10th ANNUAL REPORT 2019/2020 1 - Mega Bank Nepal
-
Upload
khangminh22 -
Category
Documents
-
view
0 -
download
0
Transcript of 10th ANNUAL REPORT 2019/2020 1 - Mega Bank Nepal
10th ANNUAL REPORT 2019/2020
Key Financial Highlights
NET PROFIT
BALANCE SHEET
CAPITAL ADEQUACY RATIO
NON PERFORMING CREDIT
TOTAL LOANS
TOTAL DEPOSIT
BILLION
BILLION
BILLION
BILLION
155 132
114
1.58
13.24%
1.15
10th ANNUAL REPORT 2019/2020
3Mega Bank Nepal Limited
Contents
1. AGM Notice 12
2. Proxy Form 14
3. Chairman’s Speech 18
4. Message from CEO 22
5. Mega Bank Today 24
a. Our activities
b. What we are
c. Company’s performance
d. Key Figures
e. Mega Bank’s Presence
6. Business Model and Strategy 33
a. The Future of Banking
b. Business Model
c. What does a Mega Bank makes a difference
d. Management of Capital
e. Value Chain
f. Strategic Foundations for next 5 years
g. Capital & Business relationship
h. Comparative Results and Awards
7. Mega Bank’s Primary Business Activities 49
- Contents of Products and Services
8. A Framework of Trust 60
a. Corporate Governance Model
b. Lines of Management & Control
c. Risk Management
d. Ethics and Social Responsibility with
photos
9. Report of Board of Directors 74
10. Report under Section 109 86
Financial Report Part
11. Independent Auditor’s Report 89
12. Financial Statements 93
13. Notes to Accounts 102
14. Annexure 125
15. Additional Disclosure 163
Proposals and Approvals
16. Approval from NRB 198
17. Implementation Status of NRB Directions 199
18. MOA & AOA amendment 200
10th ANNUAL REPORT 2019/2020
6Mega Bank Nepal Limited
Branch Managers and Extension Counter In-Charge
S.N.Province 1 - Head Bibek Bandhu Neupane
Branch Branch Managers
1 Fungling Branch, Taplejung Sangam Deep Shrestha
2 Phidim Branch, Panchthar Prem Prasad Neupane
3 Kummayak Branch, Panchthar Chhtrapati Niraula
4 Rong Branch, Illam Prakash Bhattrai
5 Birtamod Branch, Jhapa Kuldip Bimoli
6 Birtamod Branch -2, Jhapa Prakash Giri
7 Damak Branch, Jhapa Samip Shrestha
8 Damak Branch -2, Jhapa Bishwo Raj Adhikari
9 Bhojpur Branch, Bhojpur Sumit Karmacharya
10 Dharan Branch, Sunsari Sabin Shrestha
11 Itahari Branch, Sunsari Sikkandar Thapa
12 Itahari Branch -2, Sunsari Devendra Khatri
13 Inaruwa Branch, Sunsari Dev Sharan Mehta
14 Biratnagar Branch, Morang Dipesh Jung Thapa
15 Biratnagar Branch -2, Morang Binod Raj Thapa
16 Biratnagar Branch -3, Morang Rajib Bikram Panta
17 Gramthang Branch, Morang Bishnu Prasad Ghimire
18 Khijidemba Branch, Okhaldhung Durga Bahadur Khatri
19 Okhaldhunga Branch, Okhaldhunga Shamnbhu Prasad Parajuli
20 Rautamai Branch, Udaypur Raisul Aajam
Incharge of Extension Counters
1 Shivasatakshi Extension Counter, Jhapa Pooja Adhikari
2 Dhanpalthan Extension Counter, Morang Siddhanta Shrestha
3 Ratuwamai Extension Counter, Morang Bikram Chauhan
4 Baraha Extension Counter, Sunsari Prashant Chaudhary
5 Koshi Extension Counter, Sunsari Rabin Upreti
S.N.Province 2 - Head Yashpal Kumar Tibrewal
Branch Branch Managers
1 Lahan Branch, Siraha Amrendra Shah
2 Lahan Branch -2, Siraha Prakash Sharma Ghimire
3 Bishnupur Branch, Siraha Bibek Raj Bhattrai
4 Laxminiya Branch, Dhanusha Dipak Kumar Mandal
5 Janakpur Branch, Dhanusha Galek Kumar Yadav
6 Janakpur Branch 2, Dhanusha Binay Kumar Shah
7 Bardibas Branch, Mahottari Yash Prasad Dahal
8 Hariwan Branch, Sarlahi Ishwor Timilsina
9 Ramnagar Branch, Sarlahi Ramesh Kumar Yadav
10 Birgunj Branch, Parsa Yashpal Kumar Tibrewal
11 Birgunj Branch -2, Parsa David Thapa
12 Birgunj Branch -3, Parsa Mukesh Adhikari
Incharge of Extension CountersIncharge of Extension Counters
1 Mithila Bihari Extension Counter, Dhanusha Santosh Kumar Mishra
2 Nagarain Extension Counter, Dhanusha Anil Kumar Joshi
10th ANNUAL REPORT 2019/2020
7Mega Bank Nepal Limited
S.N.
Bagmati Province - Head Shreeram Giri
Branch Branch Managers
Valley Branches
1 Main Branch, Kamaladi, Kathmandu Ashish Kumar Shrestha
2 Kapan Branch, Kathmandu Rajesh Thapa
3 New Baneshwor Branch, Kathmandu Suhita Shrestha
4 New Baneshwor Branch -2, Kathmandu Saguna Shakya Bajracharya
5 Baneshwor Branch -3, Kathmandu Arjun Dhakal
6 Teku Branch, Kathmandu Preskshya Sapkota
7 Maharajgunj Branch, Kathmandu Abhasratna Tuladhar
8 Maharajgunj Branch -2, Kathmandu Manisha Manandhar
9 Maitidevi Branch, Kathmandu Ami Shrestha
10 Maitidevi Branch -2, Kathmandu Ami Shrestha
11 New Road Branch, Kathmandu Indira Paneru
12 New Road Branch -2, Kathmandu Ganesh Tamang
13 Kamalakshi Branch, Kathmandu Krishna Prasad Sharma
14 Khichhapokhari Branch, Kathmandu Rabin Shrestha
15 Thamel Branch, Kathmandu Ganesh Dhakal
16 Thamel Branch -2, Kathmandu Niraj Gautam
17 Boudhha Branch, Kathmandu Madhav Humagain
18 Kalanki Branch, Kathmandu Karna Bahadur Thapa
19 Kalanki Branch -2, Kathmandu Chhapendra Kunwar
20 Gyaneshwor Branch, Kathmandu Alina Shrestha
21 Chhabhil Branch, Kathmandu Manoj Raj Pathak
22 Gongabu Branch, Kathmandu Sunita Thapa
23 Khusibu Branch, Kathmandu Sushila Pandey
24 Hattigaunda Branch, Kathmandu Namrata Sharma
25 Baniyatar Branch, Kathmandu Shahdev Basnet
26 Jorankhu Branch, Kathmandu Ishwor Pandit
27 Baluwakhani Branch, Kathmandu Amit Kumar Khadka
28 Jorpati Branch, Kathmandu Krishna Shrestha
29 Samakhusi Branch, Kathmandu Naresh Lal Joshi
30 Jawalakhel Branch, Lalitpur Nitisha Giri
31 Imadol Branch, Lalitpur Sarina Karki
32 Imadol Branch -2, Lalitpur Pratima Malla
33 Kumaripati Branch, Lalitpur Heri Raj Maharjan
34 Thiaba Branch, Lalitpur Jyotsana Kunwar
35 Patan Branch, Lalitpur Shailesh Mulmi
36 Suryabinayak Branch, Bhaktapur Dipendra Chaulagain
37 Sukuldhoka Branch, Bhaktapur Ukesh Duwal
38 Balkot Branch, Bhaktapur Sumit Bhandari
39 Thimi Branch, Bhaktapur Manil Ratna Shahi
40 Thimi Branch -2, Bhaktapur Bikas Maharjan
Out of Valley BranchesOut of Valley Branches
41 Mainapokhari Branch, Dolakha Sushil Kumar Upreti
42 Charikot Branch, Dolakha Kapil Prasad Bhandari
43 Bagkhor Branch, Dolakha Manisha Shrestha
44 Manthali Branch, Ramechhap Pushkar Lamichhane
10th ANNUAL REPORT 2019/2020
8Mega Bank Nepal Limited
45 Khurkot Branch, Sindhuli Shailendra Sharma
46 Sindhuli Branch, Sindhuli Keshab Prasad Devkota
47 Bhiman Branch, Sindhuli Bijay Kumar Shah
48 Chautara Branch, Sindhupalchok Ram Krishna Parajuli
49 Indrawati Branch, Sindhupalchok Rajan Shrestha
50 Panchpokhari Branch, Sindhupalchok Chattur Prasad Bhattrai
51 Helambu Branch, Sindhupalchok Gopal Neupane
52 Banepa Branch, Kavrepalanchok Rajeshwor Shrestha
53 Syafrubeshi Branch, Rasuwa Chhokyal Dorje Lama
54 Malekhu Branch, Dhading Surya Kumar Tripathi
55 Malekhu Branch -2, Dhading Surya Kumar Tripathi
56 Dhading Branch, Dhading Santosh Khanal
57 Dhading -2 Branch, Dhading Rammani Neupane
58 Jwalamukhi Branch, Dhading Atma Ram Dawadi
59 Tripurasundari Branch, Dhading Devendra Giri
61 Hetauda Branch, Makwanpur Niranjan Devkota
62 Hetauda Branch -2, Makwanpur Madhavi Bose
63 Hetauda Branch -3, Makwanpur Sanam Lama
60 Mugling Branch, Chitwan Narhari Mishra
64 Tandi Branch, Chitwan Sushila Aryal
65 Tandi Branch 2, Chitwan Prem Ghimire
66 Narayangarh Branch, Chitwan Laxmi Thapaliya
69 Naryangarh Branch -2, Chitwan Suraj Sharma
67 Hakimchowk Branch, Chitwan Khadka Raj Parajuli
68 Bharatpur Branch, Chitwan Dipak Pathak
70 Chanauli Branch, Chitwan Gyanendra Prasad Mainali
71 Parsa Branch, Parsa Navaraj Aryal
72 Bhojad Branch, Chitwan Keshav Raj Acharya
73 Meghauli Branch, Chitwan Homnath Lamsal
Incharge of Extension Counters
1 Dahachowk Extension Counter, Kathmandu Sarswati Shrestha
2 Radhakirshan Mandi Extension Counter, Kathmandu Nirmala Barakoti
3 Balaju Extension Counter (DDC), Kathmandu Reshma Maharjan
4 Kavresthali Extension Counter, Kathmandu Madhav Prasad Pokhrel
5 Narayantar Extension Counter (Gokerneshwor), Kathmandu Anju Aryal
6 Harharmahadev Extension Counter, Kathmandu Karuna Upreti
7 Pasikot Extension Counter, Kathmandu Archana Bista
8 Jhor Extension Counter, Kathmandu Sama Aryal
9 Gandhimod Extension Counter, Kathmandu Lila Thapa
10 Thulo Bharayang Extension Counter, Kathmandu Sagin K.C.
11 Minbhawan Extension Counter, Kathmandu Suxmi Sthapit
12 Gamchha Extension Counter, Bhaktapur Rajju Heka
13 Kamalbinayak Extension Counter, Bhaktapur Iresh Baidya Shrestha
14 Gundu Extension Counter, Bhaktapur Rajiv Regmi
15 Dhapakhel Extension Counter, Lalitpur Sabina Shrestha
16 Sunakothi Extension Counter, Lalitpur Sailaja Neupane
17 Dhungrebas Extension Counter, Sindhuli Ganesh Mahato
10th ANNUAL REPORT 2019/2020
9Mega Bank Nepal Limited
S.N.Gandaki Provice - Head Gyanendra Pant
Branch Branch Managers
1 Bhimsen Branch, Gorkha Suman Bagale
2 Gorkha Branch, Gorkha Ajit Raman Khanal
3 Bhedabari Branch, Nawalpur Suman Khanal
4 Rajahar Branch, Nawalpur Janak Upadhaya
5 Kawasoti Branch, Nawalpur Gopal Khanal
6 Kawasoti Branch -2, Nawalpur Prakash Devkota
7 Chormara Branch, Nawalpur Dolraj Bhurtel
8 Chame Branch, Manang Keshar Thapa
9 Beshishahar Branch, Lamjung Sujan Poudel
10 Bhoteodar Branch, Lamjung Govinda Tiwari Chhetri
11 Bhanu Branch, Tanahun Sudip Joshi
12 Damuali Branch, Tanahun Arjun Prasad Subedi
13 Jamune Branch, Tanahun Pradip Adhikari
14 Bhimad Branch, Tanahun Kamal Thapa
15 Dulegaunda Branch, Tanahun Anand Subedi
16 Kagbeni Branch, Mustang Dinesh Poudel
17 Jomsom Branch, Mustang Sumita Sherpa
18 Jomsom Branch -2, Mustang Mahesh Thakali
19 Beni Branch, Myagdi Kumar Dhungana
20 Baglung Branch, Baglung Upendra Gautam
21 Kushma Branch, Parbat Thakur Prasad Gautam
22 Kushma Branch -2, Parbat Keshav Acharya
23 Huwas Branch, Parbat Bishnu Prasad Poudel
24 Hemja Branch, Kaski Rajan Bahadur Thapa
25 Lamachaur Branch, Surendra Basnet
26 Bagar Branch, Kaski Dinesh Kumar Shrestha
27 Chipledhunga Branch, Kaski Santosh Pokhrel
28 Pokhara New Road Branch, Kaski Prabindra Shrestha
29 Pokhara Branch, Kaski Sadip Dhakal
30 Pokhara Branch 2, Kaski Mohan Giri
31 Parsyang Branch, Kaski Pramod Ojha
32 Ratnachowk Branch, Kaski Laxman Baral
33 Lakeside Branch, Kaski Milan Pahari
34 Lakeside Branch -2, Kaski Milan Pahari
35 Birauta Branch, Kaski Shiva Bahadur Karki
36 Bajhpatan Branch, Kaski Laxman Acharya
37 Amarsingh Branch, Kaski Nabin Thapa
38 Chauthe Branch, Kaski Rabi Pradhan
39 Lekhnath Branch, Kaski Bishwa Raj Poudel
40 Lekhnath Branch -2, Kaski Prakash Sigdel
41 Talchowk Branch, Kaski Santosh Gurung
42 Gagangaunda Branch, Kaski Harishchandra Poduel
43 Syngja Branch, Syagnja Rabindra Nepal
44 Bhirkot Branch, Syangja Kamalkanta Adhikari
45 Waling Branch, Syangja Bhojraj Bhatta
46 Waling Branch -2, Syangja Chakrapani Bashyal
47 Bhumre Branch, Parbat Bishnu Prasad Bhattrai
10th ANNUAL REPORT 2019/2020
10Mega Bank Nepal Limited
S.N.Lumbini Province - Head Taranath Lamsal
Branch Branch Managers
1 Tamghas Branch, Gulmi Tejendra Karki
2 Gulmi Branch, Gulmi Kalidas Pande
3 Tansen Branch, Palpa Narayan Prasad Ghimire
4 Tansen Branch -2, Palpa Bishnu Prasad Bhandari
5 Rampur Branch, Palpa Tanka Prasad Neupane
6 Rampur Branch -2, Palpa Shukra Bikram Rana
7 Sunawal Branch, Nawalparasi Krishna Bhandari
8 Bardaghat Branch, Nawalparasi Dambar Bahadur Poudel
9 Butwal Branch, Rupandehi Milan Kuman Pun
10 Butwal Branch -2, Rupandehi Binita Shrestha
11 Butwal Branch -3, Rupandehi Dipak Neupane
12 B.P. Chowk Branch, Rupandehi Janendra Pokharel
13 Manigram Branch, Rupandehi Laxman Panthi
14 Thutipipal Branch, Rupandehi Subash Bhattrai
15 Kattaiya Branch, Rupandehi Dhiraj Dhakal
16 Bhairahawa Branch, Rupandehi Biplavi Tripathi
17 Bhairahawa Branch -2, Rupandehi Amrit Thapa
18 Nayagaun Branch, Rupandehi Ashok Rana
19 Sainamaina Branch, Rupandehi Santu Subedi
20 Sainamaina Branch -2, Rupandehi Santu Subedi
21 Semlar Branch, Rupandehi Ambika Lamichane
22 Amuwa Branch, Rupandehi Suraj Prasad Neupane
23 Kanchan Branch, Rupandehi Gopal Bhandari
24 Maanpakadi Branch, Rupandehi Gyan Prasad Subedi
25 Jitpur Branch, Kapilvastu Saroj Bhandari
26 Jitpur Branch -2, Kapilvastu Prakash Marasini
27 Taulihawa Branch, Kapilvastu Rajendra Prasad Sharma
28 Arghakhanchi Branch, Arghakhanchi Kiran Ghimire
29 Airawati Branch, Pyuthan Shreedhar Pokharel
30 Tulsipur Branch, Dang Rajan Bhandari
31 Tulsipur Branch -2, Dang Chhabilal Bhandari
32 Ghorai Branch, Dang Sharad Adhikari
33 Ghorai Branch -2, Dang Bibek Acharya
34 Kohalpur Branch, Banke Anil Rokaya
35 Kohalpur Branch -2, Banke Yadunath Khanal
36 Nepalgunj Branch, Banke Ashok Neupane
37 Nepalgunj Branch -2, Banke Mohan Chaudhary
38 Geruwa Branch, Bardia Ram Chandra Kadariya
39 Bansgadhi Branch, Bardiya Prem Chand
Incharge of Extension Counters
1 Ruru Extension Counter, Gulmi Bigyan Pant
2 Mathagadhi Extension Counter, Palpa Baburam Parajuli
3 Rupandehi District Court Extension Counter, Rupandehi Karishma Shrestha
4 Malarani Extension Counter, Arghakhanchi Suman Bashyal
5 Tulsipur Sub-Metropolitan City Extension Counter, Dang Shreedhar Pande
10th ANNUAL REPORT 2019/2020
11Mega Bank Nepal Limited
S.N.Karnali Province - Head Kamal Prasad Bhandari
Branch Branch Managers
1 Khalanga Branch, Salyan Shiv Dev Gautam
2 Jumla Branch, Jumla Ashok Shah
3 Kalikot Branch, Kalikot Rohan Kumar Bista
4 Dailekh Branch, Dailekh Padam Prasad Adhikari
5 Birendranagar Branch, Surkhet Bikram Thapa
6 Birendranagar Branch -2, Surkhet Prakash Shrestha
Incharge of Extension Counters
1 Kapoorkot Extension Counter, Salyan Umesh Shrestha
S.N.Sudurpachim Province - Head Sagar Ojha
Branch Branch Managers
1 Sanfebagar Branch, Accham Chetraj Pant
2 Attariya Branch, Kailali Padam Bahadur Chand
3 Dhangadhi Branch, Kailali Homendra Upadhaya
4 Dhangadhi Branch -2, Kailali Yogendra Raj Awasthi
5 Khalanga Branch, Darchula Lok Raj Bhatta
6 Baitadi Branch, Baitadi Jaya Raj Bhatta
7 Jogbudha Branch, Dadeldhura Rabindra Karki
8 Mahendranagar Branch, Kanchanpur Bishnu Raj Bhatta
9 Mahendranagar Branch -2, Kanchanpur Prakash Phullara
Incharge of Extension Counters
1 Pahalmanpur Extension Counter, Kailali Durga Dutta Bhatta
2 Shailyashikhar Extension Counter, Darchula Surendra Bhatta
3 Mahendranagar Yatayat Karyala Extension Counter, Kanchanpur Krishna Singh Bhaat
4 Mahendranagar Malpot Extension Counter, Kanchanpur Yokesh Chandra Bhatta
10th ANNUAL REPORT 2019/2020
12Mega Bank Nepal Limited
Notice of Tenth Annual General Meeting
Dear Shareholders,As per the decision of the Board of Directors of Mega Bank Nepal Limited dated 22nd December 2020 (2077/09/07), meeting number 308th, the Tenth Annual General Meeting of this Bank is going to be held in following date, time and place and for the purpose of discussion and decision of below mentioned agendas this notice has been published as per section 67 of the Companies Act 2063 to all the shareholders for their information and their valuable presence.
1. Date, Time and Place of Meeting Date : 13th January 2021 (Poush 29, 2077) Time : 11:30 AM Place : Head Office of the Bank, Kamaladi, Kathmandu
2. Resolution A) Ordinary Resolution
1. Discussion and approval of Chairman’s Speech and report of Board of Director for FY 2019/20 (FY 2076/77).
2. Discussion and approval of Consolidated Statement of Financial Position as of Mid-July 2020, Consolidated Profit or Loss Account for the period from 17th July 2019 to 15th July 2020, Consolidated Other Comprehensive Income, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity, Significant Accounting Policies and Notes to Accounts, Annexure of Financial Statements and Disclosure & Additional Information including Audited Financial Statements (including its Subsidiary Mega Capital Markets Limited).
3. Approval of cash dividend of Rs. 406,342,210.19 (Four hundred six million, three hundred forty two thousands, two hundred ten rupees and nineteen paisa only) as proposed by Board of Directors which is 3.05 percent of current paid up share capital Rs. 13,322,695,416 (Thirteen billions, three hundred twenty two millions, six hundred ninety five thousands, four hundred sixteen rupees only).
4. Appointment of Statutory auditor of the Bank for the FY 2020/21 as per section 111 of the Companies Act 2063 and concluding his/her remuneration (Current auditor C.S.C. & Co. is eligible for reappointment).
B) Special Resolution1. Approval for issue of Bonus Share of Rs. 1,332,269,541.60 (One billion, three hundred thirty two million,
two hundred sixty nine thousands, five hundred forty one rupees and sixty paisa only) as proposed by Board of Directors which is 10 percent of current paid up share capital Rs. 13,322,695,416 (Thirteen billions, three hundred twenty two millions, six hundred ninety five thousands, four hundred sixteen rupees only) and after issue of bonus shares retaining the resultant fraction shares to be adjusted in future.
2. As a result of issue of bonus shares out of profits from FY 2019/20, the capital of the Bank will increase and capital structure of the Bank require amendment therefore amending para. (a), (b) and (c) of section 6 of Memorandum of Association.
3. Delegating authority for necessary changes in Memorandum of Association proposed for amendments if any changes are directed by regulating authorities.
4. Delegation of authority in relation to mergers or acquisitions with/to other banks or financial institutions with regard to all the activities relating to mergers or acquisition including formation of merger/acquisition committee, signing Memorandum of Understanding (MOU), appointing approved valuator (national and international) for conducting due diligence audit, prescribing remuneration of valuator, assessing share swap ratio, concluding final agreement for merger/acquisition and all other activities related with mergers and acquisition.
5. For the purpose of bringing foreign strategic partner as per prevailing laws and regulations, delegating authority to Board of Director for conducting necessary activities relating to identifying foreign strategic partner.
C) Miscellaneous
.........................….……………………………..By order of Board of Director
Company Secretary
10th ANNUAL REPORT 2019/2020
13Mega Bank Nepal Limited
1. For the purpose of Annual General Meeting, the record of share registrar of Mega Bank Nepal Limited shall be closed for one day on 2077/09/17. The shareholders transacted in Nepal Stock Exchange Limited till 2077/09/16 and included in record of share registrar of Mega Capital Markets Limited shall be allowed to attend general meeting.
2. To participate in the meeting on the date of General Meeting, shareholders attendance register will be opened from 9:00 A.M. to time until the completion of Annual General Meeting. To participate in the AGM Shareholders must present compulsorily, the original share certificate or documents proving their identity and shareholders who have dematerialized their shares must present DEMAT account number and original authorized identity card.
3. In order to prevent and control corona virus pandemic (Covid-19) that has been spread all over the world, considering the protection of the health of our valued shareholders and as per the Directions and Guidelines relating to health issues issued by Nepal Government and also as per the practice followed by peer banks and financial institutions, arrangement has been done for online virtual (Zoom) medium for attending meeting, presenting their views and voting. Therefore, in order to prevent or prevented from Corona Virus infection it is requested to attend through online (virtual) medium and shareholders attending physically are requested to bring their PCR report with them.
4. Shareholders attending meeting, presenting their views and voting at the General Meeting through online (virtual) (Zoom) medium must send, 48 hours before the commencement of AGM, a scanned copy of share certificate/Demat account at email [email protected] or viber/whatsapp at mobile number 985708413 or 9840073295 or SMS typing AGM then Meeting ID and Password shall be made available. The shareholders desiring to present their views in AGM can send their written views in mentioned email address.
5. The proxy form as prescribed by the Bank and containing Bank’s seal and signature of company secretary shall only be accepted.
6. Either public or promoter shareholders interested in appointing a proxy for attending the AGM shall fill the proxy form appointing all of their one category of shares to single shareholders and shall submit the form at least 48 hours before the AGM commencement to the office of Company Secretary of the Bank, Rising Mall, Kamaladi, Kathmandu. Shareholders who want to appoint a proxy for attending the AGM can appoint only to Bank’s shareholders as a proxy.
7. In case, if any shareholder appoints more than one proxy than he should apply attending himself/herself stating that “validate my current proxy by cancelling all other earlier appointed proxy” then only his/her earlier proxy shall be cancelled and proxy submitted with application shall only be valid. If any shareholder appoints more than one proxy, by way of division or not, but without any application, his/her all proxy will be cancelled.
8. If any shareholder present himself or herself in the AGM after appointing a proxy for attending the AGM then his/her proxy shall be automatically cancelled.
9. If any corporate entity or company who has purchased shares nominates representative, such representative can attend general meeting in a capacity of shareholder.
10. If any shareholder is minor or incapable, then the person who is registered as his guardian in the shareholders’ register shall be entitled to take part, vote, or appoint a proxy in the AGM.
11. The shareholders from domestic or foreign country unable to attend general meeting by himself/herself can download the proxy form from Bank’s authorized website www.megabank.com.np and signing in it can send scan copy to the Bank.
12. For more information about general meeting of the Bank, it is requested to contact at Bank’s phone numbers 4169216, 4169217 and extension numbers 108, 300, 306 and 193 at Bank’s Head Office or can be contacted to phone numbers 4262772 and 4262775 of our share registrar Mega Capital Markets Limited at Sanket Complex, Tripureshwor Kathmandu.
Other additional Information:The Book containing the annual report of Board of Director to be discussed at the meeting, Report of Auditors including Balance Sheet, Profit or Loss Account and schedules related thereto shall be made available at Head Office of the Bank and at Bank’s share registrar Mega Capital Markets Limited, Tripureshwor, Kathmandu and also at venue of general meeting on the date of general meeting. In addition, such reports shall be made available to shareholders’ emails available at Bank’s record and also in Bank’s website www.megabank.com.np. Abridged annual financial information has been published in national daily newspaper as per sub-section 4 and 5 of section 84 of the Companies Act 2063. Also, the annual report of Board of Director and proxy form can be downloaded from Bank’s website www.megabank.com.np.
Common Information relating to General Meeting
10th ANNUAL REPORT 2019/2020
14Mega Bank Nepal Limited
Proxy Form
Entrance
To Board of DirectorMega Bank Nepal LimitedRising Mall, Kamaladi, Kathmandu
Subject: Appointment of Proxy.
Sir,
I/we ………....................................................................… residing at …………..................................….. District ……….......................................……….
Municipality/ Rural Municipality ward number …………, in a capacity of shareholder of the Bank and being
unable to attend for the discussion and decision at Tenth Annual General Meeting being held on 13th January 2021
(2077/09/29), want to appoint representative to ………............................………. (Shareholder number/DEMAT number)
residing at ….......................................…………….. District ……….................................................…….. Municipality/ Rural Municipality ward
number ………........… to attend and vote at general meeting.
Representative Applicant
Signature: Signature:
Name: Name:
Address: Address:
Shareholder No: Shareholder No:
DEMAT No. DEMAT No.
Number of Shares Number of Shares
Date: Date:
Signature of Company Secretary
Bank’s Seal
Note: This application must be submitted to Bank’s Head Office before 48 hours of commencement of the
general meeting.
Shareholder’s Name: M/s ………………................................................……………. Shareholder Identity/DEMAT No: …………....………………
Number of Shares: ………………………….. Issued for attendance at Mega Bank Nepal Limited’s Tenth Annual General
Meeting.
………………….......................……… ……..…................……………..
Shareholder’s Signature Company Secretary
10th ANNUAL REPORT 2019/2020
16Mega Bank Nepal Limited
Mr. Bhoj Bahadur ShahChairman
An academician by profession, Mr. Bhoj Bahadur Shah is the former President of Private and Boarding School’s Organization of Nepal (PABSON) and Vice President of All Nepal School's Sports Association. He brings along great experiences of being the Founder / Chairman of Ananda Bhumi High School, Founder/ Chairman of National Integrated College and Director of Sahas Urja Hydro Power Company.
Mr. Mukti Ram Pandey Director
Mr. Mukti Ram Pandey holds a Bachelor Degree in Economics and has been the Chairperson of Samrat Group of Company (Tours /Travels/adventure/Hotel/Resort /Helicopter) for over two decades. He has previously held the prestigious appointment as the Board of Director of Nepal Tourism Board (NTB) and has also been a Board of Director of Nepal Airlines Corporation (NAC), the national flag carrier airlines, since 2014. He was amongst the founder Board of Directors of Mega Bank Nepal Ltd. and was also a Board of Director of Tourism Development Bank Ltd from 2012.
Ms. Shiba Devi Kafle Independent Director
Ms. Shiba Devi Kafle holds M.Phil. degree in Monetary Economics with optional International Economics from the University of Glasgow, UK after completing MA in Economics from Tribhuwan University, Nepal. Started her career as an Assistant Lecturer with Mahendra Ratna Campus in 1980, Ms. Kafle joined Nepal Rastra Bank and served various important departments in various capacities such as Public Debt Officer in Public Debt Department, Deputy Director of Research Department, Director of Research Department, Balance of Payment Division, between 1990 to 2010. After serving for several years with the Central Bank of Nepal, Ms. Kafle was briefly appointed as the CEO of Rastriya Banijya Bank (RBB) in 2011 before being appointed as the member of the Board of Directors of RBB from 2011-14. She has also served as the SAARC Finance Coordinator between 2004-2010 and was the Vice Chairperson of Nepal Rastra Bank’s ex-Employees’ Association from 2011-14.
Mr. Bal Krishna SiwakotiDirector
Mr. Bal Krishna Siwakoti holds a Bachelor’s degree in Management and is a successful businessman. He is a Board Member of Investment Board Nepal, Board Director of Kalinchowk Cable Car and the Managing Director of Dibya Saw Mill and KasthaUdhyog. He is the Chairman of Kalinaag Multiple College, Jiri Tea Udhyog Ltd. and Nirman Mediya Camp Pvt. Ltd. He was the former Chairman of Then Kalinchowk Development Bank Ltd., Secretary of AFRO Asia Peoples Solidarity Organization (AAPSO), Member of Bank, Finance & Insurance Committee (FNCCI) and former Central Committee Member of Nepal-Bharat Friendship Association.
Board of Directors
10th ANNUAL REPORT 2019/2020
17Mega Bank Nepal Limited
Mr. Gopal KhanalDirector
A Successful Businessman, a well-known Publisher and an Educational Entrepreneur, Mr. Gopal Khanal is the Chief Executive Director of Nepal Mega College and President of Asia Publication, Universal Printing Press and Pariskrit Carpet Industry. He is a member of the Executive Committee of the Federation of Nepalese Chambers of Commerce & Industry. Mr. Khanal is also a Council member of Sopan Multiple Company Limited.
Mr. Madan Kumar AcharyaDirector
Mr. Madan Kumar Acharya is a well-known social worker and a successful businessman with over two decades of rich experiences and contribution in the tourism sector of Nepal. He is the Managing Director of one of Nepal's leading Travel Company, Loyal Travels and Tours Pvt. Ltd. He is also a Central Member of the Canoeing & Rafting Association under Nepal National Sports Council and a member of the Airlines Program Joint Council (APJC) of Nepal.
Dr. Indra Bahadur Malla ThakuriDirector
Mr. Indra Bahadur Malla Thakuri holds Ph. D in Contribution of Tourism in Rural Economy of Nepal from Mewar University, Rajasthan India and is a successful academician. He is a Lecturer of Economics for 25 years and is the Principal in National Integrated College and NIC Secondary School. He was Board Director in Mega Bank Nepal Ltd. during Jan-Dec 2011. He has participated in various workshops, seminars and training programs.
10th ANNUAL REPORT 2019/2020
Respected shareholders,On the auspicious occasion of Tenth Annual General Meeting, I would like to express warm welcome to all the respected promoters and shareholders of this reputed institution from the entire mega family.Due to the hazardous impact of covid-19 pandemic, we have to forcefully organize and conduct meetings through electronic media. Despite of the fact that we were unable to conduct meetings through physical presence of all the members, I feel glad in a sense that we got the valuable opportunity to get connected with each other through the optimum use of emerging technologies.
Impact of covid-19Even though, the first 8 months of review period was in good condition in terms of Nepalese economy, the remaining period was devastating. You all are well familiar with the harshening and degrading economic conditions of Nepal as well as the entire world due to the tremendous and rocket speeding spread of Covid-19. The pandemic exerted the adverse effect on the entire industrial and business sector. The banking sector was also directly influenced. As the developed economy of the world are facing complexities in facing a war with covid-19, Nepal is no exception to it. As a result, the current financial year will also be directly influenced by the Covid-19.
Bhoj Bahadur ShahChairman
MEGA BANK NEPAL LIMITED
Chairman’s Speech
10th ANNUAL REPORT 2019/2020
19Mega Bank Nepal Limited
The role of remittance in the Nepalese economy is fundamental. The fund generated through remittance has been contributing to deposit mobilization, loan disbursement, and foreign currency management & commission income in banking sector. As the job loss seems to have been practiced largely in the global markets, and we expect decreasing inflow of remittance in future which would have profound impact on Nepalese economy. As various sectors of the economy such as export, import, construction, transportation, education has been influenced by Covid-19, it has negatively impacted income from foreign currency transaction, and fees income from non-funded services like letter of credit and bank guarantees.
Human resourceDespite the risk and fear of Covid-19 transmission, employees of Mega Bank were dedicated towards rendering quality customer services. I would like to thank all of them from the bottom of my heart. I am grateful to the dedication shown by Bank’s employees towards fulfillment of their roles and responsibilities by working in alternate working days and as per the security measures prescribed by regulatory authority. Thus, we consider our staffs not as resources but as assets for the organization. For the overall development and skill of employee, I want to memorize you that we have established Mega Learning & Development Center and have conducted various trainings and seminars.
Future StrategiesIn order to uplift the economic condition of the nation, we are providing the various rebates and facilities directed by regulatory authority, flowing subsidized loans, rescheduling and restructuring of the loans and installment, exempting penal amount and providing rebates in interest amount from the Bank’s side. Where the banking services which directly affects the daily life of the people, are categorized as basic services by Nepal Government, Mega Bank, under various additional policies and direction of government and regulatory authority, will carry on its day to day banking operation more efficiently and effectively making it more strong and stable.
Information TechnologyIn order to lessen the effect of COVID-19 through social distancing and securing financial transactions, cash transactions are discouraged and emphasis has been provided to Digital platform for performing banking transactions. At the time of pandemic, most of the banking transactions have been performed through the use of Digital platform, thus, we consider it as the opportunity created by COVID-19 pandemic. To tackle the challenges created by COVID-19, the Bank has also established Digital Product Department. We have also formed and implemented high level Digital Transformation Steering Committee. We have launched the system wherein the Customer can open their account conveniently and safely at home through the use of Video Account Opening System developed by the Bank.
Risk Management and AchievementThe Bank has been more cautious on operational risk exposed to when regular banking operation were conducted during the country lockdown because of COVID-19 pandemic, as Bank has continued its day to day operation through rotation and alternation of staffs, working from home with the use of digital platform, emphasis put on digital transaction and so on. Due to excessive liquidity in the market, interest rate on deposits and interest rate on loans has been decreasing as a result of which base rate has also been decreasing which has resulted tough competition in interest rate in the market. Decreasing interest rate on loans has acted as ointment for various business institution but on the other hand has also increased interest rate risk in banking system. From Ashad 2077, the regulatory authority has directed banks to reduce the differential average interest rate to 4.4 percent. This ensures the profound effect on the bank’s profit. The bank has been performing analysis regarding various internal and external activities related to risks.
International AwardsBank has increased investment by prioritizing the micro, small, cottage and medium industries as per its objectives. Considering the initiatives taken by the Bank, the Bank has been awarded with awards on two different discipline, Best bank for micro-finance and Best Bank for SMEs from International Journal “The Asiamoney Publication”. Adding another milestone in our journey, we have been awarded with the prestigious “BANK OF THE YEAR 2019” award from UK based reputed Financial Publication through publication in famous magazine “The Banker”.
Merger and Network ExpansionIn order to boost the corporate objectives of establishing as a leading bank in terms of capital and business volumes, the Bank by using the authority provided by its eighth Annual General Meeting, had signed Memorandum of Understanding (MOU) on 25th September 2019 with national level “B” class licensed institution “Gandaki Bikas Bank Limited”, head office situated at Pokhara Metropolitan city of Gandaki Province for its due acquisition. After receiving final approval from Nepal Rastra Bank, both Banks commenced their joint transactions effective from 4th July 2020 (21st Ashad 2077). After acquisition of Gandaki Bikas Bank Limited, the Bank has been leading strong institution in Gandaki Province and its position in Kathmandu Valley including Bagmati Province and Lumbini Province has be strengthen. In addition, the branch network of the Bank all over Nepal has been extended to 206 in numbers. After acquisition, the branches of the Bank has been extended to 58 districts from previous 51 districts. In the review period, the Bank has increased its volume (deposits and loans) by around 60 percent establishing itself amongst top 11 commercial banks that existed now in terms of business volume. In recent times, with continuous practices of mergers and acquisitions, voice has been raised for the need of big mergers. Thus, I assure that we have developed strategic foundation for prioritizing such initiation. I assume that mergers and acquisitions materialized until now have given us that experiences and knowledge as well. Current year, we are planning to adjust appropriately the duplicating branches occurred in same place due to acquisition of erstwhile Gandaki Bikas Bank Limited after which the activities for further branch expansion will get a pace.
Land Purchase and BuildingThe provincial building constructed in its own land situated in Butwal has been completed and is in use. Also, the Bank is inquisitive for appropriate land or building for its central office.
Corporate Social ResponsibilityWith an effort to ensure bright future of girl children, Mega Bank has started a campaign named as “Education is Enlightenment” where each branch has provided financial support and education materials to one girl student from economically deprived family from the previous year. Through this program, the Bank supports these selected girl children from Grade 1 to Grade 12. In continuation of that program and expanding the support, the Bank has provided support for 2 girl students from each branch effective from session commencing for 2077. In the panic situation of Covid-19 in the review period, the Bank provided financial support of Rs. 10 million to the fund established by Central Government and Rs. 5 hundred thousand each to the funds established by all State Governments, total funding being Rs. 13.5 million (Including contribution from staffs and member of Board of Director). We believe that these types of social activities are building positive perception among people towards the Bank.
At last, on behalf of Board of Directors and myself, I want to present heartfelt thanks to the promoters, shareholders, customers, Nepal Rastra Bank, Nepal Government, Securities Board Nepal, Nepal Stock Exchange Limited, Company Registrar’s Office, CDS and Clearing Limited and other regulators, Chief Executive Officer Mrs. Anupama Khunjeli her management team, Senior Deputy General Manager cum Company Secretary Mr. Tulsi Ram Pokharel, staffs, media and all those who directly or indirectly have contributed in business growth and development of the Bank.
