,09

4,7

07

,52

0-

-2

,09

4,7

07

,52

02

0%

41

8,9

41

,50

41

,59

8,6

47

,49

83

19

,72

9,5

00

Cla

ims

onfo

reig

nba

nk(E

CA

Rat

ing

2)

46

,02

5,6

59

46

,02

5,6

59

50

%2

3,0

12

,82

9-

-

Cla

ims

onfo

reig

nba

nk(E

CA

Rat

ing

3-6

)-

--

-1

00

%-

42

,03

7,7

54

42

,03

7,7

54

Cla

ims

onfo

reig

nba

nk(E

CA

Rat

ing

7)

--

--

15

0%

--

-

Cla

ims

onfo

reig

nba

nkin

corp

orat

edin

SAAR

Cre

gion

oper

atin

gw

itha

buffe

rof

1%

abov

eth

eir

resp

ectiv

ere

gula

tory

capi

talr

equi

rem

ent

7,4

89

,86

5,1

80

--

7,4

89

,86

5,1

80

20

%1

,49

7,9

73

,03

64

,03

5,2

82

,05

28

07

,05

6,4

10

Cla

ims

onD

omes

ticC

orpo

rate

s3

3,2

29

,36

2,3

85

20

3,9

90

70

5,7

78

,01

53

2,5

23

,38

0,3

80

10

0%

32

,52

3,3

80

,38

02

7,6

05

,55

2,6

31

27

,60

5,5

52

,63

1

Cla

ims

onFo

reig

nC

orpo

rate

s(E

CA

0-1

)-

--

20

%-

--

Con

td.

Nabil Bank Limited

110Cr

edit

Ris

k(Asat15July2013)

Schedule30(B)

ASAT

15JULY

2013

ASAT

15JULY

2012

PARTICULARS

BOOKVALUE

SPECIFIC

ELIGIBLE

NETVALUE

RISK

RISKWEIGHTED

NETVALUE

RISKWEIGHTED

PROVISION

CRM

WEIGHT

EXPOSURE

EXPOSURE

Cla

ims

onFo

reig

nC

orpo

rate

s(E

CA

2)

--

--

50

%-

--

Cla

ims

onFo

reig

nC

orpo

rate

s(E

CA

3-6

)-

--

-1

00

%-

--

Cla

ims

onFo

reig

nC

orpo

rate

s(E

CA

7)

--

--

15

0%

--

-

Reg

ulat

ory

Ret

ailP

ortfo

lio(N

otO

verd

ue)

1,9

36

,99

1,0

31

-2

9,1

98

,53

41

,90

7,7

92

,49

77

5%

1,4

30

,84

4,3

73

2,0

71

,16

6,5

28

1,5

53

,37

4,8

96

Reg

ulat

ory

Ret

ailP

ortfo

lioEx

cept

for

Gra

nula

rity

--

--

10

0%

--

-

Cla

ims

secu

red

byre

side

ntia

lpro

pert

ies

3,2

37

,97

9,2

45

--

3,2

37

,97

9,2

45

60

%1

,94

2,7

87

,54

72

,83

9,9

60

,95

01

,70

3,9

76

,57

0

Cla

ims

not

fully

secu

red

byre

side

ntia

lpro

pert

ies

--

--

15

0%

--

-

Cla

ims

secu

red

byre

side

ntia

lpro

pert

ies

(Ove

rdue

)9

8,7

58

,14

51

8,2

01

,83

8-

80

,55

6,3

07

10

0%

80

,55

6,3

07

15

,17

4,1

45

15

,17

4,1

45

Cla

ims

secu

red

byC

omm

erci

alre

ales

tate

86

4,8

78

,70

0-

-8

64

,87

8,7

00

10

0%

86

4,8

78

,70

04

,19

7,6

71

,38

64

,19

7,6

71

,38

6

Past

due

clai

ms

(exc

ept

for

clai

mse

cure

dby

resi

dent

ialp

rope

rtie

s)2

,19

4,9

55

,05

88

02

,95

3,3

66

-1

,39

2,0

01

,69

21

50

%2

,08

8,0

02

,53

85

92

,88

8,8

69

88

9,3

33

,30

4

Hig

hR

isk

clai

ms

2,4

84

,19

7,9

41

96

5,9

37

34

,01

5,3

28

2,4

49

,21

6,6

76

15

0%

3,6

73

,82

5,0

14

1,8

65

,86

4,7

74

2,7

98

,79

7,1

62

Inve

stm

ents

ineq

uity

and

othe

rca

pita

lins

trum

ents

ofin

stitu

tions

liste

din

the

stoc

kex

chan

ge3

97

,19

1,8

64

13

,34

6,6

12

-3

83

,84

5,2

52

10

0%

38

3,8

45

,25

22

56

,70

8,0

81

25

6,7

08

,08

1

Inve

stm

ents

ineq

uity

and

othe

rca

pita

lins

trum

ents

ofin

stitu

tions

not

liste

din

the

stoc

kex

chan

ge8

4,7

67

,48

62

,94

4,5

55

-8

1,8

22

,93

11

50

%1

22

,73

4,3

97

71

,95

3,8

62

10

7,9

30

,79

3

Staf

floa

nse

cure

dby

resi

dent

ialp

rope

rty

67

3,9

77

,09

1-

-6

73

,97

7,0

91

60

%4

04

,38

6,2

54

64

0,2

51

,47

33

84

,15

0,8

84

Inte

rest

Rec

eiva

ble/

clai

mon

gove

rnm

ent

secu

ritie

s2

9,9

84

,68

2-

-2

9,9

84

,68

20

%-

36

,04

9,2

52

-

Cas

hin

tran

sit

and

othe

rca

shite

ms

inth

epr

oces

sof

colle

ctio

n-

--

-2

0%

--

-

Oth

erAss

ets

5,4

08

,24

8,1

81

1,0

24

,82

7,5

59

94

,01

4,0

70

4,2

89

,40

6,5

51

10

0%

4,2

89

,40

6,5

51

3,2

20

,51

3,2

11

3,2

20

,51

3,2

11

TOTAL

76,189,370,779

1,863,443,857

863,005,947

73,462,920,976

50,403,130,391

63,594,359,961

44,235,622,844

B.OffBalanceSheetExposuresGrossBook

ab

cd=

a-b-c

ef=d*e

Rev

ocab

leC

omm

itmen

ts-

--

0%

--

-

Bill

sU

nder

Col

lect

ion

38

1,0

79

,75

7-

38

1,0

79

,75

70

%-

23

1,3

57

,52

1-

Forw

ard

Exch

ange

Con

trac

t7

,75

0,1

00

,52

0-

7,7

50

,10

0,5

20

10

%7

75

,01

0,0

52

4,2

24

,97

7,7

42

42

2,4

97

,77

4

LCC

omm

itmen

tsW

ithO

rigin

alM

atur

ityU

pto

6m

onth

s

dom

estic

coun

terp

arty

3,5

66

,95

0,9

15

16

8,4

50

,83

03

,39

8,5

00

,08

52

0%

67

9,7

00

,01

74

,71

4,2

48

,67

79

42

,84

9,7

35

fore

ign

coun

terp

arty

(EC

AR

atin

g:0-1

)-

20

%-

--

fore

ign

coun

terp

arty

(EC

AR

atin

g:2)

-5

0%

--

-

fore

ign

coun

terp

arty

(EC

AR

atin

g:3-6

)-

10

0%

--

-

fore

ign

coun

terp

arty

(EC

AR

atin

g7

)-

15

0%

--

-

Con

td.

Con

td.


111

Cred

itR

isk

(Asat15July2013)

Schedule30(B)

ASAT

15JULY

2013

ASAT

15JULY

2012

PARTICULARS

BOOKVALUE

SPECIFIC

ELIGIBLE

NETVALUE

RISK

RISKWEIGHTED

NETVALUE

RISKWEIGHTED

PROVISION

CRM

WEIGHT

EXPOSURE

EXPOSURE

LCC

omm

itmen

tsW

ithO

rigin

alM

atur

ityO

ver

6m

onth

s

dom

estic

coun

terp

arty

1,8

83

,41

5,8

85

72

7,7

91

,22

41

,15

5,6

24

,66

15

0%

57

7,8

12

,33

19

6,6

62

,23

34

8,3

31

,11

6

fore

ign

coun

terp

arty

(EC

AR

atin

g:0-1

)-

20

%-

--

fore

ign

coun

terp

arty

(EC

AR

atin

g:2

)-

50

%-

--

fore

ign

cout

erpa

rty

(EC

AR

atin

g:3-6

)-

10

0%

--

-

fore

ign

coun

terp

arty

(EC

AR

atin

g:7)

-1

50

%-

--

Bid

Bon

d,Pe

rfor

man

ceB

ond

and

Cou

nter

guar

ante

e

dom

estic

coun

terp

arty

4,0

15

,23

5,7

62

33

8,8

46

,65

23

,67

6,3

89

,11

05

0%

1,8

38

,19

4,5

55

3,5

57

,39

5,2

35

1,7

78

,69

7,6

17

fore

ign

coun

terp

arty

(EC

AR

atin

g:0-1

)8

90

,17

6,2

35

71

2,1

40

,98

81

78

,03

5,2

47

20

%3

5,6

07

,04

91

64

,67

9,8

18

32

,93

5,9

64

fore

ign

coun

terp

arty

(EC

AR

atin

g:2)

28

0,6

92

,37

71

40

,34

6,1

88

14

0,3

46

,18

85

0%

70

,17

3,0

94

17

1,2

87

,05

68

5,6

43

,52

8

fore

ign

coun

terp

arty

(EC

AR

atin

g:3-6

)2

45

,49

0,0

08

-2

45

,49

0,0

08

10

0%

24

5,4

90

,00

82

29

,85

5,9

26

22

9,8

55

,92

6

fore

ign

coun

terp

arty

(EC

AR

atin

g:7)

--

-1

50

%-

--

Und

erw

ritin

gco

mm

itmen

ts-

50

%-

--

Lend

ing

ofB

ank'

sSe

curit

ies

orPo

stin

gof

Secu

ritie

sas

colla

tera

l-

10

0%

--

-

Rep

urch

ase

Agr

eem

ents

-1

00

%-

--

Adv

ance

Paym

ent

Gua

rant

ee1

,75

6,2

23

,52

81

,12

5,2

40

,63

06

30

,98

2,8

98

10

0%

63

0,9

82

,89

88

47

,11

1,9

64

84

7,1

11

,96

4

Fina

ncia

lGua

rant

ee-

10

0%

--

-

Acc

epta

nces

and

Endo

rsem

ents

1,0

06

,15

2,5

86

-1

,00

6,1

52

,58

61

00

%1

,00

6,1

52

,58

66

82

,16

6,5

82

68

2,1

66

,58

2

Unp

aid

port

ion

ofPa

rtly

paid

shar

esan

dSe

curit

ies

39

,25

0,0

00

-3

9,2

50

,00

01

00

%3

9,2

50

,00

03

9,2

50

,00

03

9,2

50

,00

0

Irre

voca

ble

Cre

dit

com

mitm

ents

(sho

rtte

rm)

4,5

54

,99

0,1

99

33

4,1

56

,53

44

,22

0,8

33

,66

52

0%

84

4,1

66

,73

33

,21

9,7

40

,43

46

43

,94

8,0

87

Irre

voca

ble

Cre

dit

com

mitm

ents

(long

term

)5

0%

--

Oth

erC

ontin

gent

Liab

ilitie

s-

10

0%

--

-

Gua

rant

eecl

aim

edbu

tno

tac

cept

ed/h

onou

red

22

,91

6,7

55

-2

2,9

16

,75

52

00

%4

5,8

33

,51

01

6,3

86

,50

03

2,7

73

,00

0

TOTAL

26,392,674,527

-3,546,973,046

22,845,701,481

6,788,372,833

18,195,119,688

5,786,061,293

TotalRWEforcreditRisk(A)+

(B)

102,582,045,306

1,863,443,8574,409,978,993

96,308,622,456

57,191,503,224

81,789,479,648

50,021,684,138

AdjustmentUnderPillar-II

Add:

10%

ofth

elo

anan

dfa

cilit

ies

inex

cess

ofSi

ngle

Obl

igor

Lim

it

Add:

1%of

the

cont

ract

(Sal

e)va

lue

inca

seof

the

sale

ofcr

edit

with

reco

urse

TotalRWEforCreditRisk(AfterBank'sAdjustmentofPillar-II)

102,582,045,306

1,863,443,8574,409,978,993

96,308,622,456

57,191,503,224

81,789,479,648

50,021,684,138

Con

td.

Nabil Bank Limited

112

DEPOSITS

G'TEE

OF

SEC/G'TEE

OF

G'TEE

OF

DEPOSITS

WITHOTHER

GOVT.&NRB

GOVT.OF

OTHER

DOMESTIC

G'TEE

OF

SEC/G'TEE

OF

TOTAL

CREDITEXPOSURES

WITHBANK

BANKS/FIS

GOLD

SECURITIES

NEPAL

SOVEREIGNS

BANKS

MDBS

FOREIGNBANKS

ab

cd

ef

gh

i

BalanceSheetExposures

Cash

Bal

ance

-

Bal

ance

With

Nep

alR

astra

Ban

k-

Gol

d-

Inve

stm

enti

nN

epal

ese

Gov

ernm

entS

ecur

ities

-

AllC

laim

son

Gov

ernm

ento

fNep

al-

Inve

stm

enti

nN

epal

Ras

traB

ank

Secu

ritie

s-

Allc

laim

son

Nep

alR

astra

Ban

k-

Clai

ms

onFo

reig

ngo

vern

men

tand

Cent

ralB

ank

(ECA

:0-1

)-

Clai

ms

onFo

reig

ngo

vern

men

tand

Cent

ralB

ank

(ECA

:2)

-

Clai

ms

onFo

reig

ngo

vern

men

tand

Cent

ralB

ank

(ECA

:3)

-

Clai

ms

onFo

reig

ngo

vern

men

tand

Cent

ralB

ank

(ECA

:4-6

)-

Clai

ms

onFo

reig

ngo

vern

men

tand

Cent

ralB

ank

(ECA

:7)

-

Clai

ms

On

BIS

,IM

F,EC

B,E

Can

don

Mul

tilat

eral

Dev

elop

men

tBan

ks

(MD

Bs)

reco

gniz

edby

the

Fram

ewor

k-

Clai

ms

onO

ther

Mul

tilat

eral

Dev

elop

men

tBan

ks-

Clai

ms

onPu

blic

Sect

orEn

tity

(ECA

:0-1

)-

Clai

ms

onPu

blic

Sect

orEn

tity

(ECA

:2)

-

Clai

ms

onPu

blic

Sect

orEn

tity

(ECA

:3-6

)-

Clai

ms

onPu

blic

Sect

orEn

tity

(ECA

:7)

-

Clai

ms

ondo

mes

ticba

nks

that

mee

tcap

itala

dequ

acy

requ

irem

ents

-

Clai

ms

ondo

mes

ticba

nks

that

dono

tmee

tcap

ital

adeq

uacy

requ

irem

ents

-

Clai

ms

onfo

reig

nba

nk(E

CAR

atin

g:0-

1)-

Clai

ms

onfo

reig

nba

nk(E

CAR

atin

g:2)

-

Clai

ms

onfo

reig

nba

nk(E

CAR

atin

g:3-

6)-

Clai

ms

onfo

reig

nba

nk(E

CAR

atin

g:7)

-

Clai

ms

onfo

reig

nba

nkin

corp

orat

edin

SAAR

Cre

gion

oper

atin

gw

ith

abu

ffero

f1%

abov

eth

eirr

espe

ctiv

ere

gula

tory

capi

talr

equi

rem

ent

-

Clai

ms

onD

omes

ticCo

rpor

ates

/Ind

ivid

uals

128,

370,

299

577,

407,

717

705,

778,

015

Clai

ms

onFo

reig

nCo

rpor

ates

(ECA

:0-1

)-

Clai

ms

onFo

reig

nCo

rpor

ates

(ECA

:2)

-

Clai

ms

onFo

reig

nCo

rpor

ates

(ECA

:3-6

)-

Clai

ms

onFo

reig

nCo

rpor

ates

(ECA

:7)

-

Reg

ulat

ory

Ret

ailP

ortfo

lio(N

otO

verd

ue)

29,1

98,5

3429

,198

,534

Reg

ulat

ory

Ret

ailP

ortfo

lio(O

verd

ue)

Reg

ulat

ory

Ret

ailP

ortfo

lioEx

cept

forG

ranu

larit

y-

Clai

ms

secu

red

byre

side

ntia

lpro

pertie

s-

Cred

itR

isk

Miti

gatio

nFortheperiod


2069to31Ashadh2070)

Schedule30(C)

Con

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2069to31Ashadh2070)

Con

td.

Nabil Bank Limited

114

Operations Risk(As at 15 July 2013)

Schedule 30(D)

PARTICULARS YEAR 1 YEAR 2 YEAR 3 LAST YEAR

Net Interest Income 2,978,248,622 2,298,599,711 2,089,606,277

Commission and Discount Income 364,075,214 290,855,057 215,481,543

Other Operating Income 201,084,866 180,570,348 184,024,512

Exchange Fluctuation Income 447,070,485 276,102,798 276,964,251

Additional Interest Suspense during the period 98,947,274 51,116,013 69,520,870

Gross income (a) 4,089,426,461 3,097,243,927 2,835,597,453

Alfa (b) 15% 15% 15%

Fixed Percentage of Gross Income [c=(a×b)] 613,413,969 464,586,589 425,339,618

Capital Requirement for operational risk (d) (average of c) 501,113,392 408,867,454

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

Equivalent Risk Weight Exposure [f=(d×e)] 5,011,133,921 4,088,674,543

Adjustment Under Pillar - II

If Gross Income for all the last three years is negative

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

Capital Requirement for operational risk (5%) - -

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

Equivalent Risk Weight Exposure (g) - -

Equivalent Risk Weight Exposure (h=f+g) 5,011,133,921 4,088,674,543

Market Risk(As at 15 July 2013)

Schedule 30(E)

THIS YEAR Rs. PREVIOUS YEAR Rs.S.NO. OPEN POSITION RELEVANT OPEN RELEVANT OPEN

CURRENCY OPEN POSITION (FCY) (NPR) POSITION POSITION

1 USD 317,152 30,430,756 30,430,756 109,652,725

2 GBP 51,781 7,502,036 7,502,036 3,641,860

3 EUR 29,476 3,695,656 3,695,656 2,274,283

4 CAD 42,987 3,960,350 3,960,350 3,143,591

5 AUD 64,995 5,649,360 5,649,360 2,286,373

6 JPY 2,335,665 2,257,887 2,257,887 1,628,899

7 CHF 42,751 4,337,038 4,337,038 3,047,060

8 CNY 59,019 922,467 922,467 258,190

9 DKK 85,457 1,437,385 1,437,385 2,812,736

10 HKD 2,600 32,162 32,162 47,981

11 INR 71,962,722 115,194,328 115,194,328 26,435,484

12 QAR 5,575 146,901 146,901 163,480

13 SAR 16,044 410,566 410,566 487,287

14 SGD 24,068 1,826,768 1,826,768 2,153,243

15 SEK 6,160 88,642 88,642 1,508

16 AED 4,045 105,696 105,696 109,125

17 MYR 6,781 204,379 204,379 121,040

18 THB 44,840 138,107 138,107 69,582

Total Open Position (a) 178,340,484 178,340,484 158,334,447

Fixed Percentage (b) 5% 5%

Capital Charge for Market Risk [c=(a×b)] 8,917,024 7,916,722

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

Equivalent Risk Weight Exposure [e=(c×d)] 89,170,240 79,167,220


115

Principal Indicators(As at 15 July 2013)

Schedule 31

S.N. PARTICULARS FINANCIAL YEARINDIC-ATORS 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

1 Net Profit/Gross Income % 29.68 30.56 24.11 22.29 23.74 32.66

2 Earnings Per Share Rs. 115.86 113.44 83.81 70.67 83.23 95.14

3 Market Value per Share Rs. 5,275 4,899 2,384 1,252 1,355 1,815

4 Price Earning Ratio Times 45.53 43.19 28.45 17.72 16.21 19.08

5 Dividend (including bonus) on share capital % 100.00 85.00 70.00 30.00 60.00 65.00

6 Cash Dividend on Share Capital % 60.00 35.00 30.00 30.00 40.00 40.00

7 Interest Income/Loans & Advances % 8.04 8.82 10.41 12.50 12.85 11.64

8 Employee Expense/Total Operating Expense % 21.17 23.96 13.79 11.91 12.26 19.59

9 Interest Expense on Total Deposit and Borrowings % 2.64 3.22 4.43 6.15 5.74 3.67

10 Exchange Gain/Total Income % 7.81 7.47 6.17 4.60 6.26 7.20

11 Staff Bonus/ Total Employee Expenses % 41.42 43.50 44.29 42.05 48.26 48.90

12 Net Profit/Loans & Advances % 3.96 4.02 3.47 3.73 4.14 5.04

13 Net Profit/ Total Assets % 2.32 2.55 2.37 2.43 2.80 3.25

14 Total Credit/Deposit % 68.18 73.87 71.17 78.29 77.91 74.90

15 Total Operating Expenses/Total Assets % 3.86 4.34 5.54 6.91 6.73 4.84

16 Adequacy of Capital Fund on Risk Weighted Assets

a. Core Capital % 8.75 8.74 8.77 8.83 9.30 9.98

b. Supplementary Capital % 2.35 1.96 1.73 1.75 1.71 1.61

c. Total Capital Fund % 11.10 10.70 10.50 10.58 11.01 11.59

17 Liquidity (CRR) % 8.37 9.03 3.02 4.90 8.60 9.32

18 Non Performing Loans/Total Loans % 0.74 0.80 1.48 1.77 2.33 2.13

19 Weighted Average Interest Rate Spread 3.94 4.16 4.40 4.37 4.95 5.48

20 Book Net Worth per Share Rs. 354 324 265 225 269 275

21 Total Shares Number 6,892,160 9,657,470 14,491,240 20,297,694 20,297,694 24,368,414

22 Total Permanent Employees Number 416 505 557 657 650 742

23 Weighted Average Number of Ordinary

Shares Outstanding Number 6,442,910 9,089,256 13,590,702 18,929,598 20,297,694 23,320,064

24 Return on Equity % 29.35 33.93 30.27 29.02 30.25 32.78

25 Return on Assets % 2.32 2.55 2.38 2.43 2.80 3.25

26 Dividend Payout Ratio % 92.33 79.62 89.05 42.45 71.80 68.32

27 Earnings Yield % 2.20 2.32 3.52 5.64 6.17 5.24

28 Dividend Yield % 1.90 1.74 2.94 2.40 4.43 3.58

29 Cost to Income Ratio % 51.14 52.11 56.31 63.50 57.16 48.60

30 Total Assets to Shareholders' Fund times 15.24 14.01 13.59 12.73 10.09 9.56

31 Shareholders' Fund to Liability including

Contingent Liability % 5.74 5.98 6.21 6.61 7.71 8.33

32 Number of Offices Number 28 38 49 49 52 51

33 Number of ATMs Number 32 48 63 68 78 81

contd.

Nabil Bank Limited

116

1. Gross Income in S.N. 1 comprises of

Interest Income, Commission and Discount,

Other Operating Income and Exchange

Income.

2. EPS in S.No.2 is computed in line with

Nepal Accounting Standard (NAS) 26 Earning

Per Share that requires computation of EPS

dividing earnings attributable to equity holders

by weighted average number of shares.

Weighted average number of ordinary shares

outstanding (in S.No.23) during the period is

the number of ordinary shares outstanding at

the beginning of the period, adjusted by the

number of ordinary shares bought back or

issued during the period multiplied by a time-

weighting factor. The time-weighting factor is

the number of days that the shares are

outstanding as a proportion of the total

number of days in the period. Bank's basic

and diluted EPS is same since there are no

potential ordinary shares outstanding as on the

balance sheet date.

3. Market Value per Share in S.N. 3 is the

closing price quoted in Nepal Stock Exchange

on Monday, the 15th July 2013.

4. The Interest Income in S. N. 7 is the

interest income from loans and advances

(excluding staff loans) only. The loans and

advances are the average loans and advances

for the entire financial year. The average

balance during the year was

Rs.43,997,640,455.17.

5. Total Operating Expense in S.N. 8

comprises Interest Expense, Staff Expense and

Other Operating Expense.

6. The Deposits and Borrowings in S.N.9 are

the average deposits and borrowings (including

debentures) for the entire financial year. The

average balances of deposits and borrowing

during the year was Rs.58,330,804,734.32

and Rs.1,300,107,665.58 respectively.

7. Total Income in S.N. 10 is same as Gross

Income in S.N. 1 comprising of Interest

Income, Commission and Discount, Other

Operating Income and Exchange Income.

8. The Loans and Advances in S.N. 12 is

same as Loans and Advances in S.N. 7 and is

the average balance for the entire financial

year.

9. Total Assets in S.N. 13 and S.N. 15 are

average balance of assets computed by

averaging outstanding balance of previous

financial year and current financial year.

10. Credit and Deposit in S.N. 14 is the

outstanding balance as of balance sheet date.

11. CRR in the S.N. 17 is computed on the

basis of cash and cash equivalents and

deposits outstanding on the balance sheet

date. The CRR (as per NRB Directives) for the

last week of the current financial year is

6.22%.

12. Return on Equity in S.N. 24 is computed

by taking average Equity including Proposed

Dividend of previous year till the date of AGM

and average after-tax net profit of current year.

Figures of previous years have been restated

accordingly wherever necessary.

13. Earnings Yield represent earning

(attributable to equityholders) per market

value of share.

14. Dividend Yield represent dividend per

market value of share.

NOTE:


117

1. CORPORATE INFORMATION1.1 Reporting Entity: Nabil Bank Limited

(hereinafter referred to as “the Bank”) is a

joint venture public limited company,

incorporated on 11th May 1984 as per the

then Companies Act 1964 of Nepal, and

domiciled in Nepal. It is a “Ka” class licensed

institution licensed under the Bank and

Financial Institutions Act, 2006 and

commenced its commercial banking

operations from 12th July 1984 as per the

then Commercial Banking Act, 1964. The

registered office of the Bank is located at

Nabil Centre, Durbar Marg, Kathmandu,

Nepal. Its ordinary shares (Class C),

institutional investor shares (Class B) and

promoter shares (Class A) are listed on the

Nepal Stock Exchange Limited (the sole stock

exchange in Nepal) for public trading.

The Bank has employed 1,270 people in

total as at 15 July 2013 that comprises of

742 permanent staff (650 as at 15 July

2012) and 528 outsourced and contract

staffs (604 as at 15 July 2012).

1.2 Subsidiary: Nabil Investment Banking

Ltd. (herein after referred to as “the

Subsidiary”) is a subsidiary company of the

Bank. It was incorporated on 07th of

February 2010 as a public limited company

as per the Companies Act 2006. It is a

Merchant Banker licensed by Securities Board

of Nepal under the Securities Businessperson

(Merchant Banker) Regulations, 2008. The

Bank, as at the Balance Sheet date, holds

74.29% controlling interest in the Subsidiary.

The Subsidiary has employed 17 people in

total as at 15 July 2013 that comprises of

12 permanent staff (8 as at 15 July 2012)

and 5 outsourced and contract staffs (4 as at

15 July 2012). Additional 2 personnel are

deputed by the Bank to work in the

Subsidiary.

The financial year of the Subsidiary is

common to that of the Bank (parent

company). The current Financial Year ended

on July 15, 2013.

1.3 The Bank and the Subsidiary are

collectively referred to as “the Group”.

2. PRINCIPAL ACTIVITIES2.1 The principal activities of the Bank are to

provide full-fledged commercial banking

services including, agency services, trade

finance services, card services, e-commerce

products and services and commodity trading

services to its customers through its strategic

business units, branches, extension counters,

ATMs and network of agents.

2.2 The principal activities of the Subsidiary

are to provide merchant/investment banking

services that include management of public

offerings, portfolio management, underwriting

of securities, fund management of mutual

fund schemes, depository participant's

service under Central Depository Service

(CDS) and administration and record keeping

of securities of its clients.

3. APPROVAL OF FINANCIALSTATEMENTS BY BOARD OFDIRECTORS3.1 The accompanied financial statements

including consolidated financial statements

have been authorized by the Board of

Directors, vide its resolution dated September

06, 2013 and recommended for its approval

by the Annual General Meeting of the

shareholders.

4. RESPONSIBILITY FORFINANCIAL STATEMENTS4.1 The Board of Directors, per paragraph 6 of

NAS 01, “Presentation of Financial Statements”

read in conjunction to Section 108(2) of the

Company Act 2006, is responsible for the

preparation of financial statements of the Bank.

The Board of Directors acknowledges this

responsibility as set out in the “Annual Report

of the Board of Directors”.

4.2 These financial statements include the

following components:

a. a Balance Sheet (including Consolidated

Balance Sheet) disclosing the information on

financial position of the Group and the Bank;

b. a Profit and Loss Account (including

Consolidated Profit and Loss Account)

disclosing the financial performance of the

Group and the Bank for the period under

review;

c. a Cash Flow Statement (including

Consolidated Cash Flow Statement)

disclosing the information on the ability of the

Group and the Bank to generate cash and

cash equivalents;

d. a Statement of Changes in Equity

(including Consolidated Statement of Changes

in Equity) showing all changes in equity of

the Group and Bank; and

e. Notes to the Financial Statements

comprising a summary of principal

accounting policies of the Group and the

Bank and other relevant explanatory notes

that is of material importance to the readers

of the financial statements to facilitate

informed decision making.

5. STATEMENT OF COMPLIANCE5.1 Except otherwise stated by Nepal Rastra

Bank (NRB) Directives, Bank & Financial

Institutions Act 2006 and Company Act

2006, the consolidated financial statements

of the Group and separate financial

statements of the Bank have been prepared

in accordance with Nepal Accounting

Standards (“NAS”) as issued by the Nepal

Accounting Standard Board (NASB) and in

accordance with International Financial

Reporting Standards 10 "Consolidated

Financial Statements".

Principal Accounting PoliciesSchedule 32

Nabil Bank Limited

118

5.2 NAS comprise of all accounting

standards as well as interpretations issued by

the NASB that were effective at the time of

preparation and presentation of financial

statements. As of the balance sheet date,

NASB has pronounced nineteen accounting

standards in effect and six accounting

standards for voluntary application.