10th ANNUAL REPORT 2019/2020
20Mega Bank Nepal Limited
JENU THAPAChief Liability Officer
MANOJ KHADKAChief Marketing Officer (CMO)
RAVEENA DESRAJ SHRESTHADeputy Chief Executive Officer
CHHABINDRA NATH SHARMABusiness Development Officer (BDO)
AMIT SHRESTHAChief Credit Officer (CCO)
Senior Management
10th ANNUAL REPORT 2019/2020
21Mega Bank Nepal Limited
RAJESH SHARMAChief Operating Officer (COO)
DENY SHRESTHAChief Global Market
ANUPAMA KHUNJELIChief Executive Officer
TULSI RAM POKHARELSenior Deputy General Manager
PRAGYA PANDEYChief Risk Officer (CRO)
10th ANNUAL REPORT 2019/2020
22Mega Bank Nepal Limited
2020 - A year to remember!
10 years is a milestone. It is an occasion to celebrate, an opportunity to momentarily look back and also a golden ticket to chart the path forward. With the completion of a decade long journey, this year it was marred by the unsurprising event CORORNA VIRUS.
With the worldwide spread of the virus, Nepal was affected equally with an uncertainty of business, jobs and even our life. This toughest period taught us to combat together; since the initial state of COVID-19 crisis, Mega Bank Nepal Limited (MBNL) have put its Customers at its ‘First Priority’ above and beyond all the scenario.
Yet, despite the odd stumbling blocks along the way - we have completed a decade - together, supportive, encouraging and enduring like a family. We, ‘Mega Bank’ not only saw the drawbacks of crisis but we took it as an opportunity to respond and give best facilities as possible to our Customers and communities equally.
Being one of the standing milestones of the economy, Bank has taken some corporate and non-corporate stand to help customers who were impacted by the coronavirus by deferring payments on their mortgages, personal loans, auto loans, and business loans which in-turn helped to realize that Bank act an important financial shock absorber for individuals, households, small businesses, and corporations by providing important liquidity when it is needed most and we ‘Mega Bank’ were able to stand by our customers going forward.
To our customers I would like to say: Thank you for your patience and enormous belief towards our Bank. We do not take it for granted.
Paradigm Shift of Business: The acquisition of erstwhile Gandaki Bikas Bank Limited with the huge increase on customer base in a considerable way is like paradigm Shift over our business module. The acquisition of Gandaki Bikas Bank Limited is a step forward for continuous growth, the cooperation of the Board of director and their tireless efforts in making our Bank function smoothly in such a contingent situation in the right direction is acknowledgeable.
Technology is the future!Technology has been creating a revolution in the world. Digitalization in banking does not only mean online
banking, internet banking, mobile banking or paperless banking rather it is the application of new technologies to transform the existing banking business model into a new banking business model.
A model which will itself produce new customer base, unveil new financial services, ensure faster and seamless services to clients with reduced operational cost, zero error, ease of use and apparently, maximum security. Therefore, it’s not only a new channel; rather it’s a whole new way of transforming existing transaction-based banking into the experience-based banking.
So that, banking can be accessed by customers anytime and from anywhere. Keeping this in mind, we have set up a MIS department where we gather the innovative ideas and put those ideas into the real time execution.
Being in the service industry, we are always looking forward to provide our customers the top most service.
In the coming years, our vision is to create the value creation to our customers where they can tap from anywhere in Nepal and get the desired service from our Bank without being able to visit any branch.
For example; we have introduced the account opening through video call which rightly gives path to our vision. Similarly, our internal control mechanism has been strengthen on year to year basis and ever improving towards mitigating and minimizing various risks. The Bank is committed to adopt and implement good governance system and has included corporate culture and ethics in its core values for its sustainable growth.
I would like to thank all of our stakeholders including our customers for their continued support and confidence they have put in the Bank. I would also like to express my appreciation to our dedicated Board of Directors, Management and Staffs for their invaluable contribution and hard work which brought the Bank at today’s position.
Not to forget, I am very grateful to Nepal Rastra Bank and other regulating bodies for their continuous guidance, framework and support.
Chief Executive OfficerAnupama Khunjeli
Message from CEO
10th ANNUAL REPORT 2019/2020
5. Mega Bank Today
a. Our Activities Our activities are concentrated over
two segments Retail Banking and Corporate Banking.
Retail Banking Mega Bank’s Retail Banking segment
offers various banking solutions to our retail customers through multiple channels offering various products and services featured with latest technologies.
Retail Deposits Retail deposits include saving
accounts, fixed deposits, high net-worth individuals, senior citizens, students, newly married couples, salaried employees, retired officials, remittance income earners, etc.
Retail Lending The Bank offers various ranges
of retail asset products including home loans, auto loans, consumer products loans, loan against gold/gilt securities/FD Receipts, education loans, personal loans, etc.
Payment Solutions The Bank’s payment products and
services are debit cards, credit cards, travel cards, Point of Sale (POS), QR Scan to Pay, etc. Other alternatives payments products and services are ATMs, Mobile Banking, Remittances and Online Internet Banking.
Corporate Banking Mega Bank’s Corporate Banking
segment offers various banking solutions to our corporate customers through various products and services like Credit, Treasury, Transaction Banking and Investment Banking.
Credits The Bank’s loan products and
fee-based products and services are targeted to meet the financial requirements of large corporate houses, medium-sized corporate clients and SMEs. Our products and services include corporate credits, mid-corporate credits, SMEs, demand loans, short-term loans, project financing, export credit, bills discounting, documentary credits, guarantees, and foreign exchange and derivative products. Our products and services on the liability side include current accounts, call accounts and time deposits.
Treasury The Treasury function in Bank
manages our non-credit funds by investing them in debt instruments including bonds and T-bills, and also engages in trading of equity
instruments of listed companies in Nepal Stock Exchange. The Treasury also manages regulatory reserve requirement of the Bank including Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). In addition, the Treasury division governs investment in mutual funds and manages foreign exchanges. It does private placements in domestic and foreign nostro balances and offers a wide range of treasury products and services to the Bank’s corporate clients including forward contracts deals and bullion trading.
Transaction Banking The Bank’s Transaction Banking
units offers varieties of inter-related and integrated products and services like current accounts, cash management services, capital market services (via. Subsidiary Company), foreign exchange and derivatives, correspondent banking services, revenue collection and dissemination on behalf of local governments, etc.
Investment Banking We provide investment banking
services and trusteeship services to our individual and corporate clients through our wholly-owned subsidiary Mega Capital Markets Limited. The wide range of services provided include investment management, share management, corporate advisory solutions, issue management, underwriting and services of securities registrars.
b. What We Are In addition to performing
contemporary banking, we are committed to set up business models that creates values by transforming various capital inputs (financial, social, intellectual, human) into value outputs (people, planet and prosperity).
We aim to do banking on financial realm of fair interest rates to savers, reasonable long-term return to investors, credit disbursements to sustainable entrepreneurs delivering real impact in the economy. For that purpose, we aim to use deposits rather than long term debt instruments and borrowings from other banks and we endeavor to deliver a healthy balance between loans and deposits so that we could mobilize as much of our deposits as possible.
We also maintain healthy levels of
financial capital, well above regulatory requirements. This will help us to do sustainable banking and makes us more resilient over the long-term.
10th ANNUAL REPORT 2019/2020
26Mega Bank Nepal Limited
Call
Saving
Fixed
c. Key Figures
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
8,472
19,678
28,90336,375
73,082
Rs.
In M
illio
n
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
10,3718,446
15,452
20,821
33,409
Rs.
In M
illio
n
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
9,933
8,796
13,973
17,476
12,834
Rs.
In M
illio
n
10th ANNUAL REPORT 2019/2020
27Mega Bank Nepal Limited
Margin
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
185231
520
635
735R
s. In
Mill
ion
FCY
TOTAL DEPOSIT
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
30,75038,937
62,965
81,859
132,017
Rs.
In M
illio
n
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
650 573
214
1,551
1,770
Rs.
In M
illio
n
10th ANNUAL REPORT 2019/2020
28Mega Bank Nepal Limited
CORPORATE
MID-CORPORATE
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
6,0547,673
12,108
19,372
30,044R
s. In
Mill
ion
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
7,930
10,898
13,96214,749
14,012
Rs.
In M
illio
n
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
6,045 6,526
10,78812,381
23,289
Rs.
In M
illio
n
SME
10th ANNUAL REPORT 2019/2020
29Mega Bank Nepal Limited
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
5,878 7,488
16,62819,720
38,687R
s. In
Mill
ion
RETAIL
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
27,82735,191
57,264
72,744
113,809
Rs.
In M
illio
n
TOTAL LOANS
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
1,5052,214
3,506
4,881
6,814
Rs.
In M
illio
n
MICRO
10th ANNUAL REPORT 2019/2020
30Mega Bank Nepal Limited
d. Mega Bank’s Presence Networks of Branches and Extension Counters
Bagmati ProvinceProvince 1
Province 2
Branches -20
Branches -12
Branches -73
Extension Counters -5
Extension Counters -2
Extension Counters -17
10th ANNUAL REPORT 2019/2020
31Mega Bank Nepal Limited
Gandaki Province Lumbini Province
Karnali Province Sudurpachim Province
Branches -47 Branches -39
Branches -9Branches -6
Extension Counters -5
Extension Counters -4Extension Counters -1
10th ANNUAL REPORT 2019/2020
32Mega Bank Nepal Limited
Other forms of NetworksBranchless Banking 89
Point of Sale 666
ATMs 142
QR Merchant Point 5600
Domestic 3200+International 23
Subsidiaries of Mega Bank Nepal LimitedMega Capital Markets Limited is in operation from 1st April 2019
Mega Stock Market Limited is incorporated and license under process.
Subsidiaries ofMega Bank
Nepal Limited
Subsidiaries
PartiallyFully
MegaCapital
MarketsLimited
10th ANNUAL REPORT 2019/2020
33Mega Bank Nepal Limited
6. Business Model and Strategy
a. The Future of Banking The three areas i.e. intangibility of the Bank’s service,
customer integration and heterogeneity in quality of service (caused by different individuals serving differently) will continue to pose opportunities and challenges for the Bank towards in future. In addition, the growing technologies and its dynamism is posing different challenges in pursuing the business model and our banking landscape.
To be successful and for sustainable banking, the
Bank of the future will need to embrace emerging technology, remain flexible to adopt evolving business models, and put customers at the center of every strategy. The future of banking will look very different from today. Faced with changing consumer expectations, emerging technologies, and new business models, banks will need to start putting strategies in place now to help them prepare for banking in future. As per Deloitte, the Bank needs to explore following eight key trends that are changing the banking landscape in future:
Enterprise Agility: The accelerated pace of technology innovation is
giving rise to new business model at an even faster speed. Today, competitive advantage doesn’t come from being big, but from being fast and nimble in adhering to latest technology.
Future of Work:
Banks are embracing new technologies and investing heavily in digital transformation initiatives in a ways to change the future work and workforce. Automation and artificial intelligence are replacing human thinking and urging Banks to revisit their talent landscape and knowledge management process.
Leveraging Platforms and monetizing data: Banks Today must offer customers the desirable
service in a way they want to receive it. Bank must use data to optimize their products and services to decide how they want to utilize platforms and the data, in order to grow.
Orchestrating across the ecosystem: The financial services ecosystem is growing.
Regulators, fintechs, banks, businesses and all others need to work together. The importance of deliberate ecosystem strategy and the effective orchestration will be vital in a days to come.
Cyber Risk and Financial Crime: The financial crime ecosystem is evolving as
criminals are adopting new and innovative ways
to commit crime. The Bank needs to embrace advanced technologies such as analytics and artificial intelligence to improve threat visibility and detect fraud effectively.
Data Integrity and Analytics: Data is power and it is plentiful in current context but
is not easily accessible, clean enough or integrated. Integrity of data will have profound impact over business intelligence.
Digital and Emerging Technologies: New technologies are drastically changing the
banking industry and financial markets. Artificial Intelligence and automation are proving to be valuable in ways we never thought possible. Blockchain and cloud computing are changing the industry outside Nepal and has implications as companies are trying to understand these technologies.
Embracing and becoming Digital:
Technology will continue to be the driver of the business growth and central to delivering a wide range of services through strong customer experiences. For Banks, it can be a vital to succeed through digital business model in a changing business environment.
Digitization, meanwhile, is driving down costs and causing commoditization. Intangibles enable a business to differentiate from its competitors. They are already the main drivers of the value that a business can create. The quality of its decision making enables a business to adapt more swiftly than its competitors to the opportunities and threats presented by the digital age and the developments in its markets. It is also the key intangible that unlocks the potential to develop other intangibles within the business, such as its competitive position, its brand’s reputation, the qualities of its people, its intellectual capital and how well it implements its decisions.
Customers are also changing the way they buy financial services. That means we can’t afford to sit on the sidelines when it comes to our digital capabilities. In order to enhance our digital capabilities, we have already established digital banking department.
Till Today, the Bank has already started various digital services like Smart Banking, Internet Banking, Online Account Opening and QR merchant payment system for our digital-savvy customer through which customer can perform both financial and non-financial transactions. Further to this, Bank is also launching Online Loan & Credit Card eligibility
10th ANNUAL REPORT 2019/2020
34Mega Bank Nepal Limited
module, Missed Call Based Banking Services & Chabot to electrify the consumers’ experiences.
Digital Banking Department’s preliminary focus is on the digital transformation of the Bank through research & design of digital products by analyzing the value proposition. Moreover, Digital Banking Department is also doing rigorous study of current business processes and automating the processes to enhance the efficiency as well as easing the control functions.
Banking is getting branch-less, contemporary and digital at a very fast pace. As Banks compete to gain competitive advantage, the need for managing big data and data analytics becomes more relevant. Data Analytics has transformed the way traditional banks worked in the past and has been very helpful
in informed decision-making. Banks are using predictive analytics software for studying customer behavior, fraud analysis, data processing and validation, use analytics to manage credit lines and collections.
Through associated data analytics tools, the Bank is trying to gain greater visibility into customers’ behaviors, assess the probability of risk and help small businesses. MIS & Automation unit of the Bank is combining various data sources like Core Banking Data & Transactional Data including other various alternate channels and analyzing those data to generate analytical MIS which is helping all the level of management for the effective decision making purpose.
b. Mission, Vision, Values
“Bank’s Mission is to serve the entire Economic Pyramid by enhancing inclusiveness amongst all strata of Nepalese Society while providing complete financial solutions. Delivering ‘Service Excellence to Create Mutually Beneficial Relationships' with all our stakeholders i.e. Shareholders, Customers, Regulators, Staff & Society to create, build and strengthen relationship of mutual benefit.
Service CentricProviding the best services in the industry
TransformationalAdopting latest knowledge and skills
Action OrientedBelieving in work ratherthan words
Result Focused & ResponsivenessDelivering consistent results
SynergisticWorking as a team to meet the needs
‘Banker of every Nepali from Plough to Power - Halo to Hydro’.
10th ANNUAL REPORT 2019/2020
35Mega Bank Nepal Limited
C. What does a Mega Bank makes a difference Mega Bank’s presence in the society is impacting
our various stakeholders in different ways. Its contribution to the environment in which it is operating includes human development, social relationship, financial return, nature preservation, cultural development, nation’s growth, social security development, etc. Following are the Bank’s key business models including products, services and approaches that signposts that the Bank has been playing pivotal role in shaping society and the country:
Inclusive business models including vision and
mission directs the Bank to contribute towards every strata of population.
Provincial specific CSR activities.
Focused products and services.
Typical rural presence over various parts of the country.
Tab banking and BLBs services aligned with our mission statement.
Adequate and standardized policies.
Flexible and effective organizational structure.
Adherences to corporate ethics and culture.
Country-wide branches and other networks like BLBs, ATMs, remittance agents, etc.
Embracing to latest technologies and services for customers like QR Payments, VISA & Master cards, Online banking, Mobile Banking, etc.
Committed and qualified workforce.
Priority over risk assessment, risk management and compliance issues.
Enhanced customers’ services because of our skilled and trained manpower.
In-house dedicated training centre - Mega Learning & Development Centre.
Knowledge management through knowledge portal (Mega Learning Portal) and frequent personal development programs like mock exams to each of the staff.
Dedicated functions in organizational structure like R&D unit, Product Optimization Unit, New Product Development Unit, Digitization Unit, etc.
Continuous development in Mega ERP software.
Diversified business operations via its subsidiaries
d. Management of Assets (Capital) The Bank holds valuable assets for the development
of its business model. The strategy defined by the Bank transforms these assets (capital) to create value for all its Stakeholders. Generally there are six different types of assets (capital) that company deploys to create value viz. Financial, Manufactured, Intellectual, Human, Social & Relationship and Natural. For the Bank, being wholly a service industry and investment concentrated over financial assets, manufactured capital is not much significant and natural assets deployment are not direct therefore not much material. However, Bank uses other major four types of assets in creating value for its stakeholders.
Assets (Capital) What is it? Significant
AreasManagement
Approach
Financial
Financial resources the company already has or obtains through financing.
However, the description of financial capital focuses on the source of funds (e.g., debt or equity) rather than its application, which may be in the form of intellectual property, or in other forms of capital.
Debt, Equity& Deposits
Balanced growth
Sound financial structure
Operational efficiency
Sustainable results and dividends
The financial resilience of this
model is built on fair interest rates
to savers to attract loyal, values-aligned customers
Reasonable long-term
returns for investors
Deposits deployment to sustainable entrepreneurship
Use of deposits rather than
borrow from other banks.
Use equity above regulatory requirements
10th ANNUAL REPORT 2019/2020
36Mega Bank Nepal Limited
Human
Employee knowledge, skills, experience and motivation.
Human resources management
Knowledge Management
Secured workplace
Talent management
Diversity
Equal opportunity
We focus on following three aspects:
Competencies: tacit and implicit knowledge and attitudes,
including skills acquired through formal
education and on the job
training
Capabilities: the sum of
expertise and ability to carry out an organizational activity.
Organizational culture: Indeed included in social
and relationship capital, but plays
an important role
in the ability of an organization to add value through human capital
development
Intellectual
Intangible, knowledge-based assets. Intellectual capital as a composite of other capitals
Promotion of R&D
Efficiency and new products and services
Disruptive technology and business models
Software, rights and licenses
Development of organizational capital such as tacit knowledge, system,
procedures and protocols
Developments of brands and reputation
Social & Relationship
Ability to share, relate, and collaborate with its Stakeholders, promoting community development and well-being
Stakeholder relations
CSR activities
Group foundations
Corporate reputation
Brand management
Informational transparency
Promote and maintain relations of trust with stakeholders
Improving quality of life of people
Creation of an organization’s social license to operate
e. Value Chain
Value Creation Value activities are the means by which a firm
creates value in its products and services.
Porter (in Competitive Advantage) grouped the various activities of an organization into a value chain. He has distinguished activities as primary activities and support activities. The excess the customer is prepared to pay over the cost to the Bank of obtaining resource inputs and providing value activities is the profit margin. It represents the value created by the value activities themselves and by the management of the linkages between them.
The activities of the Bank can be linked over to the Porter’s Value Chain Model as Business Functions (i.e. primary activities) like Deposit Business, Credit Business, Remittance, Global Business, Cards & Alternate Channel, etc. and Support Functions (i.e. support activities) like Finance & Planning, Credit Administration, Information Technology, Human Resource Management, etc.
In addition to primary and support activities, other few functions are streamlined with their operational strategy in order to have control and overlook into actions of both primary and support functions known as Control Functions like Internal Audit, Compliance, Risk, etc.
The Bank’s value creation process of the Bank is driven by transforming capital inputs. These inputs include the skills and entrepreneurship of the people within our organisation and money from shareholders, debt holders and customers, via our core products and services.
Bank transforms these inputs into value outputs so that they make a valuable contribution to the development of an environment around us.
10th ANNUAL REPORT 2019/2020
37Mega Bank Nepal Limited
Capital Input for Value Creation Value Created
Financial Capital:Bank uses capital effectively so as to maximize the value to be created. Our dynamically managed and deposit driven funding modality together with well diversified deposit mix and opportunistic utilization of alternative funding drives our disciplined, sustainable and financial growth. With a 6 times growth of paid up equity capital since 2010, challenges lies in sustaining business growth in order to cope with growing equity capital. Thus, it is our goal to constantly improve our business model and processes with an operational and environmental efficiency point of view and seek cost and revenue synergies in creating value to the providers of financial capital.
We contribute to the economy and the society by paying dividends to our shareholders, salaries to our employees, invoices to our suppliers and tax revenues to governments.
Total value addition to the economy by the Bank is NPR. 9.717 billion.
Return on equity 14.65%
Return on Assets 1.64%
Capital Adequacy Ratio 13.241%
We make a significant contribution to public finances not only through our own tax payments, but also, through third party tax collection (TDS) due to our economic activity.
Intellectual Capital:We constantly invest in digital platforms so as to provide transaction convenience, unrivaled customer experience and pioneering solution suggestions to our around 1.09 million banking customers. We are expanding our digital customer base and increasing the share of digital channels in our sales. Our efforts are directed towards employees’ skill development, creativity, problem solving techniques, enhancing customers’ loyalty and brand development of the Bank. We use various channels and advertising media to create our intellectual assets. However, we take precautions against all types risks which comfort us in providing secure and uninterrupted service ensuring information security.
Our investment in digital channels resulted in increase in revenue of:
Mobile banking fee 109%
Credit Card related fee 36%
Other Cards fee 38%
We have been able to increase our:
Mobile banking user by 92.91%
Internet banking user by 11.22%
Credit card user by 31.46%
Other card customer by 44.17%
Four number of new saving deposits products were developed and issued with varied features and facilities
Human skills development though not measurable with rigidity, but impacting our performance due to increase in confidence and enhancement of skills in our employee.
ERP software integrating all HR functionality and comprehensive platform for knowledge and information sharing
We have been capable of disseminating good footprint over various media i.e. newspaper, online news, radio, televisions, hoarding boards, banners, programs, etc.
10th ANNUAL REPORT 2019/2020
38Mega Bank Nepal Limited
Human Capital:We invest in our employees by focusing on their development, satisfaction and well-being through training and well-being programs. We strive to form teams possessing team spirit, acting with shared wisdom, social responsibility and delivering results. We embrace a fair and transparent management policy based on performance, focused on equal opportunities and diversity.
Our relationship with our customers is built on trust by exceeding their expectations and enhancing their satisfaction.
Customer experience focus is at the core of our business model.
Our efforts in supporting financial literacy, CSR activities have contributed to thousands of people and millions of customers.
We have had partnership with various projects, INGOs/NGOs like Sakchhyam, DFID, Helvetas, etc.
We are supporting to government development plans by flowing the government funds at local level through our dedicated branches and other networks.
Bank creates value by transforming capital inputs viz. financial capital, intellectual capital, human capital and relationship capital. Normally, these inputs include the skills and entrepreneurship of the people within our organisation and money from customers, via our core products and services. Bank transforms these inputs into value outputs posing positive contribution to people and planet and compels for prosperity in future. The financially measured value addition by the Bank in past five years have been depicted in following figure:
Value Addition by Bank Rs. in millions
Value NetworksSince our stakeholders, all internal, connected and external, are of great importance to us, regular communication with our stakeholders gives us the opportunity to be an inclusive Bank. The feedback from our stakeholders allows us to determine risk and opportunity areas more comprehensively as well as understand stakeholder expectations and meet their needs more sensitively. In addition to maintaining the dialogue with our stakeholders through various channels all year round we have separate various units/departments and assigned functional roles to individual staffs:
Promoter Networking Management:To coordinate, communicate and support large base of the Bank’s promoters
Corporate Affairs Department:Tackle and manage media and publication
Grievance Handling Unit:Listening to the grievances and complaints of customers
Relationship Managers/Officers:Maintaining cordial relationship with loan clients
Deposit Relationship Managers/Officers:Maintaining cordial relationship with deposit clients
Bank has defined following stakeholders as the key stakeholders in the Bank’s value network:
Board
Regulating Bodies/Government
Shareholders/Investors
Customers
Suppliers & Vendors
SeniorManagement (BOD)
Employees2,131
4,016
6,191
9,0569,717
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
10th ANNUAL REPORT 2019/2020
39Mega Bank Nepal Limited
Bank manages the various stakeholders in order to create value as below:
Stakeholder Issue What do we do about it?
Customers
Networks over country
Appropriate return to depositors
Flexible products
Customer satisfaction
Financial health of the Bank assuring security of their deposits
Customer privacy and information security
Digital transformation and technological advancement
Business model captures the benefits of the emerging digital world with the aim of offering an excellent banking experience
QR code based transaction options
Online banking
Mobile banking & SMS alert
Knowing all the information needed to resolve customer issues in a practical way through dedicated units and people
Services to customers from customer care line.
Customer focused loan and deposit products
Branch expansion is our continuous process
ShareholdersandInvestors
Financial performance
Good corporate governance
Transparent disclosure of information for stakeholders
Risk and crisis management
Stakeholder dialogue
Financial capital always kept above regulatory requirement
Good corporate governance is our commitment
Work culture and ethics is injected in blood of each employee through our corporate values
Increased engagement of the CEO visibility with the investors and the media
Healthy flow of the funding received to the commercial market and to the investment community
Transparency in accounting, reporting and disclosures
Employees
Transparent disclosure of information for stakeholders
Compliance
Risk & crisis Management
Governance issue
Social contribution
Value addition to government exchequer
Contribution to national sustainable goals
Listed in stock exchange
Reliable CBS for database and its security
Close supervision and timely inspection by regulator (NRB)
Quick response and follow up of regulatory ] directions
Contributed largely in capital formation through enhancement of lending in productive sector
Supported government’s financial inclusion programs by opening branches at rural municipalities and routed government budget at local level
Supported prime minister’s slogan of every Nepali’s bank account
Contributed to various government approx. NPR. 709 million as direct tax and millions of rupees in the form of tax collection at source
10th ANNUAL REPORT 2019/2020
40Mega Bank Nepal Limited
GovernmentAgenciesandRegulatoryBodies
Transparent disclosure of information for stakeholders
Compliance
Risk & crisis Management
Governance issue
Social contribution
Value addition to government exchequer
Contribution to national sustainable goals
Listed in stock exchange
Reliable CBS for database and its security
Close supervision and timely inspection by regulator (NRB)
Quick response and follow up of regulatory directions
Contributed largely in capital formation through enhancement of lending in productive sector
Supported government’s financial inclusion programs by opening branches at rural municipalities and routed government budget at local level
Supported prime minister’s slogan of every Nepali’s bank account
Contributed to various government approx. NPR. 669.78 million as direct tax and millions of rupees in the form of tax collection at source
TopManagement
Management of risks
Financial sustainability
Digital transformation and technological advancement
Financial performance
Increasing customer satisfaction
Investing in human capital
Customer privacy and information security
Mitigating various risks and managing adequate capital internally for credit risk, liquidity risk, market risk, strategic risk, operational risk, etc.
Business models are designed based on Digital Banking products
Separate team is dedicated for data mining and analysis and developing platforms for creating value from existing data
Strategies are developed to increase the return every year by expanding business and bringing efficiency in cost
Re-structuring the organogram with market dynamism and business complexity
Structure developed with provincial framework
Value DistributionBank’s value distribution is spread over triple Ps i.e. People, Planet and Prosperity.
Planet Credit lending for sustainable and inclusive enterprise Financial inclusiveness in our strategy and action Funding to environmental protectionist via our CSR programs
Prosperity Fair Return on Equity above 10% in average in last 7 years High capital adequacy ration ensuring capital resilience Developing inclusive visions for the future Thought process of digitalization in future of banking
People A positive contribution to the healthy development of society’s people Brought about social change through employment creation, credit creation, social initiatives, etc. Enabling values-driven entrepreneurs to fulfil societal needs through productivity and services Transparency in finance and investment activities
Distribution of value created by the Bank to its various major stakeholders are as below:
9%14%
21%
56%
FY 2014/15
EmployeeDepositors/LendersGovernment Shareholders
10th ANNUAL REPORT 2019/2020
41Mega Bank Nepal Limited
Employee
Employee
Depositors/Lenders
Depositors/Lenders
Government
Government
Shareholders
Shareholders
FY 2019/20
7%13%
16%
64%
9%13%
20%
58%
Last 5 Years' Average
The above chart shows Bank’s value distribution to its various stakeholders of last 5 years.
Where, value distribution to employee was 14% in FY 2014/15 which has been slightly decreased to 13% in FY 2019/20 but on average over the period it is within 13%.
Meanwhile, value distribution to shareholders was 21% in FY 2014/15 which has been decreased to 16% in FY 2019/20. However, value distribution to shareholders over 5 years’ period on average is 20%. It means that the value distribution is low for FY 2019/20 as compared to previous years which may be due to inconsistencies in business growth and capital growth in FY 2019/20 (i.e. NPR. 10.36 billion average capital due to large portion of capital injection via right issue in previous period).
Value distribution to depositors was 56% in FY 2014/15 which has been significantly increased to 64% in FY 2019/20. This ratio is 58% on five years’
average. It means value distribution to depositors is in increasing trend.
Value distribution to government was 9% in FY 2014/15 which has been slightly decreased to 7% in FY 2019/20 but is consistent within 9% in average.
f. Strategic Foundations for Future Challenges and opportunities
In order to operate more as a vibrant Bank, we need to deliver more positive impact for the individuals and communities we serve, building on our unique experience as sustainable bank. By doing so, we will improve our service to sustainable enterprises, improve efficiency and we aim to maintain a stable net profit.
Bank wants to act beyond its immediate boundaries. We will develop new strategic partnerships. To become less dependent on interest income, we will focus on growing our fee based income, mainly through the expansion of our ancillary services and use of latest available technologies. We anticipate continuing upward pressure on our cost base due to ongoing regulatory requirements. We recognize that these obligations that come with the license to operate a bank, are important. In particular the increased responsibility of banks for customer due diligence and transaction monitoring require attention and investment, to both comply and stay fully update with new developments.
Likewise Bank faces a serious challenge with unstable interest rates and increasing regulatory costs. And yet, the opportunities for Mega Bank as a frontrunner in responsible finance is significant. With a controlled growth strategy, generating maximum impact and a stable profit, we expect a healthy development in years to come.
10th ANNUAL REPORT 2019/2020
42Mega Bank Nepal Limited
The assumption over the major challenges in banking sector are :- present context
Area Challenges What we do
Consumer expectations
These day, consumer expectation is a major challenge that modern banking are facing. Bank feels the pressure to deliver the quality services in banking today due to growing expectations of customers because of evolving disruptive technologies.
The Bank is well versed in meeting to the expectations of customers. With the use of latest technologies like master cards, visa cards, QR scan to pay system, mobile banking and online banking; the Bank is able to cater its customers’ expectation.
Increasing Competition
The challenges regarding modern banking world is increasing competition between the banks. Different Financial Institutions like commercial banks, development banks, finance companies, FinTech, and even cooperatives to some extent all are competing for the banking customers. The Banks in Nepal are also facing challenges because of increasing operating cost caused by increase in volume, development in technologies and business complexities.
In order to cope with increasing competition, Mega Bank has set strategic direction of inorganic growth. Until now, the Bank has merged two development banks and is in plan to acquire more BFIs for its network enhancement, business expansion and bring economies of scale in its operations. The Bank has strategic partnership with various organizations involving in alternative banking channels and FinTech products and services like eSewa.
Cyber-SecurityCyber-crime is invincible challenge as so it is
Cyber-attacks are increasingly seen as a top concern issue for bankers in Nepal. The banking sector is the most targeted area by hackers and fraudsters. In modern banking world, Fraud detection and security issues are a big and costly headache for the banking industry. Customers are relying more on electronic banking for their financial solutions. They use online banking, web portals, mobile applications and other platform for banking transactions which provide convenience and enhancing the customer experience but on the other hand they pose a unique risks in terms of cyber security.
Bank makes sure that all servers and workstations are continually updated. Bank has prepared business continuity plans and also conducts Information System Audit in order to identify potential risks associated with networking and internet of things. Bank protects physical unauthorized access and also logical unauthorized access. Bank also determines the physical or logical access on our any system by our vendors, if it is so Bank reviews the rights to do so and its acceptability in terms of business alignment. Bank also implement security awareness and training programs for its employees on regular basis.
Rapid technological advancement
Banking sector is interlinked with technology. The banking sector is dependent on technology for launching new products, digitizing and data protection or providing facilities to its customers but such dependability comes with opportunities and threat. The requirement of continuous update in technology in the banking sector urges for investment in technology and larger capital investment costs.
Bank is pioneer in adopting latest technologies and platform for information technologies. It well understands the importance of technologies in creating competitive advantages for Bank’s strategic initiatives and operation.
Compliance Bankers recognize the need for tougher controls, concerns were raised about the volume and complexity of current regulation which were stated to consume industry margins and management time. However, regulation continues to be a concern for banks who must invest a sizable amount of time, money, and effort into meeting compliance standards. These regulatory challenges are continued to increase by the central bank, so today the need of Bank is to constantly evaluate and improve their operations in order to meet up the regulatory requirements and keep up with the fast pace of change in the banking and financial industry.
Compliance of regulatory requirements is of primary concern to the Bank at all times. Mega Bank always seek public confidence and efficiencies in operation through its commitment to adherence to corporate governance, work ethics and compliance of applicable laws. Tracking, analyzing and monitoring of money laundering activities and fraudulent transactions will be the major challenges and big threat in compliance aspects in days to come in which Mega Bank fits well in developing its platform to cope with the emerging challenges.
Earnings and Dividend TrendDuring past years, the Bank has distributed on an average 85% of its earnings as dividend. Both earnings and distribution of the Bank are in increasing trend over the last 7 years’ period. The Bank’s earnings and dividend trend over the past few years back can be seen in following graph:
10th ANNUAL REPORT 2019/2020
43Mega Bank Nepal Limited
The amount of earnings and amount of dividends are consistently growing over the last few years. However, due to inorganic capital injection through right issue, bonus issue and merger in order to meet regulatory compliance imposed capital and also transition phase to NFRS bases financial reporting; the Bank’s dividend payment rate over its paid up equity capital seems fluctuating over the past few years.
g. Capital & Business Relationship
Financial Capital The pool of funds that is:
Available to an organisation for use in the production of goods or the provision of services
Obtained through financing, such as debt, deposits, equity or grants, or generated through operations or investments.
Financial capital is a medium of exchange that releases its value through conversion into other forms of capital like human capital, intellectual capital, social and relationship capital.
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
FY2014/15 FY2015/16 FY2016/17 FY2017/18 FY2018/19 FY2019/20
Earnings & Distribution Trend
Net Profit Dividend
Rs. in millions
275
346532
551 697
795808
1,317
1,221
1,6301,739
1,586
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
6,212
1,016
2,399
3,649
5,579
Rs.
In M
illio
n
Value Distribution to Depositors/Lenders
Value Distribution to Shareholders
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
1,586
551
795
1,317
1,630
Rs.
In M
illio
n
10th ANNUAL REPORT 2019/2020
44Mega Bank Nepal Limited
Value Distribution to Employee
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
1,260
325
487
699
1,154
Rs.
In M
illio
n
Human Capital People’s competencies, capabilities and experience, and their motivations to innovate, including their:
Alignment with and support of an organisation’s governance framework, risk management approach, and ethical values
Ability to understand, develop and implement an organisation’s strategy
Loyalties and motivations for improving processes, goods and services, including their ability to lead, manage and collaborate.
It is the human capital that creates value through mobillity various other forms of capitals. Human capital is seen to be complementary with other intangible capitals such as intellectual capital and social and relationship capital. As intangible assets seldom affect financial performance directly but instead work through complex chains of cause and effect, human capital is dependent on other forms of capital to be fully realized.
Intellectual capitalOrganisational, knowledge-based intangibles, including:
Intellectual property, such as patents, copyrights, software, rights, and licenses
“Organisational capital” such as tacit knowledge, systems, procedures and protocols
Intangibles associated with the brand and reputation that an organisation has developed.
There is a relatively common definition of intellectual capital that identifies it as having three components:
Human capital (individual person)
Organizational, or structural, capital (including the processes, procedures and shared tacit knowledge developed within an organization i.e. intellectual capital)
Relational capital (intra/extra-organizational networks)
Social and relationship capitalThe institutions and the relationships within and between communities, groups of stakeholders and other networks, and the ability to share information to enhance individual and collective well-being.Social and relationship capital includes:
Shared norms, common values and behaviour
Key stakeholder relationships, and the trust and willingness to engage that an organisation has developed and strives to build and protect with customers, suppliers, business partners, and other external stakeholders
An organisation’s social license to operate.
Social and relationship capital is seen to complement other intangible capitals, including human and intellectual capitals and what are sometimes called organizational, information and knowledge capitals. Other intangible capitals frequently rely on social and relationship capital to be realized. Human and social and relationship capitals are “clearly linked in a kind of virtuous circle, with education tending to increase social capital and at the same time social capital tending to increase educational performance.
10th ANNUAL REPORT 2019/2020
45Mega Bank Nepal Limited
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
658
239
335
526
693R
s. In
Mill
ion
Value Distribution toGovernment
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
82.54
131.89
21.1330.75
38.94
63.50
Rs.
In B
illio
n
h. Comparative Results and Awards
Deposits (Rs. in Billion) The deposit volume of Mega Bank and Industry (commercial banks only) is depicted below:
Mega Bank
10th ANNUAL REPORT 2019/2020
46Mega Bank Nepal Limited
Industry
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
72.54
113.81
18.0027.83
35.19
57.12
Rs.
In B
illio
n
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
2,483
2,907
1,103
1,393
1,995 2,112
Rs.
In B
illio
n
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
2,899
3,490
1,4631,765
2,093
2,472
Rs.
In B
illio
n
Loans and Advances (Rs. In Billion)The credit volume of Mega Bank and Industry (commercial banks only) is depicted below:
6 year CAGR in deposits of Mega Bank is 40.50% and Industry is 19.40%.
Mega Bank
Industry
6 year CAGR in credit of Mega Bank is 40.36% and Industry is 21.53%.
10th ANNUAL REPORT 2019/2020
47Mega Bank Nepal Limited
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
1.63 1.58
0.350.55
0.79
1.32
Rs.
In B
illio
n
2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
65.40
54.70
28.39
38.13
45.43
53.63
Rs.
In B
illio
n
Mega Bank
Industry
6 year CAGR in Net Profit of Mega Bank is 31.59% and Industry is 15.42%. Source of net profit of industry is unaudited published financial results of respective banks.
Net Profit (Rs. In Billion)The net profit of Mega Bank and Industry (commercial banks only) is depicted below:
10th ANNUAL REPORT 2019/2020
48Mega Bank Nepal Limited
1. Awarded by Internationally reputed publication Asia Money in two sectors: Best Bank for SMEs
3. ISO CertificationAchieved “ISO 9001:2015” certification for its sustainable development, contemporary products and services, efficient management and practices.
2. Bank of the Year
Best Bank for Micro Finance
The international organization “The Financial Times” of London through its reputed publication “The Banker” has awarded Mega Bank as “Bank of the Year 2019 Nepal” for its growth in business and profit through mergers and acquisition, implementation of latest technology and contribution in micro loans.
10th ANNUAL REPORT 2019/2020
49Mega Bank Nepal Limited
7. Mega Bank’s Primary Business Activities
Products and Services
Consumer Loan:The Bank has brought various types of consumer loans to its customers to fulfill their personal requirements. As the Bank has brought various types of consumer
loans targeting the needs of consumers, the Bank is committed to provide services in such a way that they will have positive feelings towards the Bank whether it be a financial requirement to purchase a house or vehicles, home appliances, education, medical or financial need required for celebrating family holidays.
Mega Auto Loan: The Bank has been providing financial support to auto loan customers to purchase new and used private and commercial vehicles. Attractive interest rates, flexible loan tenure and payment options have facilitated auto loan customers to carryover the desired vehicles to their homes.
Mega Home Loan: The Bank has been providing package of Home Loan facility consisting of varied features including hassle-free and fast processing; simple and flexible payment system and attractive interest rates. The Bank has been providing full financial solution to its customers for land purchase, purchase of readymade house, apartment purchase, house construction, repair, re-construction or purchase of home equipment’s.
Mega Mortgage Loan: Mega mortgage loan is a flexible plan featured with long loan tenure, attractive interest rates and simple and fast loan processing. The customer can fulfill their immediate financial needs through this product. The customers can avail their financial needs by way of having mortgage of their fixed assets in the Bank.
Mega Education Loan: For the fulfillment of financial needs of the students desiring to get higher education in Nepal or outside Nepal, Mega Education Loan plan is the appropriate solution. The interested customers can obtain loans for meeting tuition fees, stationaries and other expenses required for the purpose of higher education by getting their fixed property mortgaged. As this product has four years of moratorium period where customers can choose to pay only due interest over the moratorium period, this product is more customer oriented.
10th ANNUAL REPORT 2019/2020
50Mega Bank Nepal Limited
Mega Simple Share Loan: This is the simple and hassle-free loan product (can be taken minimum of Rs. 100,000) with attractive interest rate for those customers desiring to obtain loan by having their share as securities.
Mega Direct Banking: The secured and reliable online banking service Mega Direct Banking has enabled our customers to perform 24 hours and 365 days banking transactions from their homes, offices or any locations having internet facility. Mega Direct banking services can be availed by both individual and institutional customers. Through this services, the customers can get the details of transactions from their accounts, the information of the payment made through Cheque, the details of deposits or loans and can transfer the amount from one account to another within the Bank. In addition, the Bank has used Two Factor Authentication model in order to simplify and make it more secured.
Corporate Banking: Considering the financial needs and competitive position of country’s larger entrepreneur and industrial establishments, the Bank has been posing a sense of understanding for the expansion of these larger establishments. The Mega Corporate Banking has been providing various facilities targeting to meet the financial needs required for operation of such establishments including international companies. For this purpose, the Bank has been providing working capital loan, letter of credit, import/export loan, demand loan, term loan, bills financing, project financing and other various types of loan facilities
which have simplified the industrial/commercial needs of the customers. The businessman can fulfill every type of their financial needs from beginning to end with the support of Mega Bank.
SME/Mid Corporate Loan: With an objective of expanding small and medium industrial (SME) sectors and contributing to nation’s economy by providing banking services to nation’s public whose economic activities are in line with slogan “Halo to Hydro (plough to Power)”, the Bank is offering Small and Medium Industry loan product which is not only providing financial support but also supporting to have practice of financial transactions, industry management and market development. In addition to this, the Bank is also focusing on mid-corporate customers that lie between SME and big corporate businesses by providing financial services to them. The Bank has been providing varied services related with deposit and credit under SME/Mid-Corporate.
Micro, Small and Medium Industry Loan: In the process of providing financial services to our valued customers and all echelons of people to enable them to become self-dependent within the country, by expanding the small and medium industry sectors, with an intent to contribute to national economy through our banking services; the Bank has offered Micro and Small & Medium Enterprise (MSME) Loan to our customers. The Bank is not limited to providing financial services to micro, small and medium enterprises but also to practice financial transactions, enterprise management and market development.
10th ANNUAL REPORT 2019/2020
51Mega Bank Nepal Limited
Mega Easy Micro Loan and Wholesale Loan (Deprived Sector Loans): To enable people spread in various sectors and area of the country specially economically backward women, tribal people, scheduled people, people with varied capacity, marginalized community, small farmers, artists, labor and landless people and involved in agriculture, animal husbandry and various micro and small enterprises, to make them self-dependent, with an intent to contribute to national economy through our banking services; the Bank has provided for Mega Easy Micro Loan. In addition, the Bank has been providing financial and other facilities including wholesale loan to Micro Financial Institution licensed by Nepal Rastra Bank and rural based cooperatives with an objective to provide banking services to the people where banking access has been difficult.
Mega Card: The total number of ATMs of the Bank has reached 142, out of which 18 ATMs are located at sites different from our branch locations. The Bank is continuously conducting feasibility studies of different new locations for ATM installation in order to serve its customers as per the requirement. In order to
provide international level of facilities to its customers, the Bank has been providing facilities of various chip-based debit and credit cards after duly obtaining authorized membership of the VISA. The Bank has been providing Prepaid Travel Card which can be used during international tours and also international credit cards as per the requirement of its customers. Further, cards under Union Pay International have been managed to operate in our ATM networks and will issue Master Cards in near future.
Through the use of VISA cards of the Bank, customers can withdraw cash from ATM and also can purchase various services and facilities via business centres and authorized e-commerce networks. The Bank has commenced services through its 3D Secured Service where customers can conduct online transactions by the use cards of Mega Bank. Each of the online transactions done through this system is more economical and technically secured. There is a provision of approval system by the customers by the use of One Time Password (OTP) received in their mobile devices or email while conducting transactions through 3D Secured Services and this has assured security of transactions conducted by the customers.
10th ANNUAL REPORT 2019/2020
52Mega Bank Nepal Limited
Contactless Card:Now, the Bank has started Payment Card based on Visa Contactless Card (NFC-Near Field Communication) in which the cardholder of Mega Bank can transact through Contactless System Enabled POS Machine on tap and pay basis without contacting card in a machine. With this new system in card, the payment up to Rs. 2,000 can be done through Contactless System Enabled POS Machine without entering any PIN. But, this depends on the terms of the PIN requirement of the vendor.
The Bank is knotted with NPN Network of Nepal Investment Bank Limited and SCT Network with an objective of providing high end services and facilities to the customers. The Bank has been issuing EMV Chip-based cards to its customers as per the International Card Payment Standards and directions of Payment Service Department of Nepal Rastra Bank and also enabled all of its ATMs compatible to EMV chip-based cards. In order to cope with the cashless transaction policy of Nepal Government and Nepal Rastra Bank, the Bank has been providing discounts, cash backs and reward points schemes to customers and businesses from time to time.
The Bank has been establishing EMV Compatible POS Machine in various sales and service centres where customers can directly make payments for purchase of services and facilities. Also, customers can make
EMI payment against the purchase of goods and services under credit card facility through Insta Buy products of the Bank.
The Bank, in addition to cards services, has been providing services of mobile banking and internet banking where customers, with the use of their cell phones or via internet can view details of their account, transfer funds (internal or external), pay credit cards’ dues, obtain information of balance, obtain information of other services of the Bank and can make payment for various other facilities and services. Through mobile banking services, customers can prepare their payment schedule and can make payment for regular services and facilities and even interest dues. In order to facilitate mobile banking services, the Bank has brought latest technology named Mega QR Code Merchant Payment System (Scan to Pay). The customers can make payment for any goods and services by scanning Static QR code availed by businesses under this technology. Similarly, with the Mega QR Code Merchant Payment System, the business persons can use dynamic QR (automatically generating QR code equivalent to value of their goods and services), view payment details (amount, date of transaction, phone number), deposit of payment received in merchants bank accounts immediately including other services like confirmation of balance transfer, change of login password and inclusion of fingerprint.
10th ANNUAL REPORT 2019/2020
53Mega Bank Nepal Limited
Mega QR Code Merchant Payment System has following additional advantages: - Easy and secured payment- Time saving and easy accounting- Payments can be obtained from foreigners (now payments of invoices can be done through application of UnionPay International and payment can be obtained through Alipay, WeChat pay, VISA, MasterCard in near future)- QR code services is more economical as compared to other services
Mega Mobile Banking:Mega Bank has launched latest mobile technology-based mobile banking services to its customers in coordination with F1 Soft. The customers can get information in easy and secured way about their banking transactions through latest electronic online payment system like eSewa, Union Pay and Fonepay. The customers shall get services like obtaining information of their transactions via mobile, balance details, fund transfers, bill payments and other financial facilities. SMS charges are not applicable in transactions done through internet banking.
Mega Deposits:In order collect financial resources from various sectors in the society and strengthen the liquidity position, the Bank has been offering various local and foreign currency deposit plans to its customers. Considering the requirements of each categories of the customers in the society, the Bank has been offering various current, saving, call and fixed deposit plans. The deposit plans of the Bank are as below:
Mega Lokpriya Bachat Khata:Mega Lokpriya Bachat Khata has been brought with an objective of providing suitable and attractive deposit plan to everyone in the society. This plan has been launched assuming the main objective of the Bank “Financial Inclusion”, where customers can open account in zero balance. This account can be used in salary management and also at the time of public offering done by companies including banks and financial institutions. The customers opening accounts under this plan can avail cheque book, visa debit cards and online banking services free of cost.
Mega Subharambha Bachat Khata:Mega Subharambha Bachat Khata is a saving deposit plan in which customers can avail various discounts and services in addition to attractive return. The customer has to deposits Rs. 10,000 as minimum balance under this plan. The customers shall get cheque book, visa debit card and online banking services free of cost. Mega personal banking and home banking are also available under this plan.
Mega Prabardak Bachat Khata:Considering the large number of network of promoters, Mega Prabardak Bachat Khata has been launched. Under this plan, promoters of the Bank can open account in minimum balance of zero and in minimum balance of Rs. 10,000, they can avail cheque book, visa debit card and online banking services free of cost.
Mega Sharedhani Bachat Khata:The main objective of launching this plan is to target large number of public shareholders of the Bank so that their dividend payment can be simplified. The feature of this plan is similar to Mega Prabardak Bachat Khata.
Mega Swabhiman Bachat Khata:This plan has been launched targeting to customers aged 50 years or more in which customers supported in getting attractive return. The people aged 50 years or more can participate in this plan who can open the account with minimum balance of Rs. 1,000 and can avail attractive return. Free cheque book, visa debit card and online banking services are other features of this plan. In addition, they can get 50% discount in locker charges and avail home banking services as well.
Mega Srijanshil Naari Bachat Khata:Bank has launched Mega Srijanshil Naari Bachat Khata for women aged 18 years and above. The women can open account under this plan at minimum balance of Rs. 500 and can get attractive interest. The customers shall get 50% discount on visa debit card facility, free cheque book, free online banking services, mobile banking services, 25% discount on locker facility, and concession on demand draft loan, etc. In addition, customers opening account under this plan can avail discounts on purchase of various consumer goods/services.
Mega Youngstar Bachat Khata:This plan has been launched targeting specially to children of ages up to 18 years. The customers intending to operate saving account under this plan shall open account at minimum balance of Rs. 1,000 along with attractive interest rate. In addition, customers are provided with free cheque book, visa debit card and free online banking services. Also, the guardian can give direction to transfer amount directly from their accounts to the accounts of their children.
Mega Karmachari Bachat Khata:This saving plan has been launched targeting to civil service holder and employee serving the private sectors in which accounts can be opened at minimum balance of Rs. 100. Customers can avail free cheque book, visa debit card, free direct banking service and 50% discount in demand draft charges. Also, customers will get death insurance facility Rs. 700,000, concessions
10th ANNUAL REPORT 2019/2020
54Mega Bank Nepal Limited
in foreign currency exchange and attractive interest rate in consumer loan products.
Mega Youth My Bank at Campus Account:This saving plan has been launched targeting to the college studying students in which accounts can be opened at minimum balance of Rs. 200. In addition customers can avail free cheque book, visa debit card, free online banking services, free statement, 50% discount in charges of demand draft issuance or swift transfers, good for payment facility and balance certificate service. Also, the customers under this plan shall get educational loan for higher education up to Rs. 5,000,000 with attractive interest rate.
Mega Utkrishta Bachat Khata:The customers can open account under this plan with minimum balance of Rs. 25,000. They can get cheque book, visa debit card and online banking services free of cost.
Mega Micro Bachat Khata:The Bank has launched Mega Micro Bachat Khata targeting to deprived populace who are involved in agriculture sectors which has been the main basis of national economy where accounts can be opened via their business representatives at minimum balance of Rs. 5.
Mega Remit Bachat Khata:The Bank has launched Mega Remit Khata with an objective to transfer hard earned amount in foreign country directly to the accounts of their families wherein accounts can be opened at zero minimum balance. The customers shall get cheque book, online banking services and account statement facilities free of cost. In addition, they shall get free ABBS services in transaction up to Rs. 200,000 and also get visa debit card facility. Remittance payment slip of Mega Remit, work permit, visa, PR or foreign identity cards are necessary to open the accounts under this plan.
Mega Matribhumi Bachat Khata:Mega Matribhumi Bachat Khata is a saving plan launched enabling the customers lying in foreign countries to open their accounts under this plan in which accounts can be opened at minimum zero balance. They shall get online banking, mobile banking, ABBS facility, free cheque book and 25% discount on visa debit cards. The customers can also get information of banking services and loan facility from foreign country. Nepali citizenship, passport and work permit of concerned country is necessary to open account under this plan.
Mega Jeevansathi Bachat Khata:The Bank has launched Mega Jeevansathi Bachat Khata targeting to married couple or couple ready
for marriage where attractive facility are provided by the Bank. Accounts can be opened at minimum balance of Rs. 5,000 wherein attractive interest rate are offered with quarterly interest payment facility. The customers can get cheque book, online banking services, account statement and C-ASBA facility free of cost. In addition to facilities of visa debit card, credit card and Mega Smart Mobile Banking facilities and EMI facility for purchase of consumer goods through credit card up to Rs. 500,000 to credit card customers of the Bank.
Mega Swarnim Bachat Khata:The Bank has launched Mega Swarnim Bachat Khata that can be opened with minimum balance of Rs. 5,000 and facility of attractive interest rate, cheque book, online banking, visa debit card and free account statement.
Mega Rising Bachat Khata:The Bank has launched Mega Rising Bachat Khata that can be opened with minimum balance of Rs. 10,000 and various facilities including attractive interest rate. Cheque book, online banking, account statement and C-ASBA facility are available under this plan.
Mega Sarbapriya Bachat Khata:While opening accounts featured with excessive services and facilities under this plan, the customers shall get various types free services and facilities along with high interest rate. This account can be opened at minimum balance of Rs. 50,000 wherein high interest rate is provided with quarterly payment of interest. The customers will get cheque book, online banking, account statement and C-ASBA facility at free of cost. In addition to facilities of visa debit card, credit card and Mega Smart Mobile Banking; this plan is featured with facilities of EMI facility for purchase of consumer goods through credit card up to Rs. 500,000 to credit card customers of the Bank.
Mega Corporate Benefit Saving Account V. 2020:The Bank has launched Mega Corporate Benefit Saving Account targeting specially to civil service employee and employee working at private sectors including individuals involved in various profession wherein accounts can be opened at minimum balance of Rs. 1,000. The customers shall get free cheque book, free account statement, free C-ASBA service and free online banking services.
In addition, attractive facilities including free visa debit card charges for first year, free Mega Smart Mobile Banking (for first year), 50% discount on visa credit card fee, 50% discount on Issue charges of International Visa Travel Card, free accidental death insurance of up to Rs. 700,000 to employee, free health insurance of Rs. 50,000 to employee (for hospitalization), free medical insurance of up to Rs. 15,000 (for OPD service
10th ANNUAL REPORT 2019/2020
55Mega Bank Nepal Limited
from hospitals), 25% discount on administrative fee on home loan and auto loan and concession on foreign currency exchanges are available under this plan.
Mega Nagrik Sambridhi Bachat Khata:In order to support slogan of “Sambridhisanga Jodau Nata: Sabai Nepali ko Bank Khata” under plan of Prime Minister’s “Kholau Bank Khata Abhiyan, 2076”, the Bank has launched Mega Nagarik Sambridhi Bachat Khata. Any Nepali citizen not having bank account in any Banks can open accounts under this plan with minimum balance of Rs. 100. In addition, the Bank shall deposit Rs. 100 in their accounts under Bank’s corporate social responsibility. Also, the customers can get free mobile banking services and free visa debit cards under this plan.
Mega Maya Bachat Khata V. 2020:The Bank has launched Mega Maya Bachat Khata V. 2020 with maximum insurance facility being provided amongst commercial banks in Nepal until now. This product has been featured to avail account opening with minimum balance of Rs. 50,000. The customers are being provided with free health insurance up to Rs. 100,000 (Rs. 95,000 in case of hospitalization) and Rs. 5,000 for OPD, accidental death coverage of up to Rs. 1,000,000 and for critical diseases Rs. 300,000. In addition, visa debit card and mega smart mobile banking services are provided at 100% discount along with attractive interest rate under this plan.
Mega Triple Benefit Plus Saving Account:In this plan, customers can open accounts with minimum balance of Rs. 500 with attractive interest and various facilities. This product has been brought with an intention to provide one point hassle free solution for various facilities to customers interested in evolving share markets.
Various attractive facilities are available under this plan. Customers can open saving account, Demat account, meroshare account and broker’s account with free of charge for the first year and they will also get services like mobile banking and visa debit cards at free of cost
for the first year. The Bank also provides optimum interest in this plan.
Mega Abhibhawak Bachhat Khatta:This saving plan has been launched with an objective to provide various facilities and services to guardians. The accidental insurance of Rs. 500,000 has been provided in this plan against accidental death of the accountholder so that the education of their children shall not be hindered in lack of financial needs. Accounts can be opened with minimum balance of Rs. 500 and facilities of mobile banking and visa debit card are available free of cost for the first year. The Bank also provides optimum interest in this plan.
10th ANNUAL REPORT 2019/2020
56Mega Bank Nepal Limited
Mega Professional Saving Account:This plan is launched targeting to professionals associated with various professional bodies. Professional members associated with professional bodies such as doctors, engineers, chartered accountants, nurse, pharmacist, professor, pilots, etc. can avail the facilities under this plan. Attractive feature of this product will be coverage of accidental insurance of Rs. 1 million by opening account with a minimum balance of Rs. 1,000. In addition, mobile banking and visa debit cards are available free of cost for the first year. The Bank also provides optimum interest in this plan.
Mega Call Deposit KhataThe Bank has been providing facility of call deposit account to its customers. The attractive interest rate are being provided under this product depending on deposit volume.
Mega Fixed DepositThe Bank has offered fixed deposit accounts with various fixed tenure along with attractive interest rate to its customers.
Mega RemitIt is well known truth accepted by everyone that remittance has vital contribution in the economy of the nation. Hence, there has been continuous efforts from the Bank in order to contribute additionally in commercial benefits derived from remittance to the nation. Accordingly, to expand the remittance business and searching for various opportunities of remittance business, the Bank has been providing varied remittance services to its customers as below:
Swift transfers (Inward Remittance from any foreign country)
Demand draft (Inward to and Outward from Nepal specially India)
Mega Remit (Remittance within Nepal from one place to any other place, Mega Bank’s own remittance
system to remit inward from any foreign country including Arab, Europe and America)
Business coordination with various other remittance service providers
Mega Bank’s secured, web based, user friendly remittance service Mega Remit has enabled easy and quick remittance transactions within Nepal and inward remittance from Arab and other countries. State of art technology based Mega Remit service is available at every branch of the nation and at locations of remittance agents. The agents of Mega Remit is more than 3,200. The network of this remittance service is targeted to expand all over the country including various other countries.
10th ANNUAL REPORT 2019/2020
57Mega Bank Nepal Limited
Remittance Products
1. Cash Pickup Immediate cash transfers and receipts of customers
within one minute are made possible by this product.2. Account Credit This product enables customers to transfer money
in the accounts of Mega Bank and other banks including networks of Mega Remittance agencies.
Mega Micro Banking ProgramsEconomic empowerment through Financial InclusionMega micro banking is the prototype project of Mega Bank Nepal Limited. The main objective of this project is to expand financial access to rural sectors and provide profitable and qualitative banking services to deprived and backward customers at their doors. To meet the micro business needs of micro entrepreneur in rural sectors, the Bank, by operating the branchless banking services, has been providing micro loan and micro deposit services through mobile and latest technology based instruments. Customer oriented system, high skilled manpower and financial services as per customers business needs are the major invocation of the Mega Micro Banking programs. The Bank, by providing high class micro banking facilities to small entrepreneur involved in micro businesses and accommodated them in value chain by liaising with medium and large entrepreneur. The Bank has provided different types of financial services to various government & non-government organizations, business projects, agreements with corporate families, coordination with them and members of such organizations. Mega Micro Banking programs has policy to accommodate society’s high, medium and
low end customers in one string providing financial services and full business solutions by way of expanding business development possibilities and via programs of Mega Mid-Corporate/Corporate/SME and Mega micro finance.
Basic Features Programs targeted to rural sectors low income
group deprived populace Inclusive programs without any discrimination in
terms of caste, color, group, sex, religion, profession, sectors and political association
Value chain based programs: similar financial services to large, medium and small entrepreneur
Providing full financial services and facilities to customer at their doors
Credit analysis completed at local levels Simple management system and less hazy paper
work Trainings related with business and social
development based on collective demand/requirements
Micro banking services included all types of facilities i.e. not limited to micro finance
Major Services and Facilities Working Capital Loan – short term loan – demand
loan – micro overdraft loan Term Loan Personal Loan Micro Consumer Loan Other Loan
The minimum qualification for micro loan: all Nepali citizens and lawful entity
10th ANNUAL REPORT 2019/2020
58Mega Bank Nepal Limited
Mega Saral Laghu KarjaWith the main slogan of “Agadi Badhaunuhos Parishrami Haatharu, Tapai ko Pragati ma Hamro Nirantar Saath” (Raise your hardworking progressive hands, we support continuously at your progress), Mega Saral Laghu Karja (Mega Simple Micro Loan) has been launched. The main features of this loan product are:
Loan Limit : Maximum Rs. 1.5 million Loan Tenure: Maximum 10 years Payment: Equal Monthly Installment Purpose: Agriculture, business, micro loan, foreign
employment, e-rickshaw, renewable energy, low cost housing and other income generating activities
Collateral: also cultivable land
Bank Cooperative PackageWith an objective of providing banking services to deprived populace deprived from banking facilities, Mega Bank Nepal Limited has done coordination with Cooperative Institutions and also provided services like Mega Remit agency, credit card, call deposit, debit card, wholesale credit, concession in loan processing fee, etc. to such cooperative institutions and their officials.
Mega Branchless Banking ServiceThe major banking programs of the commercial banks in the country are concentrated over cities and towns. Considering the fact that only large and medium entrepreneur are prioritized but majority of population in rural sectors including farmer and deprived person/households apart from latest banking services; the
Bank has brought branchless banking in operation at the doors of deprived people involved in agriculture sector which has been the major base of nation’s economy. Considering the high human and technical risk in expanding services through branchless banking, the Bank has been providing electronic cards to customers and also operating branchless banking programs through secured technology based equipment which validates every transactions only via thumb impression of the customers. This service has been accommodated in Mega Micro Banking programs where local individuals are developed as business representative of the Bank.
a. This services have been operated from certain distant locations from Bank’s branches outside Kathmandu valley.
b. Local individuals or institutions are designated as business representative using Point of Sale (POS) to provide this services.
c. The Bank provides electronic cards to customers who desires to obtain branchless banking services.
d. The POS provides voice communications to customers before and after every transactions and also provides two copies of advice print.
Services and Facilities Involving customers in branchless banking services
and opening their accounts Saving and fixed deposits Transfer funds from one account to another account Recharging mobile phones and e-top-up Remittance services View balance and account statement
10th ANNUAL REPORT 2019/2020
59Mega Bank Nepal Limited
S.N. Province District Controlling Branch Places Total BLBs
1 1 Jhapa Birtamod Baradashi, Goldhap, Haldibari, 3
2 1 Morang Biratnagar Boudaha, Budhiganga 2
3 1 Morang Biratnagar Budhiganga Rural Municipality 2
4 1 Sunsari Dharan Dharan, Barahachhetra 1
5 1 Udaypur Rautamai Triyuga 3
6 2 Dhanusha Laxminiya Dhanushadham, Yagyabhumi 2
7 2 Sarlahi Hariwan Lalbandi, Barathaba, Bagmati, Ishworpur, Hariwan 5
8 2 Parsa Birgunj 2 Bahudarmai, Parsagadhi, Sakhuwa Parsani 5
9 3 Sindhuli Sindhuli Tinpatan 2
10 3 Sindhupalchowk Chautara Sanghachok, Thulo Siruwa 4
11 3 Sindhupalchowk Panchpokhari Panchpokhari 1
12 3 Kavrepalanchok Thimi Banepa 1
13 3 Kathmandu Gongabu Dharmastahli, Kavresthali 2
14 3 Kathmandu Maharjgunj Tokha 1
15 3 Kathmandu Boudha Bhotechaur 1
16 3 Kathmandu Teku Ramkot 2
17 3 Lalitpur Jawlakhel Mahalaxmi Municipality 1
18 3 Nuwakot Maharajgunj Thansingh 2
19 3 Dhading Dhadingbeshi Siddhalek, Nilkantha Municipality 2
20 3 Chitwan Narayangarh Bharatpur, Sharadanagar, Madanpur 2
21 3 Chitwan Tandi Khairani Municipality 1
22 4 Mustang Jomsom Gharpojang 1
23 4 Parbat Kushma Falebas Bazar, Modi, Kushma 3
24 4 Kaski Pokhara Pokhara Metropolitan City 1
25 5 Gulmi Tamghas Chattrakot, Musilot, Malika, Ghamir, Khairang 5
26 5 Rupandehi Butwal Suddhodhan, Sainamaina, Tilottama 3
27 5 Rupandehi Manigram Tilottama 1
28 5 Arghakhanchi Arghakhanchi Sandhikharka, Bhuniksthan, Malarani, Chhatradev 5
29 5 Dang Ghorai Ghorai, Maanpur, Duruwa, Narayanpur 3
30 5 Dang Tulsipur Dangisaran, Shantinagar, Tulsipur 3
31 5 Banke Nepalgunj Sitapur, Khajura 2
32 6 Salyan Salyan Khalanga Baghchaur, Damachaur, Marke 6
33 6 Kalikot Kalikot Sannitriveni 1
34 7 Kailali Dhangadhi Gauriganga, Chaumala, Joshipur, Hasuliya, Urma 5
35 7 Achham Sanfebagar Markhu, Chaurpatti, 3
36 7 Darchula Khalanga Mahakali Municipality 1
37 7 Dadeldhura Jogbudha Parashuram, Alital 1
Total 89
Branchless Banking Centres
10th ANNUAL REPORT 2019/2020
60Mega Bank Nepal Limited
8. A Framework of Trust
a. Corporate Governance Model Corporate Governance can be defined as the
system of internal controls and procedures by which individual companies are managed. It provides a framework that defines the rights, roles and responsibilities of various groups within an organization. At its core, Corporate Governance is the arrangement of checks, balances and incentives a company needs in order to minimize and manage the conflicting interests between insiders and external stakeholders.
In this context, the Bank is required to have prime concern towards Corporate Governance. The Bank and the Management at all times is fully committed to adhere to the laws and regulations of the country, guidelines, rules and codes established by regulatory bodies, the Bank’s internal policies, rules and specific operational procedures. Culture of good governance practice is guided by a Corporate Governance policy of the Bank. Maintaining high level of transparency and appropriate disclosures of information for the consumption of the stakeholders has been integral part of good governance practice. The corporate governance structure of the Bank is guided such that it reflects and protects the Bank’s mission statement and committed for all regulatory obligations. The Bank’s corporate governance practices are guided by various laws and regulations of the country including Companies Act 2063, Banks and Financial Institutions Act 2073, Securities Laws, Nepal Rastra Bank Act 2058 and directions issued by various regulators from time to time.
Code of Conduct and Oath taking All the staffs working in Mega Bank Nepal Limited
are required to take Banker’s oath and abide by the code of conduct as per HR Bylaws of the Bank. The Board of Directors of the Bank are even required to oath taking as per Banks and Financial Institution Act 2073. By taking the oath Bank expresses its explicit statement of its actions.
Board’s Structure The Board of Directors of the Bank all plays
supervisory role which supervises and reviews the activities of the Management and monitors the essence of operational decisions taken by Management. The Board guides its Executive Team by formulating the strategy that commensurate with its mission and leads to the pathway of its vision. In addition, the Board provides advice and guidance to the Executive Team on the basis of presentations, conversations, visits and various regular reports related with business, finance, risk and compliance. Regular meetings are scheduled in such a manner that immediate activities and performance of the
Bank are well communicated to the Board so that appropriate feedbacks and timely directions can be given to Executive Team of the Bank. Besides regular meetings, other meetings are also held on a need basis whenever any agenda need to be discussed and decided. The Board also delegates some of its functions to sub-committees formed for the specific purpose comprising of board members and staffs like Audit Committee, Risk Management Committee, Human Resource Service Committee and Anti-Money Laundering Committee under regulatory provisions and other project based sub-committees like Merger/Acquisition Committee on need basis. All of these sub-committees acts as per their assigned terms of reference, deputes operating staffs for any task, collects information, does analysis and makes necessary decisions themselves or recommend for appropriate decisions to the Board.
All the Board of Directors of the Bank are non-executive directors which focuses its activity on the determination, supervision, and monitoring of the strategies and policies that must be followed by the group. The Chief Executive Officer and the rest of the management team are responsible for the organisation and strategic coordination of the group, through the dissemination, implementation, and monitoring of the overall strategy and policies.
b. Lines of Management & Control Mega Bank is a commercial bank, which is growing
in a pace above normal commercial banking. More complexity and increased regulation, as well as developments in the financial sector, have brought additional challenges to the Bank. These challenges require a strategic response which reflects the enhanced importance of sound risk management and compliance. As a result, and in close
S.N. Name Position StatusLast
Appointment Date
11Mr. Bhoj Mr. Bhoj Bahadur ShahBahadur Shah
ChairmanChairmanNon-Non-ExecutiveExecutive
13th July 201813th July 2018
22Mr. Gopal Mr. Gopal KhanalKhanal
DirectorDirectorNon-Non-ExecutiveExecutive
13th July 201813th July 2018
33Mr. Madan Mr. Madan Kumar Kumar AcharyaAcharya
DirectorDirectorNon-Non-ExecutiveExecutive
13th July 201813th July 2018
44Mr. Mukti Ram Mr. Mukti Ram PandeyPandey
DirectorDirectorNon-Non-ExecutiveExecutive
13th July 201813th July 2018
55Dr. Indra Dr. Indra Bahdaur Malla Bahdaur Malla ThakuriThakuri
DirectorDirectorNon-Non-ExecutiveExecutive
13th July 201813th July 2018
66Mr. Bal Mr. Bal Krishna Krishna SiwaktoiSiwaktoi
DirectorDirectorNon-Non-ExecutiveExecutive
13th July 201813th July 2018
77Mrs. Shiva Mrs. Shiva Devi KafleDevi Kafle
Independent Independent DirectorDirector
Non-Non-ExecutiveExecutive
27th December 27th December 20192019
10th ANNUAL REPORT 2019/2020
61Mega Bank Nepal Limited
consultation with the Board, we have concluded that it is necessary to depute separate Chief Risk Officer (CRO). Creating a CRO role with oversight of Risk Management Committee will ensure that the critical areas of risk management and compliance are represented at the appropriate level for strategic decision making. This change will allow the Chief Financial Officer (CFO) to focus fully on the financial strategy of the bank and to address in more depth the challenge of the increasing role of data quality in relation to financial management and internal and external reporting. Growth pace and organisational
complexity urges for focused on a more strategic and oversight role.
The Bank is active in an industry that is changing ever more quickly. Increased customer expectations, new digital transformation and increasing regulatory demands affect us in the same way as other banks. In order to become faster and better at delivering value for our stakeholders and communities we serve, as well as improving efficiency and control, we have introduced a dynamic form of structure.
Board of Directors
Audit Committee HRSFC Committee AML/CFT Committee Risk Management Committee
Management RiskManagement Committee
Portfolio Management Committee
Operations RiskManagement Committee
Credit RiskManagement Committee
Performance
Governance
10th ANNUAL REPORT 2019/2020
62Mega Bank Nepal Limited
The Board and Management roles in Risk Governance of the Bank will be as follows:
BusinessOperations
Implement 4
Seniormanagement committeeExecution/MonitoringRisk DepartmentMonitoring 5
SeniorManagementPolicies, high
level limits and stress tests 1
Audit/Risk Committee Review 2
BoardApprove 3
Propose (adjustments)1
Board Level Sub-Committees
Audit CommitteeMr. Bal Krishna Shiwakoti - ConvenerMs. Shiba Devi Kafle - MemberHead - Internal Audit - Member Secretary
Risk Management CommitteeMr. Mukti Ram Pandey - ConvenerMr. Bal Krishna Shiwakoti - MemberChief of Operation - MemberHead - Risk - Member Secretary
Human Resource Service and Facility CommitteeMr. Indra Bahadur Malla Thakuri - ConvenerChief Executive Officer - MemberHead - Finance and Planning - MemberHead – Human Resource - Member Secretary
AML/CFT CommitteeMr. Madan Kumar Acharya - ConvenerMr. Gopal Khanal - MemberHead - Compliance - Member SecretaryHead - Risk - Member
Management Level Sub-Committees
Management Credit Committee (MCC) Management Risk Monitoring Committee (MRMC) Credit Risk Management Committee (CRMC) Operation Risk Management Committee (ORMC) Asset Liability Committee (ALCO) Portfolio Management Committee (PMC) Loan Recovery Committee (LRC) ICAAP Committee Procurement Committee Recruitment & Human Resource Committee(R & HRC)
Mega Learning & Development Center Committee (ML&DCC)
Mega Team Mentoring and Coaching Committee (MTMCC)
Labour Relation Committee (LRC) New Product Development Committee (NPDC)
Bank sets its policies as per new NRB Risk Management Guidelines for Banks and Financial Institutions 2018 where three lines of defense of the Bank will be as follows:
10th ANNUAL REPORT 2019/2020
63Mega Bank Nepal Limited
Board of Directors
Governance
CEO and Executive Management
Performance
Bank strategy and objectives, risk appetite & ultimate level of responsibility
Board Audit Committee
1st Line of Defense Business line operations Real time operational focus:
Embeds risk management framework and sound risk management practices into standard operating procedures.
Monitors risk management performance in operation.
Accountable for effectiveness of risk management in operation.
2nd Line of DefenseRisk ManagementReal time monitoring and review focus:
Develops and implements risk management framework- policies, systems, processes and tools.
Ensures framework covers risk:
Identification Assessment/methods Response Controls/Limits Information/data Monitoring Reporting
Exercises approval authorities in accordance with delegated authorities.
3rd Line of DefenseInternal AuditIndependent review focus:
Reviews effectiveness of risk management practices.
Confirms level of compliance.
Recommends improvements and enforces corrective actions where necessary.
Board Risk Committee
10th ANNUAL REPORT 2019/2020
64Mega Bank Nepal Limited
The FIRST LINE of defense consists of the management of business lines and legal entities. It is the responsibility of first line management to identify and manage risks. This includes, at an operational level, the day-to-day effective management of risk in accordance with agreed risk policies, appetite and controls.
The SECOND LINE of defense functions provide independent oversight and assurance. They have resources at the centre and are embedded within the business lines. Central resources provide overall oversight of risks, while resources embedded within the business lines support management in ensuring that their specific risks are effectively managed as close to the source as possible. Central and embedded resources jointly oversee risks at a legal entity level.
The second line of defense functions develop, implement and integrate governance standards, frameworks and policies for each material risk type to which the group is exposed. This ensures consistency and an enterprise-wide approach across the groups business lines and legal entities.
Compliance with the standards and frameworks is ensured through annual self-assessments by the second line of defense.
The THIRD LINE of defense provides independent and objective assurance to the board and senior management on the effectiveness of the first and second lines of defense. This responsibility lies with Audit Committee. The Bank’s policy is to ensure that risk management processes throughout the bank are audited by the Internal Audit Function, which examines both the adequacy of the procedures and the bank‘s compliance with the procedures. Internal Audit division discusses the results of all assessments and reports its findings and recommendations to the Board through Audit Committee.
c. Risk Management Risk is inherent in a business and such risks
are managed through a process of continuous identification, measurement and monitoring and reporting subject to risk tolerance level and other controls. This process of risk management is critical to the Bank for sustainable growth.
The Bank is exposed to credit risk, interest rate risk, market risk, liquidity risk and operational risk. The Bank’s Business Strategy and policy is to monitor those business risks through the Bank’s strategic planning process.
The Bank has formulated Five Years Long Term Strategic Plan (FY 2017/18 to FY 2021/22) which
integrates risk management as a continuous functions of the Bank. Further, the Bank formulated Annual Plans and Budget which provide guidance on the future business prospects of the Bank. These documents establish the desired nature and size of the business portfolio at a future period. While preparing these documents, risk assessment is taken as one of the most important factors. Bank understands the various forms of risks associated with the business and the importance of business model and capital composition in mitigating these risks. Hence, the present as well as future capital requirements of the Bank are thoroughly assessed to ensure that it is more than adequate to support the business needs of the Bank.
The changes in the business environment bring about changes in the risk profile of the Bank. Hence, periodic reviews are conducted to assess the impact of any such changes in the environment. The Bank has formulated and implemented following policy related to with various types of risk:
Overall Risk Management Risk Management Policy
Related with Credit Risk Credit Strategy Paper Credit Risk Management Framework Environmental and Social Risk Policy
Related with Operational Risk Operations Risk Management Framework IT Risk Management Framework
Related with Market Risk Market Risk Management Framework
Related with Liquidity Risk Liquidity and Funding Risk Management Framework
Risk Management Structures The Board is primarily responsible for risk
management process. Risk management committee (RMC), which is a sub-committee of the Board has been established and delegated risk management responsibilities. This committee plays a pivotal role in establishing best practices in relation to risk policies and practices within the bank.
The level of risks that bank is willing to accept is decided at the RMC level, and the decisions made by this committee are communicated to the Board of Directors. The Board ratifies the risk management policies and risk tolerance levels agreed at the Risk management committee level.
10th ANNUAL REPORT 2019/2020
65Mega Bank Nepal Limited
The Committee fulfils the requirement set out in the Unified Directives No. 5/075 issued by Central Bank of Nepal.
The Committee currently consists of 5 members i.e. 3 Non-Executive Directors and representation of Chief Operating Officer and Head - Operation Department and Head - Risk Department as a member of the committee.
The Bank is exposed to various risk factors and managing these risk factors is an integral part of the Bank’s operations. Bank’s management body has a dual structure, meaning that the Board of Directors has a supervising role and the CEO has responsibility for daily operations. The ultimate responsibility for ensuring an adequate risk management framework lies with the Board of Directors. The Board defines and communicates the acceptable level of risk through the Bank’s Risk Appetite Statement and the risk management policies.
The Board of Directors have the following responsibilities under risk governance and organization:
Select competent board members; and establish guidelines to govern the board organization and structures.
Select competent executive officers, evaluate and compensate them accordingly.
Review and approve the management-developed strategy i.e. approve the overall risk-appetite of the institution.
Monitor the control of the environment. Ensure that the necessary corrective actions are
taken to remedy the situation. Ensure the compliance of the institution with its
legal and regulatory requirements. Directors are to perform these functions in
the best interest of the shareholders and other stakeholders.
The Risk Governance responsibilities structure of the Bank will be as follows:
AuditCommittee
SeniorManagement
RiskManagement
RiskManagement
Business Units
Risk oversight, approve risk management
framework
Setting, appetite and tolerance risk limits and Implementing risk management framework
Identification, assessing, monitoring and mitigation
of risks
Day-to-dayresponsibility for risk management
Board
Risk Management Committee (RMC) is supported by various sub-committees as below: Assets-Liabilities Committee (ALCO) Investment Management Committee Portfolio Management Committee Management Risk Monitoring Committee
10th ANNUAL REPORT 2019/2020
66Mega Bank Nepal Limited
Risk Management
Asset- LiabilitiesCommittee
Portfolio ManagementCommittee
Credit RiskManagement Committee
Investment ManagementCommittee
Management RiskMonitoring Committee
Operation RiskManagement Committee
Board of Directors
ALCO is entrusted with the identification and managing of Market Risk and Liquidity Risk whereas other committees are responsible for ensuring and managing overall risk management framework and adequacy of existing risk management policies and practices in addressing and mitigating inherent risk in the businesses.