5.3 NRB Directives comprise of NRB Unified

Directives and circulars issued by NRB (the

licensing and regulatory authority) relevant

for the preparation and presentation of

financial statements.

5.4 The Group and the Bank do not adopt

accounting treatments that are inconsistent

with NRB Directives and NAS and comply

with these in all material respects. In case of

any inconsistency prevailing between the

provisions in NRB Directives and NAS, NRB

Directives have been complied with to the

extent of such inconsistencies.

6. BASIS OF PREPARATION6.1 The assets and liabilities reported in the

consolidated financial statements of the

Group and the separate financial statements

of the Bank are presented in functional

currency which is Nepalese Rupees (NRs.)

and are prepared on historical cost

convention except for translated foreign

currency value.

6.2 Preparation of financial statements in

conformity with NAS requires the use of

certain critical accounting estimates and also

requires management to exercise judgement

in process of applying the Group's and the

Bank’s accounting policies.

7. BASIS OF CONSOLIDATION7.1 The consolidated financial statements

have been prepared in accordance with

International Financial Reporting Standards

10 “Consolidated Financial Statements”. In

preparing the consolidated financial

statements, the financial statements of the

Bank and the Subsidiary are combined line

by line by adding together like items of

assets, liabilities, equity, income and

expenses.

7.2 The consolidated financial statements of

the Bank for the year ended on July 15, 2013

comprise of the accounts of the Bank and the

Subsidiary. The Bank consolidates the financial

statements of the Subsidiary only when it

controls the Subsidiary. An investor controls

investee when it is exposed, or has rights, to

variable returns from its involvement with the

investee and has the ability to affect those

returns through its power over the investee.

Para 7 of IFRS 10 outlines three conditions to

be fulfilled in order to establish control:

(a) power over the investee;

(b) exposure, or rights, to variable returns

from its involvement with the investee; and

(c) the ability to use its power over the

investee to affect the amount of the investor’s

returns.

In the case of the Bank and the Subsidiary’s

investor-investee relationship,

(a) Power over the Subsidiary exists from the

voting rights granted by the equity share. The

Bank holds 74.29% of controlling interest in

the Subsidiary.

(b) The Subsidiary’s capital composes only

equity instruments and the Bank’s returns

from the involvement in equity instruments

have the potential to vary with the

performance of the Subsidiary. The Bank has

thus exposure, or rights, to variable returns

from its involvement with the Subsidiary.

(c) The Bank has deputed its staff as CEO of

the Subsidiary and CEO of the Bank represents

in the Board of the Subsidiary in the capacity

of Chairman. The Bank thus has the ability to

exercise its power over the Subsidiary to affect

the amount of the Bank’s return.

7.3 The financial statements of the

Subsidiary are included in the consolidated

financial statement from the date that control

effectively commences until the date that the

control effectively ceases.

7.4 All intra Group transactions and

balances, income and expenses and any

unrealised gains / losses arising from such

inter-company transactions and balances are

eliminated in full while preparing the

consolidated financial statements.

8. SIGNIFICANTACCOUNTING POLICIES8.1 The principal accounting policies applied

by the Group and the Bank in the preparation

of these financial statements are presented

below. These policies have been consistently

applied to all the years presented unless

stated otherwise.

A. Equity

Equity is the residual interest of the equity

holders in the assets after deducting all its

liabilities. It comprises of all funds

contributed by equity holders, retained

earnings and reserves representing

appropriation of retained earnings.

� The Group discloses all residual interest in

the form of Share Capital and Reserves &

Surplus on the face of balance sheet except

proposed cash dividend, which is separately

disclosed as Proposed Dividend on the face in

line with the format prescribed by NRB. The

proposed cash dividend continues to remain

as a part of equity until the date of

ratification by AGM. Dividend proposed by

the Subsidiary company are eliminated from

proposed dividend while consolidation and

are restated in the consolidated retained

earnings and non-controlling interest.

� As per Section 44 of Bank and Financial

Institutions Act 2006, all licensed institutions

are required to transfer minimum 20% of net

profit after tax to the General Reserve until it

becomes double of paid up capital. The Bank

consistently transfers the fund from the profit

in the General Reserve to comply with this

requirement. There is no such statutory

requirement for the Subsidiary.

� As per Section 45 of the aforesaid Act, all

licensed institutions are required to transfer

minimum 25% of the Total Revaluation Gain

(except gain from revaluation of Indian


119

Currency) in the Exchange Fluctuation

Reserve. The Bank consistently maintains the

Reserve by transferring the fund from the profit

to comply with this requirement. There is no

such statutory requirement for the Subsidiary.

� As per Directives 4 of NRB Unified

Directives, all licensed institutions are

required to maintain Deferred Tax Reserve

equivalent to the amount of Deferred Tax

Asset. The Bank consistently maintains

equivalent reserve to the amount of deferred

tax asset to comply with the requirement of

the Directives. The Subsidiary also maintains

equivalent amount in the reserve.

� The Group maintains Investment

Adjustment Reserve for Available for Sale

Investment which is not made available for

distribution to its equity holders.

� The Bank has constituted a Contingent

Reserve in line with “Scheme for Payment of

Staff Hospitalization Charges” that is

primarily intended to fund staffs’ medical

treatment for cases of severe ailments that

are not covered by medical insurance policy.

According to this Scheme, the Bank

appropriates NRs.1,000 thousand from

Retained Earning towards this reserve on

annual basis and transfers back to Retained

Earning to the extent of amount that is

contributed to the staff in the year of such

contribution. No such reserve is being

maintained by the Subsidiary.

B. Assets

Assets are resources controlled by the entity

as a result of past events and from which

future economic benefits are expected to flow

to the entity. Group's assets include all assets

controlled by the Group from which it expects

derivation of economic benefits in the future

to the Group. The assets of the Group

comprise of cash, balances held with the

central bank and financial institutions,

investments (including derivative investment),

loans and advances, fixed assets,

non-banking assets and the assets aggregated

under other assets.

i. Loans and Advancesincluding Bills Purchased

� Loans and advances include direct finance

provided to the customers. These comprise of

business loans of short term and long term

nature, project and infrastructure loans,

consumer loans, credit card loans, bills

purchased and discounted and loans provided

to deprived sectors.

� Loans and advances are recognised when

the loans are actually disbursed and are

derecognized at the time of their settlement.

� Bills purchased or discounted are

recognised as loans when the bills are

actually purchased or discounted and are

derecognized at the time of their settlement

by presentation and/or endorsement.

� These are presented at net of loan loss

provisions and are not stated on amortised

cost basis.

ii. Investment

� Investment includes short term and long

term placements, money at call and short

notice, derivative investments, government

securities (development bonds and Treasury

Bills), bonds, debentures, mutual fund

investments and share investments in

subsidiary companies and other organised

institutions.

� All investments are initially recognised at

cost, being fair value of the consideration

given, including acquisition charges

associated with the investment. The

investments held by the Bank are classified in

following 3 categories:

a. Held till Maturity (HTM) Investments:

These investments are primarily intended to

hold until the maturity and are stated at cost

and carried at these values in the Balance

Sheet until the maturity. Any impairment

losses arising in such investments are

provisioned and charged to the Profit and

Loss Account (Income Statement). Premiums

paid/ discount received while acquiring HTM

Investments is recognized as the part of initial

cost and subsequently adjusted with the

interest income on effective interest basis

until the maturity.

b. Held for Trading (HFT) Investments:

These are the marketable investments and

held with the primary intention of resale over

a short period of time. These investments are

initially measured at cost and subsequently

recognised at market value. Gains or losses

arising from trading / revaluation are

recognised in Profit and Loss Account

(Income Statement).

c. Available for Sale (AFS) Investments:

These are the investments held with the

primary intention to recover value of

investments through sale rather than

continuing to hold. These investments are

initially measured at cost and subsequently

recognised at market value. Any gains or

losses arising till the investments are held are

recognised on Investment Adjustment

Reserve. Any gains or losses are recognised

in Profit and Loss accounts only at the time of

disposal of such investments.

While assessing the market value,

consideration is given to the transaction

activities in the stock exchange and

conservative approach is adopted in order to

avoid overstatement of the equity position.

Accordingly, those investments which are not

actively traded at the stock market are carried

at cost and amount equivalent to at least 2%

of such investments are earmarked on

Investment Adjustment Reserve from the

retained earnings in line with the requirement

of NRB.

In case of unquoted investments other than

the investments in the Subsidiary, investment

adjustment reserve is maintained to the

extent of 100% of such investment:

� to the period of maximum 1 year from the

date of investment, if the company is already

incorporated prior to the investment of the

Bank and the shares of such company are not

listed in stock exchange within 1 year from

the date of investment;

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120

� to the period of maximum 2 years from the

date of investment, if the company is newly

incorporated and the Bank has also promoted

such company and the shares of such

company are not listed in the stock exchange

within 2 years from the date of investment.

In case of investment in the Subsidiary,

whether listed or not in stock exchange,

investment adjustment reserve is maintained

to the extent of 100% of such equity

investment. Such investment is also deducted

while determining the Tier 1 Capital for

Capital Adequacy calculation purpose in line

with the requirement of NRB Directives.

� All investments are subject to periodic

review as required by NRB Directives.

iii. Property, Plant and Equipment

(Fixed Assets)

� Property, plant and equipment are tangible

items that are held for use in the production

or supply of services, for rental to others, or

for administrative purposes and are expected

to use during more than one financial year.

� Group's property, plant and equipment

comprise of the Bank's and the Subsidiary’s

land & premises registered under its

ownership, office equipments and furniture,

vehicles, leasehold developments, software

applications and assets under construction or

work-in-progress.

� Cost of an item of property, plant and

equipment is recognised as an asset, if and

only if, it is probable that future economic

benefits associated with the item will flow to

the entity and the cost of the item can be

measured reliably. The cost of an item of

property, plant and equipment comprises of

purchase prices including taxes, custom

duties and any costs that is directly

attributable to bring the asset to the location

and condition that is necessary for it to be

capable for operating in the manner intended

by the management. Costs incurred for

dismantling / removal and for restoration of

site are recognised as a part of the new item

of the property, plant and equipment. Cost of

an item of an asset includes cost of an asset

under construction and work-in-progress.

� Any subsequent cost incurred for the

property, plant and equipment is recognised

as an asset if it meets the recognition criteria.

The cost that does not qualify as an asset is

charged off in the Income Statement as repair

and maintenance.

� The carrying amount of an asset is

derecognised at the time of disposal or when

no future economic benefits are expected to

flow from its use or disposal. The gain or loss

arising from derecognition of an item of

property, plant and equipment is included in

profit or loss when the item is derecognised.

� The carrying amount of the property, plant

and equipment is the amount at which an

asset is recognised after deducting any

accumulated depreciation and accumulated

impairment losses.

� Non-consumable items having life more

than one year and/or costing less than NRs.

5,000 are expensed off during the year of

purchase.

� The Bank consistently adopts cost model

for entire class of its property, plant and

equipment.

iv. Inventory

a. Stationery

i. Stationery stocks are inventories in the form

of materials or supplies held by the Group to

be consumed while rendering the services.

The Group does not hold any item of the

inventory that is in the state which is not

readily usable (i.e. raw material or semi-

finished) for rendering the services or that for

the selling purposes.

ii. Stationeries are measured either at the

lower of cost or net realisable value (NRV),

except for certain items that are specifically

used only by the Group and the Bank. Such

specific items are measured at the lower of

cost or replacement price.

iii. The stationeries are written down on an

item by item basis, when the inventories are

damaged or have become wholly or partially

obsolete that affects the effective use while

rendering services.

iv. Stationeries are recorded at actual cost

basis and charged to revenue at the time of

its consumption.

b. Bullion Stock under Consignment

i. The Bank holds precious metals (gold and

silver) in its possession arising from

consignment transaction. All risks and

rewards pertaining to the assets are vested

with the consignor. The Bank merely acts as

an agent of the consignor and hence does not

recognise the stock in its books as an

inventory.

v. Staff Loans

� Staff loans are loans granted to the staffs

as per the Integrated Staff Loan Policy of the

Bank and are recognised as loans at the time

of their disbursement. They are derecognised

at the time of recovery/settlement.

� Staff loans comprise of housing loan

facility, personal loan facility and vehicle loan

facility and are presented under "Staff Loans

and Advances" in Schedule 16 of the

Financial Statements.

vi. Interest Receivables

� Interest receivable comprise of interest

accrued on loans (including receivables on

loans to staffs under Integrated Staff Loan

Policy of the Bank) and investments and are

recognised on daily basis based on the

outstanding balance at the end of the day.

� Interest receivables on loans (except staff

loans) are stated at full value and are

disclosed net of interest suspense under

“Accrued Interest on Loan” in Schedule 16 of


121

the Financial Statements. Similarly, Interest

receivables on staff loans are presented under

“Others” in the same Schedule.

� Interest receivables on investments are

stated at full value.

vii. Prepayments

� Prepayments are the amount paid in

advance on account of provision of services in

future. Prepayments comprise of amount paid

in advance for insurance services, rental of

leased premises, communication like internet

connectivity, maintenance of services (AMCs)

and other miscellaneous services.

� Prepayments are recognised as asset at

full value on the date of payment.

� They are derecognised as and when

services are received or at the time service

accrues or period mature.

viii. Security Deposits

� Security deposits are the amount

deposited by the Bank or the Group on

account of security of fees on services that is

being received from the provider.

� They are recognised as security deposits

until the receipt of service continues and the

Bank and the Group do not have any

intentions to discontinue the service.

ix. Non Banking Assets (NBA)

� Non Banking Assets of the Bank comprise

of assets or the mortgaged properties realised

from the borrowers in lieu of settlement of the

loan after exercising all efforts for settlement

in cash.

� NBA is recognised lower of recoverable

amount from the market (Net Realisable

Value) and outstanding dues recoverable from

the borrower, immediately after the

ownership of assets is transferred to the Bank

at the concerned authority. The recoverable

amount from the market is estimated on the

basis of independent evaluation of the

approved Valuator. NBA is derecognized at

the time of its disposal.

� 100% loss provision is maintained for

NBA and continues to remain until it is

disposed off.

C. Liabilities

Liabilities are present obligations of the entity

arising from past events, the settlement of

which are expected to result in an outflow

from the entity of resources embodying

economic benefits. Liabilities of the Group

and the Bank comprise of borrowings,

deposits, bills payable, dividend payable,

interest accruals, unearned income, sundry

creditors and other liabilities.

i. Borrowings

� Borrowings comprise of local and foreign

currencies' inter-bank borrowing and the

debentures issued to the public.

� Borrowings are recorded at the full value

and recognised on the effective dates

mentioned in the deed or contract.

Borrowings are derecognised at the time of its

disposal / settlement.

ii. Deposits

� Deposits of the Bank and the Group

comprise of local and foreign currencies' current

deposits, savings deposits, call deposits, time

deposits, margin deposits and other deposits of

the customers held by the Bank and the Group.

� Deposits are stated at full value and

recognised on the date of deposition.

Deposits are derecognised at the time of its

withdrawal / maturity.

iii. Bills Payable

� Bills payable are negotiable instruments

issued/endorsed by the Bank for

consideration received in exchange from the

customer. Bills payable comprise of manager

cheques, travellers cheques, drafts issued in

local currency and foreign currencies payable

at the counter of the Bank and the cheques

realised at Nostro banks on behalf of

customer sent for collection by endorsement.

� These are recorded at full value and

recognised at the time of its issuance for the

consideration received. They are derecognised

at the time of its disposal at the Bank's

counter or after receipt of information of

disposal from other banks and financial

institutions.

iv. Dividend Payable

� Dividend payables are the dividends,

payable to its equity holders duly ratified by

the current or earlier AGMs.

� They are stated at full value immediately

after AGM ratifies the Board's proposal on

dividend. Immediately before the AGM

ratification, it retains the status of Equity.

v. Interest Accruals

� Interest accruals comprise of interest

payables on deposits, borrowings and

debenture. They are recognised on the

outstanding balance at the end of the day on

daily basis.

� Interest accruals are derecognised at the

due date i.e. on the date it is credited in

customers' account.

vi. Unearned Income

� Unearned Income comprise of income

received in advance on account of loans

under subvention scheme, LC fees and

guarantee fees issued with a risk period of

more than 1 year period and for fees with

more than Rs.50,000 (fifty thousand).

� They are recognised as liability at the time of

its receipt and are derecognised as and when

income accrues and / or risk period expires.

� Unearned interest income is presented in

“13 Others” in Schedule 7.

vii. Provisions

� Provisions are liabilities of uncertain

timing or amount. They are recognised as

liabilities when the Group or the Bank has a

present obligation (legal or constructive) as a

result of past event and that there are

probabilities of outflow of resources

embodying economic benefits to settle the

obligation and can be estimated reliably.

Nabil Bank Limited

122

� While making an estimate, consideration

is given to immediate trends, past practices

and approved polices. In extremely rare

circumstances, where no reliable estimate

can be made, a liability exists that cannot be

recognised. That liability is disclosed as a

contingent liability.

� Provisions for utility expenses: Provisions

for utility expenses are recognised based on

immediate trends. Excess or deficits are

adjusted in the subsequent months.

� Provisions for communication: Provisions

for communication (viz., telephone, swift) are

recognised based on immediate trends.

Activity log wherever possible is also

considered while estimating the provision.

Excess or deficits are adjusted in the

subsequent months.

� Provision for audit fees: Audit fees are

provisioned based on the remuneration fixed

by the equity holders at the Annual General

Meeting.

� Provision for staff bonus: Staff bonus is

provided as per Bonus Act, 1974.The Bonus

Act requires provision at the rate of 10% on

the amount of net profit before tax.

� Employee Leave:

i. Employee leave are compensated absences

and comprises of annual leave, sick leave,

casual leave, maternity leave, paternity leave,

substitute leave and bereavement leave and

are compensated as per Employee Bye-Laws

of the Bank and the Subsidiary.

ii. Entitlement to compensated absences fall

into two category:

a. accumulating; and

b. non accumulating

iii. The Group recognizes cost of

compensated absences as follows:

a. in case of accumulating, when the

employees render service that increases their

entitlement to future compensated absences;

and

b. in case of non accumulating, when the

absences occur.

iv. Annual leave and sick leave are

accumulated to the maximum extent of 60

days and 30 days (15 days till last year)

respectively and is carried forward for the use

in future periods. Leave balance in excess of

90 days (75 days till last year) as on mid

April is paid each year. Leave earned and

accrued on a proportionate basis as at the

balance sheet date (Mid July) is recognized

as liability duly reduced by the absences

availed by the employees.

viii. Gratuity, Insured benefits

and Provident Fund:

� Gratuity, insured benefits and provident

fund are post-employment benefits available

only to the permanent employees and after

completing designated service period or

probation period.

� The Bank and the Subsidiary make regular

contribution to the approved Retirement Fund

and to the Insurance Company for the disposal

of gratuity, insurance and provident fund

obligations. These benefits are defined

contributions plans and the Bank and the

Subsidiary have limited legal or constructive

obligation only to the extent that they agree to

contribute to the fund and in consequence,

actuarial risk (that benefits will be less than

expected) and investment risk (that the assets

invested by the independent entity will be

insufficient to meet expected benefits) fall on

the employee.

� Gratuity, insured benefits and provident

fund obligation to employees are computed as

per the approved policy of the Bank and the

Subsidiary and are expensed off in the Profit

and Loss Account on accrual basis. Provident

fund obligation is settled every month while

the insured benefits are paid in advance and

are recognized as prepayments and settled on

monthly basis. Gratuity obligation is

determined and settled on the last month of

each financial year (i.e. Mid July). Contribution

to approved retirement fund against the

gratuity obligations (incremental) has been

made since Mid July 2004 annually.

� The gratuity obligation disclosed as

Gratuity Fund in Schedule 7 of the financial

statement is the total gratuity obligation

accrued till Mid July 2003 and payable to the

employees of the Bank who are continuing

their employment as at the balance sheet

date. At the time of retirement (including

resignation) of the employee, the obligation is

settled by paying the amount from this Fund.

The Bank does not bear any further obligation

(either legally or constructively) to pay return

on this fund to the employees.

D. Income

Incomes are increases in economic benefits

during the accounting period in the form of

inflows or enhancements of assets or

decreases of liabilities that result in increases

in than equity, other those relating to

contributions from equity participants.

Income comprises of interest income, fees

and commission, foreign exchange income,

cards income, disposal income etc.

i. Interest Income

� Interest income comprise of interest

earnings on foreign currencies and local

currency loans & advances, investments in

Bonds, Treasury Bills and Placements.

� Interest income on loans and advances

(except staff loan under Integrated Staff Loan

Policy) are recognised on cash basis as

prescribed by NRB Directives, which is not in

accordance with NAS that prescribes

recognition of interest on effective interest

method. The practice followed by the Bank as

per NRB Directives is more conservative and

prudent. Interest income on staff loans is

recognised on accrual basis.

� Interest income on Investments including

earnings from call accounts and fixed deposits

and staff house loan is recognized on effective

interest method. Interest accruals on bonds

and debentures at the time of purchase are

reduced from the cost of acquisition. Discount

or premium on bonds / debentures and

transaction costs are adjusted with the cost of

investment to determine effective interest rate.


123

� Interest income received by the Bank from

the vendors / dealers under subvention

scheme at the beginning of the loan tenure is

initially recognised as liability and

subsequently charged to Profit or Loss

Account (Income Statement) as and when

they are earned.

� All interest earnings (including on foreign

currencies' assets) are accounted in functional

currency.

ii. Fees and Commission Income

� Fees and commission on credit service

(management/ appraisal) including renewals are

recognised as and when credit line is approved

or renewed. All other fees ancillary to credit

services is recognised as and when services are

rendered. The recognition of fees is not in line

with NAS 7, Revenue Recognition, which

prescribes that the fees that are integral part of

the effective interest rate of a financial

instrument by making an adjustment in the

effective interest rate but is in accordance with

NRB Directives which prescribes recognition of

interest on loans and advances on cash basis.

� Prepayment fee levied for pre-mature

settlement of loans and advances are

recognised at the time of credit settlement.

� Commission on guarantee exceeding NRs.

50,000 covering period more than a year is

accounted for on accrual basis over the

period of guarantee. Commission other than

above are recognised immediately after

issuance of guarantee.

� Commissions on LC issuance /

amendment, LC acceptance, draft issuance,

card issuance are recognised at the time of

issuance / amendment /acceptance. Ancillary

communication fees on LCs (issued,

amended, accepted and settlement) are

recognised at the time of their issuance,

amendment, acceptance and settlement.

� Renewal fees and cancellation charges are

recognised as and when services are renewed

or cancelled.

� TC sales, bill purchases, remittance are

recognised at the time of transactions.

� Rental fees for letting safe deposit lockers

are initially recognised when the occupancy

right is granted to the customer and

subsequent renewal fees are recognised

immediately after rental period expires.

� Agency commission on insurance services

which do not require rendition of additional

services in future are recognised on the

effective commencement or renewal dates of

the related policies.

� Commission from bullion operation is

recognised at the time the risks and rewards

attributable to the bullion are transferred to

the buyer.

� Fees for management service rendered to

the Subsidiary are recognised at the end of

every month in line with the contract executed.

� All other commissions are accounted after

rendering the services.

iii. Dividend Income

� Cash dividend on equity shares is

recognised as and when right to receive is

established. Dividend declared from net profit

of pre-acquisition period is recognised as a

recovery of part of cost unless it is difficult to

segregate into pre-acquisition and post-

acquisition dividend. In case there is a

difficulty in segregation, such dividends are

recognised as revenue.

� Cash dividend declared by resident

companies are recorded at net of withholding

tax, while declared by non resident companies

are recorded at gross value. Tax deducted by

non resident companies is recognised as

Advance Tax to the extent adjustable with the

Bank’s corporate tax liability.

� Bonus/Stock dividend declared and whose

right to receive has been established is not

recognised as income. The quantity of shares

received as bonus/stock dividend is disclosed

in Schedule 12(A) of the financial statements.

iv. Foreign Exchange Transactions

� Foreign currency transactions are initially

recognised in functional currency, by applying

to the foreign currency amount, the prevailing

exchange rate between the functional

currency and the foreign currency at the date

of transaction.

� Each foreign currency assets and liabilities

arising from foreign currency transactions and

outstanding at the end of the day are

revaluated by mid exchange rate prevailing at

the end of each day. Mid exchange rate is the

average exchange rate of Non-Cash Ask Rate

and Bid rate.

� Gain or loss realized on trading of foreign

currencies is recognized on daily basis and

accounted as Trading Gain / (Loss). This is

presented under "Trading Gain / (Loss) in

Schedule 22 of the financial statements.

� Gains/losses arising due to fluctuation in

exchange rates of different foreign currencies

at every point of time (including intra-day

fluctuations) is recognized on daily basis and

accounted as Revaluation Gain / (Loss). This

is presented under “Revaluation Gain/(Loss)”

in Schedule 22 of the financial statements.

� Premium/discount on foreign exchange

forward contract is accounted for as trading

gain or loss at the time of transaction and

presented under "Trading Gain / (Loss)" in

Schedule 22 of the financial statements.

� 25% of such revaluation gain is

transferred to Exchange Fluctuation Fund

charging Profit and Loss Appropriation

Account as per NRB Directives.

v. Recovery from Written-Off Loans

� Recovery from written-off loans is

recognised as income when the amount is

actually received from the borrower.

� All transaction costs viz., legal costs,

notice publication expense, negotiation fees

etc. incurred for the recovery of written-off

loans are reduced from the gross recovery

amount and disclosed in Schedule 28 of the


Nabil Bank Limited

124

vi. Gain / (Loss) arising on disposal of assets

� The gain or loss arising from the

derecognition of an item of property, plant

and equipment is included in profit or loss

when the item is derecognised. The gain or

loss is determined as the difference between

the net disposal proceeds, if any, and the

carrying amount of the item.

The carrying amount of an item of property,

plant and equipment is derecognised:

a. on disposal; or

b. when future economic benefits are not

expected from its use or disposal.

� The gain or loss arising on disposal of

Available for Sale Investments is included in

the profit or loss when the investments are

actually sold.

E. Expenses

Expenses are decreases in economic benefits

during the accounting period in the form of

outflows or depletions of assets or

incurrences of liabilities that result in

decreases in equity, other than those relating

to distributions to equity participants.

i. Interest Expense

� Interest expense comprise of interest

expense accrued on foreign currencies and

local currency deposits, bonds and borrowings.

� All interest expenses are accounted in

functional currency on accrual basis.

ii. Employment Benefits

� Employee benefits are all forms of

consideration given by the Bank and the

Subsidiary in exchange for service rendered

by employees.

� This comprises of:

a. short term employee benefits viz., salary

and all allowances, short term compensated

expenses, (annual leave, sick leave etc.), profit

sharing bonuses and perquisites (car facility,

subsidized loans) that is payable within twelve

months after the end of the period;

b. post employment benefits that is payable

after the completion of employment; and

c. termination benefits that is payable as a

result of the Bank's and the Subsidiary's

decision to terminate an employee's

employment before the normal retirement date

or of an employee's decision to accept voluntary

retirement in exchange of those benefits.

� Short term employee benefits are

recognised as an expense when an employee

renders the service or at the time when the

entitlement of compensation increases due to

rendition of service.

� Post employment benefits are recognised

as expense when the entitlement of

compensation accrues as a result of rendition

of service.

iii. Depreciation

� Depreciation is the systematic allocation of

the depreciable amount of an asset over its

useful life.

� Each part of an item of property, plant and

equipment of the Group which is identifiable

separately is depreciated separately. The

depreciation charge for each period is

recognised in profit or loss unless it is

included in the carrying amount of another

asset.

� Depreciation of an asset begins when it is

available for use, i.e. when it is in the

location and condition necessary for it to be

capable of operating in the manner intended

by the management. For simplicity,

depreciation is charged from the next month

it is made available for use. Depreciation of

an asset ceases when it is derecognised at

the time of its disposal.

� Depreciation on following assets is

charged to Profit and Loss Account on

Diminishing Balance method over the

estimated useful life of depreciable assets.

Land is not depreciated.

� Leasehold assets (improvements) are

amortized over the period of lease using

Straight Line Method.

� Cost of software licences and are

amortized over a period of useful life of the

software, estimated as 5 years from the date

of acquisition.

iv. Impairment Provision

� The amount of loss that results due to the

reduction of recoverable amount than the

carrying amount of an asset or as a result of

legal requirement is charged to Profit and Loss

Account as an impairment loss. The

impairment loss is provided for on the credit

portfolios, investments and fixed assets (if any)

at every reporting date.

a. Loan Loss Provision

� Provision for possible losses on loans is

made to cover the risks inherent in the Bank’s

credit portfolio. Provision for possible losses

from loans, advances and bills purchased are

made at the rates ranging from 0.25% (first

slab for insured deprived sector loans) up to

100% (for overdue loans exceeding one year)

according to the classification of such risk

assets as per NRB Directives. Additional

provision in excess of the regulatory

requirement (NRB Unified Directives) can also

be made to ensure comfortable cushion.

b. Provision on Investments

� Impairment on quoted investments is

recognised by assessing the recoverable

amount of an investment from the stock

exchange and the cost of an investment. In

case of investments that are not actively

traded at stock exchange, recoverable amount

is computed on equity basis. Impairment is

determined when the carrying amount exceeds

the recoverable amount.

NATURE OF ASSETS USEFUL DEPRECIATIONLIFE RATE

Furniture 10 years 25%

Equipments 10 years 25%

Vehicles 7 years 20%

Computers 7 years 25%

Building 50 years 5%


125

� In case of unquoted investments,

recoverable amount of an investment is

determined on an equity basis. Impairment

loss is recognised if the recoverable amount

so calculated on an equity basis is less than

the cost of an investment.

c. Impairment on Fixed Assets

� The Bank does not identify smallest group

of fixed assets that generates cash inflows

that are largely independent of the cash

inflows from other assets or group of assets

and hence no impairment loss is provided

unless there is clear evidence that its market

value has been reduced.

� The Bank and the Subsidiary assess, at

each reporting date, whether there is any

indication that an impairment loss recognised

in prior periods for an asset no longer exist or

may have reduced. If any such indication

exists, the Bank and the Subsidiary estimate

the recoverable amount of that asset. The

Bank and the Subsidiary reverse impairment

loss to the extent it has been expensed off in

prior years when the recoverable amount

exceeds the carrying amount.

v. Write Off

� Loan accounts graded ”Bad / Loss” in

compliance with NRB Directives are written

off in the books as per Loan Write off By-Law

of the Bank approved by NRB and in

compliance with Income Tax Act 2002,

without prejudice to the Bank's right to

recovery.