Capital Adequacy RatioThe banks operates in high leverage. It means bank uses large portion of public funds (deposits) as compared to equity funds in managing its assets portfolio. Thus, the Bank’s exposure to risky assets is crucial to measure its resilience in terms of its capital. This is measured and well represented in capital adequacy ratio (CAR).
Capital Adequacy Ratio is computed on a regular basis to ascertain its adequacy in terms of the associated risks. The Bank has provided priority over capital component and capital adequacy ratio which it assumes to keep quite high as compared to regulatory requirement.
ALCO is entrusted with the identification and managing of Market Risk and Liquidity Risk whereas other committees are responsible for ensuring and managing overall risk management framework and adequacy of existing risk management policies and practices in addressing and mitigating inherent risk in the businesses.
The regulatory minimum requirement of capital over the past 5 years is 11%. However, the Bank has maintained its actual capital adequacy ratio above minimum requirement. The sinking capital adequacy ratio in FY 2015/16 was enhanced by fresh 25% issue of right shares in FY 2016/17 and further 65% right issue in FY 2017/18 which is more visible in above chart as well.
Furthermore, other quantitative and indicative tools are also studied and discussed amongst the Management and the Board. Various tools and indicators have been put into practice for analysis to support the Internal Capital Adequacy Assessment Process (ICAAP) of the Bank. Moreover, an ICAAP policy has been practiced for a systematic process of identifying, measuring, monitoring and controlling various risk aspects as to further put in place a sound capital assessment and management system.
The Board of Directors and the management realize the importance of effective risk management and are keen towards continuous improvement in its risk management function. Risk unit has been placed independent from other business functions with direct reporting to the Risk Management Committee. The Unit is adequately manned and oversees all risk aspects including but not limited
15.27 13.24
Capital Adequcy Ratio (%)
Capital Adequacy Ratio (%)Minimum Capital Adequacy Ratio (%)
12.9514.80
17.91
11.00 11.00 11.00 11.00 11.00
20.00
15.00
10.00
5.00
-
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
10th ANNUAL REPORT 2019/2020
67Mega Bank Nepal Limited
to Credit, Operational, Market and other risks. The Unit is guided by risk management frameworks and guidelines to monitor various risks in different departments. The Bank has also formulated Credit Risk Management Committee and Operation Risk Management Committee whose reports are further escalated to Risk Management Committee through Management Risk Monitoring Committee.
Besides this, the Bank has an Internal Audit Department to conduct audit & inspection of various activities of the Bank and directly reports to the Audit Committee. The Management on regular intervals studies and makes analysis to identify various inherent risks based on indicative facts, figures and statistics which is further presented and rigorously discussed in the Risk Management Committee headed by a Non-Executive member of the Board and further deliberated in the Board. The Internal Capital Adequacy Assessment Process (ICAAP) policy, a comprehensive risk/capital management document, Risk Management Guidelines and various risk frameworks act as guiding tools for the Bank to effectively manage various associated risks with the business. With the regular use of various measurement tools, risk management function has been brought and put into effective practice in the Bank.
The Bank has following approaches to the following types of risk:
i. Credit Risk: Credit risk is the risk of financial loss that the
Bank may face as a result of a borrower or counterparty not meeting its obligations in line with the original contract. Since majority of the Bank’s assets are in the form of loans and advances, management of credit risk becomes the most crucial task. Bank’s approach to Credit Risk Management is governed by following Board’s approved policies and procedures. Risk Management Policy, Credit Risk Management Framework, Credit Risk Strategy Paper are formulated to monitor and manage risk pertinent to credit. The Bank has placed credit risk unit independent of business units. Risk management committee reviews various risk factors related to lending businesses on a periodic basis. Various reports related with risk factors are discussed in Management Risk Monitoring Committee and escalated to Risk Management Committee. Periodically revised credit policy guides all underwriting activities to be performed in order to ensure that potential risks are addressed, well communicated and mitigated in advance. Loans are approved only after Risk Department sanction a clean report
on the credit proposals. Credit concentrations on various sectors are regularly monitored and further planning of credit portfolio is done after due discussions in Credit Risk Management Committee, Management Risk Monitoring Committee, Risk Management Committee and Assets Liability Management Committee. The Bank also allocates adequate risk reserves so that cushion will be sufficient to cover the credit risk that may occur in future. The Bank follows incurred loss model to quantify the loan impairment amount in order to allocate credit risk reserve out of profit. However, if loan impairment amount exceeds the amount determined under incurred loss model, the higher amount shall be set as reserve in the form of loan impairment as per the requirement of Nepal Rastra Bank’s directive. Thus, we perceive that credit risk is adequately mitigated by the Bank in statement of financial position of the Bank. Similarly, credit risk in investment portfolio is guided by the Investment policy of the Bank.
3,000
2,500
2,000
1,500
1,000
500
-
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
Loan Impairment Amount(NPR. In million)
468594 866
1,292
2,605
ii. Operation Risk: Operational Risk is risk of loss resulting from
inadequate or failed internal processes, people and system or from external events. Bank is committed to continuous strengthening of internal controls. Standard Operating Procedures for all areas of bank operations have been formulated and implemented. To mitigate the operational risk, Bank has a centralized Operations unit to ensure the consistency and accuracy in processing transactions as well as to review and identify any potential risk. Bank has formulated and implemented a comprehensive IT policy to ensure and strengthen data and network security. IS Audit is also conducted separately. Bank has adopted an internationally acclaimed Flexcube as the core banking software, which has excellent inbuilt control features. The software has been thoroughly tested and customized as per the Bank’s requirements; balancing both the business requirements and its control features.
10th ANNUAL REPORT 2019/2020
68Mega Bank Nepal Limited
Large extent of the MIS requirements have been automated and efforts are always underway for further development/enhancement. In order to continuously improve the capabilities of the employees, training calendars are developed and implemented based on their need assessments. In order manage risk relating to natural disaster on data loss, the bank has placed DR server at Bhairahawa which is comparatively less seismic zone.
In order to give a charge on capital for possible operational risk, the Bank follows basic indicator approach as per Basel III requirement of NRB under which banks must hold capital for operational risk equal to the average over the previous three years of a fixed percentage (denoted alpha) of positive annual gross income. Fixed percentage (alpha) has been set 15%.
Risk Weighted Exposure for Operational Risk (NPR. In million)
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
1,5171,784
2,298
4,401
3,120
iii. Market Risk: Market risk refers to the risk to a bank resulting
from movements in market prices, in particular, changes in interest rates, foreign exchange rates, and equity and commodity prices. Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices.
The major sources of market risk for the bank are interest rate risk, exchange rate risk and liquidity risk. Bank has an Assets Liability Committee and Investment Management Committee which meets regularly to identify and manage these risks as per the laid down policies and procedures. Treasury Back Office (TBO) and risk units regularly assess and monitor the financial position and transaction of the Bank. TBO analyses the net open position on a daily basis to mitigate all possible risk associated to foreign currency. Foreign Currency Assets and Liabilities are reported on weekly basis
and ensured that the net position is within the tolerable limit (up to 30% of Tier I Capital). ALCO on regular interval evaluates the sensitivity of asset and liability towards interest rate. Further interest sensitivity analysis is conducted to act as a tool to mitigate possible interest rate risk. Movement of Bank's interest yield, cost and spread is calculated and analysed on daily basis to identify, assess and mitigate possible risk exposure.
The risks subject to this requirement are: Interest Rate Risk:Interest rate risk is a key constitute of the market risk exposure of the Bank due to adverse and unanticipated movements in future interest rate which arises from core business activities; granting of credit facilities, accepting deposits and issuing debt instruments.Interest rate risk arises from the possibility that changes in interest rates will affect future cash flow and /or, the fair values of financial instruments. Several factors give rise to interest rate risk; which arises due to the mismatches in the maturities of assets and liabilities; basis risk which is the threat to income arises due to differences in the bases on interest rates. Bank measures the impact of interest rate risk in its profitability through GAP analysis of interest sensitive assets and interest sensitive liabilities in different time buckets. This impact analysis is reported to the management through ICAAP report on a quarterly basis. Currency Risk:Foreign exchange risk is the potential for the Bank to experience volatility in the value of its assets, liabilities and solvency and to suffer actual financial losses as a result of changes in value between the currencies of its assets and liabilities and its reporting currency.
Equity Price Risk:Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in equity prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or by factors affecting all similar financial instruments traded in the market.
Out of the various components of market risk, foreign exchange risk is the predominant risk in our country. The effects of other forms of market risk are minimal. Thus, a net open position approach has been devised to measure the capital requirement for market risk. The designated Net Open Position approach requires banks to allocate
10th ANNUAL REPORT 2019/2020
69Mega Bank Nepal Limited
a fixed proportion of capital in terms of its net open position. The banks should allocate 5 percentage of their net open positions (either long or short) as capital charge for market risk.
2,500
2,000
1,500
1,000
500
-
2015/2016 2016/2017 2017/2018 2018/2019 2019/2020
Risk Weighted Exposure for Market Risk (NPR. In million)
709 960
1,913 1,918
640
iv. Liquidity Risk: Liquidity risk refers to the availability of sufficient
cash balances to meet the demands on deposits and new lending targets as well as provide a flow of net liquid assets to meet contractual borrowings and other commitments.
The Bank’s primary objective in liquidity risk management is to ensure adequate funding for its businesses throughout market cycles, including periods of financial stress. To achieves this objectives the asset and liability management committee (ALCO) analyses and monitors liquidity risk, and maintains an adequate margin of safety in liquid needs.
The bank maintains a portfolio of highly
marketable and diverse assets that are assumed to be easily liquidated in the event of unforeseen interruption of cash flow. The bank can also access to lines of credit (Inter-bank loan) that it can meet liquidity needs.
The Bank assesses its liquidity risk on a quarterly
basis through ICAAP Reports. It measures and analyze the liquidity risk by way of computing GAP analysis of its various assets and liabilities of different time buckets. However, if threshold of gap limit exceeds 20% of liabilities under 0-90 days’ time buckets, the Bank assumes that it will face immediate difficulty in managing its liquidity position which it desires to mitigate by reflecting an additional charge in capital adequacy ratio.
In addition, the Bank maintains the liquidity ratio prescribed by Central Bank of Nepal.
Cash Reserve RatioAs per Unified Directives of Central’s Bank of Nepal, the Bank has to maintain, as cash reserve ratio,
minimum weekly average of 4% of its average total deposit of previous two weeks in NRB’s nostro account. This ratio is reviewed on a weekly basis and planning of CRR for the coming week is also done in advance. Statutory Net Liquid Asset RatioAs per Unified Directives of Central’s Bank of Nepal, the bank has to maintain minimum net liquid assets comprises of 20% of total deposit. The Bank maintained a healthy statutory net liquid asset ratio throughout the year. The Bank considers cash and bank balances, money at call & short notice, placement up to 90 days and investment in government securities. Borrowings repayable up to 90 days is deducted from liquid assets to obtain net liquid assets.
Credit to Core Capital and Domestic Deposits RatioAs per Unified Directives of Central’s Bank of Nepal, the bank has to maintain maximum Credit to Core Capital and Domestic Deposit (CCD) ratio of 80 percent.
The Bank stresses the importance of maintaining an adequate customer Deposit Base such as Time, Saving and Call Deposits as source of funds to finance Loans and Advances. They are monitored using the Credit to Core Capital and Domestic Deposits ratio.
d. Ethics and Corporate Social Responsibility Since the inception, Mega Bank Nepal Limited has
been actively engaged towards contributing to the society and maintaining a strong relationship between the institution and the community at large. In order to do so, the Bank has contributed in various CSR programs including health, education, environment protection, financial literacy, gender equality, victims from natural disasters, etc. initiatives provided to various NGO programs as well as supporting the less privileged societies. Some of the major initiatives taken by Mega Bank during the financial year 2018/19 towards social welfare has been listed below:
10th ANNUAL REPORT 2019/2020
70Mega Bank Nepal Limited
d. Corporate Social Responsibility: FY 2076/77
SUPPORT IN EDUCATION SECTOR
1. In collaboration with “Fellowship Society Nepal (FSN)” Mega Bank Nepal Limited provided Braille educational materials along with software at “Shree Sanjibani Secondary School”, Dhulikhel, Kavre for 20 children having visual disability with an aim to create good environment for easy access for their better education.
2. The Bank provided financial assistance for the education of children through Help to the Helpless Council Nepal located at Dharan, a non-profit and non-government social organization.
3. Mega Bank Nepal Limited joined hand in fund raising program organized by “Help Nepal Network” named “Sikshya Ko Lagi Sangeet”. The raised fund was utilized for reconstruction of a model school building in Dolakha district that crumbled down during the April 25, 2015 earthquake.
4. Mega Bank Nepal Limited supported needy students of Dolakha and Gorkha for their better education who were victims from Earthquake 2072 through “Civil Initiative” for their education.
5. In collaboration with “Food For Life Nepal” Mega Bank Nepal Limited provided food materials to the students of “Shree Jaya Bhadrakali Aadharbhut School” in Taulung, Budhanilkantha with an aim to provide nutritious food to the students which help them to concentrate in their education. Zero Hunger and Education.
6. Mega Bank Nepal Limited supported “Private and Boarding Schools’ Organization Nepal (PABSON)” Budhanilkantha to recognize and honor the teachers who have been continuously contributing in education filed.
7. Mega Bank Nepal Limited has arranged for scholarship/financial assistance through its CSR campaign “Education is Enlightenment” with a program named “Girl Child Education” to support 2 girl child students each from deprived families through all the branches of the Bank.
8. Mega Bank Nepal Limited supported “Karnali Pradesh Paryatakiya Tatha Sanskritik Samrachyan Kendra, Kalikot” which has been providing scholarship to the needy children of Kalikot district willing to study but due to financial difficulties they are unable to continue their education.
9. Mega Bank Nepal Limited provided financial support to Mr. Tshering Taba Budha, a deprived community student from rural area for his education.
10. Mega Bank Nepal Limited supported “National Private and Boarding Schools’ Association Nepal, NPABSAN”, Banke to organize program for the development of education sector in that area as well as recognize and reward various people contributing in different sectors of the society.
11. The Bank provided support to “Rukmangad Katwal Trust” which has been providing support to needy children (orphans, marginalized community, needy women, deprived sector, and victims from conflict, disabled) for their education.
10th ANNUAL REPORT 2019/2020
71Mega Bank Nepal Limited
SUPPORT IN HEALTHSECTOR
1. Mega Bank provided financial support to the Covid-19 Fund created by the Central Government as well as all the 7 Province Governments during the pandemic of COVID-19 for the control and treatment of Covid-19 patients of the country.
2. Mega Bank supported International School of Tourism and Hotel Management, “Gorkha Human Welfare Association” and “Dharan Jaycess” for Blood Donation program at various locations.
3. Mega Bank supported Young Doctors’ Association Nepal for Health and Dental Camp at Darchula District. The main objective of their project was to provide free health care and health information as well as create awareness on hygiene and sanitation in that area.
4. Mega Bank supported Annapurna Media Network for their cancer awareness program “Ride for Life: Cycle Rally for Cancer Awareness”.
5. Mega Bank supported St. Xavier College students to organize cancer awareness program named 7th SXC Cycle Rally- Ride against Cancer awareness and also for distribution of jackets and socks to the needy students of Gorkha and Sindhhupalchowk District.
6. Mega Bank provided support to “Nepal Social Development & People Empowerment Center” for distribution of warm clothes to the needy children at Udaypur District during winter time to protect them from cold.
7. Mega Bank supported “Lumbini Development Forum” for distribution of blanket to the needy people at Musahara and Netuwa of Butwal during winter time to protect them from cold.
8. Mega Bank provided financial assistance to Red Cross Club of Budhanilkantha School for free health checkup and first aid kit distribution at Syangja District.
9. Mega Bank supported “Bal Sarathi”, a non-governmental organization which has been providing quality education, hygienic food and stationeries to the poor and needy children.
10. Mega Bank supported “Ex-Gandaki Boarding Students Association (EGBOSA)” to organize free health camp at Marpha of Mustang District.
11. Mega Bank supported “Deaf Student Activity Committee”. This is an organization established with the aim to help young people with hearing inability by organizing activities that boost their physical and mental challenges.
12. Mega Bank provided financial support to “Pabitra Samaj Sewa Nepal (PSS Nepal)” for the construction of wall and pavement in the premises of the
orphanage and elderly home. This NGO has been providing shelter, food, healthcare, education, nutrition for the conflict affected people, women, the disabled, orphans, children of victims of domestic violence.
13. Mega Bank has been involved in the awareness for diseases like Dengue, COVID-19, etc. to make the citizen aware about diseases, precaution and safety measures for these diseases.
14. Mega Bank supported “Nepal Netra Jyoti Sangh, Ram Kumar Mahabir Prasad Kedia Eye Hospital” for Cataract Surgery in the remote area of Bara and Parsa District where almost 50 people were benefited from that surgery.
15. Mega Bank provided water dispenser to Malikarjun Namuna Ma. Vi. Dhaap, Darchula in order to have health hygiene for the students and teachers of that school.
16. Mega Bank provided financial support to “M.G. Polyclinic and Diagnostic Center (MGPDC)” to honor senior citizens of Maitidevi area. MGPDC has been involved in various CSR activities like blood donation and free health checkup, etc.
17. Mega Bank provided financial assistance to Jhamsikhel Youth Club for the development of football. The club has been continuously doing various health, educational, social and sports activities at various locations.
10th ANNUAL REPORT 2019/2020
72Mega Bank Nepal Limited
Litracy and InformativeProgram
1. Mega Bank Nepal Limited in collaboration with “Nischal Advertising” supported Nepal Police for production of public awareness audio-video documentary related to crime and financial literacy.
2. Mega Bank provided financial assistance through Nepal Bankers’ Association for “Kholau Bank Khata” Financial Literacy Campaign initiated by Office of the Prime Minister.
3. Mega Bank supported and participated in financial literacy “Banking Expo-2076” organized by Media International.
4. Mega Bank conducted financial literacy program in “Subhadeep Public School” located at Teku with an aim to provide Financial and Banking knowledge to the staff, students and parents of that school.
5. Mega Bank produced an animated audio-video related to financial literacy which are broadcasted from social media pages, cinema halls and FM stations. The Bank has also organized various financial literacy programs from each province capturing students, women group from rural as well as urban areas, government and non-government employees, etc.
6. Mega Bank took an initiative to provide literacy and informative messages to the general public through 150 highway boards located in various places: Kathmandu to Pokhara, Itahari to Birtamode, Butwal to Bhairahawa and Nepalgunj to Kohalpur. The Bank has focused on informative and awareness messages related to traffic & road safety and
security measures, environment protection & awareness, Women empowerment messages etc.
7. Mega Bank supported “Disable Care Nepal” to distribute 70 white sticks to the differently abled people to make their daily life easier and provided financial literacy program to the students about financial and banking knowledge which will help in their life.
Promotion of Culture and Tourist Destination
1. Mega Bank Nepal Limited supported “Hyumat Mahila Samuha” to organize Kumari Puja to continuation of their cultural and traditional program in Basantapur.
2. Mega Bank supported “Newar Samparka Samaj Argakhanchi” for Bhairab Naach in Kathmandu for the preservation and promotion of culture.
3. Mega Bank supported “Rong Gaupalika, Illam” which was working to attract tourists in that location.
4. Mega Bank provided financial support to “Dharan Sub-Metro-politan City” to organize festival
with an aim to attract tourist in that location.
5. Mega Bank provided financial assistance to “Swasthey Amma Samuha” for the construction of their ancient and cultural temple at Salyan.
6. Mega Bank provided financial support to “Bangalamukhi Mandir Samrachyan Tatha Bebasthapan Samaj” for organizing cultural program of Banglamukhi locality, Lalitpur.
7. Mega Bank supported Bheerkot Udhyog Banijya Sangh for 2nd Bheerkot Festival 2020 which focused on internal and external tourists in the local market of Bheerkot, Syangja for economic activities and promotional of local culture and tradition focusing on tourism.
8. Mega Bank provided support to “Nawa Amarkanteswor Yuva Samuha” to organize the famous and historic Indra Jatra of Kathmandu for the preservation of culture.
9. Mega Bank supported “Shadana Kala Kendra” for their musical program to promote the country in the international platform for tourism.
10. Mega Bank provided financial assistance to “Aarish Garden
10th ANNUAL REPORT 2019/2020
73Mega Bank Nepal Limited
and Advertising Service” for the coloring of boats at Markhu, Kulekhani in order to support tourism at that area.
Suppert in tree Plantation and Enviroment Cleanliness
1. Mega Bank Nepal Limited supported “Rotary Club of Jawalakhel Manjushree” for tree plantation at Lalitpur area to maintain Greenery in that area.
2. Mega Bank handed over dustbins to “Rajarshi Janak University” Janakpur for the cleanliness of the University area.
Support for Security and Safety Measure
1. Mega Bank Nepal Limited provided financialassistance to “District Administration Office”, Tamghas, Gulmi for the installation of CCTV at Tamghas with an aim to make that area more safe and secure.
2. Mega Bank provided financial assistance to “Thamel Tourism Development Council” for management of hanging wires at Thamel area to make safer, cleaner and beautiful tourist destination of the Country.
3. Mega Bank provided pocket diaries to Metropolitan Police Office, Durbarmarg in order to help them to keep record for their daily activities.
Reduce Inequality, Gender Equality and Women Empowerment
1. Mega Bank Nepal Limited supported “Nepal Women Wrestling Foundation” for 3rd International Women Wrestling Championship in order to
encourage Nepalese women for international competition.
2. With an aim to raise awareness about the evils around acid attack and help in reducing violence against women Mega Bank supported “ZONTA Club of Kathmandu” in one of their awareness program.
3. Mega Bank supported “Bishnu Saraswoti Foundation” a non-government organization working on empowerment of single women and the welfare of children.
4. Mega Bank supported “South
Asian Women Development Forum (SAWDF)” for 5th International Women Entrepreneurs Summit. This event involves with women entrepreneurs’ organization that are involved in women empowerment, gender equality and upliftment of economic status of women.
5. Mega Bank supported non-profitable, social work based organization “Brighnaharta Nepal” for socio entrepreneurship development of tribal (Chepang) communities by technical and logistic support for Broom Grass and other cash crop cultivation.
6. Mega Bank supported “Fariya Center P. Ltd.” which is working on social awareness about the basic sanitation for girls and women mainly concerning Menstrual Taboos that are prevalent in the Nepalese society. They buy the sanitary napkins from small businesses making reusable napkins and distribute in village school of each province. They have been providing training to the girls to use and cleanliness of the reusable napkins.
7. Mega Bank supported “Lions Club of Kathmandu Sagun”
which has supported orphan and differently abled needy children with necessary materials.
8. In order to encourage differently abled person of the society Mega Bank supported “Jawalakhel Wheelchair Sports Club” for Inter-valley Wheel-Chair Basketball Competition.
Support in other Sector
1. Mega Bank Nepal Limited supported “Kiwanis International Nepal” which has been working in various CSR activities like Aayo Noon Campaign-2072, Earthquake-2075, Tornado in Bara and Parsa, free food for children in Panauti and distribution of basic essential requirements to orphanages and underprivileged.
2. Mega Bank supported “Krishi Bahas” program broadcasted at national Television with an aim to provide adequate knowledge to farmers for increasing productivity of land and farm products which will impact in their business enhancement.
10th ANNUAL REPORT 2019/2020
74Mega Bank Nepal Limited
9. Report of Board of Directors: FY 2019/20
Dear Shareholders,At first, on behalf of the Board of Directors I want to welcome gratefully to all of our valued shareholders for having your presence here in this Tenth Annual General Meeting of Mega Bank Nepal Limited. We are very much indebted by the support, devotion and direction provided by you in an endless progression path of the Bank and we are confident that the same level of support will be received unendingly in coming days as well. We also declare that with your support and direction, Mega Bank Nepal Limited has been established as disctinct Bank with sound recognition and more competitive in the national market.
The Bank has prepared its Financial Statment as per Nepal Financial Reporting Standards (NFRSs) issued by the body under Nepal Chartered Accountants Act 1997 and format prescribed by Nepal Rastra Bank due to which particulars of financial information pertaining to FY 2019/20 has been computed, classified, reported
and disclosed as per Nepal Financial Reporting Standards. The structure of Nepal Financial Reporting Standards is in compliance with International Financial Reporting Standards (IFRSs) which enables our financial information to be consistent with international standards and is also comparative and more reliable, thus we believe that this assists the Bank to expand its businesses at international level or partnering in various strategic alliances with international financial institutions in future.
Now, I seek your permission to present the Bank’s (along with its subsidiary) financial position as of mid July 2020 including Statement of Profit or Loss, Statement of Cash Flow and other financial information for the year ended FY 2019/20 for its due approval from this Annual General Meeting. First, I want to present the major financial performance indicators and other achievements of the Bank as below:
Five Years’ Major Financial Indicators Rs. In millions
SN ParticularsMid July 2030 Growth (From last year)
2016 2017 2018 2019 2020 Amount %
1 Total Assets 39,866 47,743 78,919 98,766 155,446 56,680 57.39
2 Total Equity 4,177 5,950 12,634 13,512 18,012 4,500 33.30
3 Total Deposits (Except Interest) 30,750 38,937 62,965 81,859 131,892 50,033 61.12
4 Total Loans (Except Staff Loans) 27,827 35,191 57,264 72,744 113,813 41,069 56.46
ParticularsFinancial year
Growth (From last year)
FY 2019/20
2015/16 2016/17 2017/18 2018/19 2019/20 Amount %
5 Toal Operating Income 1,360 2,091 2,873 4,661 5,140 479 10.28
6 Total Operating Expenses 540 841 1,149 1,900 2,098 198 10.44
7 Net profit 551 795 1,317 1,630 1,586 (43) (2.67)
ParticularsMid July
2016 2017 2018 2019 2020
8 Branch Network (incl. extension counters) 45 48 115 121 235
9 ATM 47 54 74 101 142
10 Brancless Banking 54 58 95 119 90
11 Number of customers 2.24 lakhs 2.60 lakhs 5.15 lakhs 6.85 lakhs 10.91 lakhs
10th ANNUAL REPORT 2019/2020
75Mega Bank Nepal Limited
Brief Analysis of Economic Condition
World Economics: As per the World Economic Outlook published by Internatioanl Monetary Fund in its October 2020 issue, the global economy is projected to decline by 4.4 percent in 2020. The global economic growth rate that remained at 2.8 percent in 2019 is projected to remain negative due to effect of the COVID-19 pandemic all over the world.
The economic growth of rate of developed countries in 2019 was 1.7 percent which is expected to decline by 5.8 percent in year 2020. Among advanced economies, the economy of the USA that grew at 2.2 percent in 2019 is projected to decline by 4.3 percent in 2020 and the economy of European economies that grew at 1.3 percent in 2019 is projected to decline by 8.3 percent in 2020. Similarly, the economy of Japan has also been affected by COVID 19. The economy of Japan that grew at 0.7 percent in 2019 is projected to decline by 5.3 percent in 2020. Emerging and developing economies that grew at the rate of 3.7 percent in 2019 is projected to decline at the rate of 3.3 percent in 2020. The economy of India that grew at 4.2 percent in 2019 is projected to decline at the rate of 10.3 percent in 2020 and economy of China that grew at 6.1 percent in 2019 is projected to grow at lower rate of 1.9 percent in 2020. The economic growth rate of India who is fighting a war with COVID 19 pandemic wil be squeezed excessively in 2020 but is projected to bounce back in 2021 with economic growth rate of 8.8 percent as per the report of International Monetary Fund.
National Economy: The gross domestic product of the country grew at the rate of 2.8 percent at base price in FY 2019/20 as per the prelimnary projection done by Central Burea of Statistics. Such growths were at the rate 6.99 percent in previous year. In the review period, the projected growth rate of agriculture sector is 2.59 percent and industry sector is 3.23 percent and service sector 1.99 percent which were 5.06 percent, 7.72 percent and 7.27 percent respectively in previous year.
In FY 2019/20, the average inflation rate on the basis of consumer price index is 6.15 percent. This inflation rate stood at 4.64 percent in previous year. The inflation in food and beverage sectors stood at 8.16 percent and non-food and service sectors stood at 4.61 percent. In the review year, the spread of COVID 19 pandemic all over the world has affected many sectors including transportation, tourism, production and closure of
international border and irregularity of imports and exports has largely affected inflation rate.
The total export that grew at the rate of 19.4 percent in FY 2018/19 grew at the rate of 0.6 percent in the review period. The total import in FY 2019/20 has declined by 15.6 percent which had grown at the rate of 13.9 percent in previous year. The trade deficit in the review period has reached Rs. 1,099 billion which squeezed at the rate of 16.8 percent. The trade deficit had grown at the rate of 13.5 percent the previous year. The remittance inflow during the FY 2019/20 was Rs. 875.03 billion the negative growth rate being 0.5 percent. This growth rate was 16.5 percent during previous year. Foreign currency reserve as on Mid July 2019 was Rs. 1,038.92 billion which increased at the rate of 34.9 percent and remained at Rs. 1,401.84 billion as on Mid July 2020. The total balance of payments in FY 2019/20 remained at a surplus of Rs. 282.41 billion. This was deficit by Rs. 67.40 billion in previou year. The current account registered a deficit of Rs. 32.06 billion in the review period and this deficit was Rs. 265.36 billion in previous year.
In FY 2018/19, the deposits of commercial banks increased by 21.18 percent (Rs. 610 billion) and extended to Rs. 3,490 billion whereas loans and advances of commercial banks increased by 16.41 percent (Rs. 410 billion) and extended to Rs. 2,910 billion. The market share of Mega Bank in this volume is 3.78 percent in deposits and 3.91 percent in loans and advances which was 2.84 percent and 2.91 percent respectively in previous financial year. As on Mid July 2020, the number of commercial banks remained at 27, the number of developments banks 20 and finance companies 22. The branch networks of BFIs (except micro-finance) was 5,057 as on Mid-July 2019 which has been extended to 5,708 as on Mid-July 2020.
Analysis of Review PeriodAt the end of review period, the loans and advances of the Bank has been increased to Rs. 113.81 billion which is a growth of 56.46 percent (growth of Rs. 41.07 billion including Rs. 27.90 billion acquired from erstwhile Gandaki Bikas Bank Limited). The Bank has been continuously enhancing its exposures in small and medium industries/businesses, consumers sectors, micro/deprived sectors and through business variations, and has been reducing its concentration risk. The share of Infrastructure and Corporate Loans in its total loan portfolio is 27.35 percent as on Mid-July 2020.
10th ANNUAL REPORT 2019/2020
76Mega Bank Nepal Limited
Loan Composition, Mid-July 2020
Micro 6%
Corporate 27%
Mid-Corporate 12%SME 21%
Retail 34%
Loans, Advances & Bills Purchased
2016 2017 2018 2019 2020
1,13,183
27,82735,191
57,264
72,744
Rs.
In M
illio
n
10th ANNUAL REPORT 2019/2020
77Mega Bank Nepal Limited
The average loans and advances per customer is Rs. 2.46 million and average deposit per customer is Rs. 0.126 million in the review period. The Bank has been spreading its business in a satisfactory manner by continuously improving its loans and deposit mix. The total number of customers at the end of reveiew period has been 1.09 million. The base formation, performance and achievement of the Bank within tenth years of its operation is more encouraging. The Bank has been able to disburse its loans to more than 29,000 customers in deprived and micro sectors. The Bank’s exposure to real estate sector is 3.67 percent. The Bank’s exposures in priority sectors (agriculture, energy and tourism) at the end of review period is 38.25 percent which should be minimum of 25 percent of the total exposures as per the provisions of Nepal Rastra Bank. Similarly, the Bank’s exposures in deprived sector is 6.93 percent.
The Bank has earned Rs. 4.18 billion of interest income in FY 2019/20 which is 10.05 percent higher as compared to previous year. At the end part of FY 2019/20 i.e. on 5th July 2020 erstwhile Gandaki Bikas Bank Limited was acquired by Mega Bank Nepal Limited and operated its joint transaction on that date thus only around 11 days’ income and expenses from the books of erstwhile Gandaki Bikas Bank Limited has been effected in FY 2019/20. The positive impacts have been observed in the business sectors because of positive indications seen in Nepalese market and this has led to increase in demands for loans for first 8 months of in the review period. The excessive demands in loans and advances pressurized the availability of loanbale funds and also demands of funds for the fulfillment of the liquidity has led the interest rate of deposits at higher level resulting in squeezed spread rate.
The impact of lock down caused due to COVID-19 pandemic has impacted overall economy including our Bank and the rebates in interest amount and interest rates as directed by Nepal Rastra Bank and additional rebates provided by the Bank’s management itself has impacted interest income of the Bank. Despite these limitations, the Bank has been able to mark its net interest income growth at satisfactory level. The average yield from the loans and advances in the review period was 12.10 percent which was 13.32 percent in previous period. The cost of deposits has been 6.93 percent which was 7.86 percent in previous year. The scarcity in loanable funds caused by increase in demand for loans in the overall banking sector in Nepal has resulted high costs deposits in the books as was in earlier year but due to impact of the COVID 19 pandemic, the interest rate fell down and weighted average cost of deposit remained lower as compared to earlier year. The average interest spread computed as per the provision of Nepal Rastra Bank for the Bank
has been 4.39 percent which was 4.33 percent in previous year. As there is decline in the yield from loans and advances, rebates provided in interest amount and interest rates, squeezing of net interest spread, etc. have casued lower growth in net interest income. The other income earned by the Bank by offering various services and facilities is Rs. 1,013.8 million which was Rs. 911.6 in previous year.
The personnel expenses (including bonus provision) in the review period is Rs. 1,260.2 million as compared to Rs. 1,154.1 million in previous year which is a growth of 9.19 percent. The major reasons for huge increment in personnel expenses are caused by acquisition effected in at the end of current period, increase in branch netwok, expansion of business, performance pay, promotion, investment in trainings, development acitivities, etc. Similarly, the other operating expenses in the review period is Rs. 837.9 million which is an increase of 12.38 percent as compared to previous year. The major reasons for increase in other operating expenses are branch expansion, purchase of additional services, additional procurement of administrative assets, etc.
The Bank has earned Rs. 2.23 billion operating income in FY 2019/20 which was Rs. 2.33 billion in previous year. Profit before tax is Rs. 2.24 billion for the same period which was Rs. 2.32 billion in previous year. The Bank has been able to earn the net of profit of Rs. 1,586.2 million in the review period which is a decline of 2.67 percent as compared to net profit of previous year i.e. Rs. 1,629.7 million. The contribution to government exchequer by the Bank in the form of government revenue is Rs. 669.8 million which was Rs. 709.3 million in previous year.
10th ANNUAL REPORT 2019/2020
78Mega Bank Nepal Limited
Net Profit
Paid Up Capital and Reserves
Rs.
In M
illio
n
1,586
551
795
1,317
1,630
2016 2017 2018 2019 2020
The total reserve and surplus of the Bank is Rs. 4.87 billion at the end of review period including the profits of the review period, adjustments of regulatory reserves, previous year’s retained profits and all other reserves. The reserves and surplus shall be reduced after the distribution of the cash dividend (including dividend tax) proposed at this General Meeting. Return on total assets is 1.68 percent in the reveiew period as compared to previous year’s return on assets of 1.64 percent. Similarly, the return on equity in the review period is 14.65 percent which was 12.82 percent in previous year. The mix of paid up equity capital & reserve and surplus of the Bank in past few years has been depicted in following diagram.
Paid Up CapitalReserves
Rs.
In M
illio
n
3,123
13,139
4,8733,041
1,086
4,582
1,368
10,286
2,246
10,389
2016 2017 2018 2019 2020
10th ANNUAL REPORT 2019/2020
79Mega Bank Nepal Limited
Return on Assets
Rs.
In M
illio
n
1.641.68
2.34
1.741.79
2016 2017 2018 2019 2020
Return on Equity
Rs.
In M
illio
n
2016 2017 2018 2019 2020
14.6512.82
16.5616.9217.24
10th ANNUAL REPORT 2019/2020
80Mega Bank Nepal Limited
Bank’s AchievementsThe international paper “The Asiamoney Publication” has awarded the Bank in two sectors for 2019 -“Best Bank for Microfinance” and “Best Bank for SME”. Similarly, the monthly magazine - “The Banker”, published by Financial Times, the UK based publication with a history of more than 90 years, has recognized the Bank with the award of Bank of the Year 2019.
Proposed DividendThe 20 percent of the net profit of FY 2018/19 amounting to Rs. 317,242,984 (Three hundred seventeen million two hundered forty two thousand nine hunder eighty four rupees) has been transferred to General Reserve Fund. Appropriation has been done in Foreign Exchange Reserve Fund during the review period equal to 25% of revaluation profit i.e. Rs. 7,423,690 (Seven million four hundered twenty three thousand six hunder mninty rupees). Including addition to and write back from regulatory reserve, the net amount equal to Rs. 835,505,978 (Eight hundred thirty five million five hundred five thousand nine hundred seventy eight rupees) has been written back from Regulatory Reserve as per the provisions of Unified Directives 2077 of Nepal Rastra Bank. As per the provision of same Directives, amount equal to Rs. 15,862,149 (Fifiteen million eight hundred sixty two thousand one hundred forty nine rupees) has been appropriated to Corporate Social Responsibility Fund (CSR). From the retained earnings that remained after all the appropriations done in FY 2019/20, amount equal to 3.05 percent of Rs. 13,322,695,416 (Thirteen billion, three hundered twenty two million, six hundred ninety five thousand four hundred sixteen rupees), current paid-up equity capital i.e. Rs. 406,342,210.19 (Four hundered six million three hundred forty two thousand two hundred ten rupees and 19/100 paisa) as cash dividend and 10 percent of same paid-up equity capital i.e. Rs. 1,332,269,541.60 (One billion, three hundred thirty two million two hundred sixty nine thousand five hundred forty one rupees 60/100 pais) as bonus share total dividend being of 13.05 percent of paid-up equity capital which amounts to Rs. 1,738,611,751.79 (One billion, seven hundred thirty eight million six hundred eleven thousand seven hundred fifty one rupees 79/100 paisa) has been proposed at this General Meeting and residual amount of Rs. 227,842.67 (Two hundred twenty seven thousand eight hundred forty two rupees and 67/100 paisa) has been carried forwarded as retained earnings.
As per the provision of sub-section 5 of section 47A of Income Tax Act 2058, the Bank shall not deduct final withholding tax on proposed cash dividend for 2 years from the date of joint operation with then Gandaki Bikas Bank Limited i.e. on 4th July 2020 to those shareholders holding shares on the date of joint operation but proposed cash dividend on shares
purchased after joint operation and owned by way of distribution of bonus issue after joint operation shall be paid after deducting applicable final withholding tax.
The achievements in Current Period and Plans for FutureFor the first quarter, in current FY 2019/20, the total deposits of the Bank reached Rs. 133.26 billion increased by Rs. 1.24 billion and net loans and advances reached Rs. 121.81 billion with an increment of Rs. 8 billion. As per the policy of Nepal Rastra Bank to reduce the poroportion of call deposits in its total deposits to 10% by the end of Ashad 2077 and due to prevalence of excess liquidity in the market, the Bank has put control over depoisit solicitation so growth of deposits has been observed lower as compared to loan growth. During the same period, the Bank has earned net profit of Rs. 607.9 million as per the quarterly reports published by the Bank. Currently, the Bank has 206 branches, 34 extension counters, 142 ATMs and 89 Brancheless Banking outlets (BLBs).
The Bank has been formulating plans and future programs like expansion of volume and scope of business; developing attractive plans to optimize services and facilities provided to customers by addressing their needs and expectations; expansion of branches, ATMs and remittance networks on the basis of feasibility reports; continuation of expansion of branches/BLBs in rurual sectors in order to enhance financial access by rural and deprived sectors including developments of new disruptive technologies to prioritize the micro lending; enhancing investments towards small and medium businesses; enhancing investments towards agriculture, tourism, energy and other productive sectors; strengthening the risk management systems of the Bank, etc. These days, there exists excessive liquidity in the banking sector thus interest rates are lowered causing severe competition in interest rate resulting in interest rate risk. Thus, considering the importance of risk management, the primary focus has been awarded to micro level of supervision over internal and external acitivities of risk and due investigation and analysis of those activities in order to prevent adverse impact on business and profitability and internal work divisions have also been strengthen.