� Impairment provisions held for the loss

accounts are written back immediately after

the loans are written-off.

vi. Income Tax Expense

� Income tax expense comprises of current

and deferred income tax and additional

income tax assessed by the tax auditor and

taxation authorities. Disclosure of additional

income tax in the Profit and Loss Account is

made as required by NRB.

� Current tax liabilities (assets) are the

amounts that are expected to be paid to

(recovered from) the Inland Revenue

Department in respect of income of current

year. The tax rates (and tax laws) used for the

computation are those that are enacted or

substantively enacted by the Balance Sheet

date. Accordingly, provision for current tax

has been made with reference to the profit of

the financial year based on the provisions of

the Income Tax Act 2002 and amendments

thereto.

� Deferred taxes are recognized and

provided for on temporary differences arising

between taxable incomes and accounting

incomes.

� Deferred tax assets and liabilities are

measured at the tax rates that are expected

to apply to the period when the asset is

realised or the liability is settled, based on tax

rates (and tax laws) that have been enacted

or substantively enacted by the balance sheet

date.

� Deferred tax assets are not recognised

unless there is convincing evidence that there

will be sufficient future taxable income

available to realize such assets. Deferred tax

assets & liabilities are netted off and

presented either under ‘Other Assets’ or under

‘Other Liabilities’.

� Deferred Tax Reserve is earmarked to the

extent of outstanding balance of Deferred Tax

Assets as per NRB guidelines.

F. Contingent Liabilities

� The contingent liabilities comprise of:

a. possible obligations that arise from past

events and whose existence will be confirmed

only by the occurrence or non-occurrence of

one or more uncertain future events not

wholly within the control of the Bank; or

b. present obligations that arise from past

events but is not recognised because:

i. it is not probable that an outflow of

resources embodying economic benefits will

be required to settle the obligation; or

ii. the amount of the obligation cannot be

measured with sufficient reliability.

� All letter of credit, bank guarantee and

forward exchange contract liabilities have

been shown in full amount as contingent

liabilities in accordance with the directive

issued by NRB.

� Besides above, all known liabilities

wherever material are provided for, and

liabilities, which are material and whose future

outcome cannot be ascertained with

reasonable certainty, are treated as contingent

and disclosed under contingent liabilities.

G. Events after the Balance Sheet Date

Events after the Balance Sheet Date are those

events, favorable and unfavorable, that occur

between the Balance Sheet date and the date

when the financial statements are authorized

for issue.

� In this regard, all material and important

events that occurred after the balance sheet

date have been considered and appropriate

disclosures are made in Note 16 to the


H. Earnings Per Share

Basic Earnings per Share is calculated for

profit or loss attributable to the Bank's and

the Subsidiary's ordinary equity holders and,

if presented, profit or loss from continuing

operation attributable to those equity holders.

It is calculated by dividing profit or loss

attributable to ordinary equity holders (in the

numerator) by the weighted average number

of ordinary shares outstanding (in the

denominator) during the period.

� The earnings attributable to the ordinary

equity holders comprise of the earnings of the

Bank and the Subsidiary after adjustment of

all expenses including tax expense and

preference dividends, differences arising on

the settlement of preference shares, and

other similar effects of preference shares

classified as equity.

Nabil Bank Limited

126

� Ordinary equity (share) comprises an

equity instrument that is subordinate to all

other classes of equity instruments of the

Bank and the Subsidiary, if any.

� Weighted average number of ordinary

shares outstanding during the period is the

number of ordinary shares outstanding at the

beginning of the period, adjusted by the

number of ordinary shares bought back or

issued during the period multiplied by a time-

weighting factor. The time-weighting factor is

the number of days that the shares are

outstanding as a proportion of the total

number of days in the period.

Diluted Earnings per Share is calculated for

profit or loss attributable to the Bank's and

the Subsidiary's ordinary equity holders and,

if presented, profit or loss from continuing

operation attributable to those equity holders.

It is calculated by dividing profit or loss

attributable to ordinary equity holders (in the

numerator) by the weighted average number

of ordinary shares outstanding (in the

denominator) during the period and is

adjusted for the effects of all dilutive potential

ordinary shares.

� As a result of adjustment for the effects of

dilutive potential ordinary shares:

i. profit or loss attributable to ordinary equity

holders of the Bank and the Subsidiary is

increased by the after-tax amount of

dividends and interest recognised in the

period in respect of the dilutive potential

ordinary shares and is adjusted for any other

changes in income or expense that would

result from the conversion of the dilutive

potential ordinary shares; and

ii. the weighted average number of ordinary

shares outstanding is increased by the

weighted average number of additional

ordinary shares that would have been

outstanding assuming the conversion of all

dilutive potential ordinary shares.

� Dilutive potential ordinary share is a

financial instrument or other contract that

may entitle its holder to ordinary shares. It

comprises of convertible instruments like

convertible preference shares, convertible

debentures, options and warrants and similar

such instruments.

I. Basis of Interest Computation

� Interest expenses on

deposits/borrowings/bonds and interest

income on loans & local currency investments

are computed on the basis of 365 days a

year.

� Interest on foreign currency investments is

computed on the basis of 365 days a year for

GBP and 360 days a year for USD, EUR,

DKK and JPY.

8.2 The Bank and its subsidiary adopt

uniform accounting policies for like

transactions and events in similar

circumstances.


127

Notes to Accounts

Schedule 33

1. EQUITY1.1. Changes in paid-up equity capital

Nepal Rastra Bank (NRB), the licensing and regulatory authority, has prescribed NRs.2 billion as

minimum equity capital requirement for class “A” licensed commercial banks.The Bank’s capital

position at balance sheet date is as follows:

1.2. Proposed changes in paid-up equity capital

The Board of Directors of the Bank, in its meeting dated September 6, 2013, has passed a resolution

recommending for distribution of stock dividend at 25% of paid up equity capital at year ended July

15, 2013. The Bank’s paid up equity capital shall increase by NRs.609,210 thousands upon

approval from the upcoming shareholder’s Annual General Meeting.

1.3. Chronology of stock issuance

Since incorporation, the Bank has increased its paid up equity capital to NRs.3,046,052 thousands

from initial level of NRs.28,182 thousands.

NRs. 000

PARTICULARS REGULATORY MINIMUM NABIL BANK

Paid Up Capital 1,600,000 3,046,052

Reserves eligible for Tier - I Capital Fund 400,000 3,372,697

Total Equity Capital 2,000,000 6,418,749

PARTICULARS EQUITY ENHANCEMENT DURINGENHANCEMENT FINANCIAL YEAR

Initial issuance (469,707 @ NRs.60 per share) 28,182 1984 - 85

Additional issuance (3,820 @ NRs.60 per share) 229 1985 - 86

Additional issuance (180 @ NRs.60 per share) 11 1986 - 87

Additional issuance (23,333 @ NRs.60 per share) 1,400 1987 - 88

Additional issuance (2,960 @ NRs.60 per share) 177 1988 - 89

Final Call (500,000 @ NRs. 40 per share)* 20,000 1991 - 92

Issuance of 30% Bonus Shares 15,426 1992 - 93










Capital Issued and Paid up at balance sheet date 2,436,842

*NRs.40 per share was capitalized from retained earnings to make paid up value NRs.100.

NRs. 000

Nabil Bank Limited

128

1.4. General Reserve

The bank’s reserve position is presented hereunder:

PARTICULARS AMOUNT AMOUNT

Opening balance 2,176,500

Minimum regulatory requirement @ 20% of net profit 443,752

Actual amount transferred to General Reserve 444,000 444,000

Closing balance 2,620,500

1.5. Contingent Reserve

The Bank has appropriated NRs.1,000 thousands in contingent

reserve out of current year’s net profit.

In the current year the bank paid NRs.400 thousands to an employee as reimbursement of medical

expenses incurred for his heart surgery performed in India. This amount has been transferred from

contingent reserve to retained earnings and recognized as medical expense presented in Schedule 23

of the financial statements.

NRs. 000

PARTICULARS AMOUNT

Opening balance 13,274

Add: Appropriation from current year's Profit 1,000

Less: Transferred to Retained Earnings on account of Hospitalization expense reimbursement to staff (400)

Closing balance 13,874

1.6. Deferred Tax Reserve

Deferred tax reserve has increased due to creation of additional deferred tax assets during the current year.

NRs. 000

PARTICULARS TEMPORARY DIFFERENCE AMOUNT


Capital nature expense charged in Profit & Loss Account 614 184

Deferred tax assets on other temporary differences 6,050 1,815


NRs. 000


129

* These investments are exempted from IAR requirement per provisions in

NRB Directives 4/069 and 8/069.

The bank has maintained IAR equivalent to 100% of its equity investment in subsidiary company in

compliance to clause 3 of NRB Directive 8/069. The bank has also deducted such investment while

calculating Tier – I Capital per the same clause.

1.8. Exchange Fluctuation Fund

Licensed institutions are required to appropriate 25% of net revaluation income to exchange

fluctuation fund each year. This is a requirement under section 45 of the Banks and Financial

Institutions Act 2006 and applies to revaluation gain on foreign currency position except the Indian

currency. The bank is in compliance to this requirement and the calculation of such appropriation is

presented hereunder:

NRs. 000

PARTICULARS AMOUNT AMOUNT


Minimum regulatory requirement @ 25%

of revaluation gain presented in Schedule 22 23,923

Actual amount transferred to Exchange Fluctuation Fund 24,000 24,000


1.7. Investment Adjustment Reserve (IAR)

The bank has maintained adequate IAR as required in NRB directives 04/069 and 08/069. Detail

calculation of IAR requirement under different categories of investment is presented hereunder:

NRs. 000

PARTICULARS NET INVESTMENTS RESERVE REQUIREMENT MOVEMENT IN RESERVE


Shares of local licensed institutions 122,581 24,081 9,834

- Listed securities @ 2% 47,735 955 29

- Not listed securities @ 100% 22,071 22,071 8,750

- Not listed securities @ 2% 52,775 1,056 1,056

Shares of local organized institutions 82,936 78,000 -

- Not listed securities (Subsidiary) @ 100% 78,000 78,000 -

- Exempted securities * 4,936 - -

Other Investments 107,041 4,141 2,357

- Listed securities (Nabil Balance Fund I) @ 2% 105,000 2,100 2,075

- Not listed securities (SWIFT shares) @ 100% 2,041 2,041 282

Closing balance 312,558 106,222 106,222

Nabil Bank Limited

130

2. PROPOSED DIVIDEND2.1. Nabil Bank

For the year ended on July 15, 2013, the Board of Directors of the Bank have recommended for

distribution of dividend NRs.65 per share (65%) that consists of a cash dividend of NRs.40 per share

(40%) and a stock dividend of NRs.25 per share (25%). This will be decided at the forthcoming

Annual General Meeting of the Bank. Total cash dividend proposed for the year will amount to

NRs.974,737 thousands.

Proposed cash dividend has been appropriated from the profit and disclosed separately on the face of

balance sheet per provisions in NRB Directive 4/069.

2.2. Subsidiary (Nabil Invest)

Until endorsement of Bank's financial statement, the Board of Directors of Nabil Invest is yet to

endorse its financial statements. The company's total distributable reserve as of balance sheet date is

NRs. 23,643 thousands an increase by NRs.21,167 thousands from last year's figure.

2.3. No interim dividends were paid during the year by the Bank or Subsidiary. Withholding tax will be

deducted at source at 5% at the time of dividend payment.

3. CAPITAL REDEMPTION RESERVEPer provisions in clause 5 of NRB directive 16/069 licensed institutions are required to maintain a

capital redemption reserve in respect of debenture liability. Regulator has approved debenture issuance

of the bank vide their letter bearing reference number Bai.Bi.Ni.Bi./Bi.R 2/Nabil Bank/9/064/65 dated

09th May 2008 (27.01.2065 B.S.). As per the approval terms the bank is required to transfer 20%

of the face value of debenture to capital redemption reserve each year, starting from the 6th year of

debenture issuance. As such the bank is required to create debenture redemption reserve starting from

financial year 2013/14.

4. ASSETS4.1. Balance with Nepal Rastra Bank (NRB)

Reconciliation of NRB Balance (Ledger and Statement Balance)

PARTICULARS LEDGER STATEMENT

Unreconciled balance as on 15.07.2013 4,789,295 3,972,779

We Debit (960,500)

They Debit (288)

We Credit 77,187

They Credit 67,085

Reconciled balance as on 15.07.2013 3,972,779 3,972,779

NRs. 000


131

NRs. 000

AGE LEDGER DEBIT STATEMENT DEBIT LEDGER CREDIT STATEMENT CREDIT

< 1 month 960,500 288 67,836 19,018

> 1 month < 3 months - - 5,522 972

> 3 month < 6 months - - 769 47,000

> 6 month < 12 months - - 1,382 96

> 12 month < 24 months - - 168 -

> 24 months - - 1,510 -

Total 960,500 288 77,187 67,085

Ageing details of pending items is presented as under:

NRs. 000


4.2. Balance with domestic Banks and Financial Institutions

Reconciliation of domestic BFIs balance (Ledger and Statement Balance)

NRs. 000


Unreconciled balance as on 15.07.2013 57,747 68,625

We Debit (1,394)

They Debit (121)

We Credit 7,267

They Credit 5,126

Reconciled balance as on 15.07.2013 68,625 68,625


< 1 month 1,394 121 5,730 5,123

> 1 month < 3 months - - 4 3

> 3 month < 6 months - - 1533 -

> 6 month < 12 months - - - -

> 12 month < 24 months - - - -

> 24 months - - - -

Total 1,394 121 7,267 5,126

Nabil Bank Limited

132

4.3. Balance with foreign Banks and Financial Institutions

Reconciliation of foreign BFIs balance (Ledger and Statement Balance)

NRs. 000



Unreconciled balance as on 15.07.2013 (104,686) 1,687,369

We Debit (427,542)

They Debit (18,412)

We Credit 1,854,013

They Credit 383,997

Reconciled balance as on 15.07.2013 1,687,369 1,687,369


< 1 month 427,542 13,721 1,853,612 342,139

> 1 month < 3 months - 24 186 35,379

> 3 month < 6 months - 4,667 5 3,465

> 6 month < 12 months - - 46 2,838

> 12 month < 24 months - - 101 -

> 24 months - - 63 176

Total 427,542 18,412 1,854,013 383,997

4.4. Inter-Branch ReconciliationThere are no un-reconciled entries/balances in case of inter-branch transactions as on balance sheet date.

4.5. Loans and AdvancesThe Bank's year-on-year gross loans and advances rose by 11% to reach NRs.47,645,530 thousands.Business Loans that comprise of term loans, overdraft, trust receipt and other working capital loansoccupy 66% of total lending portfolio. Similarly, about 25% of the portfolio is occupied by consumer retailloans and credit card loans while 9% of total exposure is occupied by real estate loans.

During the current year major volume growth was achieved under business loans reporting 12%increment. Real estate lending saw a decline of 5%.

NRB Directives 03/069 has defined real estate loans as residential real estate loans in excess of NRs.10million; business complex and residential apartment construction loans; income generating commercialcomplex loans; and other real estate loans for land purchasing and plotting.

NRs. 000

TYPE OF LOAN AND ADVANCES CURRENT YEAR PREVIOUS YEAR CHANGES VOLUME %

1. Real Estate Loan 4,435,751 4,671,457 (235,706) (5.0)

a. Residential Real Estate Loan

(except Home Loan up to NRs.10 million) 554,870 353,620 201,250 56.9

b. Business Complex & Residential Apartment Construction Loan 820,231 786,269 33,962 4.3

c. Income generating Commercial Complex Loan 614,565 610,300 4,265 0.7

d. Other Real Estate Loan

(Including Land purchase & Plotting) 2,446,085 2,921,268 (475,183) (16.3)

2. Personal Home Loan up to NRs.10 Million 3,270,349 2,446,109 824,240 33.7

3. Margin Type Loan - - 0.0

4. Term Loan 6,948,455 5,832,773 1,115,682 19.1

5. Overdraft / TR Loan / Working Capital Loan 24,555,456 22,402,265 2,153,191 9.6

6. Others 8,435,519 7,515,164 920,355 12.2

Total 47,645,530 42,867,768 4,777,762 11.1


133

NRB Directives 03/069 has set a maximum ceiling of lending to total real estate sector at 25% of gross loans andadvances. Within this total ceiling there is a separate ceiling for lending to other real estate loans for land purchasingand plotting at 10% of gross loans and advances. As at balance sheet date, bank has mere 9% exposure under thishead. The Bank stands in compliance to this requirement.

4.6. Investments4.6.1. Held for TradingThe Bank does not hold investments that are primarily intended for trading purpose as of balance sheet date.

4.6.2. Held to Maturity InvestmentsOverall held to maturity investments of current financial year have increased by 15.6% over the previous financial year.The HTM investment listed on the exchange market is presented net of impairment provision on the balance sheet date.

NRs. 000

TYPE OF INVESTMENTS AT COST IMPAIR-MENT CURRENT YEAR PREVIOUS YEAR CHANGE (%)

1. Nepal Government Treasury Bills * 4,603,924 - 4,603,924 4,494,594 2.4

- 91 days 998,042 - 998,042 1,996,147

- 182 days 595,442 - 595,442 198,428

- 251 days - - - 348,428

- 362 days 998,286 - 998,286 -

- 363 days 395,980 - 395,980 -

- 364 days 1,616,173 - 1,616,173 1,951,591

2. Nepal Government Other Securities 3,310,079 - 3,310,079 3,505,383 (5.6)

3. Foreign Bonds (denominated in US $) 239,654 11,773 227,881 196,245 16.1

4. Placement in local and foreign banks 7,877,602 - 7,877,602 5,659,108 39.2

Total 16,031,258 11,773 16,019,485 13,855,330 15.6

The Accrued Interest Receivable on treasury bills amounting to NRs.21,099 thousand on the balance sheet

date has been capitalised in the value of treasury bills, being amortisation of discount.

The increment reflected on Foreign Bonds (denominated in US $) in comparison to last year was due to

appreciation of US Dollar vis-à-vis NRs. No other foreign bonds were further acquired or disposed during the

current financial year.

4.6.3. Available for Sale Investments

The Bank's Available for Sale investments comprised of all investments other than held to maturity

investments and held for trading investments.

NRs. 000

TYPE OF INVESTMENTS AT COST IMPAIRMENT NET MARKET

INVESTMENT VALUE

1. Listed Securities 154,309 1,574 152,735 586,198

- Equity in local licensed BFIs 49,309 1,574 47,735 304,949

- Mutual Fund units 105,000 - 105,000 105,000

- Equity in foreign entities - - - 176,249

2. Not listed Securities 162,767 2,945 159,823 -

- Equity in local licensed BFIs 65,791 2,945 62,846 -

- Equity in local BFIs under licensing process 12,000 - 12,000 -

- Equity in other local institutions 4,936 - 4,936 -

- Equity in SWIFT 2,041 - 2,041 -

- Equity in subsidiary company 78,000 - 78,000 -

Total 317,076 4,518 312,558 586,198

Nabil Bank Limited

134

4.6.3.1. Equity investments in local licensed BFIs

These comprise of equity investments in promoter shares of

licensed rural development banks and micro financial

institutions. These investments are also intended for compliance

of mandatory requirements of deprived sector lending as

prescribed by the regulator. These investments are recognized at

cost considering inactive trading for bulk promoter's shares and

unavailability of market prices for such shares.

The market price in Stock Exchange generally represents closing

trading price of ordinary shares issued to public equity holders.

Promoter shares are often traded at lower price compared to

ordinary shares. Moreover, bulk promoter shares are seldom

traded due to trading restrictions imposed by the regulators. The

number of institutional investors required to ensure active trading

of these shares is also limited. Due to these reasons, quoted

market price cannot be used to estimate their fair value.

The Bank, with due compliance to the regulatory provisions, has

appropriated fund from retained earnings to investment

adjustment reserve for these investments. In addition, these

investments are also tested for impairment on equity basis and

any impairment loss is recognized in the Profit and Loss account

as described in Principal Accounting Policies under “Provision on

Investment”.

4.6.3.2. Investment in Mutual Fund Unit

The Bank has obtained license from Security Exchange Board of

Nepal (SEBON) on 01st February 2012 to sponsor Mutual Fund

schemes. During the current year the bank sponsored a Mutual

Fund Scheme under name “Nabil Balanced Fund – I”. The Bank

has subscribed to 10,500,000 units @ Rs.10 per Unit. The

Bank has invested in this fund to comply with the regulatory

provision that requires 15% seed capital injection by the Fund

Manager or the Fund Sponsor. The Bank’s investment constitutes

14% of the fund size. Remaining 1% has been subscribed by

the Fund Manager. The last traded price at Nepal Stock

Exchange was NRs.10.06 per unit.

As at balance sheet date the Net Assets Value of Nabil Balanced

Fund – I is NRs.10.22 per unit.

4.6.3.3. Equity investments in foreign entities

The Bank holds different classes of common stocks in

MasterCard International and VISA Inc.

MasterCard International on conversion into a private stock

corporation allocated its franchisee class B common stock to its

members in recognition of their membership interest. The bank

presently holds 1,114 units of Class B Common Stock having a

par value of USD 0.0001 each. Holders of Class B common

stock are entitled to receive equal amount of dividend declared

for Class A stock and confer equity rights but not the voting

rights in MasterCard Incorporated.

The shares of Class B common stock may be traded privately

among the eligible members of MasterCard International

Incorporated (subsidiary of MasterCard Incorporated) while Class

A common stock is traded in New York Stock Exchange. As on

15th July 2013, the adjusted closing price (for stock splits and

dividends) of Class A common stock was USD 595.87 per

share. The fair value of the Bank's holding of 1,114 units of

common stock is around NRs.63,692 thousands (USD

663,799 @ NRs.95.95 per USD).

Similarly, the Bank currently holds 6,166 units of Class C

Common Stock of VISA Inc. having a par value of USD 0.0001

each allocated after its conversion to VISA Inc. This class of

stock is eligible for public sale since 7th February, 2011 and

trades at same price as Class A or Class B shares. At 15th July

2013, the Class A common stock were priced at USD 190.25

per share and the fair value of the Bank's holding on that date is

NRs.112,557 thousands (USD 1,173,082 @ NRs.95.95 per

USD).

4.6.3.4. Equity investments in BFIs under licensing process

These comprise of equity investments in promoter shares of

micro financial institutions which are under approval process for

obtaining license from the regulator. Investment is these entities

are intended towards meeting the regulatory minimum deprived

sector lending requirement.

4.6.3.5. Equity investments in Subsidiary

As of balance sheet date, the Bank has invested NRs.78,000

thousand in its subsidiary holding an effective equity interest of

74.29%.

4.6.3.6. Equity investments in other local institutions

These comprise equity investments made in local companies

complementary to the banking industry. The Bank holds

promoter group equity shares in KarjaSuchana Kendra Limited,

National Banking Training Institute and Nepal Clearing House

Ltd.


135

4.6.3.7. Equity investments in SWIFT

The Bank holds eight unit shares in SWIFT (Society for

Worldwide Interbank Financial Telecommunication) having

nominal value of EUR 125 per share. These shares are

denominated in EUR. These shares are conferred to the Bank in

respect of its membership interest in SWIFT network. These

shares are entitled to voting rights at the annual General

Meeting of SWIFT shareholders.

SWIFT shares are not listed at any stock exchange and do not

confer any dividend payments. Based on net assets valuation

the transfer value of one SWIFT share has been fixed at EUR

3,300 at the June 2011 General Meeting of SWIFT

shareholders. There has been no revision in transfer value since

then.

These shares are recognized at cost being the actual transfer

value paid while subscribing to the shares awarded to the Bank.

4.7. Fixed Assets

4.7.1. Capital Work in Progress (WIP)

Carrying amount of capital work-in-progress building include

costs incurred for construction of the bank’s own building for

Birgunj Branch. As of balance sheet date the entire civil

structure work has been completed and 90% of interior work

has also been completed. Accordingly, proportionate project

work valuations have been recognized as capital work in

progress.

4.7.2. Leasehold Assets

Summary of movement in leasehold assets of the Bank and

Group is presented hereunder:

Nabil Bank Limited

136

NRs. 000

PARTICULARS NABIL BANK SUBSIDIARY CO. GROUP

At Cost 77,144 2,625 79,769

- opening balance 90,009 2,458 92,467

- additions this year 5,976 167 6,143

- deductions this year (18,841) - (18,841)

Amortization 37,942 1,327 39,269

- opening balance 40,304 808 41,112

- additions this year 16,297 519 16,816

- deductions this year (18,659) - (18,659)

Net closing balance 39,202 1,298 40,500

4.8. Other Assets

4.8.1. Stock of Stationery

As at balance sheet date, the Bank’s closing stock of stationery is valued at NRs.7,554 thousands.

Out of this stationery worth NRs.2,996 thousands are held at branches and those worth NRs.4,558

is held at central store. No material items that are disposable at the balance sheet date were held in

possession.

4.8.2. Income receivable on Investments

Income receivable on investments comprised of interest accrued on placements and bonds. Interest

accrued on treasury bills, being amortisation of discount, has been capitalised in the bid value of bills.

NRs. 000

PARTICULARS LOCAL CURRENCY FOREIGN CURRENCY TOTAL

- Interest accrued on placements - 92,566 92,566

- Interest accrued on bonds 29,985 3,258 33,243

Total 29,985 95,824 125,809

4.8.3. Accrued Interest Receivables (AIR) on loans

This comprise of interest on loans, advances and bills accrued but not yet due at balance sheet date

as well as those that stand overdue but not realized in cash. As at balance sheet date the interest

accrued but not yet due totaled NRs.80,361 thousands and overdue interest totaled NRs.301,935

thousands.

Per regulatory provisions interest suspense has been recognized equivalent to the entire AIR which is

not realised in cash. This is presented in Schedule 16 of the Financial Statements.

4.8.4. Sundry Debtors

Sundry debtors comprise of accounts receivables and deposits at Large Tax Payer's Office. Deposit at

LTPO is made in line with the requirement of Income Tax Act which stipulates for deposition of 1/3 of

disputed tax before contesting at the IRD for Director General's review against the assessment order.

The deposit reported under this head pertains to assessment of income years 2006-07 and 2007-08.

This tax deposit is not clubbed with advance tax in order to make appropriate presentation of the

bank's net corporate tax liabilities.


137

NRs. 000

PARTICULARS CURRENT YEAR PREVIOUS YEAR

Account Receivables 885,086 363,129

- Nepal Rastra Bank 6,918 1,307

- Customers * 119,169 346,633

- Employees ** 15,527 15,159

- Others 743,472 30

Deposit at Large Tax Payers Office 4,074 277

Total 889,160 363,406

* Provision on Accounts Receivable Customers amounting NRs.638 thousands has been set off with receivables from customers.** Similarly, Provision on Accounts Receivable Employees amounting NRs.506 thousands has been set off with receivables from employees above.

4.8.5. Staff loans and advances

Staff loan are extended in line with the integrated staff loan policy of the bank. Eligibility criteria for

availing staff loans are directly linked to the period of service under permanent payroll of the Bank.

Loans extended to staffs have increased during the year as more staffs became eligible and actually

availed such facilities. The loans outstanding as at the balance sheet date were as under:

NRs. 000


Auto Loan 32,579 25,020

Personal Loan 168,784 148,325

Housing Loan 673,977 640,251

Total 875,340 813,596

4.8.6. Prepayments

Following is the details of prepayments outstanding as on balance sheet date.

NRs. 000


Prepaid items

- Rent 7,526 7,614

- Insurance 13,154 10,905

- Maintenance 5,626 6,290

- Communication 3,500 4,373

- Others 2,711 2,458

Total 32,517 31,640

Nabil Bank Limited

138

4.8.7. Others

Items presented under this head are security deposits for availing

public utility services and interest receivable on staff loans.

Interest receivable on Staff Housing Loan are realised out of proceeds from Endowment Life Policy.

Before disbursement of individual home loan to employees, an endowment life policy is purchased by

the Bank for insured sum equivalent to the principal loan amount. The insured policy is purchased for

a period earlier of 20 years or remaining service period of the employee till retirement. The employees

pay insurance premium in respect of policy on monthly basis. Upon maturity of the endowment policy,

the proceeds / bonus are applied towards settlement of interest and principal loan amount in a single

installment. Any surpluses or shortfalls are on account of concerned employees.

NRs. 000


AIR on Staff Housing Loan 173,755 136,657

Advance deposits for utilities 1,477 1,592

Total 175,232 138,249

4.9. Bullion

As at balance sheet date, the Bank has held 309 Kilograms of gold in its possession.

The fair market value of the gold as on that date is NRs.1,223,510 thousands.

As detailed in Schedule 32 on “Significant Accounting Policies”, the Bank acts as an agent of the

consignor and hence does not recognise bullion stock in its books as an inventory.

5. LIABILITIES5.1. Debentures and Bonds

The Bank allotted Nabil Bank Bond 2075 (2018 A.D.) of total face value NRs.300,000 thousands in

July/August 2008 A.D., redeemable in July / August 2018 A.D. The Bond is listed in Nepal Stock

Exchange (NEPSE) with symbol NABILB2075.

5.2. Deposits

5.2.1.During the current financial year, the Bank has been able to increase overall deposits by 15.6%

or NRs.8,586,113 thousands. Movement in different deposit segments is presented hereunder:

Kilograms

PARTICULARS GOLD SILVER

Opening balance 160 -

add : consignments received during the year 3,750 48,500

less : sold to local commercial banks (3,224) (22,500)

less : sold to local non bank parties (377) (26,000)

Closing balance 309 -

Value in USD

- Gold USD 1,290.00 per Ounce 12,751,534

- Silver USD ……… per Ounce -

Value in NRs.000 (@ NRs.95.95 per USD) 1,223,510 -


139

NRs. 000

PARTICULARS CURRENT YEAR PREVIOUS YEAR CHANGES %

VOLUME

Interest Free Deposits 8,451,849 7,417,377 1,034,472 13.9

- local currency 6,462,890 5,963,884 499,006 8.4

- foreign currency 1,988,958 1,453,493 535,465 36.8

Interest Bearing Deposits 55,157,960 47,606,318 7,551,642 15.9

- local currency 47,814,777 41,599,887 6,214,890 14.9

- foreign currency 7,343,182 6,006,431 1,336,751 22.3

Total 63,609,808 55,023,695 8,586,113 15.6

5.2.2. Deposit Insurance

The bank has insured savings and fixed deposits of all natural person account holders for balance up

to NRs.200 thousands threshold amount. For this the Bank has entered into an agreement with the

insurer, Deposit and Credit Guarantee Corporation on 13th December 2011. As of balance sheet date,

the total insured deposit portfolio is NRs.7,926,497 thousands and total number of insured deposit

account holders is 215,633.

5.3. Bills Payable

Bills payable comprise of manager's cheques, demand drafts, traveller's cheques issued by the Bank

and bills (cheques) realised on behalf of customers from Nostro banks but not yet credited in

customers' accounts. Cheques (drafts) of nostro banks issued by the bank are credited in the

respective nostro accounts instead of bills payable.

NRs. 000


Local currency bills 315,681 70,813

- demand draft 10,580 41,431

- bill of exchange 44 27

- manager's cheque 305,058 29,355

- travellers' cheque - -

Foreign currency bills 213,917 108,329

- demand draft - -

- bill of exchange 195,176 91,971

- manager's cheque 5,372 4,771

- travellers' cheque 13,369 11,587

Net closing balance 529,598 179,142

Nabil Bank Limited

140

5.4. Other Liabilities

5.4.1. Gratuity Fund

The Bank has a separate Gratuity Fund in respect of gratuity obligation that accrued till Mid July

2003. As per Income Tax Rules, 2003, this portion of retirement benefit is tax free for employees.

This obligation is settled when staffs retire or resign from the services of the Bank. During the current

financial year the Bank settled gratuity obligation NRs.2,133 thousands from this fund.

Gratuity obligations that have accrued after Mid July 2003 have been settled

in the same year they arose.

5.4.2. Employees Welfare / Leave Fund

Calculation for current year’s incremental obligation under leave liability in respect of accrued

employees leave is presented hereunder:

NRs. 000

PARTICULARS CURRENT YEAR


- settled in respect of retired employees (310)

- settled in respect of resigned employees (1,823)


NRs. 000

PARTICULARS AVERAGE LAST WEIGHTED TOTAL LEAVEDRAWN MONTHLY AVERAGE LEAVE OBLIGATION

SALARY ACCRUED (MONTHS)

As at 15-Jul-2012 37,813 1,716 64,893

As at 15-Jul-2013 44,830 1,821 81,653

Incremental leave obligation in current year 7,017 105 16,760

Incremental impact of:

- salary raise (on leave balance at 15-Jul-2012) 7,017 12,043

- increased leave period ( @ salary level at 15-Jul-2013) 105 4,718

Incremental leave obligation in current year 16,760


141

Employees leave obligation increased as a result of increase in total number of weighted average leave

accrued (in months). Employees start earning leave accrual days as they spend first few years in

service. Afterwards, accrual days start to reach ceiling, if not utilized, and the pace of leave

accumulation subside. Increase in total number of weighted average leave is due to the same reason.

Salary of permanent employees at all corporate levels were raised in the current year leading to raise

in average salary.

5.4.3. Staff Bonus

In line with provision of Bonus Act 1974, employee bonus is provided as under:

NRs. 000

APARTICULARS CURRENT YEAR PREVIOUS YEAR

Net profit before bonus and taxes as per CY's PL 3,485,695 2,651,139

Adjustments:

- Error rectification on Premium Amortisation of NRB Dev. Bonds 6,884

- Error restated on Previous Year's Profit (6,884)

Adjusted Net profit before bonus and taxes of CY for bonus calculation 3,478,811

Net profit before bonus and taxes reported in PY's PL 2,658,024

Provision for staff bonus @ 10% of net profit before tax (316,256) (241,639)

5.4.4. Unearned income

As of balance sheet date, the Bank's total outstanding on unearned income stood NRs.93,836

thousands, detail of which is presented hereunder:

NRs. 000


- on letter of credit - 40,369

- on bank guarantee 90,144 109,805

- on forward forex deals 520 -

- on loan extended under subvention schemens 3,172 4,903

Total 93,836 155,077

Nabil Bank Limited

142

5.4.6. Dividend Payable

The Bank's dividend payable at balance sheet date stands NRs.41,098 thousands,

details of which is presented hereunder:

In consonance of Directive 16 of NRB Unified Directives and Section 82(3) Bank and Financial

Institutions Act 2006 the Bank has published a general notice to equity holders on 1st August 2012

calling them to collect unclaimed dividends.

5.4.7. Others

Detail of items presented as “S.No.13 Others” in Schedule 7 is presented hereunder:

NRs. 000


Accrued expense payable 5,632 3,744

Unearned income on Loans 3,172 45,272

Total 8,805 49,015

NRs. 000


Dividend relating to profit of Financial Year (FY)

1989 - 1990 to 1999 - 2000 2,399

2000 - 2001 to 2004 - 2005 5,074

2005 - 2006 to 2010 - 11 20,900

2011 - 2012 12,725

Total 41,098

Unearned income on guarantee and forward deals is presented under “Unearned Discount and

Commission” in Schedule 7 and unearned income on loans are presented under “Others” in the same

schedule of the Financial Statements.

5.4.5. Sundry creditors

NRs. 000


- TDS payable 106,445 97,846

- VAT payable 497 678

- Stale instruments 4,073 5,364

- Payable to Customers 335,115 369,160

- Payable to Employees 1,419 826

- Other Payables 3,268 14,720

Total 450,816 488,594


143

5.5. Staff Housing Fund

The Bank has been extending housing loans to its employees

and therefore provision for staff housing fund as required by the

Labour Act 1992 has not been made. The Bank has recognized

interest income on staff housing loan on accrual basis in line

with NRB’s approval.

6. CONTINGENT LIABILITIES (OFF BALANCESHEET ITEMS)Bank's outstanding claim at the beginning of current financial

year from the beneficiaries of expired bank guarantees stood at

NRs.16,387 thousand. These claims were not honoured during

the current financial year and were continued to report under

"Claims on Institution but not accepted by the Institution".

In addition, claims from two beneficiaries of unexpired

guarantees received during the current year and remained

pending as of reporting date has been disclosed under this head.

Of these claims, the concerned applicant paid NRs.29,130

thousand directly to the beneficiary for full settlement of

NRs.32,400 thousand and sought for release of guarantee. Until

the reporting date, as no release was obtained from the

beneficiary, the Bank recognized the difference of NRs.3,470

thousand as its contingent liability. In respect of another claim,

the applicant received a stay order from the Patan Appellate

Court. Until reporting date, the case is pending and accordingly

the Bank has recognized NRs.3,060 thousand as its contingent

liability.

Together with opening claims and aforementioned 2 claims,

Bank's closing contingent liability under "Claims on Institution

but not accepted by the Institution" is NRs. 22,916 thousand.

7. INCOME7.1. Interest Income on loans and advances

In addition to regulatory provision of recognising interest income

from loans and advances on cash basis, NRB directive 04/069

proviso to Section 5(1) has allowed BFIs to recognise such

interest income, that accrued till year end but was recovered in

cash within 15 days after year-end, in the income of current

year. The Bank did not chose to exercise this option and

recognized only those interest accrued and recovered in cash

within 15th July 2013 as interest income for current year.

7.2. Dividend income

The Bank has recognized NRs.20,588 thousands as dividend

income during the current financial year. This includes dividend

earned from domestic entities NRs.26,098 thousands

(accounted net of tax deduction at source @ 5%), NRs.6,263

thousands refunded to RMDC vide instruction of CIAA and

dividend earned from foreign entities NRs.754 thousand

(NRs.664 thousand from Visa Inc. and NRs.90 thousand from

MasterCard Inc. accounted on gross basis).

Tax deducted by foreign entities is claimed at the time of filing

income tax returns to the maximum extent available as per

Income Tax Act of Nepal.

7.3. Income from Non Deliverable Forward (NDF)

The Bank has recognized premium on Non Deliverable Forward

transactions as Foreign Exchange Income. During the current

financial year, Bank's net earnings against Non Deliverable

Forwards as proprietary income is NRs.110,075 thousands and

same from customer (on behalf of other banks) is Rs.56,935

thousands. As of 15th July 2013, Bank's NDF exposure was

USD16 million equivalent to NPR.1,535,200 thousands (at

NRs.95.95 per USD).

8. EXPENSES8.1. Staff Expense

8.1.1. Gratuity expense

The Bank, during the current financial year, settled Rs.103,919

thousands in respect of gratuity obligation accrued till the

balance sheet date by contributing in the approved retirement

fund. The Bank does not have any incremental gratuity

obligation as of balance sheet date. The gratuity expense is

presented under "Pension and Gratuity Contribution" in Schedule

23 of the Financial Statements.

Current year’s gratuity expense is NRs.55,349 thousands or

114% higher than that of previous year. The main reason is due

to increment in employees’ salary. Cumulative impact of salary

revision on gratuity expense falls only in the year of the

increment. Hence the expense figure is high for current year.

8.1.2. Uniform

The bank expensed NRs.14,562 thousands as uniform expense

in the current year. As per Employee By-laws, office uniform is

provided to employees up to certain corporate level once in

every two years. Such expense is recognized as operating

expense in the same year. This expense is also recognized as a

component of taxable income while calculating employees'

individual tax liability.

8.1.3. Others

Nabil Bank Limited

144

During the current financial year, the Bank accounted leave expense of NRs.48,409 thousands in

total. Of total, NRs.16,760 thousands was to provided for incremental leave obligation (presented in

Schedule 7) while NRs.31,648 thousands was paid in cash. Per Employee By-laws, accrued leave in

excess of ceiling for accumulation are settled on every Mid April through cash.

8.2. Impairment Loss

Impairment loss on investments was recognized respectively for foreign bonds and equity investments.

Impairment loss on foreign bond was recognized as per international market price prevalent on 15th

July 2013. Impairment on equity investments was recognized on equity basis for three micro-financial

institutions based on provisional financial statement received from these institutions.

NRs. 000


- funeral grant 270 135

- cash incentive 132 285

- overtime expense 896 798

- dashain allowance 25,337 25,455

- leave encashment and provisions 48,409 31,212

Net closing balance 75,044 57,885

NRs. 000


Impairment loss (net of write back) :

- on loans and advances (net of write back) 13,610 356,536

- on investments (11,525) 23,254

- on FCY bonds (12,262) 21,998

- on FCY derivative instruments - (214)

- on LCY equity instruments 737 1,470

- on account receivable from customers 639 0

Total 2,723 379,790

Employees expense Others NRs.75,044 thousand presented under Others in Schedule 23 comprise of

overtime expenses, dashain expense (festival allowance), funeral grant, leave encashment, vehicle

maintenance expenses and cash incentives.


145

8.3. Income and Deferred Tax

8.3.1.The corporate tax liabilities of Group are computed and assessed individually. As per Income Tax

Act 2002, the tax rates enacted and substantively enacted at the balance sheet date are 30% and

25% respectively for the Bank and Nabil Invest.

8.3.2.After adjusting for disallowable and tax free items the Bank and Nabil Invest have computed

corporate tax liability of NRs.946,885 thousands and NRs.7,258 thousands respectively.

NRs. 000

Note: figures stated in parenthesis are deductible balance.

PARTICULARS NABIL BANK SUBSIDIARY CO.

Profit from all activities 3,485,695 31,046

- provision for staff bonus (316,256) (2,822)

Profit before tax and tax related adjustments 3,169,439 28,223

Add back disallowable expenses 20,697 807

- donation 15 -

- employees' leave provision 16,760 182

- capital nature expense charged to revenue 614 -

- excess repair expense - 275

- excess depreciation expense 3,308 351

Deduct allowable expenses and inadmissible income (33,852) -

- gain on sale of fixed assets (983) -

- gratuity expense paid to employees (1,510) -

- write back of provision on investment (11,525) -

- dividend income from domestic companies (net) (19,835) -

- excess depreciation charged for tax computation -

Taxable Income 3,156,284 29,031

Corporate Tax Liability @ 30% and @ 25% respectively 946,885 7,258

Nabil Bank Limited

146

8.3.3.Accounting tax is computed on accounting profit which is profit before tax (before adjustments

of temporary difference) less any permanent differences. Permanent difference in the case of Group

arose on donation (not paid to tax exempt entity) and dividend received from domestic companies (the

tax of which is final withholding tax).

NRs. 000

PARTICULARS NABIL BANK SUBSIDIARY CO. INTER-CO. GROUP TOTAL

ADJUSTMENTS

Profit from all activities 3,485,695 31,046 (7,410) 3,509,331

- provision for staff bonus (316,256) (2,822) - (319,078)

Profit before tax and tax related adjustments 3,169,439 28,223 (7,410) 3,190,253

Adjustments for permanent difference: -

- donation 15 - - 15

- dividend income from domestic companies (19,835) - - (19,835)

Accounting profit after adjustments 3,149,620 28,223 (7,410) 3,170,433

Accounting tax @ 30% and @ 25% respectively (A) 944,886 7,056 - 951,942

Current Tax (B) 946,885 7,258 - 954,143

Deferred tax income in profit and loss account (B-A) 1,999 202 - 2,201

8.3.4.The relationship between tax expense and accounting profit is explained reconciling figures as under:

NRs. 000

PARTICULARS NABIL BANK SUBSIDIARY CO. INTER-CO. GROUP TOTAL

ADJUSTMENTS

Profit before tax and tax related adjustments 3,169,439 28,223 (7,410) 3,190,253

- corporate tax rate 30% 25%

Corporate tax 950,832 7,056 957,888

Tax impact of permanent difference:

- donation 5 - 5

- dividend income from domestic companies (5,950) - (5,950)

Prior period tax 5,792 - 5,792

Total Accounting Tax 950,678 7,056 390 958,123

Accounting Tax as expensed in Profit and Loss account:

- current tax 946,885 7,258 390 954,533

- deferred tax (1,999) (202) (2,201)

- prior period tax 5,792 - 5,792

Total tax expense in Profit and Loss account 950,678 7,056 390 958,123


147

8.3.5.The Bank’s deferred tax assets (DTA) as at 15th July 2013 rose to NRs.44,575 thousand from

last year’s NRs.42,575 thousands. The rise in DTA is mainly attributable to increase in leave liability.

On the other hand, Nabil Invest’s deferred tax liability as at 15th July 2013 reduced to nil from last

year’s NRs.47 thousands.

Details of temporary differences and deferred tax assets/liabilities as at 15th July 2013 are presented

below:

NRs. 000

CURRENT YEAR PREVIOUS YEAR

PARTICULARS NABIL BANK NABIL INVEST GROUP NABIL BANK NABIL INVEST GROUP

Temporary difference on fixed assets (31,854) 296 (31,558) (34,793) (330) (35,123)

- tax base 549,504 6,435 555,939 604,679 6,622 611,301

- carrying value 581,358 6,139 587,497 639,472 6,952 646,424

- unused tax losses - - - - - -

Other Items of temporary differences 180,436 324 180,760 176,711 142 176,853

- provision for other assets 5,561 - 5,561 5,561 - 5,561

- employees' leave provision 81,653 324 81,977 64,893 142 65,035

- employees' gratuity provision 76,931 - 76,931 78,441 - 78,441

- investment impairment provision 16,291 - 16,291 27,817 - 27,817

Net temporary difference * 148,582 619 149,202 141,918 (188) 141,730

Deferred tax assets @ 30% / 25% 44,575 155 44,730 42,575 42,575

Deferred tax liability @ 30% / 25% - - (47) (47)

8.3.6.The carrying amount and tax base of fixed assets of the Bank having taxable / deductible

differences are presented as under:

NRs. 000

PARTICULARS CARRYING AMOUNT TAX BASE TAXABLE DIFFERENCE

Asset Class :

- vehicle 116,003 108,100 7,903

- building 206,048 201,870 4,178

- software 26,305 23,084 3,221

- leasehold 39,202 34,113 5,089

- office equipment 193,799 181,402 12,398

- other assets - 934 (934)

Total 581,358 549,504 31,854

* Net Temporary difference presented in parenthesis represents net taxable difference.

Nabil Bank Limited

148

8.3.7.The Bank and its subsidiary have deposited advance tax in line with Income Tax Act 2002. The

amount is disclosed in the face of balance sheet by netting with income tax liabilities. The advance tax

and tax liabilities of the Bank and its subsidiary have not been offset while presenting it in

consolidated financial statements.

NRs. 000

PARTICULARS NABIL BANK SUBSIDIARY CO. GROUP

Opening balance 51,106 (4,527)

add : current tax 946,885 7,258

less : advance tax paid (880,013) (6,330)

less : previous year's tax paid (51,106) -

Closing balance : liability / (asset) 66,873 (3,599)

NRs. 000

DETAILS OF ADVANCE TAX PAYMENTS NABIL BANK SUBSIDIARY CO. GROUP

- 1st instalment 350,640 - 350,640

- 2nd instalment 262,980 - 262,980

- 3rd instalment 262,980 - 262,980

- tax deducted at source by withholder 3,413 6,330 9,742

Total 880,013 6,330 886,342

8.3.8.In addition to current tax and prior period tax, the Bank has also borne dividend tax of

NRs.1,670 thousands in respect of cash and bonus dividend received from the domestic company.

Tax on dividend being final withholding tax, the dividend earnings are accounted on net basis.

9. CONTINGENT INCOME TAX LIABILITYLarge Tax Payers’ Office (LTPO) conducts reassessment of each year’s tax filing done by the Bank

within four years after end of each year. Following reassessment, LTPO can issue reassessment order

for revision in tax liability of the bank. However, the bank may choose to contest against such

decisions. Such process would follow, in order, applying for administrative review to Director General

at Inland Revenue Department (IRD) level; case filing at Revenue Tribunal; and case filing at Supreme

Court.

Till the balance sheet date, the bank’s corporate tax liability up to income year 2005-06 has been

cleared by the tax authority. Further, reassessment from LTPO has been completed for up to income

year 2008-09. For the reassessment of last three years however, the bank has contested against the

upward revision in tax liability as issued by LTPO in their reassessment order. Total contested amount

for NRs.14,987 thousands in respect of these three income years has been recognized as Continent

Liability and presented in Schedule 17 of Financial Statements.

10. NON CONTROLLING INTEREST (NCI)As at balance sheet date, the Bank’s effective interest in Nabil Invest remained at 74.29% while that

of NCI remained at 25.71%.


149

10.1. Share of non-controlling interest (NCI) in the profit of subsidiary

For current financial year, the gross earnings of Nabil Invest is NRs.31,046 thousand and attributable

bonus and corporate tax is NRs.9,878 thousand. Based on NCI’s effective interest of 25.71% held in

the subsidiary as at balance sheet date the net profit attributable to NCI is shared as under:

NRs. 000


Subsidiary's operating profit 31,046 15,794

- less : provision for staff bonus (2,822) (1,436)

- less : provision for income tax (7,056) (3,589)

Subsidiary's net profit 21,167 10,769

NCI's share @ 25.71% 5,443 2,769

10.2. Non-controlling interest (NCI) in consolidated balance sheet

With share in profit and the funds invested, the equity of NCI as at balance sheet date stands

NRs.33,178 thousands recording a growth of 9.49% over that of previous year as stated hereunder:

NRs. 000

SUBSIDIARY CO. NCI'S SHARE

PARTICULARS CURRENT YEAR PREVIOUS YEAR CURRENT YEAR PREVIOUS YEAR

Carrying amount

- paid up equity capital 105,000 105,000 27,000 27,000

- reserves and surplus 24,165 12,975 6,214 3,336

Total 129,165 117,975 33,214 30,336

increment in carrying amount (%) 9.49% 9.49%

11. Risk Management and Basel IIDisclosure

11.1.Basel II disclosure has always been a

guiding principle at Nabil Bank in addressing

the risks and adopting measures to minimize

their impact. Increasing complexities in risks

and fast changing world pose a threat to

sustainability. The Bank, in order to address

the varieties of risk that keep coming out of

business operations, has identified different

risks and adopted different measures to

minimize them. Risk Management is a

daunting task that has a grave impact on our

operations. Failure in identifying the risk and

its correction/management in time poses a

serious threat on sustainability.

11.2. The major risk the Bank faces in the

business is Credit where about three fourth of

its incomes come from. Equally this poses a

major threat when any account turns to NPA

as margin against the same is very thin.

Therefore Bank’s Credit Risk Management has

always been kept in high priority. Any risk

generation and their impact on long term

perspective is well deliberated in the proposal,

risks and returns are properly weighed and

mitigating measures are properly spelled. The

bank has clear demarcation on business

generation and risk management where any

proposal for approval is passed through proper

fitness test, long term soundness test with

knowledge on business, against which credit is

to be sanctioned. Looking at the criticality of

Nabil Bank Limited

150

the businesses and their importance, the Bank has re-aligned its

structure and processes in a way whereby such risks can be

minimized and assessed in a quantifiable manner. Accordingly the

Bank has set up a separate credit risk division, which is headed

by the Chief Risk Officer, one of the most senior level positions in

the Bank. The division oversees global, macro, micro and unit

level risk that arises out of daily business operation and equally

due to changes in the market conditions with that particular

business of the unit. The Bank’s credit functions are broadly

categorised as Large and Corporate (including infrastructure

financing), SME and Retail credit. Credit Risk Division is manned

with separate set of skills for analysing risks in these different

credit functions, all of them report to the Chief Risk Officer. Daily

report from central level and periodic review of facilities too gives

input for timely action on any relationship which warrant for

correction.

11.3.The Bank makes decision to finance by assessing the

business. It also ensures the inherent credit risks that are

associated with the business are addressed appropriately through

coverage of better safety margin, additional collateral back up and

lower exposure to keep the business at low leverage. Periodic

review of all accounts under credit exposure is one of the prudent

practices that the Bank follows in order to take necessary steps to

avert/minimize the risk. Quarterly inspection of the business and

suggestion for timely corrective actions help protecting the

business from the viewpoint of borrower as well. Besides, where

any business faces difficulties and poses a risk to the Bank in

terms of fall in the value of assets, in those circumstances it

makes adequate provision. Any business decision for credit

exposure is taken only if it is vetted and approved by the credit

risk division. Business generation unit singly cannot take a credit

exposure decision except on instrument purchase where security

is instrument itself and the loan gets settled once instrument is

realized.

11.4.Bank has the policies and operation manuals that stipulate

proper governance and procedure for all credit relationship.

Similarly monitoring of business and annual review of entire

relationship including review of the facilities gives the bank an

idea whether or not to take forward the relationship. Besides this,

periodic review of same by the Internal Audit Department also

assists in identifying the status of exposure/relationship in line

with guiding documents of the Bank. Any weaknesses on the part

of the business of borrower and the relationship strength are

independently assessed by Internal Audit and the advice is taken

positively for necessary changes. Processes are well defined where

checking, control and independency of the credit risk function is

fully complied with.

11.5.All such actions and processes are properly recorded,

reported and discussed. These reports on need basis and on a

defined frequency are put to the oversight of senior management

and the Board. Senior Management or the Board on need basis

issue instruction as apt wherever necessary.

11.6.One of the growing risks among other these days is

Operation Risk that arises out of inefficient processes and people

inside and outside the Bank. Equally system is another area of

concern where it has witnessed growing threat from outside. Bank

has separate division to oversee operation risk including

compliance of KYC and AML. The division is headed by senior

level staff with adequate access to the daily report, operational

processes and right to recommend the changes in the system and

procedures. The head of operation risk directly reports to the Chief

Risk Officer. Bank has SIMs (Standing Instruction Manuals) for all

businesses of the bank. All the activities are undertaken in line

with the set criteria in the Standing Instruction Manual, policies

and guidelines including Directives and circulars from central

bank (the regulatory authority). Similarly daily functions at

operations are independently reported through separate reporting

line other than business generation and credit risk where

independence of checking and control is complied with.

11.7.Processes are reviewed periodically so that their perfection

can be weighed and any shortcoming can be addressed. Most of

the functions like line approval, bill payment, loan disbursement

are centralized which controls activities that can cause mistake

due to inadequate knowledge on the part of staff at

remote/branch. Similarly awareness to the public is made on our

service and products periodically. Staff is well educated and is put

to the operation for action once one gets well acquainted with the

bank’s functioning. Any staff for the first time in any job is put

under the supervision of an experienced staff and is allowed to

work independently after attaining required skills. Bank has

Whistle Blowing policy to report to senior or management directly

on anyone’s suspicious conduct outside and inside the bank.

11.8.In operations, the Bank has put in place a maker and

checker concept in which a transaction has to compulsorily go

through two individuals from a control standpoint with proper MIS

to capture deviations, if any. The activities of a personnel and

division / branch can be viewed and monitored centrally through

an integrated system, which helps in minimizing the risk of


151

misconduct, if any. The Bank has an on-line replication

Disaster Recovery Site (DRS) which captures the record of

each transaction that takes place at the Production Server.

Both the sites (Production Server and Disaster Recovery –

Back up site) are housed in well-conditioned and high shock

resistant buildings and are at different seismic zone, far from

each other. DRS is outsourced to a professionally managed

company having expertise in the sector. Drill is being done

periodically and is being tested occasionally to assess the

functioning of DRS.

11.9.Each desktop is implemented with Active Directory

System (ADS) which does not allow user to take away the data

in devices like data traveller (pen drive) or bring in data for

processing or any other purposes posing threat to the

repository. Similarly individual data in desk are also stored and

backed up in periodic interval at data centre so that any loss

of data in desk top can be retrieved from data centre.

11.10.The Bank has a separate Legal division which is

adequately manned by qualified and experienced staff. All

legal agreements, deeds and documents including claims and

charges are thoroughly studied prior to making any decision

involving such documents. Compliance with existing rules and

regulations and business practices globally and locally are

taken into account before arriving at the decision. The cases

where the Bank needs expert's opinion on any of the issues the

same is done through the expert in the respective field.

The Bank in line with Basel provisions calculates risk exposure

and allocates sufficient capital/cushion for perceived

operational risks.

11.11.Market Risks are addressed through the Asset and

Liability position and management of same on daily basis. The

limits for open position are controlled level wise which ensures

in-depth knowledge of the market and movement before taking

decision (by choice). The monthly reports on such aspects are

well discussed and dealt in ALCO (Asset Liability Management

Committee). The committee ensures functioning of the jobs in

line with the policies and procedures and

suggests/recommends for necessary steps collectively to

address the risk on interest rate movement, exchange rate

movement and equity price changes. Most of the market

operations (investments) are done from the front office which

reports to the Chief Financial Officer and exposure accounting

including booking of income/expense is done from back office

which reports to the Chief Operating Officer. The Bank

assesses the open position on daily basis and calculates risk

exposure for allocation of required capital in line with Basel

provisions.

11.12.Further the Bank takes on the capital adequacy norms

pursuant to the central bank's statutory provision for Basel

requirement under Basel - II. The determinants to this end are

the past experiences with the products, Bank’s own risk

assessment culture and contingency management for

unpredictable situations. To this effect going by the best

international practices the Bank provides for adequate capital

to withstand the inherent risks against the assets the Bank

finances. Wherever possible the Bank obtains additional

collateral, set aside higher safety margin and operates under

prudent banking norms. The Bank equally through its annual

plans projects the capital adequacy and risk exposure growth

which is reviewed monthly. The Bank also reviews its total risk

weighted exposure and Capital Adequacy Ratio (CAR) on

monthly basis. If growth exposure is higher than the formation

of capital in the Bank, the Bank pulls rein on business

generation so that CAR can be maintained. However the Bank

has not experienced such instances in its history of 29 years.

The adequacy of capital is seriously taken into consideration at

regular meetings like ALCO, X-Com and board meetings.

Nabil Bank Limited

152

11.14.Internal audit of the Bank is independent from the

management and directly reports to Audit Committee, a board

level committee. Internal Audit too has adopted risk based

auditing approach and keeps recommending the suggestions for

the area needing higher attention. Further the Bank’s Strategic

Planning Unit assesses macroeconomic indicators both on a

national and international level and observes the market trend

and suggests for necessary action to minimize the risks involved.

11.15.The Bank has developed a risk assessment culture and

has in place the required reports for assessing concentration of

risks. Periodical performance reporting based on Balanced

Scorecard, in line with capital strength, to the Board is also in

place. These reports are periodically put up to the board. Board

also reviews the same and issues instructions, as appropriate, to

the Bank’s management.

11.16.Pursuant to the guidance of Capital Adequacy Framework

2007 (updated July 2008) issued under NRB Unified Directives,

the Bank recognises following credit risk mitigating factors in

order to manage the Bank’s credit risks:

� Deposits with Banks,

� Deposits with other banks and financial institutions,

� Securities / instruments issued by the Government and NRB,

� Guarantee of government of Nepal,

� Security / guarantee of other sovereigns,

� Guarantee of domestic banks,

� Security / guarantee of specified multilateral development

banks, and

� Security / guarantee of foreign banks.

Credit risk mitigating factors are recognized only when

following eligibility criteria is fulfilled:

� That the Bank holds clear rights over the collateral to

liquidate in the event of default,

� That the credit quality of the borrower (obligor) and the

collateral does not have material positive correlation,

� That the maturity of the collateral is longer than the maturity

of the credit exposure being undertaken,

� That the currency mismatches arising from possible

differences in denomination of currencies of collateral and

credit exposure is minimized to the extent possible. In case of

existence of mismatches, 10% haircut is assigned on the

gross value of CRM,

� That the Bank employs policies and procedures to manage

legal, operational, liquidity and market risks that may be

exposed from the credit risk mitigating factors,

� That the guarantees of domestic and foreign institutions are

unconditional whatsoever.

Chief Executive Officer

Chief Risk Officer Head Legal(Legal Risks)

ALCO (including CEO)

(Market Risks -

exchange, interest,

equity price, liquidity

and other risks)

Legal, Share &Company Secretariat

Head – Infrastructure,Corporate, SME, PLU Credit

Head-Operation Risk,AML & Compliance

11.13. Risk Management and Reporting Line are presented as follows:


153

During the current financial year, the Bank has availed the benefits of credit risk mitigation as under:

NRs. 000


Benefits availed of following credit risk mitigants :

- deposit with own bank 1,602,890

- deposit with other banks and financial institutions -

- securities and bank guarantees issued by foreign banks 1,965,074

- securities issued by Nepal Government and Nepal Rastra Bank 842,015

Total 4,409,979

While availing the benefits of credit risk mitigation, supervisory haircuts have been assigned on case

to case basis by:

� 20%, in case of CRM that is deposits with other banks and financial institutions,

� 20% and 50%, in case of CRM that is security / guarantee of foreign banks

with ECA rating 0 - 1 and 2.