In situation where Bank is providing banking services to the sectors deprived of financial access through its brancheless banking technology, it has been formulating plans to further expand, make more effective and giving new thoughts in those services being provided. The Bank is in the plan in opening more BLBs in current financial year.
The process of improving the living standard of deprived people shall be continued through expansion
10th ANNUAL REPORT 2019/2020
81Mega Bank Nepal Limited
of micro loans to those people deprived of financial access. The Bank has been continuously increasing its invesments in agriculture, energy, tourism and other priority sectors. The investments of the Bank in these prioritized sectors is sufficient to cover the minimum rerquirement as set by Nepal Rastra Bank and Bank plans to enhance these investment in coming days as well. The Bank has specifically assigned separate personnel in each branch for the expansion of services to deprived populace and micro financial sectors.
The Bank’s investment in the small and medium industries/businesses which has been the skeleton of national economy shall be emphasized this year as well. The Bank’s investment in the mid sized industries/businesses that lies above SMEs but seeking space to step towards big corporate houses is also our concern in a days to come.
As the Bank believes in business diversifications and sustainability, it has primary focus in solicitation of saving deposits. In this respect, Bank has been conducting various programs in addition to commercial advertisements in order to improve its customer base and deposit base and it will be the Bank’s ongoing process to investigate the result focused ideas and forward those ideas into action through its appropriate mode of implementation.
The Bank has been making its activities more effective for the continuation of its strategic thoughts of serving customer oriented services and benefits and extending its overall customer base without being confined to particular class and sectors. With an objective to contribute to the shareholders’ fund as much as possible, the activities of business operations have been initiated in current financial year by appropriately analysing to the business risk and challenges and enabling itself to defend for the probable policy changes. The Bank has been concentrating on increasing the interest income by way of expanding its business volume. The Bank has been planning to increase the portion of non-interest income gradually in its total income. For this, the Bank has been placing more focus in non-funded based transactions like letter of credit, bank guarantees, remittances, cards, mobile banking, and foreign exchange gain and other banking services and facilities generating fees and commission by regularly instigating the activities relating to employee enablement and business promotion. The Bank is sensible in its activities to economically manage its operational and administrative expenses. For this, the Bank has been using latest information technology as its ongoing process.
With the optimum use of latest information technology, the Bank has been providing reliable, fast and efficient services and facilities which shall be continued in
days to come. The primary activities of the Bank includes conducting tranings for skill development of the employee, make internal control mechanism more effective, enhancement of international correspondence and synchronization of remittance businesses. Now, Bank has its own remittance techonology “Mega Remit” which has more than 3,200 remittance agents within Nepal and is coordinating for remittance services with almost 23 international agencies. Continuous efforts shall be made in increasing these numbers.
In the process of seeking coordination and expanding its scope of businesses, the Bank has incorporated merchant banking business named “Mega Capital Markets Limited. In addition, the Bank has incorporated “Mega Stock Markets Limited” in a Company Registrar Office on 12th August 2019 which is a fully owned subsidiary company of the Bank incorpotated for the operation of securities business/share broker and is in the process of obtaining licence.
In order to secure the Bank and expand its operations in profitable manner through investigation and innovative ideas, it has established separate Research and Development Unit which is contributing significantly to the Bank. In addition, the Bank has established separated New Product Development Unit in order to develop new plans and their implementation. This unit is effectively serving the Banks through its various innovations and products. In order to conduct post-implementation review and optimization of inactive products and services, separate Product Optimization Unit has been set up in the review period.
In today’s continuously changing and fast moving world’s economy and its nature, where customers’ requirements and preferences are always evolving, most businesses have been prompted to introduce information system to keep their competitive edge as it can bring numerous benefits including innovation and assist in the way the business handles its external and internal processes that a business encounters daily and decision making for the future. Considering this view, the Bank has set a dedicated unit for development of Management Information System named Management Information System Unit which work dedicately in development of management information system.
As the Bank is always prioritizing the cashless transactions, considering the challenges posed by the Covid-19 pandemic that evolved in December 2019 and spread all over the world, the Bank has established Digital Product Department in order to boost overall digitalization of the Bank. Digital Transformation Steering Committee (DTSC) has been formulated and is in operation, coordinator of the committee being
10th ANNUAL REPORT 2019/2020
82Mega Bank Nepal Limited
Deputy Chief Executive Officer of the Bank. The acts for paper based system to less paper system have been initiated for adopting paper-less system. In order to avail the banking facilities from the place of cusomters’ location in their preferred time, the Bank is active in devceloping the fast and simple digital medium. The Bank is in final stage of implementing AI Chatbot System in order to immediately response the queries of the customers; Tick Banking in order to enable the customers to avail the required banking facilities from Bank’s representative by selecting the options of banking services; Video Account Opening System in order to open the account by directly communicating with the customers through vedio and Score Based Loan Management System in order to intitiate provide online application of the loans and all the processes of approvals.
Capital, Propsoed changes in Capital Structure The Bank issued bonus issue of Rs. 103,094,876 from the portion of Bargain Purchase Gain created due to merger with erstwhile Tourism Development Bank Limited in FY 2017/18, after which the paid-up equity capital of the Bank has reached Rs. 10,388,621,454. On acquisition of erstwhile Gandaki Bikas Bank Limited and after joint operation on 4th July 2020, the Bank issued face value of shares of Rs. 2,750,000,000 to the shareholders of erstwhile Gandaki Bikas Bank Limited, after which the paid-up equity capital of the Bank has reached Rs. 13,138,621,454 however, in current financial year, the Bank auctioned 1,840,739.63 number of unsubsucribed right shares issued in FY 2074/75 of the Bank, thus paid-up equity capital of the Bank is now Rs. 13,322,695,416.
The Major Factors Affecting the Bank’s TransactionsThe national and international events and policies directly or indirectly affects the Bank’s transactions. These may include policies, rules and directives of government and regulators; competition level; political situation of the country; the diplomatic relation and transactions of the country with international markets; effect on other sectors of economy; overall macro-economic indicators, etc. The impact on the transactions of the Bank in the review period has been presented heading-wise in the overall analysis of economic condition and analysis of transactions of review period.
Branch Expansion and ATMThe construction of building is already completed on its own land located at Butwal Sub-Metro Municipality and is brought to use. In order to strengthen the Bank and make it more competitive, enhance its scope and size and improve its market share; the Bank is
in continuous process of the establishing branches, extension counters, ATMs and enhancing the process of mergers and acquisitions in FY 2019/20. The organization structure has been developed in a way to manage the Bank’s operation and business in provincial structure as per the direction of Nepal Rastra Bank.
The Bank has already established and operated its branches in 9 different loctions in the review period and the Bank is in process of opening branch in one more location. The Bank had 111 number of branches before acquisition and after acquisition with erstwhile Gandaki Bikas Bank Limited 95 branches were added and number of branches has reached 206. Total of 10 extenison counters were established and operated in the review period and 5 more extension counters were established and operaeted in current financial year. With due focus given to the feasibility of the business, the Bank has plan to open branches and extension counters in current financial year and more than one branches being operated in same locality due to acquisition decision and few among them are planned for adjustment by analysing the business feasibility and our requirements.
ATM and CardsThe total number of ATMs of the Bank has reached 142, out of which 18 ATMs are located at sites different from our branch locations. The Bank is continuously conducting feasibility studies of different new locations for ATM installation in order to serve its customers as per the requirement. In order to provide international level of facilities to its customers, the Bank has been providing facilities of various chip-based debit and credit cards after duly obtaining authorized membership of the VISA. The Bank has been providing Prepaid Travel Card which can be used during international tours and also international credit cards as per the requirement of its customers. Further, cards under Union Pay International have been managed to be operated in our ATM networks and we have a plan to issue Master Card in near future.
Through the use of VISA cards of the Bank, customers can withdraw cash from ATM and also can purchase various services and facilities via business centres and authorized e-commerce networks. The Bank has commenced services through its 3D Secured Service where customers can conduct online transactions by the use cards of Mega Bank.
There is a provision of approval system by the customers by the use of One Time Password (OTP) received in their mobile devices or email while conducting transactions through 3D Secured Services and this has assured security of transactions conducted by the customers.
Now, the Bank has started Payment Card based on Visa Contactless Card (NFC-Near Field Communication)
10th ANNUAL REPORT 2019/2020
83Mega Bank Nepal Limited
in which the cardholder of Mega Bank can transact through Contactless System Enabled POS Machine on tap and pay basis without contacting card in a machine. With this new system in card, the payment up to Rs. 2,000 can be done through Contactless System Enabled POS Machine without entering any PIN. But, this depends on the terms of the PIN requirement of the vendor.
The Bank is knotted with NPN Network of Nepal Investment Bank Limited and SCT Network with an objective of providing high end services and facilities to the customers. The Bank has been issuing EMV Chip-based cards to its customers as per the International Card Payment Standards and directions of Payment Service Department of Nepal Rastra Bank and also enabled all of its ATMs compatible to EMV chip-based cards.
In order to cope with the cashless transaction policy of Nepal Government and Nepal Rastra Bank, the Bank has been providing discounts, cash backs and reward points schemes to cusomters and businesses from time to time.
The Bank has been establishing EMV Compatible POS Machine in various sales and service centres where customers can directly make payments for purchase of services and facilities. Also, customers can make EMI payment against the purchase of goods and services under credit card facility through Insta Buy products of the Bank.
Information Technology and Branchless BankingThe Bank has been using featured core banking software named “Flexcube” developed by multinational company Oracle. The Bank has been offering the facilities of internet banking, ABBS service, ATMs, etc. to its customers right from its operation so that reliable, secured and effective services and facilities can be made available to its customers with the use of information technology. In addition, in order to simplify the access of banking facilties in rural area, Bank has brought latest Branchless Banking, latest and featured Tab Banking and mobile banking facilities in operation. The Bank has 89 branchless banking outlets in operation until now in rural sectors and other areas where financial access is minimal. We are planning to expand these outlets in current financial year as well. In order to cope with the natural disasters and to be secured from risks, the Bank has installed its Disaster Receovry Site in different location. The internal information system and management activities of the Bank are operated in effective, economic and systematic way with the latest use of technology. The Bank has also implemented electronic Document
Management System (DMS) for the effective flow and authorization of files and agendas. For simplicity and providing facilities to the customers in applying for IPO/FPO, right shares, etc, the Bank has provided services of ASBA/C-ASBA to the customers having saving accounts in the Bank. Considering customers needs, the Bank has been providing services of Online Account Opening, Mega Online Trade Finance Service and ConnectIPS e-Payment System. Similarly, the Bank has implemented iCare System and SWIFT Sacntion Screening System for effective abolishment and control of activities relating to Know Your Customer and Money Laundering. The Bank has been investing in various new technologies for the security of banking transactions and information system. Also, the Bank has been conducting micro studies and analysis of the sensitivity of security system through implementation of evolving technologies.
Internal Control SystemThe effective organizational structure and division of roles, responsibility, works and sectors as per the structure including detailed standard operating policies, bylaws and procedures have made the internal control system of the Bank more effective and vigorous, thus, resulting also lowering the inherent operational risks. In addition, Board of Directors, Audit Committee, Risk Management Committee and Management itself have been continuously reviewing the prevailance of adequacy and effectiveness of the internal control system in the Bank. The Statutory Auditor and Internal Auditor are also measuring and testing independently the internal control system of the Bank and providing necessary suggestions for its improvements. The other various sub-committees are also playing prominent role in supporting for the improvements of internal control mechanisms of the Bank through their various activities.
Corporate Governance As sustainable success of the Bank is dependent on effective corporate governance, the Board of Directors and Management is complying with and also committed to comply with the policies and directives issued by Nepal Rastra Bank and other regulating bodies in respect corporate governance. The Bank is focusing in its activities with the slogan of “Priority to Best over Beloved”.
Money LaunderingIn order to abolish the illicit practice of laundering the money gained illegally or deceitfully and abolish the criminal offences, the Bank has formulated and implemented Know Your Customer and Anti-Money Laundering Policy duly approved from Board of Director as per the provision of various acts, rules including directives and cicrulars issued by Nepal Rastra Bank from time to time. These activities have been made
10th ANNUAL REPORT 2019/2020
84Mega Bank Nepal Limited
more effective through the use of techonology and developing and implementing various supervisory system. In addition, the Bank has initiated various activities through Anti-Money Laundering Committee formulated in coordination of non-executive director as per the provision of directives of Nepal Rastra Bank.
Due consideration given to update KYC information of customers and comply with the provision of Nepal Rastra Bank’s directives, the Bank has provided for Online KYC Update.
To enhance skills in the subject of Money Laundering, the Bank has been providing various trainings to its staff and management team and also providing various information materials from time to time. Similarly, the Bank has been conducting Skill Assessment Test of every staff relating to Money Lanudering (AML/CFT).
Corporate Social Responsibility (CSR) The Bank is indispensable part of the society whose objective is not limited to earn the profit only but also is responsible to the society in many aspects. Keeping this assumptions in mind, in order to get diluted in the society, the Bank is providing supports to various social activities as a part of its corporate social responsibility.
With an effort to ensure bright future of girl children, Mega Bank has started a campaign named as “Education is Enlightenment” where each branch has provided financial support and education materials to one girl student from economically deprived family from the previous year. Through this program, the Bank supports these selected girl children from Grade 1 to Grade 12. In continuation of that program and expanding the support, the Bank has provided support for 2 girl students from each branch effective from session commencing for 2077.
In the panic situation of Covid-19 in the review period, the Bank provided financial support to Nepal Government and all the State Government for treatment and control of covid -19. For this, for the purspoe of prevention, control and treatement of corona virus, the Board of Director of the Bank provided Rs. 10 million to the fund established by Central Government and Rs. 5 hundred thousands each to the funds established by all State Governments, total funding being Rs. 13.5 million (Including contribution from staffs and member of Board of Director). We believe that these types of social activities are building positive perception among people towards the Bank.
Personnel ManagementThe Bank defines the personnel of the Bank as assets rather than resource and Bank routines them accordingly. We believe that the progress and success of the Bank depends on the personnel working in the Bank rather than its physical infrastructure. Thus,
efficient utilization of available personnel shall be our special focus for which Bank is always committed in creating staff-friendly working environment within Bank. In order to retain skilled manpower within the Bank, to attract such workforce and innovate them for their own career development, Bank has developed and implemented human resource strategy and practices. For the skill development and empowerment of the Bank’s personnel necessary trainings have been provided, ideas and thoughts for the HR development have been identified and role assignments, trainings, seminars, exams and other HR related programs are conducted accordingly. The Bank is also conducting various trainings and HR development programs through its dedicated units named Mega Learning & Development Centre established for that particular purpose. The Bank is conducting productive programs in order to create a “Mega Culture” so that the Bank’s vision and values are incorporated by each of the personnel in the Bank. The Bank is aiming towards boosting its personnel in performing their duties with great enthusiasm and responsibility. The Bank is also increasing its remuneration and benefits from time to time considering the factors like inflation and markets. The Bank is also conducting commercial, educational and entertaining programs regularly for their particiapation and promotion of total employee involvement. The environment has been created such that personnel can present their personal and business problems to the HR department without any hesitation and we believe that this shall help us to build positive attitude in them. The Chief Executive Officer and Chairman of the Bank are making provincewise visits so that confidence of staff can be boosted in addition to business expansion and promotion. For the development of effective and economic operations and management, the Bank has been monitoring the daily activities of its personnel of each department through its e-learning software and is also making changes and reviews as per the necessity. The internal information system is in access of each of the personnel within the Bank thus, this availability of communication networks and information system is enhancing the development of work-friendly and learning environment in the Bank.
Audit The ninth Annunal General Meeting of the Bank has appointed M/s CSC & Co., Chartered Accountants as statutory auditor of the Bank for FY 2019/20. The appointed firm has completed the auditing works. The audit done by the M/s CSC & Co., Chartered Accountants for FY 2019/20 was second years of its appointment in this Bank therefore as per the provision of Companies Act 2063 (First Amendment 2074) and Bank and Financial Institution Act 2073, it is eligible for reappointment for FY 2020/21. Thus, with recommendation from Audit Committee, M/s CSC & Co., Chartered Accountants has been proposed at this
10th ANNUAL REPORT 2019/2020
85Mega Bank Nepal Limited
tenth AGM for re-appointment as stattutoy auditor of the Bank for FY 2020/21.
Grievance In current financial year, two numbers of grievances relating to normal banking transactions were received in grievance handling unit and such girevances received from customers were addressed and resolved appropriately.
Board of DirectorThe Board of Director comprising of seven members were there as elected from seventh Annual General Meeting of the Bank held on 13th July 2018 (2075/03/29). They were Chairperson Mr. Bhoj Bahadur Shah, Mr. Gopal Khanal, Mr. Madan Kumar Acharya, Dr. Indra Bahadur Mall Thakuri, Mr. Muktiram Pandey, Mr. Balkrishna Siwakoti and independent director Mr. Shiva Devi Kafle.
Merger and AcquisitionIn order to boost the corporate objectives of establishing as a leading bank in terms of capital and business volumes, the Bank by using the authority provided by its eighth Annual General Meeting, had signed Memorandum of Understanding (MOU) on 25th Sepetember 2019 with national level “B” class licensed institution “Gandaki Bikas Bank Limited”, head office situated at Pokhara Metropolitan city of
Gandaki Province for its due acquisition. After receiving final approval from Nepal Rastra Bank, both Banks commenced their joint trasanctions effective from 4th July 2020 (21st Ashad 2077). After acquisition of Gandaki Bikas Bank Limited, the Bank has been leading strong institution in Gandaki Province and its position in Kathmandu Valley including Bagmati Province and Lumbini Province has be strengthen. In addition, the branch network of the Bank all over Nepal shall be extended to more than 206 in numbers and the Bank has stood to be amongst top 11 commercial banks that existed now in terms of business volume. At last, on behalf of Board of Directors and myself, I want to present heartfelt thanks to the promoters, shareholders, customers, Nepal Rastra Bank, Securities Board Nepal, Nepal Stock Exchange Limited, Company Registrar’s Office, CDS and Clearing Limited and other regulators, Chief Executive Officer Mrs. Anupama Khunjeli her management team, staffs, media and all those who directly or indirectly have contributed in business growth and development of the Bank.
On behalf of Board of DirectorsMr. Bhoj Bahadur ShahChairman
Date: December 22nd 2020Place: Kathmandu
10th ANNUAL REPORT 2019/2020
86Mega Bank Nepal Limited
10. Additional Information as required by Section 109(4) ofCompanies Act 2063 (FY 2019/20)
(A) A review of the business during the previous year: Please refer to the Report of Board of Director.
(B) Impacts caused on the transactions of the Company, if any, from National and International Situation:
The national and international events, causes of Covid -19, behaviour emerged due to policy changes shall directly or indirectly affect the transactions of the Bank. These includes the policy, rules and directions issued by government and regulatory bodies, competition, the political situation of the country, the diplomatic relations and transactions with international markets, the other effects on economy and overall economic indicators. The transactions of the Bank in the review period has been affected by the review of overall economic condition and review of previous financial year as represented in report of Board of Director.
(C) The Achievements to the date of issue of Annual Report and opinions of BOD to the actions to be taken in future
Please refer to the Report of Board of Director.
(D) Industrial or Professional Relations of the Company: The Bank moving with slogan of Plough to Power
(Halo to Hydro) and being banker of every Nepali and taken target of providing standard services to all of its customers, has been able to maintain cordial industrial and business relationship within short period of its operation. The customers from varied sectors are transacting with the Bank and business diversification is expanding day on day. The Bank has achieved much publicity in its short period of its operation.
(E) Changes in Board of Directors and reasons thereof: The Board of Director comprising of seven
members are Chairperson Mr. Bhoj Bahadur Shah, Mr. Gopal Khanal, Mr. Madan Kumar Acharya, Dr. Indra Bahadur Mall Thakuri, Mr. Muktiram Pandey, Mr. Balkrishna Siwakoti and independent director Mr. Shiva Devi Kafle.
(F) Main factors affecting the business: Please refer to the Report of Board of Director.
(G) Board of Directors’ Reaction to Remarks made, if any, in the Audit Report:
The board of director has been providing necessary directions to management in case of any remarks and the Bank is also committed for improvement at all time.
(H) The amount recommended for distribution as dividend:
Amount equal to 3.05 percent of Rs. 13,322,695,416 (Thirteen billion, three hundred twenty two million, six hundred ninety five thousand four hundred sixteen rupees), current paid-up equity capital i.e. Rs. 406,342,210.19 (Four hundred six million three hundred forty two thousand two hundred ten rupees and 19/100 paisa) as cash dividend and 10 percent of same paid-up equity capital i.e. Rs. 1,332,269,541.60 (One billion, three hundred thirty two million two hundred sixty nine thousand five hundred forty one rupees 60/100 paisa) as bonus share total dividend being of 13.05 percent of paid-up equity capital which amounts to Rs. 1,738,611,751.79 (One billion, seven hundred thirty eight million six hundred eleven thousand seven hundred fifty one rupees 79/100 paisa) has been proposed at this General Meeting
(I) Number of Forfeited Shares, if any, the face value of such shares, the amount derived by company prior to forfeiture and the amount derived by the company by selling such forfeited shares or details of amount refunded on such shares, if any:
There are no shares forfeited during the financial year.
(J) Progress of the activities of the Bank and its Subsidiary Company and the review of the position at the end of the year:
The progress of activities of the Bank and its Subsidiary Company have been represented in attached published Annual Reports.
(K) Main transactions carried out by the company and its subsidiary company during the financial year and any important changes in the business of the company during the period:
The company has been operating banking transactions which have been represented in report of Board of Director and major business activities of subsidiary company of the Bank are incorporated in same reports.
(L) Information furnished to the company by its substantial shareholders during the previous financial year:
No other information is received except the information to be submitted as per the direction of Nepal Rastra Bank.
(M) Particulars of the ownership of shares taken up by
the Directors and office-bearers of the company during the previous financial year, and information
10th ANNUAL REPORT 2019/2020
87Mega Bank Nepal Limited
received by the company from them about their involvement, if any, in the transactions of the shares of the company:
No such information is received regarding ownership of shares taken up by the Directors and office-bearers of the company during the previous financial year or their involvement in share transactions.
(N) Particulars of information furnished by any Director or any of his close relatives about his personal interest in any agreement connected with the company signed during the previous financial year:
No information is received.
(O) Purchase of own Shares, if any including reason of purchase and number of such shares, their face value and the amount paid by the company in such share purchase:
The company has not purchased its own shares.
(P) Whether or not there is an internal control system, and if there is any such system, details there of:
The details are represented in the Report of Board of Director.
(Q) Particulars of the total management expenses of the previous financial year:
1. Personnel Expenses Rs. 1,260,156,119 2. Operating Expenses Rs. 837,937,988 (inc. Depreciation & amortization)
(R) A list of members of the Audit Committee,
remunerations, allowances and facilities being received by them, particulars of functions discharged by the Committee, and particulars of suggestions, if any, offered by the Committee:
(1) The Name of member of Audit Committee Director, Dr. Indra Bahadur Mall Thakuri
(Coordinator) Director, Shiva Devi Kafle
(Member) Head- Internal Audit Mr. Subash Bhattarai
(Member Secretary)
(2) No any remuneration is provided to coordinator and member of Committee except meeting allowance of Rs. 13,800 per meeting.
(3) The number of meetings of Audit Committee held in FY 2019/20 is 10. The Committee has passed Annual Plan of Internal Audit function and reviewed the Bank’s policy, rules and operation and has given necessary suggestion to the Bank’s management and Board of Directors. In addition, the committee has discussed over the reports of NRB and external auditor and has provided necessary suggestion to Board of Director.
(S) Payments due, if any, to the company from any Director, Managing Director, Executive Chief or basic shareholder of the company or any of their close relatives, or from any firm, company or corporate body in which he is involved:
No such dues pending.
(T) Remunerations, Allowances and Facilities to the Directors, the Managing Director, the Executive Chief and other Office-bearers:
The members of board of directors have been provided meeting allowance of Rs. 2,739,750. In addition, payment of Rs. 1,008,000 has been done in respect of mobile and newspaper expenses.
The managers level staff and above have been provided with the following remuneration, allowances and services:
(U) Dividends yet to be Collected by Shareholders: Dividends yet to be collected by shareholders at
year end 2077 is Rs. 274,306,401.
S.N Particulars Chief Executive Officer Senior management/Managers
1 Salary 10,200,000.00 51,268,917.00
2 Allowance - 33,106,880.00
3 Provident Fund - 4,874,892.00
4 Dashain 850,000.00 5,878,478.00
5 Fuel 302,912.00 4,555,079.00
6 Other Vehicle, driver, security guard, mobileexpenses, insurance, bonus as per Act.
Vehicle, mobile expenses, insurance,housing loan, overdraft loan, bonus as per Act.
10th ANNUAL REPORT 2019/2020
88Mega Bank Nepal Limited
(V) Detail of property’s buy or sell as per Clause 141: No such details.
(W) Detail of the transactions held between Associated Companies as per Clause 175:
Represented in appropriate places in published Annual Reports.
(X) Any other matter to be mentioned in the Board of Directors’ report under Companies Act (First Amendment), 2063:
Represented in appropriate places in published Annual Reports.
(Y) Other necessary matters: Represented in appropriate places in published
Annual Reports.
Date: 17 December 2020 Place: Rising Mall, Kamaladi,Kathmandu
Bhoj Bahadur ShahChairman
Gopal KhanalDirector
Mukti Ram PandeyDirector
Shiba Devi KafleDirector
Anupama KhunjeliChief Executive Officer
Sandip Babu PaudelHead-Finance and Planning
Ram Prabodh SahPartner CSC & Co.Chartered Accountants
Dr. Indra Bahadur Malla ThakuriDirector
Bal Krishna SiwakotiDirector
As per our report of even date,
Madan Kumar AcharyaDirector
10th ANNUAL REPORT 2019/2020
93Mega Bank Nepal Limited
Particulars NoteGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
AssetsCash and cash equivalent 4.1 18,743,428,105 8,110,648,144 18,741,583,621 8,109,864,957 Due from Nepal Rastra Bank 4.2 3,599,948,114 2,964,971,270 3,599,948,114 2,964,971,270 Placement with Bank and Financial Institutions 4.3 221,203,982 869,369,719 51,203,982 739,538,453 Derivative financial instruments 4.4 77,117,583 83,697,501 77,117,583 83,697,501 Other trading assets 4.5 14,699,767 - - - Loan and advances to B/FIs 4.6 3,333,683,518 2,677,493,630 3,333,683,518 2,677,493,630 Loans and advances to customers 4.7 110,493,341,161 69,859,087,002 110,493,341,161 69,859,087,002 Investment securities 4.8 15,466,894,740 11,496,082,343 15,466,894,740 11,496,082,343 Current tax assets 4.9 325,484,495 51,711,867 325,413,049 50,526,754 Investment in susidiaries 4.10 - - 200,000,000 200,000,000 Investment in associates 4.11 44,940,618 16,213,638 38,600,000 13,600,000 Investment property 4.12 219,897,315 201,482,906 219,897,315 201,482,906 Property and equipment 4.13 1,600,938,113 746,670,978 1,589,884,682 734,921,794 Goodwill and Intangible assets 4.14 277,121,102 54,416,580 276,312,782 53,974,213 Deferred tax assets 4.15 41,633,823 77,846,888 42,814,840 78,193,559 Other assets 4.16 998,729,143 528,832,895 989,301,393 528,401,571 Total Assets 155,459,061,580 97,738,525,361 155,445,996,782 97,791,835,951
Particulars NoteGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
LiabilitiesDue to Bank and Financial Institutions 4.17 4,214,934,770 3,858,038,117 4,214,934,770 3,858,038,117 Due to Nepal Rastra Bank 4.18 614,534,631 731,802,989 614,534,631 731,802,989 Derivative financial instruments 4.19 - - - - Deposits from customers 4.20 127,878,725,703 78,620,387,753 127,894,614,502 78,684,859,077 Borrowing 4.21 2,440,271,029 - 2,440,271,029 - Current Tax Liabilities 4.9 - - - - Provisions 4.22 - - - - Deferred tax liabilities 4.15 - - - - Other liabilities 4.23 2,275,041,569 1,008,529,753 2,270,066,182 1,005,237,576 Debt securities issued 4.24 - - - - Subordinated Liabilities 4.25 - - - - Total liabilities 137,423,507,702 84,218,758,612 137,434,421,114 84,279,937,759 EquityShare capital 4.26 13,138,621,453 10,388,621,453 13,138,621,453 10,388,621,453 Share premium 235,746,619 - 235,746,619 - Retained earnings 1,733,558,672 1,229,735,919 1,710,942,557 1,221,867,362 Reserves 4.27 2,927,627,134 1,901,409,376 2,926,265,039 1,901,409,376 Total equity attributable to equity holders 18,035,553,877 13,519,766,748 18,011,575,668 13,511,898,192 Non-controlling interest - - - Total equity 18,035,553,877 13,519,766,748 18,011,575,668 13,511,898,192 Total liabilities and equity 155,459,061,580 97,738,525,361 155,445,996,782 97,791,835,951 Contingent liabilities and commitment 4.28 18,175,508,339 12,827,868,706 18,164,007,336 12,812,812,232 Net assets value per share 137.27 130.14 137.09 130.06
Consolidated Statement of Financial PositionAs on 31 Asar 2077 (15 July 2020)
Amount in NPR
Date: 17 December 2020 Place: Rising Mall, Kamaladi,Kathmandu
Bhoj Bahadur ShahChairman
Gopal KhanalDirector
Mukti Ram PandeyDirector
Shiba Devi KafleDirector
Anupama KhunjeliChief Executive Officer
Sandip Babu PaudelHead-Finance and Planning
Ram Prabodh SahPartner CSC & Co.Chartered Accountants
Dr. Indra Bahadur Malla ThakuriDirector
Bal Krishna SiwakotiDirector
As per our report of even date,
Madan Kumar AcharyaDirector
10th ANNUAL REPORT 2019/2020
94Mega Bank Nepal Limited
Date: 17 December 2020 Place: Rising Mall, Kamaladi,Kathmandu
Bhoj Bahadur ShahChairman
Gopal KhanalDirector
Mukti Ram PandeyDirector
Shiba Devi KafleDirector
Anupama KhunjeliChief Executive Officer
Sandip Babu PaudelHead-Finance and Planning
Ram Prabodh SahPartner CSC & Co.Chartered Accountants
Dr. Indra Bahadur Malla ThakuriDirector
Bal Krishna SiwakotiDirector
As per our report of even date,
Madan Kumar AcharyaDirector
Particulars NoteGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Interest income 4.29 10,405,191,301 9,375,694,339 10,389,426,217 9,374,684,378
Interest expense 4.30 6,210,718,380 5,560,029,049 6,212,017,766 5,578,933,519
Net interest income 4,194,472,920 3,815,665,291 4,177,408,451 3,795,750,859
Fee and commission income 4.31 526,166,962 531,152,172 522,733,185 531,116,553
Fee and commission expense 4.32 51,431,889 46,494,272 51,431,889 46,494,272
Net fee and commission income 474,735,073 484,657,900 471,301,295 484,622,281
Net interest, fee and commission income 4,669,207,994 4,300,323,191 4,648,709,746 4,280,373,140
Net trading income 4.33 342,476,111 277,924,723 328,086,746 277,924,723
Other operating income 4.34 163,510,495 102,656,686 163,019,960 102,534,076
Total operating income 5,175,194,600 4,680,904,600 5,139,816,452 4,660,831,939
Impairment charge/(reversal) for loans and other losses 4.35 806,439,042 426,620,643 806,439,042 426,620,643
Net operating income 4,368,755,557 4,254,283,956 4,333,377,410 4,234,211,296
Operating expense
Personnel expenses 4.36 1,269,995,600 1,159,427,834 1,260,156,119 1,154,142,994
Other operating expenses 4.37 698,680,410 635,702,272 692,332,649 629,164,493
Depreciation & Amortisation 4.38 146,961,881 117,464,739 145,605,340 116,446,356
Operating Profit 2,253,117,666 2,341,689,111 2,235,283,303 2,334,457,452
Non operating income 4.39 21,501,958 10,715,021 17,529,115 8,154,376
Non operating expense 4.40 8,152,904 19,666,562 8,152,904 19,666,562
Profit before income tax 2,266,466,720 2,332,737,569 2,244,659,513 2,322,945,266
Income tax expense 4.41 663,925,133 695,683,520 658,444,591 693,255,480
Current Tax 674,421,383 711,379,792 669,775,188 709,298,423
Deferred Tax (10,496,250) (15,696,273) (11,330,597) (16,042,943)
Profit for the period 1,602,541,586 1,637,054,050 1,586,214,922 1,629,689,787
Profit attributable to:
Equity holders of the Bank 1,602,541,586 1,637,054,050 1,586,214,922 1,629,689,787
Non-controlling interest - - - -
Profit for the period 1,602,541,586 1,637,054,050 1,586,214,922 1,629,689,787
Earnings per share
Basic earnings per share 4.14 15.30 15.76 15.15 15.69
Diluted earnings per share 4.14 15.30 15.76 15.15 15.69
Consolidated Statement of Profit or LossFor the year ended 31 Asar 2077 (15 July 2020)
10th ANNUAL REPORT 2019/2020
95Mega Bank Nepal Limited
Particulars NoteGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Profit for the year 1,602,541,586 1,637,054,050 1,586,214,922 1,629,689,787
Other comprehensive income, net of income tax
a) Items that will not be reclassified to Profit or loss
• Gains/(losses) from Investments in equity instruments measured at fair value 61,851,526 (45,727,938) 61,851,526 (45,727,938)
• Gains/(losses) on revaluation 198,823,950 - 198,823,950 -
• Actuarial gains/(losses) on defined benefit plans 14,510,928 (8,195,366) 14,510,928 (8,195,366)
• Income tax relating to above items (84,411,516) 16,176,991 (84,411,516) 16,176,991
Net other comprehensive income that will not be reclassified to profit or loss 190,774,887 (37,746,313) 190,774,887 (37,746,313)
b) Items that are or may be reclassified to profit or loss
• Gains/(losses) on cash flow hedge - - - -
• Exchange gains/(losses) (arising from trasalating financial assets of foreign operation) - - - -
• Income tax relating to above items - - - -
• Reclassify to profit or loss - - - -
Net other comprehensive income that are or may be reclassified to profit or loss - - - -
c) Share of other comprehensive income of associate accounted as per equited method - - - -
Other comprehensive income for the period, net of income tax 190,774,887 (37,746,313) 190,774,887 (37,746,313)
Equity holders of the Bank 1,793,316,474 1,599,307,737 1,776,989,809 1,591,943,474
Non-controlling interest - - - -
Total comprehensive income for the period 1,793,316,474 1,599,307,737 1,776,989,809 1,591,943,474
Consolidated Statement of Other Comprehensive IncomeFor the year ended 31 Asar 2077 (15 July 2020)
Amount in NPR
Date: 17 December 2020 Place: Rising Mall, Kamaladi,Kathmandu
Bhoj Bahadur ShahChairman
Gopal KhanalDirector
Mukti Ram PandeyDirector
Shiba Devi KafleDirector
Anupama KhunjeliChief Executive Officer
Sandip Babu PaudelHead-Finance and Planning
Ram Prabodh SahPartner CSC & Co.Chartered Accountants
Dr. Indra Bahadur Malla ThakuriDirector
Bal Krishna SiwakotiDirector
As per our report of even date,
Madan Kumar AcharyaDirector
10th ANNUAL REPORT 2019/2020
96Mega Bank Nepal Limited
Amount in NPR
Consolidated Statement of cash flowsFor the year ended 31 Asar 2077 (15 July 2020)
ParticularsGroup Bank
As at 15 July 2020
As at 15 July 2019
As at 15 July 2020
As at 16 July 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 9,773,584,641 9,338,066,564 9,773,584,641 9,337,165,467
Fees and other income received 526,166,962 531,522,845 522,733,185 531,487,226
Divided received - - - -
Receipts from other operating activities 430,947,881 373,953,043 412,585,672 373,830,433
Interest paid (7,191,721,854) (5,254,579,650) (7,193,021,240) (5,273,535,901)
Commission and fees paid (51,431,889) (46,494,272) (51,431,889) (46,494,272)
Cash payment to employees (1,249,147,518) (1,095,261,363) (1,241,917,361) (1,090,508,254)
Other expense paid (696,893,187) (635,084,844) (690,545,426) (628,078,149)
Operating cash flows before changes in operatingassets and liabilities 1,541,505,036 3,212,122,322 1,531,987,582 3,203,866,550
(Increase)/Decrease in operating assets
Due from Nepal Rastra Bank 4,744,784,343 2,383,343,902 4,744,784,343 2,383,343,902
Placement with bank and financial institutions 648,165,736 189,607,917 688,334,470 139,607,917
Other trading assets 14,699,767 - - -
Loan and advances to bank and financial institutions (299,247,541) (1,094,410,606) (299,247,541) (1,094,410,606)
Loans and advances to customers (13,014,363,254) (14,820,521,845) (13,014,363,254) (14,820,521,845)
Other assets (326,748,589) (1,034,359,903) (317,752,163) (1,033,896,565)
Increase/(Decrease) in operating liabilities
Due to bank and financial institutions (813,784,826) 435,460,917 (813,784,826) 435,460,917
Due to Nepal Rastra Bank (120,166,738) 125,585,063 (120,166,738) 125,585,063
Deposit from customers 15,174,358,495 17,427,846,792 15,125,775,970 17,472,384,056
Borrowings 2,440,271,029 - 2,440,271,029 -
Other liabilities 207,123,928 647,082,665 223,765,860 644,007,828
Net cash flow from operating activities before tax paid 10,196,597,385 7,471,757,224 10,189,604,731 7,455,427,216
Income taxes paid (846,511,055) (794,566,662) (845,059,898) (792,253,677)
Net cash flow from operating activities 9,350,086,330 6,677,190,562 9,344,544,832 6,663,173,539
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities (2,178,482,233) (4,466,041,539) (2,174,755,253) (4,466,041,539)
Receipts from sale of investment securities 14,926,866 - 14,926,866 -
Purchase of property and equipment (391,143,052) (189,820,695) (390,598,444) (176,569,860)
Receipt from the sale of property and equipment 21,766,429 6,035,660 21,765,490 6,035,660
Purchase of intangible assets (29,815,042) (36,766,396) (29,331,966) (36,766,396)
Receipt from the sale of intangible assets - - - -
Purchase of investment properties - - - -
Receipt from the sale of investment properties - 42,455,146 - 42,455,146
Interest received 566,945,405 185,343,433 566,945,405 185,343,433
Dividend received 19,627,365 19,268,113 19,136,831 19,268,113
Net cash used in investing activities (1,976,174,261) (4,439,526,278) (1,971,911,071) (4,426,275,443)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt from issue of debt securities
Repayment of debt securities - - - -
Receipt from issue of subordinated liabilities - - - -
Continuned...