NRs. 000


Eligible items for Tier - I Capital Fund :

a. Paid up equity share capital 2,436,841

b. Irredeemable Non-cumulative preference shares -

c. Share Premium 74

d. Proposed Bonus Shares 609,210

e. General Reserves 2,620,500

f. Retained Earnings 704,970

g. Current year Profit/(loss) -

h. Capital Redemption Reserves -

i. Capital Adjustment Reserves -

j. Dividend Equalization Reserves -

k. Deferred Tax Reserve 44,575

l. Other Free Reserves 2,578

m. Less: Goodwill -

n. Less: Fictitious Assets not written off -

o. Less: Investment in equity of licensed Financial Institutions -

p. Less: Investment in equity of institutions with financial interests (78,000)

Core Capital Fund (Tier - I) 6,340,749

11.17. Capital Structure and Capital Adequacy:

As at balance sheet date, the Bank's capital adequacy status is as under:

11.17.1. Tier 1 capital and a breakdown of its components:

Nabil Bank Limited

154

11.17.3. Details of Subordinated Term Debt:

The Bank has issued Nabil Bank Bond 2075 (2018 AD) for NRs.300 million in July/August 2008.

Main features of Nabil Bank Bond 2075 are as follows:

� Maturity period: 10 Years.

� Interest rate: 8.5% per annum.

� Interest Payment frequency: Half Yearly.

� Claim in case of liquidation: After depositors.

� Capital Redemption Reserve shall be created from year 2013/14 (i.e. from 6th year).

11.17.4. Deductions from Capital:

The Bank has deducted NRs.78,000 thousands in respect of its equity investment in subsidiary,

while calculating its core capital.

11.17.5.Risk weighted exposures for Credit Risk, Market Risk and Operational Risk:

11.17.2. Tier 2 capital and a breakdown of its components:

NRs. 000


Eligible items for Tier - II Capital Fund :

a. Cumulative and / or Redeemable Preference Share -

b. Subordinated Term Debt 300,000

c. Hybrid Capital Instruments -

d. General loan loss provision * 453,370

e. Exchange Equalization Reserves 150,300

f. Investments Adjustment Reserves 106,222

g. Assets Revaluation Reserves -

h. Other Reserves 13,874

Supplementary Capital Fund (Tier - II) 1,023,766

NRs. 000


Risk Weighted Exposures :

- for Credit Risk 57,191,503

- for Operational Risk 5,011,134

- for Market Risk 89,170

Adjustments under Pillar - II

- add: …. % of the total RWE due to non compliance to Disclosure Requirement -

- add: … % of the total Deposit due to insufficient Liquid Assets -

- add: 2% of the total RWE upon Supervisory Review 1,245,836

Total Risk Weighted Exposures (after bank's adjustments of Pillar II) 63,537,644

* Maximum available limit is NRs.794,221 thousands being 1.25% of total risk weighted exposures.


155

11.17.7. Capital Adequacy and Risk Weighted Exposure

NRs. 000


Total Capital Fund 7,364,515

- Core Capital Fund (Tier - I) 6,340,749

- Supplementary Capital Fund (Tier - II) 1,023,766

Total Risk Weighted Exposures (RWE) 63,537,644

Tier - I Capital Fund to Total RWE (%) 9.98

Total Capital Fund to Total RWE (%) 11.59

11.17.6. Risk weighted exposures under each 11 categories of Credit Risk:NRs. 000


Risk exposure categories under Credit Risk :

a. Claims on Government & Central Bank -

b. Claims on Other Financial Entities -

c. Claims on Banks 2,982,328

d. Claims on Domestic Corporates and Securities Firms 32,523,380

e. Claims on Regulatory Retail Portfolio 1,430,844

f. Claims Secured by Residential Properties 2,427,730

g. Claims secured by Commercial real estate 864,879

h. Past due claims 2,088,003

i. High Risk claims 3,796,559

j. Other Assets 4,289,407

k. Off Balance Items 6,788,373

Total risk weighted Exposure under Credit Risk 57,191,503

Nabil Bank Limited

15612.StatementofLiquidity

RiskAnalysisasat15July2013

NR

s.000

S.NO.PERIOD:

0-7DAYS

8-30DAYS

31-90DAYS

91-180DAYS

181-270DAYS

271-365DAYS

1YEARABOVE

TOTAL

Assets:

1C

ash

Bal

ance

s1

,14

0,2

12

--

--

--

1,1

40

,21

2

2B

alan

ces

held

with

Ban

ksan

dFi

nanc

ialI

nstit

utio

ns(4

7,5

90

)-

--

--

4,7

89

,94

64

,74

2,3

56

3In

vest

men

tsin

Fore

ign

Ban

ks-

2,0

44

,08

31

,42

3,7

78

1,8

85

,28

41

91

,90

01

,42

1,0

31

71

9,4

05

7,6

85

,48

1

4C

allM

oney

1,6

34

,30

6-

--

--

-1

,63

4,3

06

5G

over

nmen

tSe

curit

ies

--

1,9

96

,32

81

,33

7,3

34

40

7,1

78

1,5

62

,97

32

,61

0,1

90

7,9

14

,00

2

6N

RB

Bon

ds-

--

--

--

-

7In

ter-

Ban

k/F

inan

cial

Lend

ing

/Inv

estm

ents

inLo

calB

anks

-3

35

,82

59

5,9

50

--

--

43

1,7

75

8Lo

ans

and

Adv

ance

s(in

clud

ing

staf

floa

ns)

80

1,9

12

2,0

23

,56

94

,73

0,3

43

4,2

52

,44

32

,84

1,4

46

2,8

41

,44

63

1,0

29

,71

14

8,5

20

,86

9

9Acc

rued

Inte

rest

Rec

eiva

bles

(incl

udin

gAIR

from

staf

floa

ns)

22

12

4,2

81

98

,02

87

3,6

58

53

,25

35

0,8

70

28

1,7

49

68

1,8

60

10

Rev

erse

Rep

o-

--

--

--

-

11

Rec

eiva

ble

unde

rC

omm

itmen

t-

--

--

--

-

12

Rec

eiva

ble

unde

rfa

cilit

ym

entio

ned

inS.

No.

20,

21

and

22

1,1

57

,19

11

,76

1,4

66

5,3

94

,50

73

,21

3,9

39

1,5

45

,75

11

,10

5,7

50

6,2

93

,84

92

0,4

72

,45

4

13

Oth

ers

7,0

10

23

,80

44

3,7

78

3,1

35

--

35

,06

01

12

,78

7

TotalAssets

4,693,063

6,313,029

13,782,713

10,765,792

5,039,527

6,982,070

45,759,909

93,336,103

Liabilities:

14

Cur

rent

Dep

osits

(Inc

ludi

ngM

argi

nD

epos

itsan

dM

atur

edTD

s)3

39

,43

65

09

,15

5-

--

-7

,60

3,2

58

8,4

51

,84

9

15

Savi

ngs

Dep

osit

1,0

84

,17

91

,62

6,2

69

--

--

20

,62

5,6

98

23

,33

6,1

46

16

Fixe

dD

epos

its3

94

,76

58

63

,49

81

,84

8,0

52

1,6

51

,84

81

,95

0,2

90

2,5

85

,69

81

,49

1,8

79

10

,78

6,0

28

17

Bon

ds/D

eben

ture

s-

--

--

-3

00

,00

03

00

,00

0

18

Bor

row

ings

:-

--

--

--

-

Cal

l/Sh

ort

Not

ice

--

--

--

--

Inte

r-B

ank

/Fin

anci

alIn

stitu

tions

--

--

--

--

Ref

inan

ce-

--

--

--

-

Oth

ers

(Sta

ndin

gLi

quid

ityFa

cilit

y)-

--

--

--

-

19

Oth

erLi

abili

ties

and

Prov

isio

ns1

62

,80

64

48

,95

21

85

,43

21

09

,80

74

,72

94

,66

11

78

,78

01

,09

5,1

67

Sund

ryC

redi

tors

--

--

--

--

Bill

sPa

yabl

e1

03

,37

31

55

,06

01

55

,06

01

03

,37

3-

--

51

6,8

65

Acc

rued

Inte

rest

Paya

ble

--

65

--

--

65

Prov

isio

ns-

--

--

--

-

Oth

ers

59

,43

22

93

,89

23

0,3

08

6,4

34

4,7

29

4,6

61

17

8,7

80

57

8,2

37

20

Paya

ble

toIn

stitu

tions

unde

rC

omm

itmen

t(C

usto

mer

Acc

epta

nce)

21

8,9

11

38

3,8

75

31

6,4

25

49

,17

2-

--

96

8,3

82

21

Unu

tilis

edC

redi

tFa

cilit

ies

72

0,1

91

48

8,2

80

1,0

50

,87

17

60

,79

46

74

,58

55

41

,78

21

25

4,2

36

,62

7

22

Lett

erof

Cre

dit

/Gua

rant

ee(N

et)

34

6,6

66

1,0

85

,03

04

,62

6,6

01

2,0

95

,09

07

20

,13

25

31

,86

16

,18

6,3

59

15

,59

1,7

40

23

Rep

o-

--

--

--

-

24

Paya

ble

offa

cilit

ies

unde

rm

entio

ned

inS.

No.

11

--

--

--

--

25

Cal

lDep

osit

76

1,9

57

1,1

42

,93

5-

--

-1

9,1

30

,89

42

1,0

35

,78

5

26

Oth

ers

22

0-

--

--

-2

20

TotalLiabilities

4,029,130

6,547,993

8,027,381

4,666,710

3,349,736

3,664,002

55,516,992

85,801,945

NetAssets

663,933

(234,964)

5,755,332

6,099,082

1,689,791

3,318,068

(9,757,084)

7,534,159

Cum

ulat

ive

Net

Ass

ets

66

3,9

33

42

8,9

69

6,1

84

,30

21

2,2

83

,38

41

3,9

73

,17

51

7,2

91

,24

27

,53

4,1

59

-


157

13. Related Parties Disclosures

13.1.The Bank has entered into financial transactions with the

following entities where the directors have financial interest.

13.1.1.United Insurance Company (Nepal) Ltd. - Mr. Ashish

Sharma and Mr. Nirvana Chaudhary have held positions of

chairman and director respectively in the Company during the

current financial year. As at 15th July 2013, Nabil Bank owed

NRs.1,338 thousands to United Insurance in current account

deposit.

In addition, Bank purchased various insurance policies to secure

risks on assets. The coverage of risks inter alia encompassed

bankers' blanket insurance on cash in vault, transit and ATM;

fire insurance on Office Equipment, Wooden Furniture, Building

& Leasehold Assets; machinery breakdown insurance on Office

Equipment;burglary insurance on Office Equipment, Wooden

Furniture; and fire and burglary insurance on bullions. Total risk

exposures secured was NRs.1,509,402 thousands and total

insurance premium paid for these insurances amounted

NRs.3,669 thousands. The Bank has however discontinued

purchasing policies from the Company and has not renewed

since expiry.

Furthermore, Bank carried agency services on behalf of

Company in line with the agency agreement to solicit Company's

policies to the Bank's customer. During the current financial

year, Bank has earned NRs.827 thousand through the agency

service from the Company.

No loans were granted to the Company. All transactions carried

with the Company were on arms length.

13.1.2.CG Finco Pvt. Ltd. - Mr. Nirvana Chaudhari is a

Chairman of the Company and it has depository relationship

with the Bank. As at balance sheet date, the Bank owed

NRs.2,644 thousands and has paid interest NRs.106

thousands during the current financial year.

CG Finco is also shareholder of Nabil Invest, the subsidiary of

Nabil Bank. During the current financial year, the Company

received NRs.2,565 thousands net dividend declared @ 10%

from the profit of last financial year.

No loans were granted to the Company. All transactions with the

Company were on arms length.

13.1.3.Employees Provident Fund - Mr. Krishna Prasad

Acharya, director of the Bank, has held position of Chief

Administrator (CEO) until the balance sheet date. The

Employees Provident Fund, one of the largest provident fund

mobiliser in Nepal, has depository relationship with Nabil Bank.

As at balance sheet date, total deposit liability owed to

Employees Provident Fund amounted NRs.53,119 thousands

and total interest paid totaled to NRs.3,300 thousands.

No loans were granted to the EPF. All transactions with the EPF

were on arms length.

13.2.All related party transactions between the Bank and its

subsidiary are disclosed under note 13.5 “Transactions with

Nabil Invest”. Such transactions are eliminated in Consolidated

Financial Statements.

13.3. Key management personnel

Key Management Personnel of the Bank include members of the

Board, Chief Executive Officer and all managerial level

executives. Following is a list of Board of Directors and CEO

bearing office as at 15th July 2013.

Mr. Krishna BahadurManandhar Chairman

Mr. Shambhu Prasad Poudyal Director

Mr. Dayaram Gopal Agrawal Director

Mr. Krishna Prasad Acharya Director

Mr. Nirvana Kumar Chaudhary Director

Mr. Ashish Sharma Director

Mr. Mohiuddin Ahmed Director

Mr. Anil Gyawali Chief Executive Officer

Nabil Bank Limited

158

13.4. Compensation to key management personnel of the Bank

13.4.1. Compensation to Board of Directors

All members of the Board are non-executive directors and no executive compensation is paid to the

directors. Specific non-executive allowances paid to directors are as under:

Allowances paid to directors include Rs.15 thousand per month paid for covering newspaper and

communication expenses. Other expenses include reimbursement of travelling, accommodation and

daily allowances paid to directors who do not reside in Nepal and have to come to Nepal for

attending board meetings.

13.4.2. Compensation to Management Level Employees

During the current financial year NRs.215,421 thousands was incurred towards compensation to

Management Team. This includes NRs.1,886 thousands for additional leave expense accrued

during the year.

NRs. 000

NATURE OF TRANSACTION CURRENT YEAR PREVIOUS YEAR

Meeting Fees Paid 922 1,076

Allowance and other expenses relating to Board Meetings 1,534 2,168

Total Compensation Paid 2,456 3,244

NRs. 000

MANAGERIAL LEVEL HEAD SHORT TERM POST RETIREMENT TOTAL

COUNT BENEFITS BENEFITS BENEFITS

Chief Executive Officer 1 15,985 935 16,920

Asst. General Manager and above 8 45,725 6,974 52,699

below Asst. General Manager 43 110,193 35,610 145,803

Total 52 171,903 43,518 215,421

Other benefits (perquisites) are provided to CEO and managerial

level employees as per the Bank's policy. Above, head count and

total benefits paid is including in respect of those management

personnel who retired/resigned during the year. As of balance

sheet date, total 50 management personnel (including CEO) are

in the services of the Bank.

13.5. Transactions with Nabil Invest

13.5.1.The Bank has entered into a Service Level Agreement

(SLA) with Nabil Invest for the provision of management services.

Provisions laid in SLA are in line with arms length principle.

13.5.2.In line with the SLA, the Bank received NRs.500

thousands in respect of providing various administrative services

and NRs.3,836 thousands in respect of providing technical

management services to Nabil Invest.

13.5.3.The Bank paid NRs.3,472 thousands to Nabil Invest as

interest on deposit accounts maintained by Nabil Invest with the

Bank. Such deposit balances of Nabil Invest as of 15th July

2013 is NRs.104,352 thousands.

13.5.4.The Bank also paid management fee for operating bullion

business in line with SLA. The SLA prescribed fees @ 30% on

the net income from bullion business after deduction of all

related charges. During the year, the Bank paid NRs.9,982

thousands to Nabil Invest for the operation of bullion business.

13.5.5.The Bank received net dividend NRs.7,410, thousands

from Nabil Invest distributed at the rate of 10% from the profit of

last financial year (2011-12).

13.5.6.All receipt and payment transactions entered into by the

Bank with Nabil Invest were made net of TDS. The TDS has

been duly deposited at the Large Taxpayer's Office.


159

14. Ratios and other information

14.1. Weighted average interest rate spread

During the current financial year, in line with market rates, weighted average yield on loans and advances has decreased.

Similarly, weighted average cost on deposits and borrowings has decreased due to similar reasons. However, better

reduction under cost of deposit has bolstered improve spread.


Weighted average interest :

- yield on loans and investments 9.14% 10.69%

- cost on deposit and borrowings 3.67% 5.74%

Net Interest Spread 5.48% 4.95%

Annual average of loans, investments, deposits and bonds/borrowings have been taken while computing the above data.

14.2. Earnings per Share

The Bank’s and the Group’s earnings per share has been disclosed in line with Nepal Accounting Standard (NAS) 26 on

Earning per Share in Schedule 31 "Principal Indicators". As on balance sheet date, the Bank’s and the Group’s earnings per

share stood at NRs.95.14 and NRs.95.48 respectively. Compared to last year, these figures are higher by NRs.11.57 and

NRs.11.71 respectively.

The Bank and the Group has not issued any form of capital raising instruments with embedded options of conversion into

equity shares. Consequently, the Bank’s and the Group’s basic and diluted earnings per share both stand at NRs.95.14 and

NRs.95.48 respectively.

14.3. Non-performing assets

14.3.1. Amount of non-performing assets (both gross and net)

The Bank's non-performing assets as at balance sheet date amounted NRs.1,015,177 thousands, which is 2.13% of total

loan. The bank has set aside possible loss provisioning of NRs.808,370 thousands in respect of these loan assets. The

provision (related to non performing assets) coverage for the non performing assets is 80%. Similarly total provision coverage

(NRs.1,275,695 thousands) over the non performing assets is 126%.

PARTICULARS NABIL BANK GROUP

Net Profit for the year (in NRs. 000) 2,218,762 2,226,686

Weighted average number of outstanding shares 23,320,064 23,320,064

Earnings per Share in NRs. 95.14 95.48

Earnings per Share in NRs. (previous year) 83.23 83.43

Annual growth rate in Earnings per Share 14.31% 14.45%

NRs. 000


Loan Classification per NRB's definition

- pass loan 46,630,353 41,867,709 4,762,645 11.4

- non performing loans 1,015,177 1,000,059 15,118 1.5

- restructured / rescheduled - 17,204 (17,204) (100)

- substandard 204,962 162,441 42,521 26.2

- doubtful 104,422 36,784 67,638 183.9

- loss 705,792 783,630 (77,837) (9.9)

Gross loans and advances 47,645,530 42,867,768 4,777,762 11.1

Nabil Bank Limited

160

NRs. 000

PARTICULARS GROSS NPL LOSS PROVISION NET NPL

Performing Loan (pass loan) 46,630,353 467,325 46,163,028

Non Performing Loans (NPL) : 1,015,177 808,370 206,807

- restructured/ rescheduled - - -

- substandard 204,962 51,289 153,673

- doubtful 104,422 52,320 52,102

- loss 705,792 704,760 1,032

Total 47,645,530 1,275,695 46,369,835

14.3.2. NPA Ratios

NPL Ratios :

Gross NPL to Gross loans and advances 2.13%

Net NPL to Net loans and advances 0.45%

This year NPA ratio has improved to 2.13% when compared to 2.33% in the previous year.

14.4. Write off loans and interest suspense

Written off loan is presented in Schedule 28(A) of the financial statements.

Additional information on interest suspense related to such loan is presented as under:

NRs. 000

PARTICULARS AMOUNT

Loan Written Off 27,843

Interest Suspense related to written off loan 14,748

NRs. 000

PARTICULARS PRINCIPAL INTEREST TOTAL

- loan written off till previous year 678,919 266,472 945,391

- loan written off in current year 27,843 14,748 42,592

Total loan written off (A) 706,762 281,220 987,983

- recovered till previous year (448,112) (75,699) (523,811)

- recovered in current year (8,322) (2,120) (10,442)

Total recovery from written off loan (B) (456,434) (77,819) (534,253)

Net not recovered portion (A-B) 250,328 203,401 453,730

- book write off 234,318 164,604 398,923

- actual write off * 16,010 38,797 54,807

Recovery ratio (on total write-off amount) 64.58% 27.67% 54.08%

14.5. Summary of book write off loan and recovery

*The bank has relinquished its recovery rights considering remote possibility of loan recovery.


161

14.6. Movement in loan loss provision and interest suspense

With increase in business volumes figures of loan loss provisions and interest suspense has also

increased. The rise in loan loss provision of 1% is mainly due to incremental gross loan volume.

Gross loan volume has increased by 11% compared to that of previous year. Per regulatory

provisions the bank is required to maintain loss provisioning in respect of performing loans at 1% of

loan amount. Similarly, 3% rise in interest suspense is against 7% fall in gross interest income.

NRs. 000


Loan Loss Provision 1,275,695 1,262,085 13,610 1.08

Interest Suspense 382,296 371,152 11,144 3.00

15.Disclosure of components of cash and cash equivalents in Cash Flow Statement:

15.1. From operating activities:

15.1.1. Interest Income

NRs.


Interest Income in Income Statement 5,702,122,918 6,126,854,828

Interest Income from Long term Investment (239,364,585) (215,912,363)

Income Receivable on Short Term Investments (Current Year) (92,594,687) (101,475,564)

Income Receivable on Short Term Investment (Previous Year) 101,475,564 56,982,150

Interest Receivable on Staff Housing Loan (Current Year) (173,755,044) (136,656,764)

Interest Receivable on Staff Housing Loan (Previous Year) 136,656,764 112,624,270

Unearned Interest Income - Vehicle Loan (Current Year) 909,046 1,992,921

Unearned Interest Income - Vehicle Loan (Previous Year) (1,992,921) (4,069,060)

Unearned Interest Income - Housing Loan (Current Year) 2,263,079 2,909,903

Unearned Interest Income - Housing Loan (Previous Year) (2,909,903) (672,550)

Unearned Interest Income - Bills (Current Year) - 40,368,893

Unearned Interest Income - Bills (Previous Year) (40,368,893) (17,744,581)

Cash Inflow 5,392,441,338 5,865,202,083

15.1.2. Commission and Discount IncomeNRs.


Commission and Discount Income in Income Statement 393,050,514 366,387,194

Unearned Commission - Guarantee (Current Year) 67,000,243 109,805,125

Unearned Commission - Guarantee (Previous Year) (109,805,125) (54,643,419)

Cash Inflow 350,245,632 421,548,900

Nabil Bank Limited

162

15.1.3. Income from Foreign Exchange Transaction

NRs.


Exchange Income in Income Statement 489,051,079 447,070,485

Unearned Commission - Forward (Current Year) 23,663,585 -

Unearned Commission - Forward (Previous Year) - -

Cash Inflow 512,714,664 447,070,485

15.1.4. Interest Expense

NRs.


Interest Expense in Income Statement (2,186,184,871) (3,155,490,469)

Interest Payable on Deposit (Current Year) 64,854 38,399

Interest Payable on Deposit (Previous Year) (38,399) (1,108,860)

Interest Payable on Borrowing (Current Year) 3,712,957 3,856,189

Interest Payable on Borrowing (Previous Year) (3,856,189) (4,388,033)

Cash Outflow (2,186,301,648) (3,157,092,774)

15.1.5. Staff ExpenseNRs.


Staff Expenses as per Income Statement (646,759,675) (500,712,844)

Bonus Expenses (regrouped from other liabilities) (316,255,521) (241,638,501)

Total Staff Expenses (963,015,196) (742,351,345)

Grauity Fund Balance (Current Year) 76,931,147 78,441,012

Grauity Fund Balance (Previous Year) (78,441,012) (87,626,265)

Leave Provision (Current Year) 81,653,026 64,892,721

Leave Provision (Previous Year) (64,892,721) (59,337,671)

Other Staff Expenses Payable (Current Year) - 69,574

Other Staff Expenses Payable (Previous Year) (69,574) -

Staff Bonus Payable (Current Year) 316,255,521 241,638,501

Staff Bonus Payable (Previous Year) (241,638,501) (190,943,019)

Cash Outflow (873,217,310) (695,216,492)


163

15.1.6. Office Operating Expense

NRs.


Office Operating Expenses as per Income Statement (468,781,187) (430,909,132)

Depreciation / Amortisation on Fixed Assets / Intangibles 123,903,510 130,515,883

Accrued Expense Payable (Current Year) 6,732,393 4,745,609

Accrued Expense Payable (Previous Year) (4,745,609) (8,397,600)

Cash Outflow (342,890,893) (304,045,240)

15.1.7. Income Tax Payments

NRs.


Income Tax Expense in Income Statement (Current Year) (946,885,251) (728,302,031)

Prior Period Tax (5,791,658) -

Current Year Tax Liability 66,872,707 51,106,490

Previous Year Tax Liability (51,106,490) (44,104,071)

Cash Outflow (936,910,692) (721,299,612)

NRs.

RECONCILIATION OF INCOME TAX PAID FROM TAX EXHIBIT CURRENT YEAR PREVIOUS YEAR

Adv. Tax Deposited at the request of LTPO 20,000,000 -

1st Instalment of Corporate Tax Paid for FY 2069-70 330,640,000 262,000,000

Adv. Tax Deposited at the request of LTPO - 20,000,000

2nd Instalment of Corporate Tax Paid for FY 2069-70 262,980,000 176,500,000

Adv. Tax Deposited at the request of LTPO 30,000,000 20,000,000

3rd Instalment of Corporate Tax paid for FY 2069-70 232,980,000 196,000,000

Payment of Previous Year's Tax 51,106,490 44,104,071

Payment of Prior's Year Tax 5,791,658 -

TDS Deposition (Insurance Commision,

Technical Service Fee, Dividend) 3,412,544 2,695,541

Cash Outflow 936,910,692 721,299,612

Nabil Bank Limited

164

15.1.8. Other ExpenseNRs.


Income/(Expense) from Extra-ordinary Activities

as per Income Statement (17,454,214) (3,036,749)

Recovery of Loan Write Off (10,441,593) (16,770,964)

Bad Loan Write Off 27,843,275 3,006,491

Cash Outflow (52,532) (16,801,222)

15.1.9. (Increase)/Decrease in Other Short Term Investment

FY 2012/13 in NRs.

FY 2011/12 in NRs.

PARTICULARS CURRENT YEAR PREVIOUS YEAR INFLOW / (OUTFLOW)

Total Investment in Balance Sheet 16,332,043,012 14,048,965,792 (2,283,077,220)

Nepal Government Other Securities (3,310,078,588) (3,498,498,924) (188,420,336)

Foreign Bonds (239,654,168) (220,280,173) 19,373,995

Organized Institutions' Shares (210,034,800) (201,284,800) 8,750,000

Organized Institutions' Bonds and Debentures - - -

Indexed Linked and Credit Linked Deposits - (441,000,000) (441,000,000)

NCM Mutual Fund - (1,257,000) (1,257,000)

SWIFT Investment (2,041,186) (1,759,054) 282,132

Provision for Investments 16,291,166 27,816,665 11,525,499

Cash Inflow (Outflow) 12,586,525,436 9,712,702,506 (2,873,822,930)


Total Investment in Balance Sheet 14,048,965,792 13,081,205,527 (967,760,265)

Nepal Government Other Securities (3,498,498,924) (2,255,275,527) 1,243,223,397

Foreign Bonds (220,280,173) (178,059,588) 42,220,585

Organized Institutions' Shares (201,284,800) (192,489,000) 8,795,800

Organized Institutions' Bonds and Debentures - - -

Indexed Linked and Credit Linked Deposits (441,000,000) (570,400,000) (129,400,000)

NCM Mutual Fund (1,257,000) (1,257,000) -

SWIFT Investment (1,759,054) (1,640,373) 118,681

Provision for Investments 27,816,665 4,562,809 (23,253,856)

Cash Inflow (Outflow) 9,712,702,506 9,886,646,848 173,944,342


165

15.1.10. (Increase)/Decrease in Loans, Advances and Bills Purchase

FY 2012/13 in NRs.


Loans and Advances in Balance Sheet

(Net of Provision & Loan Write-Off) (46,369,834,571) (41,605,682,634) (4,764,151,937)

Net Provision Change (13,610,147) (13,610,147)

Loan Write Off During the Year (27,843,275) (27,843,275)

Cash Inflow (Outflow) (46,411,287,993) (41,605,682,634) (4,805,605,359)

FY 2011/12 in NRs.


Loans and Advances in Balance Sheet

(Net of Provision & Loan Write-Off) (41,605,682,634) (38,034,097,554) (3,571,585,080)

Net Provision Change (390,694,824) (390,694,824)

Loan Write Off During the Year (3,006,491) (3,006,491)

Cash Inflow (Outflow) (41,999,383,949) 38,034,097,554 (3,965,286,395)

15.1.11. (Increase) / Decrease in Other Assets

FY 2012/13 in NRs.


Other Assets in Balance Sheet

(Net of Provision) (2,150,185,391) (1,548,964,565) (601,220,826)

Income receivable on Investment 125,808,564 152,535,579 (26,727,015)

Interest receivable from Staff Housing Loan 173,755,044 136,656,764 37,098,280

Deferred Tax 44,574,722 42,575,441 1,999,281

Provision on Receivables (638,562) - (638,562)

Cash Outflow (1,806,685,623) (1,217,196,781) (589,488,842)

FY 2011/12 in NRs.


Other Assets in Balance Sheet (1,548,964,565) (1,201,984,291) (346,980,274)

Income receivable on Investment 152,535,579 79,395,660 73,139,919

Interest receivable from Staff Housing Loan 136,656,764 112,624,270 24,032,494

Deferred Tax 42,575,441 34,382,312 8,193,129

Provision on Receivables - - -

Cash Outflow (1,217,196,781) (975,582,049) (241,614,732)

Nabil Bank Limited

166

15.1.12. (Increase) / Decrease in Other Liabilities

FY 2012/13 in NRs.


Bills Payable as per Balance Sheet 529,597,845 179,142,358 350,455,487

Other Liabilities as per Balance Sheet 1,071,099,849 1,072,481,023

Interest Payable on Deposits (64,854) (38,399)

Interest Payable on Borrowings (3,712,957) (3,856,189)

Gratuity Fund (76,931,147) (78,441,012)

Employees' Welfare Fund / Leave Fund (81,653,026) (64,892,721)

Provision for Staff Bonus (316,255,521) (241,638,501)

Dividend Payable (41,097,769) (35,197,741)

Unearned Income

(Int on Housing/Vehicle Loans and Bills) (3,172,125) (45,271,717)

Accrued Expense Payable (6,732,393) (4,745,609)

Unearned Income (Guarantee) (90,663,828) (109,805,125)

Other Staff Expenses Payable - (69,574)

450,816,229 488,524,435 (37,708,206)

Cash Outflow 312,747,281

FY 2011/12 in NRs.


Bills Payable as per Balance Sheet 179,142,358 415,767,753 (236,625,395)

Other Liabilities as per Balance Sheet 1,072,481,023 859,405,624

Interest Payable on Deposits (38,399) (1,108,860)

Interest Payable on Borrowings (3,856,189) (4,388,033)

Gratuity Fund (78,441,012) (87,626,265)

Employees' Welfare Fund / Leave Fund (64,892,721) (59,337,671)

Provision for Staff Bonus (241,638,501) (190,943,019)

Dividend Payable (35,197,741) (27,302,999)

Unearned Income

(Int on Housing/Vehicle Loans and Bills) (45,271,717) (22,486,191)

Accrued Expense Payable (4,745,609) (8,397,600)

Unearned Income (Guarantee) (109,805,125) (54,643,419)

Other Staff Expenses Payable (69,574) -

488,524,435 403,171,567 85,352,868

Cash Outflow (151,272,527)


167

15.2. From investing activities:

15.2.1. (Increase) / Decrease in Long Term InvestmentsFY 2012/13 in NRs.


Foreign Bonds 239,654,168 220,280,173 (19,373,995)

Long Term Government Bonds 3,310,078,588 3,498,498,924 188,420,336

Shares Investment 210,034,800 201,284,800 (8,750,000)

Mutual Fund - 1,257,000 1,257,000

SWIFT Fund 2,041,186 1,759,054 (282,132)

Indexed Linked Deposits / Credit Linked Deposits - 441,000,000 441,000,000

Cash Outflow 3,761,808,742 4,364,079,951 602,271,209

FY 2011/12 in NRs.


Foreign Bonds 220,280,173 178,059,588 (42,220,585)

Long Term Government Bonds 3,498,498,924 2,255,275,527 (1,243,223,397)

Shares Investment 201,284,800 192,489,000 (8,795,800)

Mutual Fund 1,257,000 1,257,000 -

SWIFT Fund 1,759,054 1,640,373 (118,681)

Indexed Linked Deposits / Credit Linked Deposits 441,000,000 570,400,000 129,400,000

Cash Outflow 4,364,079,951 3,199,121,488 (1,164,958,463)

15.2.2. (Increase) / Decrease in Fixed Assets

NRs.


Addition during the Year (Excluding LeaseHold) (66,677,211) (77,329,458)

Addition during the Year (LeaseHold) (5,976,438) (14,649,650)

Closing Work In Progress (49,447,381) (6,553,648)

Opening Work In Progress 6,553,648 2,582,168

Disposal During the Year 7,847,648 10,200,485

Cash Outflow (107,699,734) (85,750,103)

Nabil Bank Limited

168

15.2.3. Interest Income from Long Term Investment

15.3. From investing activities:

15.3.1. Dividend Payments

16. Events after the Balance Sheet date

No circumstances have arisen since the Balance Sheet date which would require adjustments to or

disclosure in the Financial Statements other than those discussed below.

16.1. Proposed Dividend

The directors have recommended the payment of dividend of NRs.65 per share which consists of a

cash dividend of NRs.40 per share and a stock dividend of NRs.25 per share for the year ended

July 15, 2013. This will be declared at the forthcoming Annual General Meeting of the Bank for

approval of the shareholders.

16.2. Recognition of Interest Income on deferred cash basis

NRB directive 04/069 Section 5 has allowed BFIs to recognise interest income on loans and

advances that accrued till year end but was recovered in cash within 15 days after year-end, in the

income of current year. The Bank did not opt to exercise this option.

NRs.


Interest Income in Income Statement 239,364,585 215,912,363

Income Receivable on Long Term Investment (Current Year) (33,213,877) (51,060,015)

Income Receivable on Long Term Investment (Previous Year) 51,060,015 22,413,510

Cash Inflow 257,210,723 187,265,858

NRs.


Closing Dividend Payable in Balance Sheet 41,097,769 35,197,741

Proposed Cash Dividend Previous Year (811,907,760) (608,930,820)

Opening Dividend Payable in Balance Sheet (35,197,741) (27,302,999)

Cash Outflow (806,007,732) (601,036,078)


169

17. Rounding off &regrouping

17.1. All figures have been rounded off to the nearest rupee.

17.2.Previous year’s figures have been regrouped/rearranged wherever necessary and explained as under:

17.2.1. Restatement of items in Balance Sheet

INVESTMENT NRS.

Balance disclosed in PY's Balance Sheet 14,055,850,055

- Reduction of erroneous unamortized Premium (6,884,263)

Restated Balance disclosed in CY's Balance Sheet 14,048,965,792

17.2.2. Restatement of items in Profit and Loss Account

INTEREST INCOME NRS.

Balance disclosed in PY's Profit and Loss Account 6,133,739,091


Restated Interest Income disclosed in CY's Profit and Loss Account 6,126,854,828

17.2.3. Restatement of items in Schedules of Financial Statements


Balance disclosed in PY's Schedule 18 B.1.b. 202,946,829

- Rectification of erroneous Unamortized Premium on Bonds (6,884,263)

Restated Balance disclosed in CY's Schedule 18 B.1.b. 196,062,566

BOND NRS.

Balance disclosed in PY's Schedule 12 3,505,383,187

- Rectification of erroneous Unamortized Premium on Bonds (6,884,263)

Restated Balance disclosed in CY's Schedule 12 3,498,498,924

COMMISION INCOME CARDS NRS.

Balance disclosed in PY's Schedule 20 B.5. 111,378,070

- Rectification of erroneous offsetting of ATM Management Fee 2,311,980

Restated Balance disclosed in CY's Schedule 20. B.5. 113,690,050

HOUSE RENT NRS.

Balance disclosed in PY's Schedule 24 1. 52,486,027

- Regrouping of ATM Management Fee under Rent 2,311,980

Restated Balance disclosed in CY's Schedule 20. B.5. 54,798,007

Nabil Bank Limited

170

17.2.4. Restatement of items in Cash Flow Statements

CASH RECEIVED - INTEREST INCOME NRS.

Balance disclosed in PY's Cash Flow Statement a.1. 1.1 5,865,202,083


Restated Balance disclosed in CY's Cash Flow Statement 5,858,317,820

17.2.5. Restatement of items in Consolidated Balance Sheet

INVESTMENT NRS.

Balance disclosed in PY's Consolidate Balance Sheet 14,076,850,055


Restated Balance disclosed in CY's Consolidated Balance Sheet 14,069,965,792

17.2.6. Restatement of items in Consolidated Profit and Loss Account


Balance disclosed in PY's Consolidated Profit and Loss Account 6,145,750,888


Restated Interest Income disclosed in CY's Consolidated Profit and Loss Account 6,138,866,625

17.2.7. Restatement of items in Consolidated Cash Flow Statement

CASH RECEIVED - INTEREST INCOME NRS.

Balance disclosed in PY's Consolidated Cash Flow Statement a.1. 1.1 5,873,693,127


Restated Balance disclosed in CY's Consolidated Cash Flow Statement 5,866,808,864

(INCREASE)/DECREASE IN LONG-TERM INVESTMENT NRS.

Balance disclosed in PY's Consolidated Cash Flow Statement b.1. (1,195,442,726)

- Rectification of erroneous Unamortized Premium on Bonds 6,884,263

Restated Balance disclosed in CY's Consolidated Cash Flow Statement (1,188,558,463)

(INCREASE)/DECREASE IN LONG-TERM INVESTMENT NRS.

Balance disclosed in PY's Cash Flow Statement b.1. (1,171,842,726)

- Rectification of erroneous Unamortized Premium on Bonds 6,884,263

Restated Balance disclosed in CY's Cash Flow Statement (1,164,958,463)


171

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Nabil Bank Limited

172

Comparison of Unaudited and Audited Financial StatementAs of 15.07.2013 of Financial Year 2012-13

Schedule 35

VARIANCE.S.N.PARTICULARS AS PER UNAUDITED AS PER AUDITED IN AMOUNT IN REASONS FOR

FINANCIAL STATEMENT FINANCIAL STATEMENT (NPR) % VARIANCE

1. Total Capital and Liabilities (1.1 to 1.7) 74,531,125 73,241,260 (1,289,865) -1.73%

1.1 Paid up Capital 2,436,841 3,046,052 609,210 25.00% Note 1

1.2 Reserve and Surplus 5,225,337 4,617,829 (607,508) -11.63% Note 2

1.3 Debenture and Bonds 300,000 300,000 - 0.00%

1.4 Borrowings - - - #DIV/0!

1.5 Deposits (a+b) 63,609,808 63,609,808 - 0.00%

Domestic Currency (a) 54,277,667 54,277,667 - 0.00%

Foreign Currency (b) 9,332,141 9,332,141 - 0.00%

1.6 Income Tax Liability 66,736 66,873 136 0.20% Note 3

1.7 Other Liabilities 2,892,402 1,600,698 (1,291,704) -44.66% Note 4

2. Total Assets (2.1 to 2.7) 74,531,125 73,241,260 (1,289,865) -1.73%

2.1 Cash and Bank Balance 5,882,569 5,882,569 - 0.00%

2.2 Money at Call and Short Notice 1,634,306 1,634,306 - 0.00%

2.3 Investments 16,348,334 16,332,043 (16,291) -0.10% Note 5

2.4 Loans and Advances 47,645,530 46,369,835 (1,275,695) -2.68% Note 6

2.5 Fixed Assets 872,322 872,322 - 0.00%

2.6 Non Banking Assets - - -

2.7 Other Assets 2,148,064 2,150,185 2,121 0.10% Note 7

3. Profit and Loss Account

3.1 Interest Income 5,702,123 5,702,123 - 0.00%

3.2 Interest Expense 2,186,185 2,186,185 - 0.00%

A Net Interest Income (3.1-3.2) 3,515,938 3,515,938 - 0.00%

3.3 Fees,Commission and Discount 393,051 393,051 - 0.00%

3.4 Other Operating Income 209,905 209,905 - 0.00%

3.5 Foreign Exchange Gain/Loss (Net) 489,051 489,051 - 0.00%

B Total Operating Income (A+3.3+3.4+3.5) 4,607,945 4,607,945 - 0.00%

3.6 Staff Expense 646,751 646,760 9 0.00%

3.7 Other Operating Expense 468,780 468,781 1 0.00%

C Operating Profit Before Provision (B-3.6-3.7) 3,492,414 3,492,404 (10) 0.00%

3.8 Provision for Possible Losses 492,700 27,451 (465,250) -94.43% Note 8

D Operating Profit (C-3.8) 2,999,714 3,464,953 465,239 15.51%

3.9 Non Operating Income/Expenses (Net) 17,832 13,469 (4,364) -24.47% Note 9

3.10 Write Back of Provision for Possible Loss 490,714 24,728 (465,986) -94.96% Note 10

E Profit from Regular Activities (D+3.9+3.10) 3,508,260 3,503,149 (5,111) -0.15%

3.11 Extra Ordinary Income/Expense (Net) (17,454) (17,454) - 0.00%

F Profit before Bonus and Taxes (E+3.11) 3,490,806 3,485,695 (5,111) -0.15%

3.12 Provision for Staff Bonus 316,720 316,256 (465) -0.15% Note 11

3.13 Provision for Tax 950,762 950,678 (85) -0.01% Note 12

G Net Profit/(Loss) (F-3.12-3.13) 2,223,323 2,218,762 (4,561) -0.21%


173

NOTE:

1 Increase in Equity Capital as a result of proposed stock dividend @ 25% on paid up equity capital.

2 Impact on reserve due to stock dividend declaration of Rs. 609,210 thousand. In addition,

impact of dividend income Rs.1.9 million accounted post publication.

3 Impact on current tax liability due to booking of dividend (increment less reversal) giving arise to staff bonus (net) .

4 Provision on possible losses on Investments and Loans presented under Other Liabilities while publishing

fourth quarter unaudited financial results.

5 Investments reported on gross basis in fourth quarter unaudited financial results.

6 Loans, Advances and Bills reported on gross basis in fourth quarter unaudited financial results.

7 Booking of accounts receivable (dividend receivable) and other receivables.

8 Provision presented on net basis (incremental less writeback) in the Profit and Loss Account.

Additional loan loss provision of NRs.34,159 thousand booked.

9 Initially, dividend refund to RMDC vide instruction of CIAA was reported/adjusted directly to opening retained earning.

Considering non-applicability of NAS 2, Accounting Policiies, Changes in Accounting Estimates & Errors,

this has been reported/adjusted under extraordinary income.

10 Provision presented on net basis (incremental less writeback) in the Profit and Loss Account.

11 Proportional Impact of additional loan loss provisioning and dividend income in provision for staff bonus.

12 Proportional Impact of additional loan loss provisioning and staff bonus in provision for tax.

Nabil Bank Limited

174

Unaudited Financial HighlightsAs at 4th Quarter End of FY 2012/13

Schedule 4(A)

AS ATS.N.PARTICULARS 15 JULY 2013 13 APRIL 2012 15 JULY 2012 (AUDITED)

GROUP NABIL GROUP NABIL GROUP NABIL

1. Total Capital and Liabilities (1.1 to 1.7) 74,644,964 74,531,125 71,145,589 69,854,407 64,547,274 64,490,200

1.1 Paid up Capital 2,436,841 2,436,841 2,436,841 2,436,841 2,435,723 2,435,723

1.2 Reserve and Surplus 5,243,231 5,225,337 4,548,493 4,536,175 3,024,801 3,015,162

1.3 Debenture and Bond 300,000 300,000 300,000 300,000 300,000 300,000

1.4 Borrowings - - 1,450,000 1,450,000 311,080 311,080

1.5 Deposits (a+b) 63,517,756 63,609,808 57,308,041 57,597,877 54,905,676 55,023,695

Domestic Currency (a) 54,185,615 54,277,667 48,953,312 49,243,148 47,445,752 47,563,771

Foreign Currency (b) 9,332,141 9,332,141 8,354,729 8,354,729 7,459,924 7,459,924

1.6 Income Tax Liability 66,736 66,736 38,385 33,683 51,106 51,106

1.7 Other Liabilities 3,047,205 2,892,402 5,032,565 3,499,830 3,488,551 3,353,433

1.8 Non-Controlling Interest 33,194 - 31,264 - 30,336 -

2. Total Assets (2.1 to 2.7) 74,644,964 74,531,125 71,145,589 69,854,407 64,547,274 64,490,200

2.1 Cash and Bank Balance 5,909,059 5,882,569 5,661,561 4,451,850 4,294,046 4,275,822

2.2 Money at Call and Short Notice 1,634,306 1,634,306 942,300 942,300 826,436 826,436

2.3 Investments 16,360,194 16,348,334 16,754,428 16,701,252 14,104,667 14,083,667

2.4 Loans and Advances 47,645,530 47,645,530 45,100,468 45,100,468 42,867,768 42,867,768

a. Real Estate Loan 4,435,751 4,435,751 4,370,587 4,370,587 4,671,457 4,671,457

1. Residential Real Estate Loan (Except

Personal Home Loan up to Rs.10 Million) 554,870 554,870 427,930 427,930 353,620 353,620

2. Business Complex & Residential

Apartment Construction Loan 820,231 820,231 648,529 648,529 786,269 786,269

3. Income generating Commercial Complex Loan 614,565 614,565 569,284 569,284 610,300 610,300

Other Real Estate Loan

(Including Land purchase & Plotting) 2,446,085 2,446,085 2,724,845 2,724,845 2,921,267 2,921,267

b. Personal Home Loan up to 80 Lacs 3,270,349 3,270,349 2,753,004 2,753,004 2,446,109 2,446,109

c. Margin Type Loan - - - - - -

d. Term Loan 6,948,455 6,948,455 6,432,481 6,432,481 5,832,773 5,832,773

e. Overdraft Loan/TR Loan/WC Loan 24,555,456 24,555,456 24,246,954 24,246,954 22,402,265 22,402,265

f. Others 8,435,519 8,435,519 7,297,442 7,297,442 7,515,164 7,515,164

2.5 Fixed Assets 878,461 872,322 881,988 875,667 894,495 887,543

2.6 Non Banking Assets - - - - - -

2.7 Other Assets 2,217,414 2,148,064 1,804,844 1,782,870 1,559,863 1,548,965

Contd.


175

Unaudited Financial HighlightsFor the period ending on 4th Quarter of FY 2012/13

Schedule 4(A)

FOR THE PERIOD ENDING ONS.N.PARTICULARS 15 JULY 2013 13 APRIL 2012 15 JULY 2012 (AUDITED)

GROUP NABIL GROUP NABIL GROUP NABIL

3. Profit and Loss Account 4 Quarters This Year 3 Quarters This Year 4 Quarters Last Year

3.1 Interest Income 5,721,591 5,702,123 4,218,025 4,204,779 6,145,751 6,133,739

3.2 Interest Expense 2,186,301 2,186,185 1,679,977 1,679,677 3,152,940 3,155,490

A Net Interest Income (3.1-3.2) 3,535,290 3,515,938 2,538,048 2,525,102 2,992,811 2,978,249

3.3 Fees,Commission and Discount 405,255 393,051 342,176 332,560 367,676 364,075

3.4 Other Operating Income 223,080 209,905 110,536 100,944 207,296 201,085

3.5 Foreign Exchange Gain/Loss (Net) 489,051 489,051 342,522 342,522 447,070 447,070

B Total Operating Income (A+3.3+3.4+3.5) 4,652,676 4,607,945 3,333,283 3,301,129 4,014,853 3,990,479

3.6 Staff Expenses 652,339 646,751 394,330 390,356 505,009 500,713

3.7 Other Operating Expenses 476,318 468,780 345,690 338,200 432,881 428,597

C Operating Profit Before Provision (B-3.6-3.7) 3,524,019 3,492,414 2,593,262 2,572,573 3,076,963 3,061,169

3.8 Provision for Possible Losses 492,700 492,700 480,289 480,289 413,949 413,949

D Operating Profit (C-3.8) 3,031,319 2,999,714 2,112,973 2,092,284 2,663,014 2,647,221

3.9 Non Operating Income/(Expenses) Net 10,422 17,832 1,587 1,587 9,940 13,840

3.10 Write Back of Provision for Possible Loss 490,714 490,714 305,365 305,365 - -

E Profit from Regular Activities (D+3.9+3.10) 3,532,455 3,508,260 2,419,925 2,399,236 2,672,954 2,661,060

3.11 Extra Ordinary Income/Expenses (Net) (17,454) (17,454) 6,557 6,557 (3,037) (3,037)

F Profit before Bonus and Taxes (E+3.11) 3,515,001 3,490,806 2,426,482 2,405,793 2,669,917 2,658,024

3.12 Provision for Staff Bonus 319,593 316,720 220,589 218,708 243,074 241,639

3.13 Provision for Tax 958,271 950,762 658,147 653,445 723,698 720,109

G Net Profit/(Loss) (F-3.12-3.13) 2,237,136 2,223,323 1,547,745 1,533,639 1,703,145 1,696,276

3.14 Share of Non-Controlling Interest

on Profit of Subsidiary 5,558 - 3,627 - 2,769 -

H Net Profit/(Loss) (G-3.14) 2,231,579 2,223,323 1,544,118 1,533,639 1,700,376 1,696,276

AS AT4. RATIOS & OTHERS (%) 15 JULY 2013 13 APRIL 2012 15 JULY 2012 (AUDITED)

4.1 Capital Fund to RWA 13.29 13.17 12.93 12.85 11.18 11.01

4.2 Non Performing Loan (NPL) to Total Loan 2.13 2.13 3.40 3.40 2.33 2.33

4.3 Net Non Performing Loan to Net Loan 0.45 0.45 1.17 1.17 0.38 0.38

4.4 Cost of Funds 4.36 4.36 4.59 4.59 6.85 6.85

4.5 CD Ratio (as per NRB Directive) 74.42 74.43 76.60 76.33 74.69 74.65

Contd.

SHAREHOLDERINFORMATION

06

06

OWNERSHIP

STRUCTURE OF NABIL

GENERAL

PUBLIC

30%

NB INTERNATIONAL

LIMITED

50%

NIDC DEVELOPMENT

BANK

5.07%

OTHER

ENTITIES

10%

OTHER

PROMOTER

GROUP

4.93%

REPRESENTATION INTHE BOARD OF DIRECTORS

Representation of “A” class shareholders(in relation to 50% interest of NB International Ltd.)

1. Mr. K.B. Manandhar

2. Mr. Nirvana Chaudhary

3. Mr. Dayaram Gopal Agrawal

4. Mr. Mohiuddin Ahmed

Representation of “B” class shareholders(in relation to 20% interest of NIDC, other

institutional investors and other promoters group)

1. Mr. K.P. Acharya

Representation of “C” class shareholders(in relation to 30% interest of public shareholders)

1. Mr. Shambhu Prasad Poudyal

2. Mr. Ashish Sharma

STRUCTURE OF SHARE CAPITAL


177

As at balance sheet date (15th July 2013), the Bank’s share registrar,

M/s Nabil Investment Banking Ltd. has recorded following details of shareholders:

Nabil Bank’s shares are traded on the Nepal Stock Exchange Ltd. (NEPSE) with stock

symbol "NABIL" for ordinary shares and "NABILP" for promoter shares.

SHAREHOLDING RANGE NO. OF SHAREHOLDERS TOTAL SHARES HELD

1-100 4,001 216,645

101-500 4,683 1,212,391

501-1000 1,041 751,585

1001-2500 1,200 1,993,479

2501-5000 248 867,648

5001-10000 89 623,457

10001-25000 36 549,403

25001-50000 12 477,541

50001-100000 7 552,209

Above 100000 11 17,124,056

Total 11,328 24,368,414

SHAREHOLDER’S PROFILE

STOCK SYMBOL

06

06

Nabil Bank Limited

178

ANNUAL GENERAL MEETING

The 29th Annual General Meeting (AGM) of the Bank

will be held on 27th December 2013 at 1:00 p.m.

Following agendas will be discussed in the meeting.

ORDINARY RESOLUTION

1. To receive and adopt Directors’

Report – 2012/13;

2. To receive and approve Balance Sheet as

of 15th July 2013, Profit/Loss Account and

Cash Flow Statement for the year ended

thereat, together with Auditor’s Report;

3. To approve consolidated books of

accounts i.e. including books of accounts of

Bank’s subsidy Nabil Investment Banking

Limited for F.Y. 2012/13;

4. To approve cash dividend @ 40% of the

Paid-up Capital (i.e Rs.40/- per share) as

proposed by the Board; and

5. To appoint Auditor(s) for the financial year

2013/14 (2070/71) and to fix the auditor’s

remuneration as per Section 111 of the

Companies Act 2006.

(Proviso to Section 60(2) of the Bank and

Financial Institutions Act – 2006 (B.S.

2063), present Auditor M/s CSC & Co. will

be eligible for re-appointment)

SPECIAL RESOLUTION

1. To ratify the amendment of Bank’s

Memorandum of Association and to

authorize Board of Directors for needful

adjustment in case of changes made by the

Nepal Rastra Bank in the proposed

amendment.

2. To increase authorized capital of the Bank

to NRs.3,100,000,000 (in words rupees

three billion and hundred million).

3. To increase the issued and paid capital to

NRs.3,046,051,750 by issuing bonus

shares at the ratio of 4:1 (for every 4 share

to issue 1 share or 25% of each share) from

the profit of year that ended on July 15,

2013 and to approve the adjustment in paid

up capital, keeping intact the shareholding

ratio, due to adjustment of fraction share

into whole from the cash dividend as a

consequence of issuance of bonus shares in

such proportion.

All resolutions considered at 28th AGM held

on 17th October 2012 were ratified by the

shareholders in the meeting.

06


179

SHAREHOLDER ENQUIRIESAND COMMUNICATION

COMMUNICATION

All information related and relevant to

shareholders that are necessary and

mandatory in accordance to law is

communicated via print media (national

daily) and electronically through Bank’s

official website www.nabilbank.com. The

detailed information of AGM including

agendas that will be discussed is notified

publicly through national daily 21 days

before the date of AGM. Similarly, interim

financial highlights are published within the

stipulated deadline of 30 days prescribed by

Securities Exchange Board of Nepal. These

statements along with Basel II Disclosures as

prescribed by Point 7.4(b) of Capital

Adequacy Framework 2007 (updated July

2008) under Directive 1 of NRB Unified

Directives are posted in the Bank’s official

website.

ENQUIRES

Any enquiries related to the shareholders of

Nabil Bank on the share register viz.,

maintenance of shareholder’s record, share

transfer including domestic transfer in case

of death of a shareholder, replacement of lost

share certificate, pledge of shares, dividend

warrants/bonus shares declared and ratified

by the AGM, payment against dividend/ lost

warrant should be sent at the address given

below:

Nabil Investment Banking Ltd.

Naxal, Narayan Chaur, Kathmandu, Nepal

Tel: -977-1-4411604, 4411733

Fax: -977-1-4410554

Email: [email protected]

Web: www.nabilinvest.com.np

06

Nabil Bank Limited

180

TAXATION ON DIVIDENDSAND SHARES

TAXATION ON DIVIDENDS

(CASH AND BONUS DIVIDENDS)

Pursuant to Section 88(2) of the Income Tax

Act 2002, the tax on dividend received by

the shareholders of Nabil Bank from the

Nabil Bank is subject to withholding tax at

the rate of 5%. The tax is final withholding

tax as per Section 92(1)(a) of the Act and

need not require further assessment while

filing annual tax return under Section 96.

However, the dividend distributed by the

Bank from the dividend earned from the

resident company is not subject to tax at the

time of its distribution as per Section 54(3).

The Bank has received dividend

NRs.61,323 thousand from the resident

companies from financial year 2001-02 till

2012-13.

Capitalization of profits is deemed as

distribution under Section 53(1)(b) of the

Act and hence, issuance of bonus shares by

the Bank from the profits earned (excluding

dividend received) is subject to withholding

tax at the rate of 5% under Section 88(2).

CAPITAL GAINS ON

DISPOSAL OF SHARES

Pursuant to clause (a) of Section 95A(2) of

the Income Tax Act, 2002 (amended by

Finance Ordinance 2013), the gain on

disposal of shares listed in Securities Board

of Nepal computed as per Section 37 of the

Act is subject to withholding tax at the rate

of 5%, in case, the beneficiary of the gain is

resident natural person and at the rate of

10%, in case of any other person other than

resident natural person. Shares of Nabil

Bank are listed both in Securities Board of

Nepal and Nepal Stock Exchange for the

purpose of public trading and therefore the

gain on disposal of Bank’s shares are subject

to withholding tax in accordance to clause

(a) of Section 95A(2).

Gain or loss arising from disposal of shares

under Section 37 of the Act shall be the

amount that is determined by reducing the

amount incurred while acquiring the shares

with the amount that is received at the time

of its disposal. The amount of disposal in

case the Nabil Bank’s shares are sold

through stock exchange shall be the net

amount received from the buyer less

brokerage and other costs incurred during

the transaction. The costs incurred for the

shares by the way of an acquisition through

stock exchange shall be the amount paid to

the beneficiary plus all costs attributable to

the acquisition. Further, the costs incurred

for the shares by the way of transfer from the

deceased person shall be the market value

prevailing immediately before the death of

the transferor. The tax being withheld on the

gains arising from disposal of shares is an

advance tax and the tax credit is available at

the time of filing annual tax returns.

S.N. YEAR NRS.

1 FY 2001-02 (2058-59) 323,000

2 FY 2002-03 (2059-60) 418,000

3 FY 2003-04 (2060-61) 456,000

4 FY 2004-05 (2061-62) 476,853

5 FY 2005-06 (2062-63) 469,205

6 FY 2006-07 (2063-64) 720,323

7 FY 2007-08 (2064-65) 1,850,862

8 FY 2008-09 (2065-66) 2,409,200

9 FY 2009-10 (2066-67) 7,764,735

10 FY 2010-11 (2067-68) 10,526,931

11 FY 2011-12 (2068-69) 16,073,799

12 FY 2012-13 (2069-70) 19,834,571

Total 61,323,479

06

07

BFIs/Insurance Companies Mid July 2013 Mid July 2012

Commercial Banks 31 32

Development Banks 86 88

Finance Companies 59 70

Microfinance Institutions 31 24

Co-operatives Licensed by NRB (for Limited Banking Services) 16 16

NGOs Licensed by NRB (for Microfinance activities) 31 36

Insurance Companies 25 25

NABILINVESTMENTBANKING LIMITED

DIRECTORS’ REPORT

Respected Shareholders,

On behalf of Nabil Investment Banking

Limited, I would like to welcome all the

shareholders in the Fourth Annual General

Meeting (AGM) of the Company. Nabil Bank

Limited with its mission to be the First Choice

Provider of Complete Financial Solutions

incepted "Nabil Investment Banking Ltd.

(Nabil Invest)" as a Subsidiary so as to develop

the company as Investment Banker of First

Choice in the long run introducing innovative

products and services in the Nepalese capital

market.

I will be presenting achievements of the

Company during the review FY 2012/13,

policies and strategies adopted by and future

plans of the Company in this AGM which shall

be passed after your approval. In this context,

I would like to seek your consent for

presenting audited financials of the company

for the review period including Balance Sheet,

Income Statement and Cash Flow Statement

for your approval. I request you all to discuss

and approve the same.

Now, I proceed to briefly inform the overall

capital market situations along with expansion

in financial systems of the Country during the

review fiscal year:

Deposit mobilization and credit extension of

banks and financial institutions licensed by

Nepal Rastra Bank as of mid July 2013 stood

at NPR 1252 billion 890 million and NPR

987 billion 770 million respectively compared

to NPR 1076 billion 620 million and NPR

807 billion 570 million as of mid July 2012

having increased by 17.4% towards deposit

mobilization and 18.6% towards credit

extension in FY 2012/13. The growth rate of

deposit mobilization being lesser than the

growth rate of loans & advances has resulted

lower liquidity in the banking industry.