10th ANNUAL REPORT 2019/2020
97Mega Bank Nepal Limited
Date: 17 December 2020 Place: Rising Mall, Kamaladi,Kathmandu
Bhoj Bahadur ShahChairman
Gopal KhanalDirector
Mukti Ram PandeyDirector
Shiba Devi KafleDirector
Anupama KhunjeliChief Executive Officer
Sandip Babu PaudelHead-Finance and Planning
Ram Prabodh SahPartner CSC & Co.Chartered Accountants
Dr. Indra Bahadur Malla ThakuriDirector
Bal Krishna SiwakotiDirector
As per our report of even date,
Madan Kumar AcharyaDirector
ParticularsGroup Bank
As at 15 July 2020
As at 15 July 2019
As at 15 July 2020
As at 16 July 2019
Repayment of subordinated liabilities - - - -
Receipt from issue of shares - - - -
Dividends paid (1,141,877,028) (573,378,688) (1,141,660,014) (573,378,688)
Interest paid (116,824,843) (153,347,239) (116,824,845) (153,347,239)
Other receipt/payment - - - -
Net cash from financing activities (1,258,701,871) (726,725,927) (1,258,484,860) (726,725,927)
Net increase (decrease) in cash and cash equivalents 6,115,210,198 1,510,938,356 6,114,148,902 1,510,172,169
Cash & Bank Balance taken over on Business Combination with GBBL 4,487,875,004 - 4,487,875,004 -
Cash and cash equivalents at Shrawan 1, 2075 8,110,648,144 6,604,236,381 8,109,864,957 6,604,219,381
Effect of exchange rate fluctuations on cash and cash equivalents held 29,694,759 (4,526,593) 29,694,759 (4,526,593)
Cash and cash equivalents at Ashadh end 2076 18,743,428,105 8,110,648,144 18,741,583,621 8,109,864,957
10th ANNUAL REPORT 2019/2020
98Mega Bank Nepal Limited
Con
solid
ated
Sta
tem
ent o
f cha
nges
in e
quity
As
on 3
1 A
sar 2
077
(15
July
20
20)
Am
ount
in N
PR
Part
icul
ars
Gro
up
Attr
ibut
able
to e
quity
hol
ders
of t
he B
ank
Non
-co
ntro
lling
inte
rest
Tota
l equ
ityS
hare
Cap
ital
Sha
re
prem
ium
Gen
eral
re
serv
e
Exch
ange
eq
ualis
atio
n re
serv
e
Reg
ulat
ory
rese
rve
Fair
valu
e re
serv
eR
eval
uatio
n re
serv
eR
etai
ned
ea
rnin
gO
ther
re
serv
eTo
tal
Bal
ance
at S
hraw
an 1
, 20
7510
,285
,526
,578
2
,56
3,88
1 1,
013
,36
3,25
2 3
,679
,90
6
60
8,26
1,9
87
(70,
825,
703)
37,
49
1,47
5 7
09,
129,
506
4
5,50
3,27
4 1
2,6
34,6
94,
154
-
12,
634
,69
4,15
4
Adj
ustm
ent/
Res
tate
men
t -
-
-
-
-
-
-
-
-
-
-
-
Adj
uste
d/R
esta
ted
bala
nce
at
Shr
awan
1, 2
075
10,2
85,5
26,5
78
2,5
63,
881
1,0
13,3
63,
252
3,6
79,9
06
6
08,
261,
987
(7
0,82
5,70
3) 3
7,4
91,
475
70
9,12
9,50
6
45,
503,
274
12,
634
,69
4,15
4
- 1
2,6
34,6
94,
154
Com
preh
ensi
ve in
com
e fo
r the
yea
r -
-
-
-
-
-
-
-
-
-
-
-
Profi
t for
the
year
-
-
-
-
-
-
- 1
,637
,054
,050
-
1
,637
,054
,050
-
1
,637
,054
,050
Oth
er c
ompr
ehen
sive
inco
me,
ne
t of t
ax -
-
-
-
-
-
-
-
-
-
-
-
G
ains
/(lo
sses
) fro
m in
vest
men
ts in
e
quity
inst
rum
ents
mea
sure
d at
fair
val
ue -
-
-
-
-
(3
2,0
09,
557)
-
-
-
(32,
00
9,55
7) -
(3
2,0
09,
557)
G
ains
/(lo
ses)
on
reva
luat
ion
-
-
-
-
-
-
-
-
-
-
-
-
A
ctua
rial g
ains
/(lo
sses
) on
defin
ed
b
enefi
t pla
ns -
-
-
-
-
-
-
-
(5
,736
,756
) (5
,736
,756
) -
(5
,736
,756
)
G
ains
/(lo
sses
) on
cash
flow
hed
ge -
-
-
-
-
-
-
-
-
-
-
-
E
xcha
nges
gai
ns/(
loss
es) (
aris
ing
fr
om tr
ansa
lting
fina
ncia
l ass
est o
f
fore
ign
oper
atio
n)
-
-
-
-
-
-
-
-
-
-
-
-
Tota
l com
preh
ensi
ve in
com
e
for t
he y
ear
-
-
-
-
-
-
-
-
-
-
-
-
T
rans
fer t
o re
serv
e du
ring
the
year
-
-
325
,937
,957
-
1
32,11
6,76
3 -
-
(4
74,3
51,6
18)
16,
296,
898
-
-
-
T
rans
fer f
rom
rese
rve
durin
g th
e ye
ar -
-
-
-
(5
3,0
89,5
31)
-
-
62,
462,
554
(19,
049
,59
4) (9
,676
,571
) -
(9
,676
,571
)
Tran
sact
ions
with
ow
ners
, dire
ctly
re
cogn
ised
in e
quity
-
-
-
-
-
-
-
-
-
-
-
-
Rig
ht s
hare
issu
ed -
-
-
-
-
-
-
-
-
-
-
Sha
re b
ased
pay
men
ts -
-
-
-
-
-
-
-
-
-
-
-
Div
iden
ds to
equ
ity h
olde
rs -
-
-
-
-
-
-
-
-
-
-
-
Bon
us s
hare
s is
sued
10
3,0
94,
876
(2
,56
3,88
1)(1
00,
530,
99
5) -
-
-
-
-
-
-
Cas
h di
vide
nd p
aid
-
-
-
-
-
-
-
(70
4,55
8,57
1) -
(7
04,
558,
571)
-
(70
4,55
8,57
1)
Tota
l con
trib
utio
ns b
y an
d
dist
ribut
ions
10
3,0
94,
876
(2,5
63,
881)
325
,937
,957
-
(2
1,50
3,76
3) (3
2,0
09,
557)
-
520
,60
6,4
15
(8,4
89,4
52)
885
,072
,59
5 -
8
85,0
72,5
95
Bal
ance
at A
sar e
nd 2
076
10,3
88,6
21,4
54
- 1
,339
,30
1,20
9
3,6
79,9
06
58
6,7
58,2
24 (
102,
835,
260)
37,
49
1,47
5 1
,229
,735
,921
3
7,0
13,8
22 1
3,51
9,76
6,7
48
-
13,5
19,7
66
,74
8
10th ANNUAL REPORT 2019/2020
99Mega Bank Nepal Limited
Part
icul
ars
Gro
upAt
trib
utab
le to
equ
ity h
olde
rs o
f the
Ban
kN
on-
cont
rollin
g in
tere
stTo
tal e
quity
Sha
re C
apita
lS
hare
pr
emiu
mG
ener
al
rese
rve
Exch
ange
eq
ualis
atio
n re
serv
e
Reg
ulat
ory
rese
rve
Fair
valu
e re
serv
eR
eval
uatio
n re
serv
eR
etai
ned
ea
rnin
gO
ther
re
serv
eTo
tal
Bal
ance
at S
hraw
an 1
, 20
7610
,388
,621
,454
-
1,3
39,3
01,
209
3
,679
,90
6
586
,758
,224
(10
2,83
5,26
0) 3
7,4
91,
475
1,2
29,7
35,9
21
37,
013
,822
13
,519
,76
6,7
48
-13
,519
,76
6,7
49
Take
n ov
er o
n ac
quis
ition
thro
ugh
Bus
ines
s C
ombi
natio
n2,
750,
00
0,0
00
27,
897,0
38
720
,214
,89
7 -
6
51,12
0,34
1 (6
,615
,60
2) -
(3
65,
268,
544)
(15,
446,
560)
3,7
61,9
01,
571
- 3
,76
1,90
1,57
1
Adj
uste
d/R
esta
ted
bala
nce
at
Shr
awan
1, 2
076
13,
138,
621
,454
2
7,89
7,0
38
2,0
59,5
16,10
6
3,6
79,9
06
1,2
37,8
78,5
64
(10
9,4
50,8
62)
37,
49
1,47
5 8
64,
46
7,37
7 2
1,56
7,26
1 1
7,28
1,6
68,
319
-
17,
281,
66
8,31
9
Com
preh
ensi
ve in
com
e
for t
he y
ear
--
--
--
--
- -
-
-
Profi
t for
the
year
--
--
--
- 1
,60
2,54
1,58
6
- 1
,60
2,54
1,58
6
- 1
,60
2,54
1,58
6
Oth
er c
ompr
ehen
sive
inco
me,
ne
t of t
ax-
--
--
--
--
-
- -
Gai
ns/(
loss
es) f
rom
inve
stm
ents
in
equ
ity in
stru
men
ts m
easu
red
at fa
ir va
lue
--
--
- 4
1,440
,473
-
--
41,4
40,4
73
- 4
1,440
,473
Gai
ns/(
lose
s) o
n re
valu
atio
n-
--
--
- 1
39,17
6,76
5 -
139
,176,
765
- 1
39,17
6,76
5 A
ctua
rial g
ains
/(lo
sses
) on
de-
fined
ben
efit p
lans
--
--
--
--
10,
157,6
50
10,
157,6
50
- 1
0,15
7,650
Gai
ns/(
loss
es) o
n ca
sh fl
ow h
edge
--
--
--
--
- -
-
-
Exch
ange
s ga
ins/
(loss
es) (
aris
ing
from
tran
salti
ng fi
nanc
ial a
sses
t of
fore
ign
oper
atio
n)
--
--
--
--
- -
-
-
Cas
h flo
w h
edge
s:-
--
- -
-
Eff
ectiv
e po
rtio
n of
cha
nges
in
f
air v
alue
--
--
--
--
- -
-
N
et A
mou
nt re
clas
sifie
d to
pro
fit o
r los
s-
--
--
--
--
-
- -
Tota
l com
preh
ensi
ve in
com
e
for t
he y
ear
--
--
--
--
- -
-
-
Tran
sfer
to re
serv
e du
ring
th
e ye
ar-
- 3
18,4
81,2
51
7,4
23,6
90
-
6
,185,
317
(348
,076
,234
) 1
5,9
85,9
76
-
- -
Tran
sfer
from
rese
rve
durin
g
the
year
--
--
(835
,50
5,9
78)
-
- 8
35,5
05,
978
(26
,40
0,46
2) (2
6,40
0,46
2)-
(26,
400,
462)
Tran
sact
ions
with
ow
ners
, dire
ctly
re
cogn
ised
in e
quity
--
--
--
- -
-
-
-
Rig
ht s
hare
issu
ed-
--
--
--
- -
-
-
-
Sha
re b
ased
pay
men
ts-
--
--
--
- -
-
-
-
Div
iden
ds to
equ
ity h
olde
rs-
--
--
--
- -
-
-
-
Bon
us s
hare
s is
sued
--
--
--
- -
-
-
-
Cas
h di
vide
nd p
aid
--
--
--
-(1
,220
,756
,074
) (1
,220
,756
,074
)-
(1,2
20,7
56,0
74)
Rev
alua
tion
Sur
plus
--
--
--
--
- -
-
-
Oth
ers
(Bus
ines
s C
ombi
natio
n &
C
onso
lidat
ion)
-
207,
849,
581
--
--
- (1
23,9
61)
- 2
07,
725,
619
-
20
7,72
5,6
19
Tota
l con
trib
utio
ns b
y
and
dist
ribut
ions
-
20
7,84
9,58
1 3
18,4
81,2
51
7,4
23,6
90
(83
5,50
5,9
78)
47,
625
,79
0
139,
176
,76
5 8
69,
09
1,29
5 (2
56,8
36)
753
,885
,557
-
7
53,8
85,5
57
Bal
ance
at A
sar e
nd 2
077
13,
138,
621
,453
235
,74
6,6
18
2,37
7,9
97,
357
11,1
03,
595
40
2,37
2,58
5 (6
1,82
5,0
72)
176
,66
8,23
9 1
,733
,558
,672
2
1,31
0,4
24 1
8,0
35,5
53,8
76
- 1
8,0
35,5
53,8
77
10th ANNUAL REPORT 2019/2020
100Mega Bank Nepal Limited
Part
icul
ars
Ban
kAt
trib
utab
le to
equ
ity h
olde
rs o
f the
Ban
kN
on-
cont
rollin
g in
tere
stTo
tal e
quity
Sha
re C
apita
lS
hare
pr
emiu
mG
ener
alre
serv
e
Exch
ange
eq
uali-
satio
n re
serv
e
Reg
ulat
ory
rese
rve
Fair
valu
e re
serv
eR
eval
uatio
n re
serv
eR
etai
ned
ea
rnin
gO
ther
re
serv
eTo
tal
Bal
ance
at S
hraw
an 1
, 20
75 1
0,28
5,52
6,5
78
2,5
63,
881
1,0
13,3
63,
252
3,6
79,9
06
6
08,
261,
987
(7
0,82
5,70
3) 3
7,4
91,
475
70
8,6
25,2
11
45,
503,
274
12,
634
,189,
859
-
12,6
34,18
9,85
9
Adj
ustm
ent/
Res
tate
men
t-
--
--
--
--
-
- -
A
djus
ted/
Res
tate
d ba
lanc
e at
S
hraw
an 1
, 20
7510
,285
,526
,578
2,56
3,88
11,
013
,36
3,25
23,
679
,90
66
08,
261,
987
(70,
825,
703)
37,4
91,
475.
00
70
8,6
25,2
114
5,50
3,27
412
,634
,189,
859
-
12,6
34,18
9,85
9
Com
preh
ensi
ve in
com
e fo
r the
yea
r-
--
--
--
--
-
- -
Pr
ofit f
or th
e ye
ar-
--
--
--
1,6
29,6
89,7
87
- 1
,629
,689
,787
-
1,6
29,6
89,7
87
Oth
er c
ompr
ehen
sive
inco
me,
ne
t of t
ax-
--
--
--
--
-
- -
Gai
ns/(
loss
es) f
rom
inve
stm
ents
in
equ
ity in
stru
men
ts m
easu
red
at
fair
valu
e-
--
--
(32,
00
9,55
7)-
--
(32,
00
9,55
7)-
(32,
00
9,55
7)
Gai
ns/(
lose
s) o
n re
valu
atio
n-
--
--
-
- -
-
-
Act
uaria
l gai
ns/(
loss
es) o
n de
fined
be
nefit
pla
ns-
--
--
--
(5,7
36,7
56)
(5,7
36,7
56)
- (5
,736
,756
)
Gai
ns/(
loss
es) o
n ca
sh fl
ow h
edge
--
--
- -
Ex
chan
ges
gain
s/(lo
sses
) (ar
isin
g fr
om tr
ansa
lting
fina
ncia
l ass
est o
f fo
reig
n op
erat
ion)
-
--
--
--
--
- -
Tota
l com
preh
ensi
ve in
com
e fo
r the
yea
r-
--
--
--
--
--
-
Tran
sfer
to re
serv
e du
ring
the
year
--
325
,937
,957
-
132
,116,
763
--
(474
,351
,619
) 1
6,29
6,89
8 -
-Tr
ansf
er fr
om re
serv
e du
ring
th
e ye
ar-
--
- (5
3,0
89,5
30)
--
62,
462,
554
(19,
049
,59
4) (9
,676
,570
)-
(9,6
76,5
70)
Tran
sact
ions
with
ow
ners
, dire
ctly
re
cogn
ised
in e
quity
--
--
--
--
- -
Sha
re is
sued
--
--
--
--
- -
-
-
Prem
ium
rece
ived
on
issu
ance
of
uns
ubsc
ribed
num
ber o
f rig
ht
shar
es-
--
--
--
--
-
- -
Sha
re b
ased
pay
men
ts-
--
--
--
--
--
-
Div
iden
ds to
equ
ity h
olde
rs-
--
--
--
-
--
- -
B
onus
sha
res
issu
ed 1
03,
09
4,87
6
(2,5
63,
881)
--
(10
0,53
0,9
95)
--
-
- -
-
-
Cas
h di
vide
nd p
aid
--
--
--
- (7
04,
558,
571)
- (7
04,
558,
571)
- (7
04,
558,
571)
Tota
l con
trib
utio
ns b
y an
d
dist
ribut
ions
10
3,0
94,
876
(2,
563,
881)
325
,937
,957
-
(2
1,50
3,76
2)(3
2,0
09,
557)
-
513
,24
2,15
2 (8
,489
,452
) 8
77,7
08,
333
-
877
,70
8,33
3
Bal
ance
at A
sar e
nd 2
075
10,
388,
621
,453
-
1,3
39,3
01,
209
3,6
79,9
06
58
6,7
58,2
24
(10
2,83
5,26
0) 3
7,4
91,
475
1,2
21,8
67,
361
37,
013
,822
13
,511
,89
8,19
2 -
1
3,51
1,89
8,19
2
10th ANNUAL REPORT 2019/2020
101Mega Bank Nepal Limited
Part
icul
ars
Ban
kAt
trib
utab
le to
equ
ity h
olde
rs o
f the
Ban
kN
on-
cont
rollin
g in
tere
stTo
tal e
quity
Sha
re C
apita
lS
hare
pr
emiu
mG
ener
al
rese
rve
Exch
ange
eq
ualis
atio
n re
serv
e
Reg
ulat
ory
rese
rve
Fair
valu
e re
serv
eR
eval
uatio
n re
serv
eR
etai
ned
ea
rnin
gO
ther
re
serv
eTo
tal
Bal
ance
at S
hraw
an 1
, 20
7610
,388
,621
,453
-
1,3
39,3
01,
209
3
,679
,90
6
586
,758
,224
(10
2,83
5,26
0) 3
7,4
91,
475
1,2
21,8
67,
361
37,
013
,822
13
,511
,89
8,19
0
-
13,5
11,8
98,
190
Take
n ov
er o
n ac
quis
ition
th
roug
h B
usin
ess
C
ombi
natio
n 2
,750
,00
0,0
00
2
7,89
7,038
7
20,2
14,8
97
- 6
51,12
0,34
1 (6
,615
,60
2) -
(3
65,
268,
544)
(15,
446,
560)
3,7
61,9
01,
571
3,7
61,9
01,
571
Adj
uste
d/R
esta
ted
bala
nce
at S
hraw
an 1
, 20
76 1
3,13
8,6
21,4
53
27,
897,
038
2,
059
,516
,107
3,6
79,9
06
1,2
37,8
78,5
65
(10
9,4
50,8
62)
37,
49
1,47
5 8
56,5
98,
817
21,
567,
261
17,
273,
799,
761
-
17,
273,
799,
761
Com
preh
ensi
ve in
com
e fo
r th
e ye
ar-
--
--
--
--
-
-
Profi
t for
the
year
--
--
--
- 1
,586
,214
,922
-
1,5
86,2
14,9
22
1,5
86,2
14,9
22
Oth
er c
ompr
ehen
sive
inco
me,
ne
t of t
ax-
--
--
--
--
-
-
Gai
ns/(
loss
es) f
rom
in
vest
men
ts in
equ
ity
inst
rum
ents
mea
sure
d
at fa
ir va
lue
--
--
- 4
1,440
,473
-
--
41,4
40,4
73
41,4
40,4
73
Gai
ns/(
lose
s) o
n re
valu
atio
n-
--
--
- 1
39,17
6,76
5 -
- 1
39,17
6,76
5 1
39,17
6,76
5 A
ctua
rial g
ains
/(lo
sses
) on
defin
ed b
enefi
t pla
ns-
--
--
--
- 1
0,15
7,650
1
0,15
7,650
1
0,15
7,650
Gai
ns/(
loss
es) o
n ca
sh fl
ow
hedg
e-
--
--
--
--
-
-
Exch
ange
s ga
ins/
(loss
es)
(aris
ing
from
tran
salti
ng
finan
cial
ass
est o
f for
eign
op
erat
ion)
--
--
--
--
- -
-
Tota
l com
preh
ensi
ve in
com
e fo
r the
yea
r-
--
--
--
--
-
-
Tran
sfer
to re
serv
e du
ring
the
year
--
317
,242
,984
7
,423
,69
0
-
--
(346
,714
,140)
15,
862,
149
-
Tran
sfer
from
rese
rve
durin
g th
e ye
ar-
--
- (8
35,5
05,
978
)-
- 8
35,5
05,
978
(26
,40
0,46
2) (2
6,40
0,46
2) (2
6,40
0,46
2)
Tran
sact
ions
with
ow
ners
, di
rect
ly re
cogn
ised
in e
quity
--
--
--
--
- -
-
Sha
res
issu
ed-
--
--
--
--
-
-
Sha
re b
ased
pay
men
ts-
--
--
--
--
-
-
Div
iden
ds to
equ
ity h
olde
rs-
--
--
--
--
-
-
Bon
us s
hare
s is
sued
--
--
--
--
- -
-
C
ash
divi
dend
pai
d-
--
--
--
(1,2
20,6
63,
021
)-
(1,2
20,6
63,
021
) (1
,220
,66
3,0
21)
Rev
alua
tion
Sur
plus
--
--
--
- -
-
-
-
Oth
er (B
usin
ess
Com
bina
tion
& C
onso
lidat
ion)
- 2
07,
849,
581
--
--
--
- 2
07,
849,
581
20
7,84
9,58
1
Tota
l con
trib
utio
ns b
y an
d di
strib
utio
ns -
207,
849,
581
317
,24
2,9
84
7,4
23,6
90
(83
5,50
5,9
78)
47,
625
,79
0
139
,176
,76
5 8
54,3
43,
739
(3
80,6
63)
737
,775
,90
7 7
37,7
75,9
07
Bal
ance
at A
sar e
nd 2
077
13,
138,
621
,453
235
,74
6,6
19 2
,376
,759
,09
1 1
1,10
3,59
6
40
2,37
2,58
7 (6
1,82
5,0
72)
176
,66
8,24
0
1,7
10,9
42,
557
21,1
86,5
98
18,
011
,575
,66
8 -
18
,011
,575
,66
8
Oth
er re
serv
es a
s at
15
July
20
20 in
clud
es C
orpo
rate
Soc
ial R
espo
nsib
ility
Res
erve
, Inv
estm
ent A
djus
tmen
t Res
erve
, Int
eres
t Cap
italis
atio
n R
eser
ve a
nd A
ctua
rial G
ain
on G
ratu
ity.
Dat
e: 1
7 D
ecem
ber 2
020
P
lace
: Ris
ing
Mal
l, Ka
mal
adi,K
athm
andu
Bho
j Bah
adur
Sha
hC
hairm
anG
opal
Kha
nal
Dire
ctor
Muk
ti R
am P
ande
yD
irect
or
Shi
ba D
evi K
afle
Dire
ctor
Anu
pam
a K
hunj
eli
Chi
ef E
xecu
tive
Offi
cer
San
dip
Bab
u P
aude
lH
ead-
Fina
nce
and
Pla
nnin
gR
am P
rabo
dh S
ahP
artn
er
CS
C &
Co.
Cha
rter
ed A
ccou
ntan
ts
Dr.
Indr
a B
ahad
ur M
alla
Tha
kuri
Dire
ctor
Bal
Kris
hna
Siw
akot
iD
irect
orA
s pe
r our
repo
rt o
f eve
n da
te,
Mad
an K
umar
Ach
arya
Dire
ctor
10th ANNUAL REPORT 2019/2020
102Mega Bank Nepal Limited
Significant Accounting Policies and Notes to Accounts
1. Reporting Entity MEGA BANK NEPAL LIMITED (“MEGA” or “the
Bank”) is a limited liability company domiciled in Nepal which has been in operation in Nepal since 2010. The Bank is registered with the Office of the Company Registrar as a public limited company and carries out commercial banking activities in Nepal under the license from Nepal Rastra Bank as Class “Ka” licensed institution. It’s registered and corporate office is at Rising Mall, Kamaladi, Kathmandu, Nepal.
The Bank offers full commercial banking services of banking products and services including loans and advances, deposits, trade finance, e-commerce services, bullion, etc. to wide range of clients encompassing individuals, corporates, multinationals, large public sector companies, government corporations, etc. as authorized by the Nepal Rastra Bank (Central Bank of Nepal).
The Bank is listed in Nepal Stock Exchange Limited (the sole stock exchange in Nepal) for public trading and its stock symbol is “MEGA”
1.1. Subsidiaries The Bank has one wholly owned subsidiary namely Mega Capital Markets Limited.
Mega Capital Markets Limited is a wholly owned subsidiary of the Bank and was incorporated on 13 October 2017 as a public limited company as per the Companies Act 2063 and has obtained operating license on 01 April 2019 from Securities Board of Nepal under the Securities Businessperson (Merchant Banker) Regulations, 2008 to provide merchant banking and investment banking services.
The financial year of the subsidiary is same as that of the Bank ending on 15 July 2020 (31 Asar 2077).
“The Group” represents the Bank and its subsidiary.
1.2. Associates The Bank has two associates namely Sparsha Laghubitta Bittiya Sanstha Limited and Aviyan Laghubitta Bittiya Sanstha Limited.
a. Sparsha Laghubitta Bittiya Sanstha Limited (SLBSL) is incorporated as a limited liability company under company Act 2063 and
licensed by Nepal Rastra Bank as “D” class financial institution.
b. Aviyan Laghubitta Bittiya Sanstha Limited (AVIYAN) is incorporated as a limited liability company under company Act 2063 and licensed by Nepal Rastra Bank as “D” class financial institution.
2. Basis of Preparation
2.1 Statement of ComplianceThe coronavirus outbreaks characterized by the World Health Organization as a pandemic on 11th March 2020 as well as measure introduced by governments and regulators to tackle the outbreak has affected the supply chain and demand for goods and services and therefore had a significant impact on the business operation. At the same time, fiscal and monetary policies have been eased to sustain the economy.
The consolidated financial statements of Mega Bank Nepal Limited as on 15th July 2020 (31st Asar 2077) are prepared on a going concern basis. The impacts of the pandemic, mitigated by all countercyclical measures such as government and financial support to customers, mainly related payment holidays to all borrowers, credit losses and Asset valuation. These impacts were estimated against a background of uncertainty about the magnitude of the impact of the outbreak on economies. The consolidated financial statements have been prepared in accordance with Nepal Financial Reporting Standards (NFRS) as published by the Accounting Standards Board (ASB) Nepal and pronounced by The Institute of Chartered Accountants of Nepal (ICAN) and in the format issued by Nepal Rastra Bank.
The financial statements comprise the Statement of Financial Position, Statement of Profit or Loss, Statement of Other Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and the Notes to the Accounts.
Historical cost convention has been used for financial statement recognition and measurement except otherwise required
10th ANNUAL REPORT 2019/2020
103Mega Bank Nepal Limited
by NFRS. Where, other method(s), other than historical costs, such as fair value has been applied these have been disclosed in accordance with the applicable reporting framework.
These policies have been consistently applied to all the years presented except otherwise stated.
2.2 Reporting period and approval of financial statements
The approval of financial statements accompanied with notes to the financial statements have been adopted by the Board of Directors in it’s 307th meeting held on 17th December, 2020 and the Board acknowledges the responsibility of preparation of financial statements of the Bank. The approved financial statements have been recommended for approval by the shareholders in the 10th annual general meeting of the Bank subject to approval from Nepal Rastra Bank.
2.3 Functional and Presentation CurrencyThe financial statements are presented in Nepalese Rupees (NPR) which is the Bank’s functional currency. All financial information presented in NPR has been rounded to the nearest rupee except where indicated otherwise.
2.4 Use of Estimates, Assumptions and Judgements
The Bank, under NFRS, is required to apply accounting policies to most appropriately suit its circumstances and operating environment. Further, the Bank is required to make judgments in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the financial statements. This may later be determined that a different choice could have been more appropriate.
The accounting policies have been included in the relevant notes for each item of the financial statements and the effect and nature of the changes, if any, have been disclosed.
The NFRS requires the Bank to make estimates and assumptions that will affect the assets, liabilities, disclosure of contingent assets and liabilities, and profit or loss as reported in the financial statements. The Bank applies estimates in preparing and presenting the financial statements and such estimates
and underlying assumptions are reviewed periodically. The revision to accounting estimates are recognised in the period in which the estimates are revised, and are applied prospectively.
Disclosures of the accounting estimates have been included in the relevant sections of the notes wherever the estimates have been applied along with the nature and effect of changes of accounting estimates, if any.
2.5 Going Concern The financial statements are prepared on a going concern basis, as the Board of the Bank is satisfied that the Bank has the resources to continue in business for the foreseeable future. In making this assessment, the Board of Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability, cash flows and capital requirements and capital resources. These considerations include stressed scenarios that reflects the increasing uncertainty that the global Covid-19 pandemic has had on bank operations as well as considering potential impacts from other top and emerging risks, and the related impact on profitability, capital, and liquidity. Further management considers the effects of Covid -19 is short to medium term and has taken adequate measures to mitigate the possible effects.
2.6 The Impact of Covid 19The sudden shock arises from the outbreak of the COVID-19 globally since January 2020 caused massive economic disruption leading to uncertainty in the whole world and Nepal, the country exposed to this risk late in March 2020. Subsequent to the Outbreak of COVID -19, the bank has strictly adhered to the guidelines and directions issued by the Government, Health authorities and the Central Bank of Nepal (NRB) when conducting its business operation. Since limited access to the office was feasible the bank immediately planned to “work from home” and facilitated the key management personnel. The announcement by the Government that Banks are essential service provider led the bank to operate with critical functions to ensure uninterrupted service to its valued customers. Detailed discussion is given in the notes to the financial statements.
2.7 Changes in Accounting PoliciesThe Bank is required to adopt and apply
10th ANNUAL REPORT 2019/2020
104Mega Bank Nepal Limited
the accounting policies in conformity with NFRS. The accounting policies are applied consistently, changes, if any, are disclosed with the financial impact to the extent possible. When polices are not guided by the reporting framework, NFRS, other reporting standards and generally accepted accounting principles are followed.
2.8 Reporting PronouncementsThe Bank has, for the preparation of financial statements, adopted the NFRS pronounced by ICAN as effective on 13 September 2013. The NFRS conform, in all material respect, to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
However, the Institute of Chartered Accountants of Nepal (ICAN) vide its notice dated 20 September 2018 has resolved that Carve-outs in NFRS with Alternative Treatment and the effective period shall be provided to the Banks and Financial Institutions regulated by NRB on the specific recommendation of Accounting Standard Board (ASB). Further on 10 November 2020 as recommended by the Accounting Standard Board (ASB), the Institution of Chartered Accountants of Nepal has resolved more Carve-out with Alternative Treatment accompanying varied periods of Carve-out. Some Carve-outs provided previously have been extended to cover the additional fiscal years.
Summary of carve-outs has been provided chronologically as under.
2.8.1 NFRS 10: Consolidated Financial Statements
In para 19 of NFRS 10, a parent shall prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances unless it is impracticable to do so.
The carve-out is optional and has been valid Upto FY 2019-20. The Bank has complied as required by NFRS. Accordingly, Bank’s investment in Mega Capital Markets Limited, a 100% owned subsidiary, has been consolidated.
2.8.2 Investment in Associates and Joint Ventures
In para 35, the entity’s financial statements shall be prepared using uniform accounting policies for like transactions and events in similar circumstances unless in case of an associate, it is impracticable to do so.
The carve-out is optional and has been valid Upto FY 2019-20. Accordingly, the bank has opted for carve-out.
2.8.3 NAS 39: Financial Instruments: Recognition and Measurement
a) ImpairmentIn para 58, an entity shall assess at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets measured at amortized cost- is impaired. If any such evidence exists, the entity shall apply paragraph 63 to determine the amount of any impairment loss unless the entity is a bank or financial institution registered as per Bank and Financial Institutions Act, 2073. Such entities shall measure impairment loss on loan and advances as the higher amount derived as per norms prescribed by Nepal Rastra Bank for loan loss provision and the amount determined as per paragraph 63; and shall apply paragraph 63 to measure the impairment loss on financial assets other than loan and advances. The entity shall disclose the impairment loss as per this carve-out and the amount of impairment loss determined as per paragraph 63.
The carve-out is not optional and has been valid Upto FY 2020-21. The Bank has measured the impairment of loans and advances to customers as higher of the impairment as assessed under NFRS or as per the norms prescribed by Nepal Rastra Bank. The provision is mandatory where impairment under NFRS and impairment under NRB norms have been disclosed for comparison and the higher of the two is charged as impairment and recognized in the financial statements.
10th ANNUAL REPORT 2019/2020
105Mega Bank Nepal Limited
b) Impracticability to determine transaction cost of all previous years which is the part of effective interest rate
In para 9, The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call, and similar options) but shall not consider future credit losses. The calculation includes all fees and points paid or received, unless it is immaterial or impracticable to determine reliably, between parties to the contract that are an integral part of the effective interest rate (see NAS 18 Revenue), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the entity shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).
The carve-out is optional and that has initially been provided Upto the period FY 2018-19 was extended the coverage period till FY 2020-21. Accordingly, the bank has opted for the carve-out.
c) Impracticability to determine interest income on amortized cost
In para AG 93, once a financial asset or a group of similar financial assets have been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income shall be calculated by applying an effective interest
rate to the gross carrying amount of a financial asset unless the financial asset is written off either partially or fully.
The carve-out is optional and has been valid Upto FY 2020-21. Accordingly, the bank has opted for the carve-out.
2.8.4 NFRS 3: Business Combinationa) Para 18, NFRS 3: Exclusion for the acquirer to measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair value.
The acquirer shall account for and integrate into it books of account on announced books integration date (being acquisition date) the total assets and liabilities (except equity and all reserves) of acquiree at the value determined by applying the same basis considered for determining a restated value for its adjusted net worth for the purpose of swap ratio as per NRB Merger and Acquisition Bylaws, the value so determined is to be considered as the fair value of the acquiree.
The carve-out is not optional and has been valid Upto FY 2020-2021. Accordingly, the bank has opted for the carve-out.
b) Para 37, NFRS 3: Exception to consideration transferred in a business combination measured at fair value.
Where purchase consideration is settled through the issue of share (ordinary equity or other shares) of the acquirer, the fair value of such ordinary equity share to be issued by the acquirer shall be the value determined by applying the various parameters as per NRB merger and acquisition Bylaws for the purpose of swap Ratio. Accordingly, the acquirer will issue the required number of its ordinary equity shares ( or other shares) to the shareholders of the acquiree as per swap ratio so determined /approved by a regulatory authority. Ordinary equity shares so issued are valued at the fair value (as determined for the purpose of swap
10th ANNUAL REPORT 2019/2020
106Mega Bank Nepal Limited
ratio) where the face value shall be accounted for as cent percent paid-up ordinary equity shares in the books of accounts of acquirer and balance being the difference between the fair value of the share ( considered for swap ratio ) and the face value of such ordinary equity shares shall be accounted for as other components of equity (share premium/discount).
The Carve-out is not optional and has been Valid Upto FY 2020-2021. Accordingly, the bank has opted for the carve-out. However, to comply with the statutory and regulatory requirements for BFIs and in absence of specific instructions on consolidation of other components of equity such as General Reserve, Exchange Equalisation Reserve, Regulatory Reserve, Fair Value Reserve, Revaluation reserve, Retained Earnings and Other Reserves are taken over on acquisition has been consolidated in the same heading of acquirer’s other components of equity. The treatment has resulted net share premium amount of Rs. 207,849,580.64, which would otherwise have been Rs. 1,347,500,000.00.
2.9 Adoption of new and revised Standards New and amended NFRS Standards that are effective from 17th July 2021 (1st Shrawan 2078)
The Institution of Chartered Accountants of Nepal vide dated 9th July 2020, issued notice regarding the implementation of New Accounting Standards. Those Accounting Standards shall be effective from on and after 17th July 2021 (1st Shrawan 2078).
The following New Accounting Standards have not been early adopted by the bank in the current fiscal year. The Bank is still currently assessing the detailed impact of these amendments.
2.9.1 NFRS 9 ‘Financial InstrumentsIFRS 9 ‘Financial Instruments’ was issued by the IASB in July 2014 and effective internationally for the financials beginning on or after 1 January 2018. ASB endorsed NFRS 9 Financial Instruments with some exceptions,
mainly in the impairment. Currently, the Incurred Loss Model as specified in NAS 39 is used. The requirement of NFRS 9 is the Expected Credit Loss Model.
Expected Credit Loss Model (ECL) of ImpairmentThe Expected Credit Loss (ECL) model is a forward-looking model. The ECL estimates are unbiased, probability-weighted, and include supportable information about past events, current conditions, and forecasts of future economic conditions. IFRS 9 introduces “general model” of recognizing impairment loss. This model requires recognizing impairment losses in line with the stage in which the financial asset currently is. There are three stages.
Stage 1: 12 month ECL – No significantly increased credit risk. Financial instruments that have not had a significant increase in credit risk since initial recognition require, at initial recognition a provision for ECL associated with the probability of default events occurring within the next 12 months (12 month ECL). For those financial assets with a remaining maturity of less than 12 months, a Probability of Default (PD) is used that corresponds to the remaining maturity. Interest will be calculated on the gross carrying amount of the financial asset before adjusting for ECL
Stage 2: Lifetime ECL – Significantly increased credit risk. In the event of a significant increase in credit risk since initial recognition, a provision is required for the lifetime ECL representing losses over the life of the financial instrument (lifetime ECL).
Interest income will continue to be recognized on a gross basis.
Stage 3: Lifetime ECL – Defaulted Financial instruments that move into Stage 3 once credit impaired and purchases of credit impaired assets will require a lifetime provision. Interest income will be calculated based on the gross carrying amount of the financial asset less ECL (Net basis).
10th ANNUAL REPORT 2019/2020
107Mega Bank Nepal Limited
2.9.2 NFRS-15: Revenue from contract with customers:
The IASB issued a new standard for revenue recognition which overhauls the existing revenue recognition standards. The core principle of the guidance is that the entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires the following five step model framework to be followed for revenue recognition:
Identify the contract(s) with a customer. Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract. Recognize revenue when (or as) the entity satisfies a performance obligation.
2.9.3 NFRS 16 ‘Leases’NFRS 16 is the new accounting standard for leases and will replace NAS 17 ‘Leases’ and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’. The new standard removes the distinction between operating or finance leases for lessee accounting, resulting in all leases being treated as finance leases. All leases will be recognized on the statement of financial position with the optional exceptions for short-term leases with a lease term of less than 12 months and leases of low-value assets (for example mobile phones or laptops). A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The main reason for this change is that this approach will result in a more comparable representation of a lessee’s assets and liabilities in relation to other companies and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed. The standard permits a lessee to choose
either a full retrospective or a modified retrospective transition approach.
2.9.4 NAS 29 Financial Reporting in Hyperinflationary Economies
NAS 29 Financial Reporting in Hyperinflationary Economies applies to the financial statements, including the consolidated financial statements, of any undertaking whose functional currency is the currency of a hyperinflationary economy. Inflation-adjusted financial statements are an extension to, not a departure from, historical cost accounting. NAS 29 aims to overcome the limitations of historical cost financial reporting in hyperinflationary environments.
In a hyperinflationary economy, reporting of operating results and financial position in the local currency without restatement is not useful and comparisons of results over time mean little. As prices rise, the value of money (the general purchasing power) falls, as you can buy less with each unit of currency. Financial statements unadjusted for inflation do not properly reflect the company’s position at the balance sheet date, the results of its operations, or cash flows.
NAS 29 does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgment when the restatement of financial statements in accordance with NAS 29 becomes necessary.
Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:
1. the general population prefers to keep its wealth in non-monetary assets (preferring barter to cash) or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;2. the general population regards
monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
10th ANNUAL REPORT 2019/2020
108Mega Bank Nepal Limited
3. sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
4. interest rates, wages, and prices are linked to a price index; and
5. the cumulative inflation rate over three years is approaching, or exceeds, 100%.
Nevertheless, NAS 29 applies to the financial statements of any undertaking from the start of the reporting period in which it identifies the existence of hyperinflation in the country in whose currency it reports.
2.10 New and revised Standards in issue but not yet effective
At the date of authorization of these financial statements, the bank has not applied the following new and revised IFRS Standards that have been issued but are not yet effective and has not yet been adopted by ASB Nepal.
A number of new standards and amendments to the existing standards and interpretations have been issued by IASB after the pronouncements of NFRS with varying effective dates. Those become applicable when ASB Nepal incorporates them within NFRS. Some of the major amendments to NFRS, NAS and IFRIC has been presented below.
2.10.1 Amendments to NFRS 3: Definition of a Business
The aim of the amendments to NFRS 3 Business Combinations is to establish a better distinction between the acquisition of a business and the acquisition of a group of assets.
The amendment clarifies that to be considered a business, an integrated set of activities and assets muct includes, at a minimum, an input and a substantive process that, together , significantly contribute to the ability to create output. Futhermore, it clarifies that a business can exit without including all of the inputs and processe needed to create
outputs. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
The amendments introduce an optional concentration test that premits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross asset acquired is concentrated in a single identifiable asset or group of similar assets.
These amendments had no impact on the consolidated financial statement of the Bank , but may impact future periods should the Bank enter into any business combinations.
2.10.2 Amendments to NAS 1 and NAS 8: Definition of Material
The Amendments NAS 1 and NAS 8 is to tighten up the the definition of the term ‘material’ without fundamentally altering the application of the principal of materiality. In particular, the amendments introduce the new notion of ‘obscuring information’ and place ‘obscuring’ on a par with omitting or misstating information.
The amendments provide a new definition of material that states, “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments are intended to make the definition of material in NAS 1 easier
10th ANNUAL REPORT 2019/2020
109Mega Bank Nepal Limited
to understand and are not intended to alter the underlying concept of materiality in NFRS Standards. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition. The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’.
The definition of material in NAS 8 has been replaced by a reference to the definition of material in NAS
In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Bank.
2.10.3 IFRIC Interpretation 23: Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatment involve uncertainty that affets the application of NAS 12 Income Taxes. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax treatment. The interpretation required to
determine whether uncertain tax positions are assessed separately or as a group. assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used by, an entity in its income tax filings;
- if yes, the bank should determine its accounting tax position consistently with the
tax treatment used or planned to be used in its income tax filings.- If not , the bank should reflect the effect of uncertainty in determining its accounting tax position using either the most likely amount or the expected value method.
The Interpretation didn’t have an impact on the consolidated financial statements of the Bank.
2.10.4 Amendments to NFRS 9 : Prepayment features with negative Compensation
The amendments to NFRS 9 clarify that for the purpose of assessing whether a prepayment feature meets the ‘solely payments of principal and interest’ (SPPI) condition, the party exercising option may pay or receive reasonable compensation for the prepayment irrespective of the reason for prepayment. In other words, financial assets with prepayment features with negative compensation do not automatically fail SPPI. These amendments has no impact on the consolidated financial statement of the Bank.
2.10.5 Amendments to NAS 19 : Employee Benefit Plan Amendment, Curtailment or Settlement
The amendments clarify that the past service cost (or of the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated assumptions and comparing benefit offered and plan assets before and after the plan amendments (or, curtailment or settlement) but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus position). NAS 19 is now clear that the change in the effect of the asset ceiling that may result from the plan amendment (or curtailment or
10th ANNUAL REPORT 2019/2020
110Mega Bank Nepal Limited
settlement) is determined in a second step and is recognised in the normal manner in other comprehensive Income.
2.10.6 Amendments to NFRS 10 and NAS 18: Sales or Contribution of Assets between an investor and its Associate or Joint Venture.
The amendments to NFRS 10 and NAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture.
2.11 Discounting When the realization of assets and settlement of obligation is for more than one year, the Bank considers the discounting of such assets and liabilities where the impact is material. Various internal and external factors have been considered for determining the discount rate to be applied to the cash flows of the Bank.
2.12 Limitation of NFRS ImplementationWherever the information is not adequately available and/or it is impracticable to develop, such exception to NFRS implementation has been noted and disclosed in respective sections.
2.13 MaterialityThe Bank for the preparation of financial statements determines materiality based on the nature or magnitude, or both. Materiality is a pervasive constraint in financial reporting because it is pertinent to all of the qualitative characteristics.
3. Significant Accounting Policies
3.1 Basis of MeasurementThe financial statements have been prepared on historical cost basis except for the following material items in the statement of financial position:
derivative financial instruments are measured at fair value
financial instruments at fair value through profit or loss are measured at fair value
financial instruments at fair value through other comprehensive income are measured at fair value
freehold land at fair value investment property is measured at fair
value liabilities for cash-settled share-based
payment arrangements are measured at fair value
the liability for defined benefit obligations is recognized as the present value of the defined benefit obligation less the net total of the plan assets, plus unrecognized actuarial gains, less unrecognized past service cost and unrecognized actuarial losses.
3.2 Basis of Consolidation
a. Business CombinationBusiness combinations are accounted for using the acquisition method as at the acquisition date i.e. when control is transferred to the Bank. Control is the power to govern the financial and operating policies of an entity to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.
The Bank measures goodwill at the acquisition date as; the fair value of the consideration
transferred, plus the recognized amount of any non-
controlling interests in the acquire, plus if the business combination is achieved
in stages, the fair value of the preexisting equity interest in the acquire, less
10th ANNUAL REPORT 2019/2020
111Mega Bank Nepal Limited
the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Bank incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.
b. Non-Controlling Interest (NCI) For each business combination, the Bank elects to measure any non-controlling interests in the acquiree either:
at fair value; or at their proportionate share of the acquire identifiable net assets, which are generally at fair value.
Changes in the Bank’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognized in profit or loss.
c. SubsidiariesSubsidiaries are the entities controlled by the Bank. The Bank controls an entity if 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. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases.
The Bank reassesses whether it has control if there are changes to one or more of the elements of control. In preparing the consolidated financial statements, the financial statements are combined line by line by adding the like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiary. The carrying amount of the parent’s investment in subsidiary and the parent’s portion of equity of subsidiary are eliminated in full. All intra group assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (such as interest income and technical fee) are eliminated in full while preparing the consolidated financial statements.
d. Loss of Control
Upon the loss of control, the Bank derecognizes the assets and liabilities of the subsidiary, carrying amount of non-controlling interests and the cumulative translation differences recorded in equity related to the subsidiary. Further parent’s share of components previously recognized in Other Comprehensive Income (OCI) is reclassified to profit or loss or retained earnings as appropriate. Any surplus or deficit arising on the loss of control is recognized in the profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for financial instruments depending on the level of influence retained
e. Special Purpose EntitiesSpecial purpose entities (SPEs) are entities that are created to accomplish a narrow and well-defined objectives. An SPE is consolidated if, based on an evaluation of the substance of its relationship with the Bank and the SPE’s risks and rewards, the Bank concludes that it controls the SPE.
The following circumstances may indicate a relationship in which, in substance, the Bank controls and consequently consolidates an SPE:
The activities of the SPE are being conducted on behalf of the Bank according to it specific business needs so that the Bank obtains benefits from the SPE’s operation.
10th ANNUAL REPORT 2019/2020
112Mega Bank Nepal Limited
The Bank has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an ‘autopilot’ mechanism, the Bank has delegated these decision-making powers.
The Bank has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incident to the activities of the SPE.
The Bank retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities.
f. Transaction Elimination on Consolidation All intra-group balances and transactions, and any unrealized income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
3.3 Cash and Cash equivalent Cash and cash equivalents include cash in
hand, balances with B/FIs, money at call & short notice and highly liquid financial assets with original maturities of three months or less from the acquisition dates that are subject to an insignificant risk of changes in their fair value and are used by the Bank in the management of its short-term commitments.
Cash and Cash equivalents are carried at amortized cost in the statement of financial position.
3.4 Financial Assets and Financial Liabilities
A. RecognitionThe Bank initially recognizes a financial asset or a financial liability in its statement of financial position when, and only when, it becomes party to the contractual provisions of the instrument. The Bank initially recognize loans and advances, deposits and debt securities/ subordinated liabilities issued on the date that they are originated which is the date that the Bank becomes party to the contractual provisions of the instruments. Investments in equity instruments, bonds, debenture, Government securities, NRB bond or deposit auction, reverse repos, outright purchase are recognized on trade date at which the Bank commits to purchase/ acquire the financial
assets. Regular way purchase and sale of financial assets are recognized on trade date at which the Bank commits to purchase or sell the asset.
B. Classification
I. Financial AssetsThe Bank classifies the financial assets and subsequently measured at amortized cost or fair value on the basis of the Bank’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
The two classes of financial assets are as follows :
i. Financial assets measured at amortized cost The Bank classifies a financial asset measured at amortized cost if both of the following conditions are met:
The asset is held within a b u s i n e s s model whose objective is to hold the instruments in order to collect the contractual cash flows and The cash flows consist solely of payments relating to principal and interest on principal.
Business model criterion Financial assets are managed within a business model whose objective is to hold financial assets in order to collect cash flows through the collection of contractual payments over the life of the instruments.
The realization of disposals close to the maturity of the instrument and for an amount close to the remaining contractual cash-flows, or due to an increase in the counterparty’s credit risk is consistent with a business model whose objectives is to collect the contractual cash flows. Sales imposed by regulatory requirements or to manage the concentration of credit risk (without an increase in the asset’s credit risk) are also consistent with this business model when they are infrequent or insignificant in value.
Cash flow criterion The cash flow criterion is satisfied if the contractual terms of the debt instrument give rise, on specified dates, to cash flows that are solely repayments of principal and
10th ANNUAL REPORT 2019/2020
113Mega Bank Nepal Limited
interest on the principal amount outstanding.The criterion is not met in the event of a contractual characteristic that exposes the holder to risks or to the volatility of contractual cash flows that are inconsistent with those of a basic lending arrangement. It is also not satisfied in the event of leverage that increases the variability of the contractual cash flows.
The ‘financial assets at amortised cost category includes, in particular, loans granted to customer and BFIs, repurchase agreement and some securities held within the activity of Asset and Liability Management in order to collect contractual flows ( treasury bills, government bonds, other debt securities). ii. Financial asset measured at fair value Financial assets other than those measured at amortized cost are measured at fair value. Financial assets measured at fair value are further classified into two categories as below: Financial assets at fair value through profit or loss.
Financial assets are classified as fair value through profit or loss (FVTPL) if they are held for trading or are designated at fair value through profit or loss.
The trading portfolio includes instruments held for trading (trading transactions), including derivatives. Other financial assets measured at fair value through profit or loss include debt instruments that do not meet the “collect” or “collect and sales” business model criterion or that do not meet the cash-flow criterion, as well as equity instruments for which the fair value through other comprehensive income has not been acceptable.
Upon initial recognition, transaction cost are directly attributable to the acquisition are recognized in profit or loss as incurred. Such assets are subsequently measured at fair value and changes in fair value are recognized in Statement of Profit or Loss.
inancial assets at fair value through other comprehensive income
Investment in an equity instrument that is not held for trading and at the
initial recognition, the Bank makes an irrevocable election that the subsequent changes in fair value of the instrument is to be recognized in other comprehensive income are classified as financial assets at fair value through other comprehensive income. Such assets are subsequently measured at fair value and changes in fair value are recognized in other comprehensive income.
Business Model CriterionFinancial assets are held in a business model whose objective is achieved by both holding the financial assets in order to collect contractual cash flows and selling the financial assets (“collect and sale”). The latter is not incidental but is an integral part of the business model.
Cash flow criterion The principles are identical to those applicable to financial assets at amortised cost.
II. Financial LiabilitiesAll financial liabilities should be classified and measured at amortised cost, with the exception of (NFRS 9 Para 4.2.1)
- Financial liabilities at fair value through profit or loss (including most derivatives)
- Financial liabilities arising when transfer of financial asset does not qualify for derecognition; and
- Financial guarantee contracts and commitments to provide a loan at a below- market interest rate.
The Bank classifies its financial liabilities as follows:
Financial Liabilities at Fair Value through Profit or Loss
Financial liabilities are classified as fair value through profit or loss if they are held for trading or are designated at fair value through profit or loss. Upon initial recognition, transaction costs are directly attributable to the acquisition are recognized in Statement of Profit or Loss as incurred. Subsequent changes in fair value is recognized at profit or loss.
Financial Liabilities measured at amortised cost
All financial liabilities other than those
10th ANNUAL REPORT 2019/2020
114Mega Bank Nepal Limited
measured at fair value though profit or loss are classified and subsequently measured at amortized cost using effective interest rate method.
C. Measurement
i. Initial MeasurementFinancial Instruments are initially measured at the transaction price that is the fair value of the consideration given. Transaction cost in relation to financial assets and liabilities at fair value through profit or loss are recognized in Statement of Profit or Loss. In the case of financial assets classified and measured at amortized cost or at fair value through other comprehensive income, transaction costs directly attributable to the acquisition of the financial asset are added to this amount whereas transaction costs are deducted from this amount for financial liabilities classified and measured at amortised cost.
In some cases, the transaction price may not be equal to fair value. An example of this is share options exercise their options and purchase shares. The price paid by the option holders is likely to be less than the fair value of the shares. The shares should be initially measured at fair value, evidenced by a quoted price in an active market for identical shares, rather than at transaction price.
ii. Subsequent Measurement A financial asset or financial liability is subsequently measured either at fair value or at amortized cost based on the classification of the financial asset or liability. Financial asset or liability classified and measured at amortized cost is subsequently measured at amortized cost using effective interest rate method.
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility.
Financial assets classified at fair value are subsequently measured at fair value. The subsequent changes in fair value of financial assets at fair value through profit or loss are recognized in Statement of Profit or Loss whereas of financial assets at fair value through other comprehensive income are recognized in other comprehensive income.
In the case of financial liability where the fair value is not capable of reliable measurement, they should be measured at cost.
Covid-19 pandemic has created a situation where the volume of activities for several assets and liabilities being curtailed resulting their values to significantly reduced along with the reduced market activities in an active market. The bank has consider the information available and market conditions at the measurement date.
3.4.1 Derecognition
Derecognition of Financial AssetsThe Bank derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred to another entity. If the Bank neither transfers nor retains substantially all the risks and rewards of ownership and it continues to control the transferred assets, the Bank recognizes its interest in the asset and an associated liability for the amounts it may have to pay.
On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit and loss. In addition, on derecognition of investment in a debt instrument classified as at FVOCI, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to profit or loss. In contract, on derecognition of an investment in an equity instrument which it has elected on initial recognition to measure
10th ANNUAL REPORT 2019/2020
115Mega Bank Nepal Limited
at FVOCI, the difference between (a) the carrying amount (measured at the date of derecognition) and (b) the consideration received (including any new liability assumed) shall be recognised in profit or loss.
Derecognition of Financial LiabilitiesA financial liability is derecognized when the obligation under the liability is discharged or canceled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in Statement of Profit or Loss.
3.4.2 Determination of Fair Value Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date. The fair value of a liability reflects its non-performance risk
The fair values are determined according to the following hierarchy:
Level 1: fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: valuations are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.
Level 3: portfolios are those where at least one input, which could have a significant effect on the instrument’s valuation, is not based on observable market
data.When available, the Bank measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis. If a market for a financial instrument is not active, the Bank establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price – i.e. the fair value of the consideration given or received. However, in some cases, the fair value of a financial instrument on initial recognition may be different to its transaction price. If such fair value is evidenced by comparison with other observable current market transactions in the same instrument (without modification) or based on a valuation technique whose variables include only data from observable markets, then the difference is recognized in profit or loss on initial recognition of the instrument. In other cases the difference is not recognized in profit or loss immediately but is recognized over the life of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes observable.
All unquoted equity investments are valued at net worth basis ,considering the non-trading of promoter shares and on the assumption that in the event of liquidation shareholders shall get proportionate value of net worth of company up to the date of balance sheet, and the market price of such shares could not be ascertained with certainty. Hence, these investments are recognized at fair value using net worth of company and net of impairment, if any.
The fair values of equity investment for
10th ANNUAL REPORT 2019/2020
116Mega Bank Nepal Limited
quoted entities have been determined based on the market price prevailed as at 15 July 2020, which is the last date of trading for the financial year 2019/20.
3.4.3 ImpairmentAt each reporting date the Bank assesses whether there is any indication that an asset may have been impaired. If such indication exists, the recoverable amount is determined. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events occurring after the initial recognition of the asset (a loss event), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
The Bank considers the following factors in assessing objective evidence of impairment: Whether the counterparty is in default
of principal or interest payments. When a counterparty files for
bankruptcy and this would avoid or delay discharge of its obligation.
Where the Bank initiates legal recourse of recovery in respect of a credit obligation of the counterpart.
Where the Bank consents to a restructuring of the obligation, resulting in a diminished financial obligation, demonstrated by a material forgiveness of debt or postponement of scheduled payments.
Where there is observable data indicating that there is a measurable decrease in the estimated future cash flows of a group of financial assets, although the decrease cannot yet be identified with specific individual financial assets.
The Bank considers evidence of impairment for loans and advances and held-to-maturity investment securities at both a specific asset and collective level. All individually significant loans and advances and held-to-maturity investment securities are assessed
for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.
Loans and advances and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances and held-to-maturity investment securities with similar risk characteristics. Impairment test has been done on quarterly basis for Loans and advances and held-to-maturity investment; and for other trade receivables and other financial assets impairment is done on annual basis which is based on the internal and external indication observed.
In assessing collective impairment, the Bank uses statistical modelling of historical trends of the probability of default (PD), the timing of recoveries and the amount of loss incurred(LGD), adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.
In the light of current uncertainty resulting from the Covid-19 pandemic, the bank believe that their existing metholodogy to calculate impairment should not apply mechanically. Hence, the bank has consider the information such as the extention of payment holidays to eligible borrowers, various government relief measures to estimate probability of default (PD), loss given default (LGD) to reflect current economic scanerio. That has affected impairment allowance on loans and advances as on Asar end 2077.
a) Impairment losses on assets measured at amortised cost
As per NAS 39Financial assets carried at amortised cost (such as amounts due from
10th ANNUAL REPORT 2019/2020
117Mega Bank Nepal Limited
Banks, loans and advances to customers as well as held–to–maturity investments is impaired, and impairment losses are recognized, only if there is objective evidence as a result of one or more events that occurred after the initial recognition of the asset. The amount of the loss is measured as the difference between the asset's carrying amount and the deemed recoverable value of loan.
Loans and advances to customers with significant value (Top 100 borrowers and borrowers classified as Non-Performing Loans as per Nepal Rastra Bank Directive) are assessed for individual impairment test. The recoverable value of loan is estimated on the basis of realizable value of collateral and the conduct of the borrower/past experience of the bank. Assets that are individually assessed and for which no impairment exists are grouped with financial assets with similar credit risk characteristics and collectively assessed for impairment. The credit risk statistics for each group of the loan and advances are determined by management prudently being based on the past experience. For the purpose of collective assessment of impairment bank has categorized assets in to 10 broad products as follows:
1. Term Loan2. Overdraft Loan3. Import Loan4. Demand and Working capitals Loan5. Personal residential Loan6. Real estate Loan7. Margin lending Loan8. Hire Purchase Loan9. Deprived Sector Loan10. Others
If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the impairment provision in Profit and Loss account. If a future write–
off is later recovered, the recovery is credited to the ’Income Statement’.
As per Loan Loss Provision of Nepal Rastra BankLoan loss provisions in respect of non-performing loans and advances are based on management’s assessment of the degree of impairment of the loans and advances, subject to the minimum provisioning level prescribed in relevant NRB guidelines. Provision is made for possible losses on loans and advances including bills purchased at 1% to 100% on the basis of classification of loans and advances, overdraft and bills purchased in accordance with NRB directives.
Policies Adopted As per the Carve out notice issued by ICAN, the Bank has measured impairment loss on loan and advances as the higher of amount derived as per norms prescribed by Nepal Rastra Bank for loan loss provision and amount determined as per paragraph 63 of NAS 39.
b) Impairment of investment in equity instrument classified as fair value through other comprehensive income
Where objective evidence of impairment exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the transaction cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of profit or loss) is reclassified from equity and recognised in the statement of profit and loss account. A significant or prolonged decline in the fair value of an equity security below its cost is considered, among other factors in assessing objective evidence of impairment for equity securities.
If, in a subsequent period, the fair value of equity investment classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through other comprehensive income.
3.5 Trading AssetsTrading assets and liabilities are those assets and liabilities that the Bank acquires or
10th ANNUAL REPORT 2019/2020
118Mega Bank Nepal Limited
incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position taking.
Trading assets and liabilities are initially recognized at cost and subsequently measured at fair value in the statement of financial position, with transaction costs recognized in profit or loss. All changes in fair value are recognized as part of net trading income in profit or loss as regarded as fair value through profit & loss.
3.6 Derivative Assets and Derivative Liabilities
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. Derivatives held for risk management purposes are measured at fair value in the statement of financial position.
Considering the requirement of NAS 39 for qualification of hedge accounting and cost benefits along with materiality, Bank has not adopted hedge accounting for certain derivatives held for risk management.
3.7 Investment in an AssociatesThe Bank has a 16.39% interest in Sparsha Laghubitta Bittiya Sanstha Ltd. licensed by Nepal Rastra Bank as “D” class financial institution which involves in the providing micro –finance service in rural area such as development of agriculture, irrigation, drinking water, cottage and rural industries, forestry and alternative energy. Sparsha Laghubitta Bittiya Sastha Ltd is a public limited company that is listed in stock exchange Limited. The Bank’s Interest in Sparsha Laghubitta Bittiya Sanstha Limited is accounted for using the equity method in the consolidation of financial statements.
Similarly, the bank also has a 16.39% interest in Aviyan Laghubitta Bittiya Sanstha Ltd licensed by Nepal Rastra Bank as “D” class financial Institution that objective of this institute is to serve the agriculture enterprises, enterprises, small entrepreneur and small enterprises with the low investment within the area of its operation with the facilities of Micro Credit and allied micro finance facilities and to earn the profit for the benefit of the stakeholders whether directly or indirectly. The investment on shares of Aviyan Laghubitta Bittiya Sanstha Limited is not listed on the stock exchange
as on reporting date .The Bank’s Interest in Aviyan Laghubitta Bittiya Sanstha Limited is accounted for using the equity method in the consolidation of financial statements.
3.8 Property and Equipment
a. Recognition and MeasurementThe cost of an item of property and equipment shall be recognized as an asset, initially recognized at cost, 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.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:
the cost of materials and direct labour; any other costs directly attributable to
bringing the assets to a working condition for their intended use;
when the Bank has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and
Capitalized borrowing costs.
The Bank adopts cost model for entire class of property and equipment except land. Apart from land, neither class of the property and equipment are measured at revaluation model nor is their fair value measured at the reporting date. The items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
Subsequent expenditure is capitalized if it is probable that the future economic benefits from the expenditure will flow to the Bank. Ongoing repairs and maintenance to keep the assets in working condition are expensed as incurred. Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized within other income in profit or loss.
10th ANNUAL REPORT 2019/2020
119Mega Bank Nepal Limited
b. Capital Work in Progress Fixed assets under construction and cost of assets not ready for use are shown as capital work in progress.
c. Depreciation Depreciation on other assets is calculated using the straight- line method to allocate their cost to their residual values over their estimated useful life as per management judgement as follows:
Group Useful Life (In Years)
Computer 5-10
Metal Furniture 10
Office Equipment & Others 10
Vehicle 8
Wooden Furniture 10
Building 50
Lease Hold Assets are amortized on a straight line basis in profit or loss over the period of the lease agreement, from the date that it is available for use.
Non-consumable items having life less than one year or costing less than NPR 10,000 are expensed off during the year of purchase. Capital nature expenditures on immovable Non-consumable items of more than NPR 3,000 are recognized as fixed assets on the basis of their useful life and required level of control.
d. DerecognitionThe carrying amount of Property and Equipment shall be derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property and equipment shall be included in profit or loss when the item is derecognized (unless on a sale & lease back).
Depreciation method, useful lives and residual value are reviewed at each reporting date and adjusted, if any.
3.9 Intangible Assets / Goodwill
GoodwillAny excess of the cost of acquisition over the fair values of the identifiable net
assets acquired in Business Combination is recognised as goodwill. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired.
Acquired Intangible AssetsIntangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic benefits embodied in the asset will flow to the Bank, and are amortized on the basis of their expected useful lives.
Computer softwareAcquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Costs associated with the development of software are capitalized where it is probable that it will generate future economic benefits in excess of its cost. Computer software costs are amortized on the basis of expected useful life. Costs associated with maintaining software are recognized as an expense as incurred.
At each reporting date, these assets are assessed for indicators of impairment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately.
Software is amortised on a straight line basis in profit or loss over its estimated useful life, from the date that it is available for use. The estimated useful life of software for the current and comparative periods is five years. Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
3.10 Investment Property/Non-Current Assets Held for Sale
Investment Property Investment properties include land or land and buildings other than those classified as property and equipment and non-current assets held for sale. Generally, it includes land, land and building acquired by the Bank as non-banking assets but not sold as on the reporting date.
10th ANNUAL REPORT 2019/2020
120Mega Bank Nepal Limited
The Bank holds investment property that has been acquired through enforcement of security over the loans and advances.
Non-Current Assets Held for SaleNon-current assets (such as property) and disposal groups (including both the assets and liabilities of the disposal groups) are classified as held for sale and measured at the lower of their carrying amount and fair value less cost to sell when: (i) their carrying amounts will be recovered principally through sale; (ii) they are available-for-sale in their present condition; and (iii) their sale is highly probable.
Immediately before the initial classification as held for sale, the carrying amounts of the assets (or assets and liabilities in a disposal group) are measured in accordance with the applicable accounting policies described above.
3.11 Income TaxTax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to items recognised directly in equity or in other comprehensive income.
a. Current TaxCurrent tax is the expected tax payable or recoverable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
b. Deferred TaxDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is determined using tax rate applicable to the Bank as at the reporting date which is expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized where it is probable that future taxable profit will be available, against which the temporary differences can be utilized.
3.12 Deposits, debts securities issued and subordinated liabilities
a. Deposits The Bank accepts deposits from its customers under savings account, current, term deposits and margin accounts which allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the Bank and represents the amount owed by the Bank to the customer.
b. Debt Securities Issued
It includes debentures, bonds or other debt securities. Deposits, debt securities issued and subordinated liabilities are initially measured at fair value minus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method, except where the Group designates liabilities at fair value through profit or loss. However, the bank does not have any issue of such debt securities.
c. Subordinated LiabilitiesSubordinated liabilities are those liabilities which at the event of winding up are subordinate to the claims of depositors, debt securities issued and other creditors. The bank does not have any of such subordinated liabilities.
3.13 BorrowingsBorrowings obtained by the Bank that are not designated at fair value through profit or loss, are classified as liabilities under ‘Borrowings’; where the substance of the contractual arrangement results in the bank having an obligation to repay in full on the Termination Date.
After initial measurement, borrowings are subsequently measured at amortised cost using the effective Interest Rate.
3.14 ProvisionsThe Bank recognizes a provision if, as a result of past event, the Bank has a present constructive or legal obligation that can be reliably measured and it is probable that an outflow of economic benefit will be required to settle the obligation.
10th ANNUAL REPORT 2019/2020
121Mega Bank Nepal Limited
A disclosure for contingent liability is made when there is a possible obligation that arises from past events, and whose existence will be confirmed by the occurrence, or non –occurrence, of uncertain future events; or present obligation that do not meet the recognition criteria because either it is not probable that an outflow of resources embodying economic benefits will be required to settled the obligation or, a sufficiently reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
A provision for onerous contract is recognized when the expected benefits to be derived by the Bank from a contract are lower than the unavoidable cost of meeting its obligation under the contract.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
3.15 Revenue Recognition
Revenue is the gross inflow of economic benefits during the period arising from the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants. Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. Revenue is not recognized during the period in which its recoverability of income is not probable. The Bank’s revenue comprises of interest income, fees and commission, foreign exchange income, cards income, remittance income, bancassurance commission, etc. and the bases of incomes recognition are as follows:
a. Interest Income Interest income on financial assets
measured at fair value through other comprehensive income (FVOCI) and financial assets held at amortised cost shall be recognized using the bank’s normal interest rate which is very close to effective interest rate using effective interest rate method.
Similarly, only accrued interest on loans and advances to the extent allowed by Guideline on Recognition of Interest Income, 2019 as issued by Nepal Rastra Bank has been recognized as interest income. Interest accrual falls outside the scope of recognition criteria as per the guidelines has been barred and shall be recognized on a cash basis.
Refer 2.7.4 (b) for carve out applied to recognize interest income (transaction cost) using effective interest rate.
Gains and losses arising from changes in the fair value of financial instruments held at fair value through profit or loss are included in the statement of profit or loss in the period in which they arise. Contractual interest income and expense on financial instruments held at fair value through profit or loss is recognized within net interest income.
b. Fees & CommissionFees and commissions are recognized on an accrual basis when the service has been provided or significant act performed whenever the benefit exceeds cost in determining such value. Whenever, the cost of recognizing fees and commissions on an accrual basis exceeds the benefit in determining such value, the fees and commissions are charged off during the year.
c. Dividend IncomeDividend income are recognized when right to receive such dividend is established. Usually this is the ex-dividend date for equity securities. Dividends are presented in net trading income, net income from other financial instruments at fair value through profit or loss or other revenue based on the underlying classification of the equity investment.
d. Net Trading IncomeNet trading income comprises gains less losses related to trading assets and
10th ANNUAL REPORT 2019/2020
122Mega Bank Nepal Limited
liabilities, and includes all realized and unrealized fair value changes, interest, dividends and foreign exchange differences.
e. Net Income from other financial instrument at fair value through Profit or Loss
Net income from other financial instruments at fair value through profit or loss relates to non-trading derivatives held for risk management purposes that do not form part of qualifying hedge relationships and financial assets and liabilities designated at fair value through profit or loss. It includes all realized and unrealized fair value changes, interest, dividends and foreign exchange differences.
3.16 Interest expenseInterest expense on all financial liabilities including deposits are recognized in profit or loss using effective interest rate method. Interest expense on all trading liabilities are considered to be incidental to the Bank’s trading operations and are presented together with all other changes in fair value of trading assets and liabilities in net trading income.
3.17 Employees Benefits
a. Short Term Employee BenefitsShort term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is also recognized for the amount expected to be paid under bonus required by the Bonus Act, 2030 to pay the amount as a result of past service provided by the employee and the obligation can be estimated reliably under short term employee benefits. Short-term employee benefits include all the following items (if payable within 12 months after the end of the reporting period):
wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses and non-monetary benefits
b. Post-Employment Benefits Post-employment benefit plan includes the followings;
i. Defined Contribution PlanA defined contribution plan is a post-
employment benefit plan under which the Bank pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as personnel expenses in profit or loss in the periods during which related services are rendered.
Contributions to a defined contribution plan that are due more than 12 months after the end of the reporting period in which the employees render the service are discounted to their present value.
All employees of the Bank are entitled to receive benefits under the provident fund, a defined contribution plan, in which both the employee and the Bank contribute monthly at a pre-determined rate of 10% of the basic salary. The Bank does not assume any future liability for provident fund benefits other than its annual contribution. The bank has not considered the gratuity of 8.33% as required by Labor Act 2074 however, provision of gratuity has been done on the basis of actuarial valuation as per HR bylaw of the Bank which does not comply with the provisions of Labor Act 2074.
ii. Defined Benefit planThe Bank continues to operate gratuity payments as post-retirement benefits as defined benefit schemes. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Bank’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The Bank recognises all actuarial gains and losses net of deferred tax arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in employee benefit expense in profit or loss.
10th ANNUAL REPORT 2019/2020
123Mega Bank Nepal Limited
The Bank recognises gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment or settlement comprises any resulting change in the fair value of plan assets, any change in the present value of the defined benefit obligation, any related actuarial gains and losses and any past service cost that had not previously been recognised.
iii. Other long –Term Employee benefitThe Bank operate accumulated annual leave and sick leave payment which are long term employee benefits other than defined employment benefits and termination benefits. These benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees rendered the related services.
The bank recognises amount as liability for long term employee benefits the net total, at the end of the reporting periods, of the present value of the defined obligation and the fair value of the plan assets (If any) out of which the obligations are to be settled directly.
All the assets, liabilities, income and expenditure relating to such benefits should be accounted for in the same way, and subject to the same restriction on the recognition of those relating to a defined benefit pension plan except that remeasurements are recognised in profit or loss.
The measurement of other long –term employee benefits is not usually subject to the same degree of uncertainty as that of define employment benefits.
iv. Termination BenefitsTermination benefits are recognized as an expense when the Bank is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Bank has made
an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.
3.18 LeasesLease payments under an operating lease excluding costs for services such as insurance and maintenance, shall be recognized as an expense on a straight-line basis over the lease term unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payment are not on that basis.
IAS 17 requires a straight-line recognition of the lease expenses even when amounts are not payable on this basis.Generally, lease payments are increased by fixed minimum increments intended to compensate for expected annual inflation over the lease period. The fixed minimum increment will have to be spread so as to take the payments on a straight-line basis over the lease term.
The bank has received some lease concession on lease ATM rent as a result of on going COVID-19 pandemic and hence, has recognized operating lease expenses net of such incentive received.
3.19 Foreign Currency TranslationThe financial statements are presented in Nepalese Rupees (NPR).
Transactions in foreign currencies are initially recorded at the functional currency rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange at the statement of financial position date.
Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit or loss.
Non-monetary assets and liabilities are translated at historical exchange rates if held at historical cost, or year-end exchange rates if held at fair value, and the resulting foreign
10th ANNUAL REPORT 2019/2020
124Mega Bank Nepal Limited
exchange gains and losses are recognized in either the statement of profit or loss or shareholders’ equity depending on the treatment of the gain or loss on the asset or liability.
3.20 Financial guarantee and loan commitment
Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions. Loan commitment is the commitment where the Bank has confirmed its intention to provide funds to a customer or on behalf of a customer in the form of loans, overdrafts, future guarantees, whether cancellable or not, or letters of credit and the Bank has not made payments at the reporting date, those instruments are included in these financial statement as commitments.
3.21 Share Capital and Reserves
The Bank classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments. Equity is defined as residual interest in total assets of the Bank after deducting all its liabilities. Common shares are classified as equity of the Bank and distributions thereon are presented in statement of changes in equity.
Dividends on ordinary shares and preference shares classified as equity are recognized in equity in the period in which they are declared and approved competent authority.
Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments considering the tax benefits achieved thereon.
The reserves include retained earnings and other statutory reserves such as general reserve, foreign exchange equalization reserve, regulatory reserve, investment adjustment reserve, staff training and development fund, CSR reserve and actuarial gain/(loss) reserve etc.
3.22 Earnings per share including dilutedThe Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. The basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
3.23 Segment ReportingThe Bank is organized for management and reporting purposes into segments such as General Banking, Micro Lending, Remittance, Cards and Alternate Channels and Treasury. The segment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly common assets, head office expenses, and tax assets and liabilities.
10th ANNUAL REPORT 2019/2020
125Mega Bank Nepal Limited
Notes forming part of the financial statements
4.1 Cash and cash equivalentAmount in NPR
4.2 Due from Nepal Rastra BankAmount in NPR
4.3 Placements with Bank and Financial InstituitionsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Cash in hand 4,074,222,343 2,231,093,516 4,074,213,381 2,231,076,260
Balances with B/FIs 2,563,501,077 400,246,861 2,561,665,556 399,480,930
Money at call and short notice 7,425,816,643 3,486,833,244 7,425,816,643 3,486,833,244
Other 4,679,888,042 1,992,474,522 4,679,888,042 1,992,474,522
Total 18,743,428,105 8,110,648,144 18,741,583,621 8,109,864,957
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Statutory balances with NRB 3,599,948,114 2,964,971,270 3,599,948,114 2,964,971,270
Securities purchased under resale agreement - - - -
Other deposit and receivable from NRB - - - -
Total 3,599,948,114 2,964,971,270 3,599,948,114 2,964,971,270
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Placement with domestic B/FIs 190,919,126 149,004,497 20,919,126 19,173,231
Placement with foreign B/FIs 30,284,856 720,365,222 30,284,856 720,365,222
Less: Allowances for impairment - - - -
Total 221,203,982 869,369,719 51,203,982 739,538,453
“The fair value of cash and cash equivalent is its carrying value.Cash at vault is adequately insured for physical and financial risks.The amount of cash at vault is maintained on the basis of the liquidity and business requirements. Balance with BFIs includes balance maintained at various banks and financial institutions.Cash held in foreign currency is subject to risk of changes in the foreign exchange rates.These are closely monitored, and risks, if identified, are promptly managed.Other items on cash and cash equivalents includes interbank placements with maturity above seven days and below three months and balances with NRB other than statutory balance required to be maintained.
As required by provision of the unified directives 13/076, a cash balance is required to be maintained with central Bank of Nepal. As at July 15, 2020 the minimum cash reserve ratio requirement was 3% of rupee liabilties of the average domestic deposit currency.There is no reserve requirement for foreign currency deposit liabilities. Other deposit and receivable from NRB includes deposit placed with NRB at year end.
Placements with domestic as well as foreign bank and financial institutions with original maturities of more than three months from the acquisition date are presented above.
10th ANNUAL REPORT 2019/2020
126Mega Bank Nepal Limited
4.4 Derivative financial instrumentsAmount in NPR
4.5 Other trading assetsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Held for trading 77,117,583 83,697,501 77,117,583 83,697,501
Interest rate swap - - - -
Currency swap - - - -
Forward exchange contract 77,117,583 83,697,501 77,117,583 83,697,501
Others - - - -
Held for risk management - - - -
Interest rate swap - - - -
Currency swap - - - -
Forward exchange contract - - - -
Other - - - -
Total 77,117,583 83,697,501 77,117,583 83,697,501
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Teasury bills - - - -
Government bonds - - - -
NRB Bonds - - - -
Domestic Corporate bonds - - - -
Equities 14,699,767 - - -
Other - - - -
Total 14,699,767 - - -
Pledged - - - -
Non-pledged 14,699,767 - - -
A significant part of the derivatives in the portfolio are related to non-deliverable forwards (NDFs) for trading purpose and remaining part are of foreign exchange forward contract for servicing corporate clients and manage its exposures in their risk management to hedge, e.g. foreign currency exposures. These products are used by Bank as part of its own regular treasury activities. From a risk perspective, Foreign Exchange Forward Constracts and NDFs have been netted-off in the financial statement. Further, Previous year figures have been reclassified and presented in same manner.
10th ANNUAL REPORT 2019/2020
127Mega Bank Nepal Limited
Amount in NPR
4.6 Loan and advances to B/FIsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Loans to microfinance institutions 3,357,164,838 2,702,276,281 3,357,164,838 2,702,276,281
Other - - - -
Interest Receivable on BFI Loans 10,294,830 2,240,112 10,294,830 2,240,112
Less: Allowances for impairment on BFI Loans 33,776,149 27,022,763 33,776,149 27,022,763
Total 3,333,683,518 2,677,493,630 3,333,683,518 2,677,493,630
Loans and advances to BFIs are measured at amortised cost, becouse these instruments meet the SPPI criterion and are held to collect the contractaul cash flows.Impairment allowance on Loans and advances to BFIs have been consided as per NRB directive. All the loans to BFIs have been classified in pass category as per the provisions of NRB directive 02/2076.