SECURITIES MARKET:

The main glimpses of securities market of the

country during FY 2012/13 are as follows:

a. FY 2012/13 witnessed remarkable

improvements in the securities market. By the

mid of July 2013 NEPSE index reached a level

of 518.3 points with an increase of 33 percent

over the previous year same period where it

was 389.7 points.

b. During the review period securities

transactions volume recorded a significant

growth of 114.5 percent as compared to

previous year. During FY 2012/13 NEPSE

posted a transaction volume of NPR 22.05

EXPANSION IN FINANCIAL SYSTEM:

The number of BFIs and Insurance Companies as of July 15, 2013 are as follows:

Source: Websites of NRB and Insurance Board

For the Fiscal Year 2012/13

Nabil Bank Limited

182

billion comprising of 81.6 million units of

shares while it was NPR 10.26 billion of 41.9

million shares in the previous year.

c. The number of listed companies with

NEPSE reached 230 by the mid July 2013

whereas it was 216 in mid July 2012.

d. In the review period, the market

capitalization of listed companies increased by

39.7 percent to be NPR 514 billion as

compared to market capitalization of NPR 368

billion in the previous fiscal year.

e. Banks and Financial Institutions including

Insurance Companies constitute 71.7%,

Manufacturing and Processing Companies 3%,

Hotels 1.7%, Trading Organizations 0.2%,

Hydropower Companies 6% and Others

17.4% share in the total market capitalization

of listed companies. The trend of dominating

the capital market by BFIs continues this year

as in the past.

f. The total value of listed securities as of July

15, 2013 increased by 14% as compared to

previous year and reached to NPR 126.06

billion.

g. During the review period, 14 Securities

Business Persons (Merchant Banker) licensed

by SEBON have been providing their services

of Issue Management, Share Registration,

Portfolio Management and Underwriting in

accordance with their paid up capital.

h. During the review period, SEBON approved

issuance of common shares (IPO) of 23

corporate bodies comprising NPR 3.11 billion,

right issues of 5 companies comprising NPR

3.93 billion and debenture issue of 7

commercial banks consisting of NPR 3.55

billion.

In the previous year, SEBON approved

issuance of common shares (IPO) of 15

corporate bodies comprising NPR 4.05 billion,

right issues of 7 companies comprising NPR

0.45 billion and debenture issue of 4

commercial banks consisting of NPR 1.50

billion.

SUMMARY OF FINANCIALINFORMATION OF FY 2012/13The major activities of the company and its

financial highlights during FY 2012/13 have

been presented below:

A) MAJOR ACTIVITIES

Issue Management: During the review period,

the Company, as joint issue manager,

successfully managed IPOs of three

commercial banks and debenture issues of two

commercial banks. The company has been

providing debenture trusteeship services to five

commercial banks.

Portfolio Management Service: As per the

objective of the company to cater its services

to the investors, the company has been

providing Portfolio Management Services to its

wide clientele in a professional manner.

Mutual Fund: The Sponsor Nabil Bank

appointed Nabil Invest, an institution licensed

by SEBON to render Fund Management

services to the schemes of Nabil Mutual Fund.

During the review period, the Company as the

Fund Manager successfully launched Nabil

Balanced Fund I under the Nabil Mutual Fund,

Due to the overwhelming response from the

market, the issue was highly oversubscribed

and hence 75 million units of NPR 10 each

were allotted against the issue size of 60

million units of NPR 10 each as per the

prevailing Mutual Fund Regulation.

The Company has also been rendering

Depository services to the unit holders of Nabil

Balanced Fund I as per its license obtained

from SEBON & in line with the provisions of

prevailing regulations on mutual funds.

Depository Participant and Registrar to

Shares: The Company has obtained the DP

license from SEBON and took the membership

of CDS and Clearing Limited in order to

provide DP services to its clientele. The

required logistics and infrastructure have also

been prepared. The company started rendering

RTS services to Nabil Bank Limited and

Swabalamban Laghubitta Bikas Bank Limited

from its Anamnagar premises in the review

period.

Corporate Advisory Service: The Company has

already prepared the Product Papers and SIM

to launch Corporate Advisory Services like

Loan Syndication and Merger & Acquisition

Advisory Services. The Company is exploring

business opportunities in these new areas and

reached a few institutions in order to provide

such services. In addition, the Company also

provided advisory services to few institutions

in the form of Investment Advisory and

Business Valuation Reports during the review

period.

During FY 2012/13, the company has earned

about NPR 7.1 million from securities

business (including PMS), NPR 3.7 million

from mutual fund and remaining income

constitute the return from investment of its

share capital and service fees in lieu of various

administrative/operational supports provided to

its promoter Nabil Bank Limited. The company

expects to generate additional revenue from

DP and share registration services, loan

syndication and merger & acquisitions services

under corporate advisory services and from

second scheme under Nabil Mutual Fund

providing fund management and depository

services to it in the current fiscal year.


183

PARTICULARS NPR IN THOUSAND NPR IN THOUSAND GROWTH (%)FY 2012/13 FY 2011/12

Share Capital 105,000 105,000 -

Total Assets 284,038 253,093 12.23

Total Income 51,695 28,522 81.25

Total Expenses 20,650 12,728 62.24

Operating Profit 31,045 15,794 96.56

Net Profit (After Employees Bonus and Tax) 21,167 10,769 96.55

Proposed Dividend 15,750 10,500 50.00

No. of Shares (in thousands) 1,050 1,050 -

Earnings Per Share (Rs.) 20.16 10.26 96.57

Return on Assets (Rs.) 16.39 9.13 79.54

Net worth per Share (after Dividend)(Rs.) 108.01 102.36 5.52

The amount to be refunded to the applicants

after allotment of the IPO amounting to NPR

100 million (approx.) has been placed in

various Bankers to the Issue (BTI) accounts.

The company attained a growth of approx.

12% in its total assets in the review period

2012/13 because of increased balance in the

BTI accounts and income generating activities

carried out by the company during the year.

The company witnessed an encouraging

growth of 96% in net profits in the review

period as compared to previous period.

Similarly, total income of the company has

increased by 81% whereas total expenses

have increased by 62% in the review period.

This shows that the overall transactions and

financial situation of the company remained

satisfactory during the review period. In the

previous year, the company distributed 10%

cash dividend (NPR 10.5 million) while this

year the company has proposed to distribute

15% cash dividend (NPR 15.75 million), an

increment of 50%.

The additional details as required by section

109(4) of prevailing Companies Act has been

presented in Annexure.

On behalf of the Board, I would like to express

sincere gratitude to all the customers, well-

wishers, promoter company Nabil Bank

Limited and its employees; and institutional

shareholder CG Finco Pvt. Ltd. for their

continuous support and cooperation. I also

thank all the Regulators for their cooperation

and guidance. I appreciate tremendous

contributions made by Mr. Sabin Joshi,

Director and Mr. Rewat Bahadur Karki,

Independent Professional Director during their

association (till the acceptance of resignation)

with the company. I extend my sincere thanks

to Mr. Sujan Kumar Kafle of M/s Sujan Kafle &

Associates, Chartered Accountants for

professionally completing the audit of the

company for the review period and suggestion

and contributions made during the course of

audit. Similarly, my especial thanks go to all

the employees of the company for their

noteworthy contributions for achieving

objectives of the company and expect similar

contributions in the days ahead.

Thank you.

On behalf of the Board

Anil Gyawali

Chairman

B) FINANCIAL HIGHLIGHTS:

Nabil Bank Limited

184

INFORMATION UNDER SECTION 109(4)OF COMPANIES ACT, 2006

a) Business assessment of review fiscal year:

During the review period, the Company, as

joint issue manager, successfully managed

IPOs of three commercial banks and debenture

issues of two commercial banks. The company

has been providing debenture trusteeship

services to five commercial banks.

The company has already started rendering

full fledge PMS services with an objective of

establishing the company as “Investment

Banking” company in addition to Issue

Manager. The company has brought Nabil

Balanced Fund I under Nabil Mutual Fund into

operation in the review period. During the

review year, the company has made an action

plan of creating a separate unit for providing

Corporate Advisory Services in full fledge from

the coming year and has performed a few

Business Valuation jobs.

b) Any impact that caused to the business of

the company due to national and

international condition:

In the context of Nepalese capital market not

being directly linked with International

markets, the changes in the international

conditions do not have significant impact on

Nepalese market. However, few impacts can

be observed sometimes.

If the political situations of the country move

towards positive direction, Nepal can be

benefitted a lot from the attractive economic

growth of its neighboring countries China and

India which ultimately result positive impact

on the business of the company.

The new investors have not attracted towards

the capital market of Nepal as the Nepalese

capital market has not become lucrative for a

long period. Because of this, there were less

participation in the IPO and Rights issued by

majority of the companies except commercial

banks and microfinance development banks.

Therefore, while providing underwriting

services by the company, the overall financial

conditions of Issuer Company need to be

correctly evaluated. SEBON has already issued

policies, regulations and directives relating to

mutual fund, credit rating and central

depository system and accordingly institutions

have made their presence in the market to

provide such services. It can be expected that

these new services will have a positive impact

to boost the market in the days to come.

Similarly, there will be positive impact on the

market if elections for Constituent Assembly

completes within the deadline in a fearless

environment.

c) Current year’s achievement until the date

of preparation of Report from the Board of

Directors view on future activities of the

company:

The company has already signed an

agreement as Issue Manager for IPO of a

commercial bank and Debenture Issue

(through public and private placement) of

another commercial bank till the date of this

report.

The company has successfully launched Nabil

Balanced Fund I under Nabil Mutual Fund and

serving as Fund Manager and Depository to

the Scheme. Similarly, the Company has

obtained the DP license from SEBON and took

the membership of CDS and Clearing Limited

in order to provide DP services.

The company shall improvise the above

services; the existing services rendered by the

company and adopt the services rendered by

the regional investment bankers as per need in

the context of Nepalese market so as to cater

high level services to its customers. For this,

the company will make necessary coordination

with the regulators.

d) Industrial and professional relation of the

company:

The company has been maintaining cordial

relationship with industrial and professional

corporate bodies and enhancing its business

substantially therefrom. The company has

always placed high priority to the compliance

with related acts, laws and directives issued

by the regulators from time to time. The

company has been conducting its business on

the basis of healthy competition to other

licensed merchant bankers. The company has

been contributing growth of overall capital

market with association with the Merchant

Bankers’ Association in the capacity of General

Secretary. There is amicable relationship

between the management and other

employees in the company.

e) Board of Directors:

The details of Board of Directors and the Chief

Executive Officer have been presented below:

Mr. Anil Gyawali - Chairman

Mr. Krishna Dutta Bhattarai - Director

Mr. Kapil Adhikari - Director

Mr. Krishna Kumar Pradhan -

Independent Professional Director

Mr. Mahesh Kumar Karki -

Independent Professional Director

Mr. Pravin Raman Parajuli -

Chief Executive Officer/Company Secretary

During the review period, Mr. Sabin Joshi,

Director and Mr. Rewat Bahadur Karki,

Independent Professional Director tendered

their resignation due to business and personal

reasons respectively. Both the resignations

were approved the Board.

f) Board of Directors response on

Independent Auditor’s Report:

The audit of review period was carried out by

auditor Mr. Sujan Kumar Kafle of M/s Sujan

Kafle & Associates, Chartered Accountants

appointed unanimously by the third AGM of

the company. The Board discussed the

auditor’s report and unanimously approved the

audited annual accounts, Balance Sheet, Profit

& Loss A/c, P/L Appropriation A/c and Cash

Flow Statement of the company.

07


185

g) Details of shares forfeited:

The company has not forfeited any shares.

h) Review of the progresses made by the

company and its subsidiary and the position

of the same at the end of the fiscal year:

The progresses made and major activities

undertaken by the company during the review

period have already been mentioned above.

The company does not have any subsidiary.

i) Any information given to the company by

its fundamental shareholders:

The information provided by promoter

shareholder Nabil Bank Limited under group A

and institutional shareholder CG Finco Pvt.

Ltd. under group B have been maintained by

the company.

j) Shares held by the directors and officials of

the company and information received by the

company on their involvement in trading

shares:

The directors of the company have been

nominated by institutional shareholders and

the directors have no shareholding and

involvement of trading thereon. The same fact

applies in case of independent professional

directors.

k) Information provided on personal interest

of Board of Directors and their close relatives

regarding contract or agreement done with

the company:

The company has not received any such

information.

l) Buy back of shares by the company and

information pertaining to this:

The company has not bought back any shares

m) Information of internal control system:

The internal audit of the company for the

review period was carried out by the Internal

Audit Department of the bank as per the

provision of Service Level Agreement entered

between the bank and the company. Further,

the Board of the company has approved

Financial Administration Bylaws, HR Bylaws

including Product Paper and Standard

Instruction Manual (SIM) of services rendered

for maintaining effective internal control

system and enhancing service quality.

n) Details of management expenses incurred

during the year:

The total management expenses under the

heading of employee and administrative

expense incurred by the company during the

review period is NPR 15,069,450.

o) Remuneration, allowances and benefits

paid to directors, managing director, chief

executive officer and officials:

The Articles of Association of the company lays

down a provision of granting meeting allowance

of NPR 10,000 to the chairman and directors

in each meeting of the Board. Accordingly, the

company has paid NRs. 100,000 to its

Professional Independent Directors as meeting

fee during the review period. However, the

Board of Directors representing the Bank & CG

Finco Pvt. have decided not to accept any

meeting fees until otherwise decided at a later

stage. The Company does not provide any other

financial benefits to its Board of Directors

except meeting fee to the Professional

Independent Director.

The employees of the company are being

provided remuneration, allowances and

benefits as provided in the Employees’ Bylaws

of the company approved by the Board. In

case of employees deputed by the promoter

bank, the remuneration, allowances and

benefits have been provided as per the Bylaws

of the bank and agreements between the bank

and the company. Accordingly, the total

employee benefits paid to Chief Executive

Officer of the company in the review period

amounts to NPR 1.91 Million.

p) Income Tax:

The company has provided NPR 7,055,828

for income tax liability for the review period

which was calculated at the rate of 25% on

net profit (after provision for staff bonus) of

NPR 28,223,313 i.e. NPR 7,257,694 and

adjusting deferred tax of NPR 201,866

thereon.

q) Location of office:

The company currently has its office at

Chabahil, Kathmandu.

r) Technology:

The company has been using Accounting

Software purchased from MicroBanker Pvt.

Ltd. for recording all financial and accounting

transactions. Similarly, the company has been

using different software developed by local

vendor for transactions relating to issue

management, RTS, PMS and fund

management and depository under mutual

fund. In addition, the company is operating its

separate official website.

Nabil Bank Limited

186

Balance Sheetas at 15 July 2013 (31 Ashadh 2070)

CAPITAL & LIABILITIES SCHEDULE THIS YEAR Rs. PREVIOUS YEAR Rs.

Share Capital 1 105,000,000 105,000,000

Reserves and Surplus 2 24,165,108 12,975,223

Other Liabilities and Provisions 3 154,873,861 135,118,050

Proposed Dividend - -

Total 284,038,969 253,093,273

ASSETS SCHEDULE THIS YEAR Rs. PREVIOUS YEAR Rs.

Cash and Bank Balance 4 110,535,802 128,243,001

Fixed Assets 5 6,139,204. 6,952,017

Investments 6 98,382,600 107,000,000

Other Assets 7 68,981,363 10,898,255

Total 284,038,969 253,093,273

Significant Accounting Policies Schedule 12

Notes to Accounts Schedule 13

Nabil Investment Banking LimitedChabahil, Kathmandu, Nepal

Schedules 1 to 7 form integral part of the Balance Sheet.

Suman Kumar BoharaHead-Accounts

Pravin Raman ParajuliChief Executive Officer

Anil GyawaliChairman

As per our report of even date.

Krishna Dutta BhattaraiDirector

Kapil AdhikariDirector

Krishna Kumar PradhanProfessional IndependentDirector

Sujan Kumar Kafle, FCAFor and on behalf of sujankafle & Associates CharteredAccountants

Mahesh Kumar KarkiProfessional IndependentDirector

DATE: September 15, 2013PLACE: Chabahil, Kathmandu


187

Income Statement(For the period from 16July 2012 to 15 July 2013)


Income

Commission Income 8 12,424,269 3,601,182

Interest Income 22,454,763 14,632,926

Other Income 9 16,816,641 10,287,962

Total Income 51,695,673 28,522,070

Expenses

Personnel Expenses 10 5,603,220 4,296,050

General Operating Expenses 11 9,466,230 6,646,989

Depreciation Charge 5 1,992,333 1,714,052

Interest Expenses 3,588,246 71,014

Total Expenses 20,650,029 12,728,105

Operating Profit 31,045,644 15,793,965

Profit from Regular Activities 31,045,644 15,793,965

Provision for Staff Bonus 2,822,331 1,435,815

Profit Before Income tax 28,223,313 14,358,150

Provision for Income Tax 7,055,828 3,589,538

Current Tax 7,257,694 3,602,948

Deferred Tax (201,866) (13,410)

Net Profit/(Loss) for the year 21,167,485 10,768,612

Schedules 8 to 11 form integral part of the Income Statement.











Nabil Bank Limited

188

Profit and Loss Appropriation AccountFiscal Year 2012/13 (2069/2070)


Income

Accumulated Profit up to Last Year (Restated Balance) 12,975,223 7,456,611

Current Year's Profit 21,167,485 10,768,612

Deferred Tax Reserve - -

Total 34,142,708 18,225,223

Expense

Accumulated Loss up to Last Year - -

Current Year's Loss - -

Deferred Tax Reserve 154,845 -

Dividend Payment 10,500,000 5,250,000

Total 10,654,845 5,250,000

Retained Earnings 23,487,863 12,975,223












189

Cash Flow Statement(For the period from 16July 2012 to 15 July 2013)


(a) Cash Flow from Operating Activities (26,999,123) 129,732,575

1. Cash Received from Income 39,864,029 25,001,317

1.1 Income from Merchant Banking Operation 12,424,269 3,601,182

1.2 Interest Income 10,623,119 11,112,173

1.2 Other Income 16,816,641 10,287,962

2. Cash Payment (26,423,317) (14,690,627)

2.1 Personnel Expenses (7,039,035) (4,296,050)


2.3 Interest Expenses (3,588,246) (71,014)

2.4 Income Tax Paid (6,329,806) (3,676,574)

Cash Flow before changes in Working Capital 13,440,712 10,310,690

(Increase)/Decrease in Current Assets (58,856,151) (5,236,448)

1. (Increase)/Decrease in Available for Sale and Trading Investments - -


Increase/(Decrease) in Current Liabilities 18,416,316 124,658,333

3. Increase/(Decrease) in Borrowings (2,000,000) 24,000,000

4. Increase/(Decrease) in Other Liabilities 20,416,316 100,658,333

(b) Cash Flow from Investment Activities 19,791,924 (22,576,168)

1. (Increase)/Decrease in HTM Investment 9,139,800 (23,600,000)




1. Increase/(Decrease) in Share Capital - -

2. Payment of Dividend (10,500,000) (5,250,000)


(e) Current Year's Cash Flow from All Activities (17,707,199) 101,906,407

(f) Opening Cash and Bank Balance 128,243,001 26,336,594

(g) Closing Cash and Bank Balance 110,535,802 128,243,001











Nabil Bank Limited

190

Statement of Changes in EquityFiscal Year 2012/13 (2069/70)

PARTICULARS SHARE RETAINED DEFERRED AVAILABLE TOTAL

CAPITAL EARNINGS TAX RESERVE FOR SALE RESERVE AMOUNT

Balance as on 16 July 2012 105,000,000 12,975,223 - 117,975,223

Changes in Accounting Policy - -

Share Capital Adjustment -

Changes in Tax Accounting Policy - -

Restated Balance 105,000,000 12,975,223 - 117,975,223

Net Gains and Losses not recognised in the Income Statement -

Net Profit for the period 21,167,485 21,167,485

Adjustments: -

Issuance of Share Capital - -

General Reserve Fund -

Proposed Stock Dividend -

Cash Dividend (10,500,000) (10,500,000)

Available for Sale Reserve 522,400 522,400

Dividend Equalization Fund - -

Deferred Tax Reserve (154,845) 154,845 -

Closing Balance 105,000,000 23,487,863 154,845 522,400 129,165,108

Rs.

Share Capital(As at 15 July 2013)


1. Share Capital

1.1 Authorized Capital 200,000,000 200,000,000

a) 2,000,000 Ordinary Shares of Rs. 100 each 200,000,000 200,000,000



1.2 Issued Capital 150,000,000 150,000,000




1.3 Paid Up Capital 105,000,000 105,000,000




1.4 Proposed Bonus Shares - -

1.5 Calls in Advance - -

Schedule 1


191

Share OwnershipPARTICULARS % THIS YEAR RS. % PREVIOUS YEAR RS.

1. Local Ownership 100.00 105,000,000 100.00 105,000,000

1.1 Government of Nepal - - - -

1.2 "Ka" Class Licensed Institutions 74.29 78,000,000 74.29 78,000,000

1.3 Other Licensed Institutions - - - -

1.4 Other Entities 25.71 27,000,000 25.71 27,000,000

1.5 General Public - - - -

1.6 Others - - - -

2. Foreign Ownership - - - -

Total 100.00 105,000,000 100.00 105,000,000

Reserves & Surplus(As at 15 July 2013)


1. Deferred Tax Reserve 154,845 -

2. Available for Sale Reserve 522,400 -

3. Retained Earnings 23,487,863 12,975,223

Total 24,165,108 12,975,223

Schedule 2

Other Liabilities & Provisions(As at 15 July 2013)


1. Accounts Payable 119,287,004 109,207,831

2. Provision for Audit Expense - 45,000

3. Provision for Expenses 323,708 64,900


5. Deferred Tax Liability - 47,021

6. Short Term Loan 22,000,000 24,000,000

7. Others 10,440,818 317,483

Total 154,873,861 135,118,050

Schedule 3

Details of Shareholders Holding ≥ 0.5% SharesS.N. PARTICULARS THIS YEAR

% Rs.

1 Nabil Bank Limited 74.29 78,000,000

2 CG Finco Pvt. Ltd. 25.71 27,000,000

3 General Public - -

Nabil Bank Limited

192

Cash and Bank Balance(As at 15 July 2013)


Cash Balance - 10,000

Petty Cash Fund - 10,000

Current Account (4,715,934) 10,000

1. Nepal Rastra Bank - -

2. Nabil Bank Limited (7,208,372) -

3. Everest Bank Limited 35,392 10,000

4. Sunrise Bank Limited 143,808 -

5. NIDC Development Bank Limited 617,987 -

6. Nabil Bank Limited - RTS 191,316 -

7. Civil Bank Limited 472,052 -

8. Commerz & Trust Bank Nepal Limited 301,922 -

9. Grand Bank Nepal Limited (Current A/c - PMS) 182,864 -

10. Janata Bank Nepal Limited (Current A/c - PMS) 20,310 -

11. Global IME Bank Limited (Current A/c - PMS) 114,238 -

12. Citizens Bank International Limited (Current A/c - PMS) 206,194 -

13. Clean Energy Development Bank Limited 206,355 -

Call Account 7,787,172 18,007,439

1. Nabil Bank Limited 4,806,383 4,459,769

2. Pacific Development Bank Limited 36,881 34,863

3. Sanima Bank Limited 96,513 13,512,807

4. Nabil Bank Limited -RTS (SWBBL) 2,847,395 -

Bankers to the Issue Account 107,464,564 110,215,562


2. Mega Bank Nepal Limited 851,380 73,270

3. NMB Bank Limited 583,365 909,001

4. Commerz & Trust Bank Nepal Limited 31,986 277,527

5. Civil Bank Limited 5,000 5,000

6. Sunrise Bank Limited 1,172,332 84,378

7. Century Commercial Bank Limited 84,572 19,580

8. Janata Bank Nepal Limited 7,000 7,000

9. Nepal SBI Bank Limited 13,101 534,760

10. Siddhartha Bank Limited - 70,795

11. Global IME Bank Limited - 2,674,975

12. Laxmi Bank Limited 20,056 -

13. Bank of Asia Nepal Limited 1,672,632 -

14. Nabil Bank Limited - MF 7,874,375 -

15. Nabil Bank Limited (Mega Bank Limited - IPO) 696,959 -

16. Kumari Bank Limited 306,849 -

17. Machhapuchhre Bank Limited 163,031 -

18. Nepal Investment Bank Limited 7,484,490 -

Total 110,535,802 128,243,001

Schedule 4


193

Fixe

dAs

sets

(Asat15July2013)

Schedule5

PARTICULARS

ASSETS

THISYEARRS.

PREVIOUSYEARRS.

BUILDING

VEHICLES

FURNITURE

COMPUTER&

SOFTWARE

OTHERS

TOTAL

OFFICEEQUIPMENT

1.CostPrice

a.Pr

evio

usYe

arB

alan

ce-

3,2

53

,12

76

53

,41

52

,77

9,7

25

82

2,4

07

-7

,50

8,6

74

5,0

11

,75

3

b.Add

ition

durin

gth

eYe

ar-

-3

5,3

49

50

2,7

98

47

4,6

00

-1

,01

2,7

47

2,4

96

,92

1

c.R

eval

uatio

n/W

rite

Bac

kTh

isYe

ar-

--

--

--

-

d.So

lddu

ring

the

Year

--

--

--

--

e.W

rite

offd

urin

gth

eYe

ar-

--

--

--

-

TotalCost(a+b+

c+d+

e)-

3,253,127

688,764

3,282,523

1,297,007

-8,521,421

7,508,674

2.Depreciation

a.U

pto

Prev

ious

Year

-4

69

,85

02

36

,12

61

,33

4,2

14

16

6,8

16

-2

,20

7,0

06

98

4,5

39

b.Fo

rTh

isYe

ar-

55

6,6

55

11

1,6

87

62

2,0

58

18

2,5

61

-1

,47

2,9

61

1,2

22

,46

7

c.R

eval

uatio

n/W

rite

Bac

kTh

isYe

ar-

--

--

--

-

d.D

epre

ciat

ion

onSo

ldAss

ets

--

--

--

--

e.D

epre

ciat

ion

onW

riten

Off

Ass

ets

--

--

--

--

TotalDepreciation

-1,026,505

347,813

1,956,272

349,377

-3,679,967

2,207,006

3.BookValue(WDV*)(1-2)

-2,226,622

340,951

1,326,251

947,630

-4,841,454

5,301,668

4.Land

--

--

--

--

5.PendingCapitalization

--

--

--

--

6.LeaseholdAssets

--

--

-1,297,750

1,297,750

1,650,349

Total(3+4+5+6)

-2,226,622

340,951

1,326,251

947,630

1,297,750

6,139,204

6,952,017

Investments(As at 15 July 2013)


Fixed Deposits 12,875,000 8,000,000


2. NIDC Development Bank Limited 4,875,000 -

Bonds & Debentures 85,507,600 99,000,000

1. 12.5% Nepal SBI Bank Limited Debenture 60,000,000 60,000,000

2. 11% Siddhartha Bank Limited Debenture 15,000,000 15,000,000

3. 10% Global Bank Limited Debenture - 24,000,000

4. 8% Laxmi Bank Limited Debenture - -

5. Siddhartha Mutual Fund 552,000 -

6. Commerz & Trust Bank Nepal Limited- IPO 1,646,400 -

7. Nabil Balanced Fund I (Seed Capital) 7,500,000 -

8. NLG Insurance Company Limited - IPO 78,300 -

9. Mega Bank Nepal Limited - IPO 730,900 -

Total 98,382,600 107,000,000

Schedule 6

Other Assets(As at 15 July 2013)


1. Deferred Tax Assets 154,845 -

2. Account Receivables 30,485,692 6,330,282

3. Advance Tax (Net of Tax Liability) 3,599,013 4,526,901

4. Deposit for Telephone 112,000 12,000

5. Advance Salary - -

6. Others 34,629,813 29,072

Total 68,981,363 10,898,255

Schedule 7

Commission Income(For the period from 16July 2012 to 15 July 2013)


1. Issue Management Commission 6,853,731 2,133,809

2. Underwriting 1,477,326 210,000

3. Registrar to Issue 633,878 -

4. Portfolio Management Services 3,459,334 1,257,373

Total 12,424,269 3,601,182

Schedule 8

Nabil Bank Limited

194


195

Other Income(For the period from 16July 2012 to 15 July 2013)


1. Operational Support/Advisory Fees 9,981,575 10,161,472

2. Fund Management Fees (NBF I) 2,777,982 -

3. Depository Fees (NBF I) 925,994 -

4. Business Advisory 511,200 -

5. Miscellaneous Income 2,619,890 126,490

Total 16,816,641 10,287,962

Schedule 9

Personnel Expenses(For the period from 16July 2012 to 15 July 2013)


1. Salary 2,666,914 1,946,405

2. Allowances 1,997,282 1,280,588

3. Contribution to Provident Fund 222,411 171,726

4. Overtime - -

5. Training Expenses 55,000 156,240

6. Uniform Expenses - -

7. Dashain Expenses 314,128 275,871

8. Staff Insurance Premium 106,247 75,916

9. Contract Staff Expenses 8,000 150,281

10. Leave Encashment 233,238 239,023

Total 5,603,220 4,296,050

Schedule 10

Nabil Bank Limited

196

General Operating Expenses(For the period from 16July 2012 to 15 July 2013)


1. Supplies and Stationeries 226,245 114,551

2. Communication Expenses 167,267 109,597

3. Expenses relating to Audit

a. Audit Fees 50,000 45,000

b. Other Expenses 2,558 1,610

4. Repairs & Maintenance 502,705 179,485

5. Water 63,547 47,133

6. Electricity 205,162 131,844

7. Janitorial 56,737 17,373

8. Advertisement Expenses 256,306 449,335

9. Insurance - Fire & Others 28,517 57,717

10. Board Meeting Fees 100,000 60,000

11. Professional Services - Others 645,063 720,060

12. Technical Management Service Fees 3,873,100 3,577,202

13. Fuel Expensses - Vehicle 354,508 188,293

14. Fuel Expensses - Generator 267,156 76,529

15. Newspapers/Periodicals/ Books 18,021 13,349

16. Tea, Coffee & Snacks 255,014 123,526

17. Membership Fees 70,000 20,000

18. Other Taxes & Fees (SEBON) 425,000 246,869

19. Vehicle Registration & Renewal 58,615 36,980

20. Contract Service Expenses 1,236,564 383,574

21. Miscellaneous Expenses 51,202 31,285

22. AGM Expenses 8,421 11,716

23.Travelling Expenses 144,475 2,780

24. AMC Charges 354,477 -

25. Bank Charges 45,570 1,181

Total 9,466,230 6,646,989

Schedule 11


197

Schedule 12Significant Accounting Policies

1. CORPORATE INFORMATIONNabil Investment Banking Limited (Nabil

Invest) is a limited liability Company,

incorporated on 7th February, 2010 and

domiciled in Nepal. It is a licensed Merchant

Bank as a subsidiary of Nabil Bank Ltd. with

CG Finco Pvt. Ltd. as its Institutional

shareholder, licensed under Securities

Businessperson (Merchant Banker) Rules,

2064 from the Securities Board of Nepal

(SEBON). The registered address of Nabil

Invest is Kathmandu, Nepal.

2. APPROVAL OF FINANCIALSTATEMENTS BY THE BOARDOF DIRECTORSThe Financial Statements for the year ended

on 15th July, 2013 was approved for

issuance by the Board of Directors on

September 15, 2013

3. PRINCIPAL ACTIVITIESAND OPERATIONSNabil Invest obtained license for commercial

operation as a Securities Businessperson

(Merchant Banker) from SEBON on May 26,

2010. The major activities of the Company

are issue management, portfolio management

services, underwriting of securities, securities

trustee, registrar to shares, fund management

& depository services in a mutual fund,

depository participant services in a central

depository services, corporate advisory

services, provide allied support services etc.

ISSUE MANAGEMENT

During the review period, the Company, as

joint issue manager, entered into Agreements

with four commercial banks for managing

their IPOs. Of these, IPO of the following

three banks were successfully managed:

� Civil Bank Limited

� Commerz and Trust Bank Nepal Limited

� Mega Bank Nepal Limited

IPO of Century Commercial Bank Limited is

in the process of approval with SEBON and is

targeted to be completed by second quarter

of coming fiscal year.

Further, the Company was able to

successfully manage the debenture issues of

the following Commercial Banks:

� 8% Laxmi Bank Limited Debentures

� 8% Everest Bank Limited Debentures

The Company was awarded Debenture issue

management job of the following Commercial

Banks which was underway till the end of the

review period:

� 8% Nepal Investment Bank Limited

Debentures

� 8% Everest Bank Limited Debentures

UNDERWRITING

The Company entered into Agreements to

undertake the underwriting commitment of

the IPOs of the following Commercial Banks:

All the above issues were oversubscribed.

Hence, the Company did not incur any

financial liability towards its underwriting

commitment. However, the IPO of Century

Commercial Bank is yet to hit the market.

REGISTRAR TO SHARES (RTS) &

DEPOSITORY PARTICIPANT (DP) SERVICES:

The Company started rendering RTS from its

Anamnagar premises in the review period. In

F.Y. 2069-70, the Company entered into

Agreements and started rendering RTS

services to the following Companies:

� Nabil BanK Limited

� Swabalamban Laghubitta Bikas Bank

Limited

The Company also obtained the DP license

from SEBON and took the membership of

CDS and Clearing Limited in order to provide

DP services to its clientele. The required

logistics and infrastructure have been

prepared at Anamnagar premises of the

Company to render the said services and we

target to render full fledged services in

coming FY once CDSC renders its full scale of

operations.

COMMERCIAL BANKS UNDERWRITING AMOUNT (RS.)

Civil Bank Limited 66,666,667 (666,667 shares of Rs.100 each)

Commerz and Trust Bank Nepal Ltd. 94,000,000 (940,000 shares of Rs.100 each)

Mega Bank Nepal Limited 90,000,000 (900,000 shares of Rs.100 each)

Century Commercial Bank Limited 62,500,000 (625,000 shares of Rs.100 each)

Nabil Bank Limited

198

PORTFOLIO MANAGEMENT SERVICES (PMS)

PMS is a professional service offered by

Portfolio Managers to their Clients to help

them manage their wealth professionally. The

Portfolio Manager manages the assets of the

Client considering their investment goals and

risk appetite. As managing investments

requires time, knowledge, experience and

constant monitoring, investors who lag these

aspects seek the support of professional

Portfolio Managers.

The Company provides the following services

to the investors under PMS:

� Discretionary Portfolio Management Services

� Non Discretionary

Portfolio Management Services

� Advisory Services

� Administrative Services

� Customized Portfolio Management Services

The size of the total Assets under Management

(AuM) has reached NRs. 616,595,480 at the

end of the review period. Out of the total size,

NRs 574,876,129 constitutes the guaranteed

returns portfolio.

FUND MANAGEMENT & DEPOSITORY

SERVICES TO NABIL MUTUAL FUND

The Sponsor Nabil Bank appointed Nabil

Invest, an institution licensed by SEBON

render Fund Management services to the

schemes of Nabil Mutual Fund. During the

review period, the Company as the Fund

Manager successfully launched Nabil

Balanced Fund I under the Nabil Mutual

Fund, Due to the overwhelming response

from the market, the issue was highly

oversubscribed and hence 75 million units of

NPR 10 each were allotted against the issue

size of 60 million units of NPR 10 each as

per the prevailing Mutual Fund Regulation.

The Company has also been rendering

Depository services to the unit holders of Nabil

Balanced Fund I as per its license obtained

from SEBON & in line with the provisions of

prevailing regulations on mutual funds.

CORPORATE ADVISORY SERVICES

The Company has already prepared the

Product Papers and SIM to launch Corporate

Advisory Services like Loan Syndication and

Merger & Acquisition Advisory Services. The

Company is exploring business opportunities

in these new areas and reached a few

institutions in order to provide such services.

The process is positively moving ahead and

probably would materialize in the coming FY.

In addition, the Company also provided

advisory services to few institutions in the

form of Investment Advisory and Business

Valuation Reports.

OTHER SUPPORT SERVICES

The Company continued rendering its

operational support services to Nabil Bank in

their bullion operations in coordination with

Treasury & the Branches of the Bank.

4. RESPONSIBILITY FORFINANCIAL STATEMENTSThe Board of Directors of the Company is

responsible for the preparation of financial

statements. The Board of Directors

acknowledges this responsibility as set out in

the “Annual Report of the Board of Directors”.

These financial statements include the

following components:

a. a Balance Sheet disclosing the information

on financial position of Nabil Invest;

b. an Income Statement disclosing the

financial performance of Nabil Invest for

the period under review;

c. a Statement of Changes in Equity showing

all changes in equity of Nabil Invest;

d. a Cash Flow Statement disclosing the

information on the ability of Nabil Invest to

generate cash and cash equivalents; and

e. Notes to the Financial Statements

comprising a summary of principal

accounting policies and other relevant

explanatory notes.

5. STATEMENT OF COMPLIANCEThe Financial Statements which comprises

components mentioned above have been

prepared in accordance with Nepal Accounting

Standards (NAS) pronounced by the Institute

of Chartered Accountants of Nepal and in

compliance with Companies Act, 2007.

6. BASIS OF PREPARATIONThe Financial Statements are presented in

Nepalese Rupees (NRs) and are prepared on

historical cost basis. Preparation of financial

statements in conformity with NAS and GAAP

requires the use of certain critical accounting

estimates and also requires management to

exercise judgement in the process of applying

Nabil Invest’s accounting policies.

7. SUMMARY OF PRINCIPALACCOUNTING POLICIESThe principal accounting policies adopted by

the Board of Directors are presented below.

8. INCOME RECOGNITIONA. INCOME FROM INVESTMENTS

� Interest earnings on fixed deposits, call

deposits and bonds and debentures are

recognised on accrual basis.

� Dividend on share investments is

recognised as and when the right to

receive is established.

B. FEE INCOME

� Issue Management Income is recognised

when the issue management services are

fully rendered.

� Underwriting Commission is recognised

when the Issuing Company complies with

all the terms of underwriting commitment

Agreement.

� Portfolio / Assets Management Income is

recognised when the contract with the

Client for the Portfolio Management

Service is executed.

� Bond / Debenture Trusteeship Income are

accounted for on accrual basis when the

Trust Deed provides lump sum fee

covering period more than 1 year, it shall

be accounted on pro-rata basis.


199

� Income with respect to advisory services

are recognised:

- after the services are fully rendered, if

the right to receive the fee is subject to

the fulfilment of terms of advisory

services,

- on accrual basis, if the right to receive

the fee is established after elapse of a

time.

� Income from facilitation services to Bank’s

customers for securities is recognised after

the transactions are executed.

� Loan Syndication Fee is recognised after

the loan syndication services are rendered.

� Fee from Business Outsourcing Services

are recognised:

- after the services are fully rendered, if

the right to receive the fee is subject to

the fulfilment of terms of business

outsourcing services,

- on accrual basis, if the right to receive

the fee is established after elapse of a

time.

� Fee from Cross Sale Services are

recognised when the cross selling services

are rendered.

� Commission on ETF is accounted for as

and when contract for ETF is executed.

C. GAINS / LOSSES ON TRADING AND

AVAILABLE FOR SECURITIES (SELL)

� Gains and losses arising from trading are

recognised after the securities are sold

while gains and losses arising from

revaluation are recognised on daily basis.

9. EXPENSE RECOGNITIONA. INTEREST ON BORROWINGS

� Interest expenses on borrowings are

accounted for on accrual basis.

� Interest assured on funds received for

Portfolio Management are accounted for

on accrual basis.

B. STAFF BONUS

� Provision for staff bonus is provided for as

per the Bonus Act, 1974.

10. INVESTMENTSA. The investments held by Nabil Invest are

classified under 3 categories:

� Investments Held for Trading:

These are marketable investments and

held with the primary intention of resale

over a short period of time. These

investments are initially measured at cost

and subsequently accounted at market

value.

� Investments Available for Sale:

These are investments held with the

primary intention to recover value of

investments through sell rather than

continuing to hold. These investments are

initially measured at cost and

subsequently accounted at market value.

� Investments Held Till Maturity (HTM):

These investments are primarily intended

to be held till maturity and are valued at

cost and carried at these values in the

Balance Sheet till maturity. Any

impairment losses arising in such

investments are provisioned and charged

in the Income Statement. Premiums paid

while acquiring HTM Investments shall be

recognized as the part of initial cost and

subsequently amortized on proportionate

basis till maturity.

B. Investments in unlisted companies are

initially stated at cost and carried at these

values in the Balance Sheet. Any

impairment losses arising in such

investments are provisioned and charged

in the Income Statement. Nabil Invest

recognizes equity method to calculate

impairment losses on unlisted

investments.

11. FIXED ASSETS ANDDEPRECIATIONA. Fixed assets are stated at cost less

accumulated depreciation.

B. Depreciation is charged to Income

Statement on Written Down Value method

over the estimated useful lives of the fixed

assets. The depreciation rates applied for

various asset categories are as follows:

C. In case of fixed assets purchased during

the year and booked for more than one

month, depreciation is charged from the

subsequent month of booking. Depreciation

on fixed assets sold or disposed off during the

year is charged to the previous month after

(after or previous) of such disposal.

D. Leasehold improvements are amortized

over the period of lease.

E. Cost of computer software licences are

capitalised and are amortized over a period of

useful life of the software, estimated as 5

years from the date of acquisition.

F. Non-consumable items having life less than

one year and/or costing less than NRs. 5,000

are expensed off during the year of purchase.

12. CONTINGENT LIABILITIESAll types of guarantees & claims whose future

outcome cannot be ascertained with

reasonable certainty is recognized as

contingent liabilities in accordance with NAS

– 12 “Provisions, Contingent Liabilities and

Contingent Assets”.

NATURE OF ASSETSDEPRECIATION RATEESTIMATED USEFUL LIFE

Furniture 25% 15 years

Equipments 25% 15 years

Vehicles 20% 7 years

Computers 40% 5 years

Building 5% 50 years

Leasehold Items 20% (Straight Line) 5 years

Nabil Bank Limited

200

13. STATIONERY STOCKStationery purchased are charged to revenue

at the time of consumption and valued at

average cost basis.

14. INCOME TAXESA. Provision for current tax is made based on

the provisions of the Income Tax Act, 2058

and amendments thereto.

B. Deferred tax is recognized and provided for

on the timing differences between taxable

income and accounting income.

C. Deferred tax assets are not recognised

unless there is a virtual/reasonable certainty

that there will be sufficient future taxable

income available to realize such assets.

Deferred tax assets & liabilities are netted off

and presented either under ‘Other Assets’ or

under ‘Other Liabilities'.

D. The equivalent amount of outstanding

Deferred Tax Assets is earmarked under

Deferred Tax Reserve in order to make the

accounting policy uniform with the

accounting policy of Nabil Bank Limited, the

parent Company.


201

Schedule 13Notes to Accounts

1. PAID UP CAPITALThe issued and paid up capital of the Company is NRs.150 Million and NRs. 105 Million

respectively. The remaining portion of the issued capital shall be issued by the Company in future in

such a manner as the Board of the Company deems appropriate. Out of paid-up capital of NRs.105

Million, Nabil Bank Limited holds NRs.78 Million while the balance of NRs.27 Million is held by

CG Finco Pvt. Ltd.

2. INCOME TAX AND DEFERRED TAXThe tax liability of the Company for the review period is NRs. 7,257,694.25, detailed as under:

Deferred tax income of NRs. 201,866 has been recognised in the income statement this year on the

taxable temporary difference arising due to charge of depreciation and on creating provision for

Leave Encashment as shown hereunder:


Accounting Net Profit Before Tax 28,223,312

Tax Rate 25%

Tax on Accounting Profit 7,055,828

Deferred Tax Income 201,866

Current Tax 7,257,694

ITEMS CARRYING AMOUNT TAX BASE TAXABLE DEDUCTIBLE DEFERRED TAXTEMPORARY TEMPORARY LIABILITY /

DIFFERENCES DIFFERENCES (ASSETS)

Fixed Assets 6,952,017 6,622,044 329,973 82,493

Provision for

Leave Encashment 141,889 - - (141,889) (35,472)

Total 329,973 (141,888) 47,021

Deferred Tax of Previous Year

ITEMS CARRYING AMOUNT TAX BASE TAXABLE DEDUCTIBLE DEFERRED TAXTEMPORARY TEMPORARY LIABILITY /

DIFFERENCES DIFFERENCES (ASSETS)

Fixed Assets 6,139,204 6,434,875 (295,671) (73,918)

Provision for

Leave Encashment 323,708 - (323,708) (80,927)

Total (619,379) - (154,845)

Calculation of Deferred Tax -This Year

Deferred Tax Income Recognised in the review period is Rs. 201,866.00

Nabil Bank Limited

202

3. RELATED PARTIES DISCLOSURES

A. THE COMPANY HAS THE FOLLOWING RELATED PARTIES:

NAME RELATIONSHIP

Nabil Bank Limited Holding Company

CG Finco Pvt. Limited An Associate Company

The Company has entered into following transactions with its related parties during F.Y.2069/70:

B. KEY MANAGEMENT PERSONNEL

Key Management Personnel of Nabil Invest includes

the Board of Directors and the Chief Executive Officer:

Mr. Anil Gyawali - Chairman

Mr. Krishna Dutta Bhattarai - Director

Mr. Kapil Adhikari - Director

Mr. Krishna Kumar Pradhan - Independent Professional Director

Mr. Mahesh Kumar Karki - Independent Professional Director

Mr. Pravin Raman Parajuli - Chief Executive Officer/Company Secretary

C. COMPENSATION TO KEY MANAGEMENT PERSONNEL OF NABIL INVEST

The total employee benefits paid to Mr. Pravin Raman Parajuli in the capacity as Chief Executive

Officer of Nabil Invest in the review period amounts to NRs.1.91 Million.

D. TRANSACTION WITH KEY MANAGEMENT PERSONNEL OF THE BANK

The Board of Directors representing the Bank & CG.Finco Pvt. have decided not to accept any

meeting fees until otherwise decided at a later stage. However, this decision does not apply to the

Professional Independent Directors. The Company has paid NRs.100,000 to its Professional

Independent Directors as meeting fee during the review period. The Company does not provide any

other financial benefits to its Board of Directors except meeting fee to the Professional Independent

Director.

RELATED PARTY TRANSACTIONS AMOUNT

Nabil Bank Limited Balance in Call Account Closing Balance NRs. 110,542,740.01

Nabil Bank Limited Balance in Fixed Deposit Closing Balance NRs. 8,000,000

Nabil Bank Limited Interest Income on Call &

Fixed Deposit Accounts NRs. 3,472,174.84

Nabil Bank Limited Proceeds realised for rendering

operational support assistance

for the Bank NRs.9,981,575.02

Nabil Bank Limited Service Level Agreement

(SLA) Fees paid NRs.5,00,000

Nabil Bank Limited Technical Management Service

Fee paid NRs.3,873,099.89


203

4. USAGE OF NABIL BANK’SINFRASTRUCTUREa.The Company has entered into Service Level Agreement

(SLA) with Nabil Bank under which the Company receives

services of the Bank in areas like Administration, Operations,

Accounts, Finance & Planning, Information Technology,

Clearing & Settlement, Human Resources, Legal, Treasury etc.

at an annual fees of NRs. 5,00,000.

b.The Company has been using the premises of Nabil Bank at

Chabahil and Anamnagar. The Company has reimbursed

NRs.1,127,388 i.e. the rental cost of the premises used by

the Company as per the provisions of Management Service

Agreement (MSA), entered between Nabil Bank & the

Company, to the Bank on actual cost basis.

c.The Company has been receiving services from two staffs

deputed by the Bank including the CEO of the Company.

During the year, the Company has reimbursed

NRs.2,745,712 to the Bank as fees paid on actual cost basis

for the deputed staffs as per the provisions of Management

Service Agreement (MSA) entered between Nabil Bank & the

Company.

5. BORROWINGThe Company has borrowed NRs. 22 Million against the

pledge of "12.5% Nepal SBI Debenture 2078" worth NRs. 60

Million. Further, the Company has obtained an Overdraft

Facility of NPR 7.6 Million from Nabil Bank Limited against

the pledge of bank’s own FD receipt worth NPR 8 Million.

Out of the approved limit, the actual utilization as on Ashadh

End 2070 (15 July, 2013) stands to be NPR 7.21 Million.

6. INVESTMENTSThe investments of Company constitute investments in

Debentures, Time Deposits, Mutual Fund Units and Equity

Shares purchased through IPO. Some of these investments

have been made with objective of holding them till maturity

for regular returns and hence valued at cost. The investments

in equity shares through IPO shall be sold once they are listed

with NEPSE and upon receipt of reasonable targeted returns.

Such investments have been classified under Available for

Sale Category and valued at fair value that is market price as

on Balance Sheet date in case of shares which are listed with

NEPSE. In case of shares which are not listed till the Balance

Sheet date, they are valued at cost. The Company does not

hold any investments which are classified as Held for Trading.

Nabil Bank Limited

204

PARTICULARS COST PRICE, NRS. MARKET VALUE, NRS MARKET PRICE ASON ASAR END 2070, NRS.

Held to Maturity Investments

Fixed Deposits 12,875,000 12,875,000


2. NIDC Development Bank Limited 4,875,000 4,875,000

Bonds/ Debentures 75,000,000 75,000,000

1. 12.5% Nepal SBI Bank Limited

Debenture (60,000 Units

@ Rs. 1,000 each) 60,000,000 60,000,000

2. 11% Siddhartha Bank Limited

Debenture (15,000 Units

@ Rs. 1,000 each) 15,000,000 15,000,000

Mutual Fund Units 7,500,000 7,545,000

1. Nabil Balanced Fund I -Seed

Capital (750,000 units @ Rs. 10 each) 7,500,000 7,545,000

Total 95,375,000 95,375,000

Available for Sale Investments

Equity Shares and Mutual Fund Units 2,485,200 3,007,600

1. Siddhartha Mutual Fund

(50,000 units @ Rs.10 each) 500,000 552,000 Rs. 11.04

2. Commerz & Trust Bank Nepal Limited

- IPO (11,760 Units @ Rs. 100 each) 1,176,000 1,646,400 Rs. 140

3. NLG Insurance Company Ltd. - IPO

(783 Units @ Rs. 100 each and bonus

shares 157 Units - total 940 Units) 78,300 78,300 Not Listed

4. Mega Bank Nepal Limited IPO

(7,309 Units @ Rs. 100 each) 730,900 730,900 Not Listed

Total 2,485,200 3,007,600

Total Investments 97,860,200 98,382,600

7. INTEREST INCOMEThe Company has earned total interest income of NRs. 22,454,763 which includes NRs.

13,269,397 earned from placement of subscription amount raised from public offers with Bankers

to the Issue and NRs. 13,269,397 received from Investment on Debentures and Bank Deposits.

8. PROPOSED DIVIDENDThe Board of Directors of the Company has decided to propose 15 percent of cash dividend for

approval in its forth coming Annual General Meeting.

9. PREVIOUS YEAR'S FIGURES HAVE BEEN REGROUPED/REARRANGEDWHEREVER NECESSARY.

The details of investments of the Company as on Balance Sheet date is as follows;


205

AWARDS

Mr. Krishna Dutta Bhattarai, Chief

Finance Officer of Nabil Bank Limited

receiving the prestigeous BPA Award

2012 from Honorable Finance Minister

Mr. Shankar Prasad Koirala

Mr. Anil Gyawali, Chief Executive Officer of

Nabil Bank Limited receiving the People’s

Excellence Award 2013 from Rt. Honorable

President Dr. Ram Baran Yadav»

Highest Tax Payer Award

among banking and financial

institution category for year

2010/11

»

WINNER

National Best Presented

Accounts Award, 2009

»

WINNER



»

WINNER



»

»

Nabil Bank Limited

206

1. KANTIPATH BRANCHKantipath, KathmanduPhone: 01-4239204, 01-4239205Fax: 01-4239203P.O. Box no.: 3729, Kathmandu

2. TRIPURESHWOR BRANCHUWTC Building, Tripureshwor, KathmanduPhone: 01-4117014/15/16/17Fax: 01-4117018P.O. Box no.: 3729, KTM

3. NEW ROAD BRANCHNew Road, KathmanduPhone: 01-4224592, 01-4224533, 01-4225420Fax: 01-4224837P.O. Box no.: 3729, KTM

4. JORPATI BRANCHJorpati, KathmanduPhone: 01-4917498, 01-4917569Fax: 01-4917343P.O. Box no.: 3729, KTM

5. BIRGUNJ BRANCHAadarsha Nagar, Birgunj, ParsaPhone: -051-521476, 051-521746, 051-530723Fax: 051- 523156P.O. Box no.: 73, Birgunj

6. POWER HOUSE CHOWK BRANCHShreepur, Birgunj, ParsaPhone: 051-525449, 530216Fax: 051-528680P.O. Box no.: 73, Birgunj

7. BIRATNAGAR BRANCHGoshwara Road, Biratnagar, MorangPhone: 021-526213, 021-522752, 021-525372, 021-526214Fax: 21-524800P.O. Box no.: 208, Biratnagar

8. LALITPUR BRANCHKupoundol, KathmanduPhone: 01-5542891, 01-5520431, 01-5532189Fax: 01-5542890P.O. Box no.: 3729, KTM

9. ITAHARI BRANCHMain Road, Itahari, SunsariPhone: 025-580741, 01-581400Fax: 025-581054P.O. Box no.: 208, Biratnagar

10. BUTWAL BRANCHMain Road, Butwal, RupandehiPhone: -071-541059, 071-542274Fax: 071-541210P.O. Box no.: 18, Butwal

11. BHALWADI BRANCHBhalwadi, RupandehiPhone: 071-560357, 071-561357Fax: 071-560957P.O. Box no.: 18, Butwal

12. POKHARA BRANCHDipendra Sabha Griha, New Road, Pokhara,KaskiPhone: 061-525715, 061-532951Fax: 061-525203P.O. Box no.: 442, Pokhara

13. BHAIRAHAWA BRANCHNarayanpath, Bhairahawa, RupandehiPhone: 071-524041Fax: 071-524141P.O. Box no.: 18, Butwal

14. NEPALGUNJ BRANCHDhamboji, Nepalgunj, BankePhone: 081-524221Fax: 081-524222P.O. Box no.: 22, Nepalgunj

15. LAKESIDE BRANCHLakeside, Pokhara, KaskiPhone: 061-464268Fax: 061-461969P.O. Box no.: 442, Pokhara

16. DHARAN BRANCHMahendrapath, Dharan, SunsariPhone: 025-530130, 025-530621Fax: 025-530131P.O. Box no.: 208, Biratnagar

17. MAHARAJGUNJ BRANCHMaharajgunj, KathmanduPhone: 01-4720870/71, 01-4720875/77Fax: 01-4720844P.O. Box no.: 3729, KTM

18. BIRTAMODE BRANCHHicola Road, Anarmani, JhapaPhone: 023-543727Fax: 023-543400

19. DAMAK BRANCHMain Highway Road, Damak, JhapaPhone: 023- 585190/91Fax: 023-585192

20. HETAUDA BRANCHBank Road, Hetauda, MakwanpurPhone: 057-524667/689Fax: 057-524690

21. NARAYANGARH BRANCHSahidChowk, Narayangarh, ChitwanPhone: 056-523033, 056-532487Fax: 056-523034

22. TULSIPUR BRANCHSitalpur Road, Tulsipur, DangPhone: 082-522673/74Fax: 082-522672

23. GHORAHI BRANCHGanesh Hall Road, Ghorahi, DangPhone: 082-561685/86Fax: 082-561687

24. BAGLUNG BRANCHMahendrapath, Baglung, BaglungPhone: 068-522193/94Fax: 068-522195

25. DHANGADI BRANCHMain Road, Dhangadi, KailaliPhone: 091-526681/85Fax: 091-526682

26. MAHENDRANAGAR BRANCHMahendranagar, KanchanpurPhone: 099-525450, 099-525431Fax: 099-525601P.O. Box no.: 16, Kanchanpur

27. NEW BANESHWOR BRANCHNew Baneshwor, KathmanduPhone: 01-4485212, 4492125Fax: 01-4490882P.O. Box no.: 3729, KTM

28. HALCHOWK BRANCHHalchowk, KathmanduPhone: 01-4033553/54Fax: 01-4033552P.O. Box no.: 3729, KTM

29. THAMEL BRANCHThamel, KathmanduPhone: 01-4212167, 01-4212606Fax: 01-4238543P.O. Box no.: 3729, KTM

30. KAUSHALTAR BRANCHKaushaltar, BhaktapurPhone: 01-6635184, 01-6635460Fax: 01-6635199P.O. Box no.: 3729, KTM

31. CHABAHIL BRANCHChabahil, KathmanduPhone: 01-4464470, 4461895Fax: 01-4464469P.O. Box no.: 3729, KTM

32. MAITIDEVI BRANCHMaitidevi, KathmanduPhone: 01-4439488, 01-4443706Fax: 01-4434045P.O. Box no.: 3729, KTM

33. BALAJU BRANCHBalaju, KathmanduPhone: 01-4388915, 01-4388916Fax: 01-4388918P.O. Box no.: 3729, KTM

34. KULESHWOR BRANCHKuleshwor, KathmanduPhone: 01-4287576, 01-4287596Fax: 01-4287547P.O. Box no.: 3729, KTM

35. SATDOBATO BRANCHSatdobato, LalitpurPhone: 01-5550332Fax: 01-5548766P.O. Box no.: 3729, KTM

36. CHARIKOT BRANCHBhimeshwor, Charikot, DolakhaPhone: 049-421882, 049-421883Fax: 049-421887

37. KHADBARI BRANCHKhadbari, SankhuwasabhaPhone: 029-560874/84/85Fax: 029-560883

38. DHULIKHEL BRANCHDhulikhel, KavrePhone: 011-490730, 011-490731Fax: 011-490732P.O. Box no.: 3729, KTM

39. GORKHA BRANCHGorkha, GorkhaPhone: 064-421529Fax: 064-421530

40. BESHISAHAR BRANCHBeshisahar, LamjunjPhone: 066-520805, 066-520806Fax: 066-520807

41. CHANDRAGADHI BRANCHChandragadhi, JhapaPhone: 023-457021, 023-457022Fax: 023-457023

42. DHAPASI BRANCHDhapasi, KathmanduPhone: 01-4384990, 01-4384991Fax: 01-4384855P.O. Box no.: 3729, KTM

43. ANAMNAGAR BRANCHAnamnagar, KathmanduPhone: 01-4249884, 01-4245274Fax: 977-1-4250339P.O. Box no.: 3729, KTM

44. GWARKO BRANCHGwarko, KathmanduPhone: 01-5541590, 5554190Fax: 01-5538190P.O. Box no.: 3729, KTM

45. ATTERKHEL BRANCHAtterkhel, KathmanduPhone: 01-4912990, 4912991Fax: 01-4912992P.O. Box no.: 3729, KTM

46. SINAMANGAL BRANCHSinamangal, KathmanduPhone: 01-4110852, 4110851Fax: 01-4110850P.O. Box no.: 3729, KTM

47. TEENDHARA BRANCHTeendhara, KathmanduPhone: 01-4227181, 01-4221718Fax: 01-4226905, 4241808P.O. Box no.: 3729, KTM

48. JANAKPUR BRANCHDhanusa, JanakpurDhamPhone: 041-528706, 528709Fax: 041-528708

49. EXTENSION COUNTERKathmandu Metropolitan City OfficeBaghdurbar, KathmanduPhone: 01-4216070P.O.Box No.: 3729, KTM

50. EXCHANGE COUNTERPokhara Airport, Pokhara

OFFICE NETWORK

Nabil CenterBeena Marga, Durbar Marga, Kathmandu, NepalTel: 01-4221718, 01-4227181, Fax: 01-4226905SWIFT: NARBNPKAEmail: [email protected]

NABIL BANK LTD.HEAD OFFICE

N

Mahendranagar (1)

Dhangadi (1)

Nepalgunj (1)

Tulsipur (1)

Ghorahi (1)

Butwal (1)

Bhairahawa (1)

Bhalwadi (1)

Narayanghdh (1)

Birgunj (2)

Hetauda (1)

Janakpur (1)

Dharan (1)

Itahari (1)

Biratnagar (1)

Damak (1)

Birtamod (1)

Chandragadi (1)

Baglung (1) Pokhara (2) Beshisahar (1)

Gorkha (1)

Lalitpur (3)

Kathmandu (17)

Dhulikhel (1)

Bhaktapur (1)

Charikot (1)

Khandbari (1)

DESIGN & PRINT PROCESS:

TheSquare Design Communication Pvt. Ltd.www.thesquare.com.np


www.nabilbank.com


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Annual Report 69-70_20140305122025

Documents

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financial highlights

banking industry

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foreign jointventure

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