4.5.1 Details of other trading equity investments
Particulars Total Units
Group Bank
As at 15 July 2020 As at 16 July 2019 As at 15 July 2020 As at 16 July 2019
Cost Fair Value Cost Fair Value Cost Fair Value Cost Fair Value
Agriculture Development Bank Limited 1308 508,594 503,580 - - - - - -
Chhimek Laghubitta Bikas Bank Limited 406 309,343 442,540 - - - - - -
Citizen Bank International Limited 2600 492,326 488,800 - - - - - -
Deprosc Laghubitta Bittiya Sanstha Limited 188 105,246 162,808 - - - - - -
Everest Bank Limited 28 14,494 18,900 - - - - - -
Forward Community Microfinance Bittiya Sanstha Limited 130 125,517 207,870 - - - - - -
Global IME Bank Limited 3000 811,650 717,000 - - - - - -
Janautthan Samudayic Laghubitta Bikas Bank Limited 660 449,629 1,102,200 - - - - - -
Nepal Bank Limited 480 132,405 119,520 - - - - - -
NIC Asia Bank Limited 3200 1,680,485 1,769,600 - - - - - -
Nepal Life Insurance Co. Limited 500 630,744 630,000 - - - - - -
NMB Bank Limited 3100 1,196,483 1,230,700 - - - - - -
NMB Microfinance Bittiya Sanstha Limited 89 39,320 71,912 - - - - - -
Nepal Doorsanchar Comapany Limited 3250 2,088,075 2,128,750 - - - - - -
Nirdhan Utthan Laghubitta Bittiya Sanstha Limited 320 221,248 324,800 - - - - - -
Prime Commercial Bank Limited 2025 546,492 516,375 - - - - - -
Prime Life Insurance Company Limited 787 395,663 417,897 - - - - - -
Prabhu Bank Limited 500 114,382 115,000 - - - - - -
Sanima Bank Limited 1993 675,938 657,690 - - - - - -
Swadeshi Laghubitta Bittiya Sanstha Limited 100 50,873 92,600 - - - - - -
Sana Kisan Bikas Bank Limited 239 172,590 310,939 - - - - - -
Swarojgar Laghu Bitta Bikas Bank Limited 566 242,607 522,418 - - - - - -
Samata Microfinance Bittiya Sanstha Limited 1757 838,524 1,159,620 - - - - - -
Sunrise Bank Limited 2000 498,852 468,000 - - - - - -
Swabalamban Laghubitta Bittiya Sanstha Limited 286 207,887 352,638 - - - - - -
United Insurance Co. (Nepal) Limited 453 82,994 167,610 - - - - - -
Total 12,632,360 14,699,767
10th ANNUAL REPORT 2019/2020
128Mega Bank Nepal Limited
4.6.1 Specific allowances for impairmentAmount in NPR
4.7 Loans and advances to customersAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Balance at Shrawan 1, 2076 27,022,763 16,078,657 27,022,763 16,078,657
Taken over on acquisition from Business Combination with GBBL 3,556,410 - 3,556,410 -
Impairment loss for the year: 3,196,976 10,944,106 3,196,976 10,944,106
Charge for the year 3,196,976 10,944,106 3,196,976 10,944,106
Recoveries/reversal - - -
Amount written off - - -
Balance at Asar end 33,776,149 27,022,763 33,776,149 27,022,763
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Loan and advances measured at amortized cost 113,064,175,249 71,124,230,080
113,064,175,249 71,124,230,080
Less: Impairment allowances 2,570,834,088 1,265,143,078 2,570,834,088 1,265,143,078
Collective impairment 1,543,593,606 791,037,725 1,543,593,606 791,037,725
Individual impairment 1,027,240,481 474,105,353 1,027,240,481 474,105,353
Net amount 110,493,341,161 69,859,087,002 110,493,341,161 69,859,087,002
Loan and advances measured at FVTPL - - - -
Total 110,493,341,161 69,859,087,002 110,493,341,161 69,859,087,002
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Loans and advances to Customer 110,455,499,444 70,041,267,499 110,455,499,444 70,041,267,499
Loans and advances to staff 942,769,519 806,006,575 942,769,519 806,006,575
Accrued Interest 1,665,906,286 276,956,006 1,665,906,286 276,956,006
Total 113,064,175,249 71,124,230,080 113,064,175,249 71,124,230,080
Impairment (Including loans & advances to BFIs)
As per NRB Directive No. 2 2,604,610,237 1,292,165,841 2,604,610,237 1,292,165,841
AS per NAS 39 2,446,965,378 312,092,679 2,446,965,378 312,092,679
No individual loans to micro finance has terms and conditions that significantly affect the amount, timing or certainty of consolidated cash flows of the Bank.These assets have been classified as loans and receivables and are subsequently measured at amortized costs. Risks associated with these assets are regularly assessed. These are interest bearing advances and the income on these assets is credited to statement of profit or loss under interest income.
The total loans and advances to customers balance are measured at amorised cost. Impairment presented is computed as per the provisions of NRB directive no.2 which is higher than total impairment computed as per NAS 39.Total provision for impairment as per NAS 39 amounted to NPR /- 2,446,965,377.95 and NPR 312,092,679/-for 2019/20 and 2018/19 respectively.
10th ANNUAL REPORT 2019/2020
129Mega Bank Nepal Limited
4.7.1 Analysis of loan and advances - By ProductAmount in NPR
4.7.2 Analysis of loan and advances - By CurrencyAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Product
Term loans 18,991,054,273 11,461,066,881 18,991,054,273 11,461,066,881
Overdraft 20,384,183,490 13,362,250,971 20,384,183,490 13,362,250,971
Trust receipt/Import loans 1,441,624,868 3,912,762,990 1,441,624,868 3,912,762,990
Demand and other working capital loans 25,658,715,420 15,137,723,596 25,658,715,420 15,137,723,596
Personal residential loans 7,768,542,714 3,238,682,498 7,768,542,714 3,238,682,498
Real estate loans 11,067,912,729 6,857,257,246 11,067,912,729 6,857,257,246
Margin lending loans 2,109,709,163 836,731,569 2,109,709,163 836,731,569
Hire purchase loans 6,148,705,826 4,708,200,883 6,148,705,826 4,708,200,883
Deprived sector loans 4,113,159,374 1,907,738,921 4,113,159,374 1,907,738,921
Bills purchased 961,444,531 1,640,754,797 961,444,531 1,640,754,797
Staff loans 942,769,519 806,006,575 942,769,519 806,006,575
Other 11,810,447,055 6,978,097,146 11,810,447,055 6,978,097,146
Sub total 111,398,268,962 70,847,274,074 111,398,268,962 70,847,274,074
Interest receivable 1,665,906,286 276,956,006 1,665,906,286 276,956,006
Grand total 113,064,175,249 71,124,230,080 113,064,175,249 71,124,230,080
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Nepalese Rupee 112,102,730,717 69,482,856,531 112,102,730,717 69,482,856,531
Indian Rupee - - -
United States Dollar 955,575,562 1,637,790,009 955,575,562 1,637,790,009
Great Britain Pound - - - -
Euro 5,868,970 3,583,540 5,868,970 3,583,540
Japenese Yen - - - -
Chinese Yuan - - - -
Other - - - -
Total 113,064,175,249 71,124,230,080 113,064,175,249 71,124,230,080
10th ANNUAL REPORT 2019/2020
130Mega Bank Nepal Limited
4.7.3 Analysis of loan and advances - By CollateralAmount in NPR
4.7.4 Allowances for impairmentAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Secured
Movable/immovable assets 106,573,106,102 67,869,740,489 106,573,106,102 67,869,740,489
Gold and silver 1,124,124,965 1,166,918 1,124,124,965 1,166,918
Guarantee of domestic B/FIs - - - -
Government guarantee - - - -
Guarantee of international rated bank - - - -
Collateral of export document - - - -
Collateral of fixed deposit receipt 370,625,950 365,841,987 370,625,950 365,841,987
Collateral of Governement securities - 2,055,089 - 2,055,089
Counter guarantee - -
Personal guarantee - -
Other collateral 4,996,318,232 2,885,425,597 4,996,318,232 2,885,425,597
Subtotal 113,064,175,249 71,124,230,080 113,064,175,249 71,124,230,080
Unsecured - - - -
Grant Total 113,064,175,249 71,124,230,080 113,064,175,249 71,124,230,080
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Specific allowances for impairment
Balance at Shrawan 1, 2076 474,105,353 268,138,802 474,105,353 268,138,802
Taken over on acquisition from Business Combination with GBBL 114,049,490 - 114,049,490 -
Impairment loss for the year: 367,783,905 205,966,551 367,783,905 205,966,551
Charge for the year 586,571,698 205,966,551 586,571,698 205,966,551
Recoveries/reversal during the year (218,787,793) - (218,787,793) -
Write-offs - - - -
Exchange rate variance on foreign currency impairment - - - -
Other movement - - - -
Balance at Asar end 955,938,748 474,105,353 955,938,748 474,105,353
Collective allowances for impairment
Balance at Shrawan 1, 2076 791,037,725 581,327,739 791,037,725 581,327,739
Taken over on acquisition from Business Com-bination with GBBL 387,968,953 - 387,968,953 -
Impairment loss for the year: 435,888,662 209,709,986 435,888,662 209,709,986
Charge/(reversal) for the year 435,888,662 209,709,986 435,888,662 209,709,986
Exchange rate variance on foreign currency impairment - - - -
Other movement - - - -
Balance at Asar end 1,614,895,340 791,037,725 1,614,895,340 791,037,725
Total allowances for impairment 2,570,834,088 1,265,143,078 2,570,834,088 1,265,143,078
10th ANNUAL REPORT 2019/2020
131Mega Bank Nepal Limited
4.8 Investment securitiesAmount in NPR
4.8.1 Investment securities measured at amortized costAmount in NPR
4.8.2 Investment in equity measured at fair value through other comprehensive incomeAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Investment securities measured at amortized cost 14,466,291,251 10,717,098,919 14,466,291,251 10,717,098,919
Investment in equity measured at FVTOCI 1,000,603,488 778,983,424 1,000,603,488 778,983,424
Total 15,466,894,740 11,496,082,343 15,466,894,740 11,496,082,343
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Debt securities - - -
Government bonds 14,170,226,801 9,860,734,082 14,170,226,801 9,860,734,082
Government treasury bills 296,064,451 856,364,837 296,064,451 856,364,837
Nepal Rastra Bank bonds - - - -
Nepal Rastra Bank deposits instruments - - - -
Other - - - -
Less: specific allowances for impairment - - - -
Total 14,466,291,251 10,717,098,919 14,466,291,251 10,717,098,919
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at16 July 2019
Equity instruments
Quoted equity securities 702,393,656 495,996,103 702,393,656 495,996,103
Unquoted equity securities 298,209,832 282,987,320 298,209,832 282,987,320
Total 1,000,603,488 778,983,424 1,000,603,488 778,983,424
Investment made by the Bank in financial instruments has been presented under this account head in two categories i.e. investment securities measured at amortized cost and investment in equity measured at fair value through other comprehensive income. Investment other than those measured at amortized cost is measured at fair value and changes in fair value shall be recognized in other comprehensive income as per the business model adopted by the Bank for the specific securities. Where income from the investment is received in the form of bonus shares, the valuation of investment is made by increasing the number of shares only without changing in the cost of investment.
Unquoted equity securities include unlisted equity Investment in Nepal Clearing House Limited, Prabhu Capital Limited, General Insurance Company Nepal Limited, Banking Finance and Insurance institute of Nepal Limited and Mahalaxmi Insurance Co. Limited. The book Net worth value of these investments are considered as fair value.
10th ANNUAL REPORT 2019/2020
132Mega Bank Nepal Limited
4.8
.3 In
form
atio
n re
lati
ng to
inve
stm
ent i
n eq
uiti
es
Par
ticul
ars
Gro
upB
ank
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Inve
stm
ent i
n qu
oted
equ
ity
1.1
Chi
lime
Hyd
ropo
wer
Com
pany
Ltd
.
(85,
84
4 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(
Incl
udes
42,
312
nos.
of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
5
9,56
9,38
3 3
4,16
5,9
12
55,
186
,80
9
34,
203,
129
5
9,56
9,38
3 3
4,16
5,9
12
55,
186
,80
9
34,
203,
129
1.2
Nep
al T
elec
om L
td.
(337
,44
6 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
) 2
90
,88
6,9
36
221
,027
,130
2
90
,88
6,9
36
233
,850
,078
2
90
,88
6,9
36
221
,027
,130
2
90
,88
6,9
36
233
,850
,078
1.3
San
imam
ai H
ydro
pow
er L
td.
(32
,96
0 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(I
nclu
des
5,72
0 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
12,
502,
157
7,3
50,0
80
1
2,50
2,15
7 7
,341
,180
1
2,50
2,15
7 7
,350
,08
0
12,
502,
157
7,3
41,18
0
1.4
Shi
khar
Insu
ranc
e C
ompa
ny L
td.
(10
,926
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(Inc
lude
s 3,
619
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
1
8,9
04,
107
11,4
61,
394
1
8,5
76,3
07
8,4
23,9
46
1
8,9
04,
107
11,4
61,
394
1
8,5
76,3
07
8,4
23,9
46
1.5
Glo
bal I
ME
Sam
mun
ati S
chem
e-1
(2,3
73,2
92
ordi
nary
sha
res
of N
PR
10
pai
d up
) 2
3,73
2,9
20
20
,36
2,8
45
9,4
93,
170
7
,955
,276
2
3,73
2,9
20
20
,36
2,8
45
9,4
93,
170
7
,955
,276
1.6
Sur
ya li
fe In
sura
nce
Com
pany
Ltd
.
(1
0,8
85
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(Inc
lude
s 2,
433
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
-
-
4
,974
,60
6
4,9
63,
560
-
-
4
,974
,60
6
4,9
63,
560
1.7
Gur
as L
ife In
sura
nce
Cop
man
y Lt
d.
(7,19
3 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
)
(I
nclu
des
88
6 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
4,5
91,
241
4,0
64,
145
3,6
44,
141
2,2
85,
94
0
4,5
91,
241
4,0
64,
145
3,6
44,
141
2,2
85,
94
0
1.8
Jal
abid
yut L
agan
i Tat
ha B
ikas
h C
o. L
td. (
HID
CL)
(1
14,5
78 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(I
nclu
des
10,4
16 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
14,
529,
86
7 1
5,23
8,8
74
14,
529,
86
7 1
8,4
47,0
58
14,
529,
86
7 1
5,23
8,8
74
14,
529,
86
7 1
8,4
47,0
58
1.9
Mer
o M
icro
finan
ce B
itti
ya S
anst
ha L
td.
(34
9 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(In
clud
es 1
32 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
21,7
00
2
35,2
26
21,7
00
1
43,
108
2
1,70
0
235
,226
2
1,70
0
14
3,10
8
1.10
But
wal
Pow
er C
ompa
ny L
td.
(9,
343
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(In
clud
es 1
,90
6 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
5,3
28,2
36
3,3
54,13
7 5
,328
,236
3
,474
,04
6
5,3
28,2
36
3,3
54,13
7 5
,328
,236
3
,474
,04
6
1.11
Nga
di G
roup
Pow
er L
td
(1,
272
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(In
clud
es 1
14 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
115
,80
0
14
6,2
80
1
15,8
00
1
47,5
52
115
,80
0
14
6,2
80
1
15,8
00
1
47,5
52
1.12
Cit
izen
Inve
stm
ent T
rust
(
2,78
8 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(
Incl
udes
1,2
51 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
6
,521
,80
5 6
,772
,052
6
,521
,80
5 6
,772
,052
1.13
Nat
iona
l Mic
rofin
ance
Bit
tiya
San
stha
Ltd
.
(
66
,011
pro
mot
er s
hare
s of
NP
R 1
00
pai
d up
)
(
Incl
udes
40
,90
2 no
s. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
2,5
10,9
75
6,6
01,1
00
2
,510
,975
2
,510
,975
2
,510
,975
6
,60
1,10
0
2,5
10,9
75
2,5
10,9
75
1.14
Aru
n K
abel
i Pow
er L
td
(29
5 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
) 2
9,50
0
55,
46
0
29,
500
5
5,4
60
1.15
NM
B H
ybrid
Fun
d-1,
Mut
ual F
und
(2,
208
,36
1 or
dina
ry s
hare
s of
NP
R 1
0 p
aid
up)
22,
08
3,6
10
20
,979
,430
1
5,77
4,0
10
15,
821
,332
2
2,0
83,
610
2
0,9
79,4
30
15,
774,
010
1
5,8
21,3
32
1.16
Nab
il Eq
uity
Fun
d
(
2,36
5,6
55 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
23,
656
,550
2
2,0
71,5
61
13,
518
,030
1
2,6
12,3
22
23,
656
,550
2
2,0
71,5
61
13,
518
,030
1
2,6
12,3
22
1.17
RS
DC
Lag
hubi
tta
Bit
tiya
San
stha
Ltd
.
(
95
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(In
clud
es 1
7 no
s. o
f Sha
res
rece
ived
as
Bon
us S
hare
s)
7,8
00
5
1,49
0
7,8
00
3
0,8
70
7,8
00
5
1,49
0
7,8
00
3
0,8
70
Am
ount
in N
PR
Con
tinun
ed...
10th ANNUAL REPORT 2019/2020
133Mega Bank Nepal Limited
Am
ount
in N
PR
Con
tinun
ed...
Par
ticul
ars
Gro
upB
ank
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
1.18
Pru
dent
ial I
nsur
ance
Co.
Ltd
.
(19,
659
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(In
clud
es 4
45
nos.
of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
19
,852
,677
1
0,8
71,4
87
18
,673
,077
1
0,9
10,7
45
19
,852
,677
1
0,8
71,4
87
18
,673
,077
1
0,9
10,7
45
1.2
0 A
run
Valle
y H
ydro
Pow
er D
evel
opm
ent C
o. L
td.
(
106
,98
5 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
)
(In
clud
es 7
,36
4 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s) 2
1,474
,331
9
,94
9,6
05
21,4
74,3
31
11,
09
8,4
46
2
1,474
,331
9
,94
9,6
05
21,4
74,3
31
11,
09
8,4
46
1.2
1 N
IBL
Pra
gati
Fun
d
(1,7
12,3
81
ordi
nary
sha
res
of N
PR
10
pai
d up
) 1
7,123
,810
1
3,9
55,9
05
11,
98
6,5
40
8
,630
,30
9
17,1
23,8
10
13,
955
,90
5 1
1,9
86
,54
0
8,6
30,3
09
1.2
2 S
yner
gy P
ower
Dev
elop
men
t Ltd
.
(6
16 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
) -
-
6
1,6
00
5
5,4
40
-
-
6
1,6
00
5
5,4
40
1.2
3 F
orw
ard
Com
mun
ity
Mic
ro F
inan
ce B
itta
ya S
asth
an L
td.
(
65
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(
Incl
udes
39
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
2,6
25
10
3,9
35
2,6
25
57,7
20
2,6
25
10
3,9
35
2,6
25
57,7
20
1.2
4 N
epal
Life
Insu
ranc
e C
ompa
ny L
td.
(
12,2
66
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(
Incl
udes
4,9
15 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s) 9
,620
,84
9
15,
455
,160
2
,48
0,9
25
2,7
84,
09
0
9,6
20,8
49
1
5,4
55,16
0
2,4
80
,925
2
,78
4,0
90
1.2
5 S
wad
eshi
Lag
ubit
ta B
itti
ya S
anst
ha L
td.
(2
7 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
)
(Inc
lude
s 1
nos.
of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
2,6
00
3
0,5
58
2,6
00
1
5,6
06
2
,60
0
30
,558
2
,60
0
15,
60
6
1.2
6 L
axm
i Equ
ity
Fund
(1
,46
2,39
5 or
dina
ry s
hare
s of
NP
R 1
0 p
aid
up)
14,
623
,950
1
2,8
25,2
04
1
4,6
23,9
50
11,1
58,0
74
14,
623
,950
1
2,8
25,2
04
1
4,6
23,9
50
11,1
58,0
74
1.2
7 C
itiz
en M
utua
l Fun
d-1
(1
,00
0,0
00
ord
inar
y sh
ares
of N
PR
10
pai
d up
) 1
0,0
00
,00
0
10
,06
0,0
00
5
,00
0,0
00
5
,09
0,0
00
1
0,0
00
,00
0
10
,06
0,0
00
5
,00
0,0
00
5
,09
0,0
00
1.2
8 N
IC A
sia
Gro
wth
Fun
d
(1,
00
0,0
00
ord
inar
y sh
ares
of N
PR
10
pai
d up
) 1
0,0
00
,00
0
10
,190
,00
0
5,0
00
,00
0
5,14
0,0
00
1
0,0
00
,00
0
10
,190
,00
0
5,0
00
,00
0
5,14
0,0
00
1.2
9 N
epal
Ins
uran
ce C
ompa
ny L
td.
(1
44,
187
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(I
nclu
des
19,11
0 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s) 6
5,76
2,9
62
63,
574,
66
3 1
10,8
02,
426
7
6,5
22,7
64
6
5,76
2,9
62
63,
574,
66
3 1
10,8
02,
426
7
6,5
22,7
64
1.3
0 D
epro
sc L
aghu
bitt
a B
itti
ya S
anst
ha L
td.
(7
,647
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(I
nclu
des
3,72
3 no
s. o
f Sha
res
rece
ived
as
Bon
us S
hare
s) 6
,26
9,73
0
6,6
22,3
02
6,2
69,
730
4
,24
6,8
04
6
,26
9,73
0
6,6
22,3
02
6,2
69,
730
4
,24
6,8
04
1.3
1 A
sian
Life
Insu
ranc
e C
o. L
td.
(3
,147
ordi
nary
sha
res
of N
PR
10
0 p
aid
up)
(In
clud
es 4
57 n
os. o
f Sha
res
rece
ived
as
Bon
us S
hare
s) 3
,275
,66
0
3,0
56,8
52
3,0
86
,76
0
1,2
05,
301
3,2
75,6
60
3
,056
,852
3
,08
6,7
60
1
,20
5,30
1
1.3
2 N
atio
nal M
icro
finan
ce B
itti
ya S
anst
ha L
td.
(5
0 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(Inc
lude
s 30
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
1,9
25
82,
500
1
,925
4
2,9
20
1,9
25
82,
500
1
,925
4
2,9
20
1.3
3 N
atio
nal L
ife In
sura
nce
Cop
man
y Lt
d.
(10
,250
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(
Incl
udes
250
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
6,2
43,
66
5 6
,78
5,50
0
-
-
6,2
43,
66
5 6
,78
5,50
0
-
-
1.3
4 D
ibya
show
ri H
ydro
pow
er L
td.
(1
1 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
) 1
,100
5
34
-
-
1,10
0
534
-
-
1.3
5 K
hani
khol
a H
ydro
pow
er L
td.
(
16 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
) 1
,60
0
78
4
-
-
1,6
00
7
84
-
-
10th ANNUAL REPORT 2019/2020
134Mega Bank Nepal Limited
Am
ount
in N
PR
Par
ticul
ars
Gro
upB
ank
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
As
at 1
5 Ju
ly 2
020
As
at 1
6 J
uly
2019
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
Cos
t Fa
ir Va
lue
1.36
Rid
i Hyd
ropo
wer
Ltd
.
(16
2 or
dina
ry s
hare
s of
NP
R 1
00
pai
d up
)
(Incl
udes
32
nos.
of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
1
3,0
00
1
3,6
08
-
-
1
3,0
00
1
3,6
08
-
-
1.37
Uni
ted
Mod
i Hyd
ropo
wer
Ltd
.
(337
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
33,
700
3
5,0
48
-
-
3
3,70
0
35,
04
8
-
-
1.38
NIB
L S
ambr
iddh
i Fun
d
(521
,673
ord
inar
y sh
ares
of N
PR
10
pai
d up
) 5
,216
,730
5
,164,
563
-
-
5,2
16,7
30
5,16
4,56
3 -
-
1.39
Nic
Asi
a B
lanc
e Fu
nd
(5
00
,00
0 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
5,0
00
,00
0
5,19
0,0
00
-
-
5
,00
0,0
00
5
,190
,00
0
-
-
1.4
0 N
MB
-50
(4,0
00
,00
0 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
40
,00
0,0
00
4
0,0
00
,00
0
-
-
40
,00
0,0
00
4
0,0
00
,00
0
-
-
1.4
1 C
itiz
en M
utua
l Fun
d-2
(1
,00
0,0
00
ord
inar
y sh
ares
of N
PR
10
pai
d up
) 1
0,0
00
,00
0
10
,00
0,0
00
-
-
1
0,0
00
,00
0
10
,00
0,0
00
-
-
1.4
2 S
anim
a Eq
uity
Fun
d
(50
0,0
00
ord
inar
y sh
ares
of N
PR
10
pai
d up
) 5
,00
0,0
00
4
,96
5,0
00
-
-
5
,00
0,0
00
4
,96
5,0
00
-
-
1.4
3 S
iddh
arth
a In
vest
men
t Gro
wth
Sch
eme-
2
(5,0
00
,00
0 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
50
,00
0,0
00
5
0,0
00
,00
0
-
-
50
,00
0,0
00
5
0,0
00
,00
0
-
-
1.4
4 S
iddh
arth
a Eq
uity
Fun
d
(96
7,74
8 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
9,6
77,4
80
9
,677
,48
0
-
-
9,6
77,4
80
9
,677
,48
0
-
-
1.4
5 S
agar
mat
ha In
sura
nce
Com
pany
Ltd
.
(7,8
86
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(I
nclu
des
3,6
46
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
5
,958
,320
5
,520
,20
0
-
-
5,9
58,3
20
5,5
20,2
00
-
-
1.4
6 N
irdha
n U
ttha
n B
ank
(3
,00
0 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
)
(Incl
udes
1,0
00
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
1
,920
,817
3
,04
5,0
00
-
-
1
,920
,817
3
,04
5,0
00
-
-
1.4
7 S
ana
Kis
an B
ikas
Ban
k
(
6,2
44
ord
inar
y sh
ares
of N
PR
10
0 p
aid
up)
(In
clud
es 1
,337
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
4
,90
9,50
7 8
,123,
44
4
-
-
4,9
09,
507
8,12
3,4
44
-
-
1.4
8 N
abil
Bal
ance
Fun
d -
2
(
2,0
00
,00
0 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
20
,00
0,0
00
1
9,8
00
,00
0
-
-
20
,00
0,0
00
1
9,8
00
,00
0
-
-
Sub
Tot
al 8
20,4
28,3
20
69
2,20
8,9
36
653
,08
8,3
38
49
5,9
96
,103
820
,428
,320
6
92,
208
,936
6
53,0
88
,338
4
95,
99
6,10
3 In
vest
men
t in
unqu
oted
equ
ity
1.1
Nep
al C
lear
ing
Hou
se L
td.
(6
9,4
86
pro
mot
er s
hare
s of
NP
R 1
00
pai
d up
)
(
Incl
udes
29,
914
nos
. of S
hare
s re
ceiv
ed a
s B
onus
Sha
res)
3
,49
6,7
00
2
1,6
66
,89
5 2
,30
2,6
00
8
,29
3,8
92
3,4
96
,70
0
21,
66
6,8
95
2,3
02,
60
0
8,2
93,
89
2
1.2
Pra
bhu
Cap
ital L
td
(121
,637
pro
mot
er s
hare
s of
NP
R 1
00
pai
d up
) 1
2,0
00
,00
0
12,
44
3,20
3 7
,50
0,0
00
1
0,2
78,4
28
12,
00
0,0
00
1
2,4
43,
203
7,5
00
,00
0
10
,278
,428
1.3
Gen
eral
Insu
ranc
e C
o. N
epal
Ltd
.
(
500
,00
0 o
rdin
ary
shar
es o
f NP
R 1
00
pai
d up
) 5
0,0
00
,00
0
53,
328
,571
5
0,0
00
,00
0
51,4
15,0
00
5
0,0
00
,00
0
53,
328
,571
5
0,0
00
,00
0
51,4
15,0
00
1.4
Ban
king
Fin
ance
and
Insu
ranc
e In
stit
ute
Of N
epal
(3
3,0
00
pro
mot
er s
hare
s of
NP
R 1
00
pai
d up
) 3
,00
0,0
00
3
,98
4,8
46
3
,00
0,0
00
3
,00
0,0
00
3
,00
0,0
00
3
,98
4,8
46
3
,00
0,0
00
3
,00
0,0
00
1.5
Mah
alax
mi L
ife In
surn
ace
Ltd.
(2
,00
0,0
00
pro
mot
er s
hare
s of
NP
R 1
00
pai
d up
) 2
00
,00
0,0
00
2
16,9
71,0
37
20
0,0
00
,00
0
20
0,0
00
,00
0
20
0,0
00
,00
0
216
,971
,037
2
00
,00
0,0
00
2
00
,00
0,0
00
1.6
Nab
il B
alan
ce F
und
- 2
(2,0
00
,00
0 o
rdin
ary
shar
es o
f NP
R 1
0 p
aid
up)
-
-
10
,00
0,0
00
1
0,0
00
,00
0
-
-
100
00
00
010
00
00
00
Sub
Tot
al 2
68
,49
6,7
00
3
08
,39
4,5
53
272
,80
2,6
00
2
82,
98
7,32
0
26
8,4
96
,70
0
30
8,3
94
,553
2
72,8
02,
60
0
28
2,9
87,
320
To
tal
1,0
88
,925
,020
1,
00
0,6
03,
48
8
925
,89
0,9
38
778
,98
3,4
24
1,0
88
,925
,020
1,0
00
,60
3,4
88
9
25,8
90
,938
7
78,9
83,
424
10th ANNUAL REPORT 2019/2020
135Mega Bank Nepal Limited
4.9 Current tax assetsAmount in NPR
4.10 Investment in subsidiariesAmount in NPR
4.10.1 Investment in quoted subsidiariesAmount in NPR
4.10.2 Investment in unquoted subsidiariesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Current tax assets 999,469,387 762,282,462 994,751,747 761,097,349 Current year income tax assets 999,469,387 762,282,462 994,751,747 761,097,349 Tax assets of prior periodsCurrent tax liabilities 673,984,892 710,570,595 669,338,697 710,570,595 Current year income tax liabilities 673,984,892 710,570,595 669,338,697 710,570,595 Tax liabilities of prior periodsTotal 325,484,495 51,711,867 325,413,049 50,526,754
ParticularsBank
As at 15 July 2020
As at 16 July 2019
Investment in quoted subsidiaries - - Investment in unquoted subsidiaries 200,000,000 200,000,000 Total investment 200,000,000 200,000,000 Less: Impairment allowances - - Net carrying amount 200,000,000 200,000,000
Particulars
BankAs at
15 July 2020As at
16 July 2019As at
15 July 2020As at
16 July 2019Cost Fair Value Cost Fair Value
- - - -Total - - - -
Current Tax Assets includes advance income tax paid by the Bank or on behalf of the Bank under self assessment tax returns filed as per section 94 and 95 of the Income Tax Act 2058. Simialrly, the current income tax liabilities includes the tax payable to the Inland Revenue Department computed as per the provision of section 96 of the Income Tax Act 2058.
Invetsment in subsidiary is consolidated as the Bank obtained control over the subsidiary and will cease when the bank loses control over the subsidiary. Specifically, the results of subsidiary acquired or disposed of during the year are included in the consolidated profit or loss account from the date the bank gains control until the date when the bank ceases to control the subsidiary. However, no such transaction took place during the period. All intragroup assets and liabilities, equity, income , expenses and cashflows relating to transactions between the members of the group are eliminated on consolidation.
Investement in subsidiries are carried at cost less any accumulated impairment losses. The Group has not determined an impairment as at reporting date due to the COVID -19 Pandemic.
The Bank's subsidiaries are not listed on the stock exchange as on the reporting date.
The Fair value of investment in subsidiary have been taken on the basis of book networth of subsidiary as at 31 Ashad 2076.
ParticularsBank
As at 15 July 2020 As at 16 July 2019Cost Fair Value Cost Fair Value
1.1 Mega Capital Markets Limited (2,000,000 Ordinary shares of Rs. 100 each) 200,000,000 217,637,589 200,000,000 205,873,357
Total 200,000,000 217,637,589 200,000,000 205,873,357
10th ANNUAL REPORT 2019/2020
136Mega Bank Nepal Limited
4.10.3 Information relating to subsidiaries of the Bank
4.10.4 Non controlling interest of the subsidiaries
Particulars
Bank
Percentage of ownershipheld by the Bank
As at 15 July 2020
As at 16 July 2019
Mega Capital Markets Limited 100 100
Total 100 100
Mega Capital Markets Limited has received operating license from Securities Exchange Board of Nepal (SEBON) at 1 April 2019.
Investment in associate is accounted for using the equity method.The carrying amount of the investment in associates is increased or decreased to recognised the Group’ s share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies. Unrealised gains and losses on transaction between the Group and its associate are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated ,the underlying asset is also tested for impairment.
Particulars
Group
As at 15 July 2020
...Ltd …Ltd. …Ltd …Ltd.
Equity interest held by NCI (%)Profit/(loss) allocated during the yearAccumulated balances of NCI as on Asar end……..Dividend paid to NCI
Particulars
BANK
As at 16 July 2019
...Ltd …Ltd. …Ltd …Ltd.
Equity interest held by NCI (%)Profit/(loss) allocated during the yearAccumulated balances of NCI as on Asar end……..Dividend paid to NCI
4.11 Investment in associatesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Investment in quoted associates 21,396,654 16,213,638 13,600,000 13,600,000
Investment in unquoted associates 23,543,964 - 25,000,000 -
Total investment 44,940,618 16,213,638 38,600,000 13,600,000
Less: Impairment allowances - - - -
Net carrying amount 44,940,618 16,213,638 38,600,000 13,600,000
As subsidiary of the Bank is wholly owned subsidiary, non controlling interest doesn’t exist on the reporting date.
10th ANNUAL REPORT 2019/2020
137Mega Bank Nepal Limited
4.11.1 Investment in quoted associatesAmount in NPR
4.11.4 Equity value of associatesAmount in NPR
4.11.2 Investment in unquoted associates
4.11.3 Information relating to associates of the Bank
Particulars
Group Bank
As at 15 July 2020 As at 16 July 2019 As at 15 July 2020 As at 16 July 2019
Cost Fair Value Cost Fair Value Cost Fair Value Cost Fair Value
Sparsha Laghubitta Bittiya Sanstha Ltd. (136,000 promoter shares of Rs. 100 each)
13,600,000 21,396,654 13,600,000 16,213,638 13,600,000 21,396,654 13,600,000 16,889,677
Total 13,600,000 21,396,654 13,600,000 16,213,638 13,600,000 21,396,654 13,600,000 16,889,677
ParticularsGroup
As at 15 July 2020
As at 16 July 2019
Sparsha Laghubitta Bittiya Sanstha Ltd. 21,396,654 16,213,638
Aviyan Laghubitta Bittiya Sanstha Ltd. 23,543,964 -
Total 44,940,618 16,213,638
Particulars
Group Bank
As at 15 July 2020 As at 16 July 2019 As at 15 July 2020 As at 16 July 2019
Cost Fair Value Cost Fair Value Cost Fair Value Cost Fair Value
"Aviyan Laghubitta Bittiya Sanstha Ltd. (25,000 promoter shares of Rs. 100 each)"
25,000,000 23,543,964 - - 25,000,000 23,543,964 - -
Total 25,000,000 23,543,964 - - 25,000,000 23,543,964 - -
Particulars
Group Bank
Percentage of ownershipheld by the Bank
Percentage of ownershipheld by the Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Sparsha Laghubitta Bittiya Sanstha Ltd. 16.39 16.39 16.39 16.39
Aviyan Laghubitta Bittiya Sanstha Ltd. 16.39 - 16.39 -
10th ANNUAL REPORT 2019/2020
138Mega Bank Nepal Limited
4.12 Investment propertiesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Investment properties measured at fair value
Balance as on Shrawan 1, 76 201,482,906 243,938,051 201,482,906 243,938,051
Addition/disposal during the year 2,431,000 (42,455,146) 2,431,000 (42,455,146)
Acquisition through business combination 15,983,410 - 15,983,410 -
Net changes in fair value during the year - - - -
Adjustment/transfer - - - -
Net amount 219,897,315 201,482,906 219,897,315 201,482,906
Investment properties measured at cost
Balance as on Shrawan 1, 76 - - - -
Addition/disposal during the year - - - -
Adjustment/transfer - - - -
Accumulated depreciation - - - -
Accumulated impairment loss - - - -
Net amount - - - -
Total 219,897,315 201,482,906 219,897,315 201,482,906
Land and Building owned under Non Banking Assets (NBA) are recorded in “Investment Property”. During the year, the bank has acquired on business combination with Gandaki Bikas Bank Limited a Non Banking Assets worth of NPR. 15,986,410/- Partywise details of Non Banking Assets as at reporting date are presented in note 4.12.
10th ANNUAL REPORT 2019/2020
139Mega Bank Nepal Limited
4.13
Pro
pert
y an
d Eq
uipm
ent
Am
ount
in N
PR
Part
icul
ars
Gro
up
Land
Bui
ldin
gLe
aseh
old
Prop
ertie
sC
ompu
ter &
A
cces
sorie
sVe
hicl
esFu
rnitu
re &
Fi
xtur
eM
achi
nery
Equi
pmen
t &
Oth
ers
As
at
15 J
uly
2020
Cos
t
As
on S
hraw
an 1
, 20
75 7
7,716
,250
2
5,56
5,12
4 2
32,8
59,3
90
1
13,2
87,4
52
216
,102,
054
9
7,60
6,0
34
-
238
,133,
864
1,0
01,
270,
168
Add
ition
dur
ing
the
Year
A
cqui
sitio
n -
-
3
3,42
0,6
72
39,
344,
876
2
5,0
37,0
54
16,
535,
417
-
68,
60
0,9
37
182
,938
,956
A
cqui
sitio
n th
roug
h bu
sine
ss c
ombi
natio
n -
-
-
-
-
-
-
-
-
C
apita
lizat
ion
-
-
-
-
-
-
-
-
-
Dis
posa
l dur
ing
the
year
-
-
(121
,039
) (2
0,20
3) (5
,29
2,0
64)
(1,10
0,6
46)
-
(920
,120)
(7,4
54,0
72)
Adj
ustm
ent/
Rev
alua
tion
-
-
(79
7,00
2) (4
75,0
11)
(113
,418
) (6
62,
735)
-
(582
,114)
(2,6
30,2
80)
Bal
ance
as
on A
sar e
nd 2
076
77,
716
,250
2
5,56
5,12
4
26
5,36
2,0
21
152
,137,
114
2
35,7
33,6
26
112
,378
,070
-
3
05,
232,
567
1,17
4,12
4,77
2
Add
ition
dur
ing
the
Year
A
cqui
sitio
n -
7
3,13
2,42
1 9
4,48
8,88
5 3
5,6
44,3
81
84,
548,
500
3
6,47
2,45
5 -
7
6,6
90,
082
4
00,
976
,723
A
cqui
sitio
n th
roug
h bu
sine
ss c
ombi
natio
n 9
0,56
4,80
0
5,7
65,
209
3
1,412
,09
6
20,
66
0,28
1 4
4,77
7,733
1
21,3
48,0
21
-
90,
269,
173
40
4,79
7,31
2
C
apita
lizat
ion
-
-
-
-
-
-
-
-
-
Dis
posa
l dur
ing
the
year
-
-
(3,8
02,
676
) (9
,244
) (3
9,81
0,79
8) (3
31,2
12)
-
(10,
408,
047
) (5
4,36
1,977
)
Adj
ustm
ent/
Rev
alua
tion
198,
823,
950
-
(7
97,0
02)
(76,
66
5) (1
13,4
18)
(149
,951
) -
(5
82,11
4) 1
97,1
04,
801
Bal
ance
as
on A
sar e
nd 2
077
36
7,10
5,0
00
10
4,4
62,
754
3
86,6
63,
324
2
08,
355,
867
325
,135,
64
2 2
69,
717,
382
-
46
1,20
1,6
61
2,12
2,6
41,6
31
Dep
reci
atio
n an
d Im
pairm
ent
As
on S
hraw
an 1
, 20
75 -
1
,079
,137
82,
640
,742
5
3,47
3,0
24
69,
397,1
91
39,
795,
783
-
87,
269,
655
3
33,6
55,5
33
Dep
reci
atio
n ch
arge
for t
he Y
ear
-
544
,357
2
8,83
6,54
7 2
0,20
4,45
8 2
6,39
3,0
19
8,3
85,10
5 -
2
4,72
8,70
5 1
09,
09
2,19
1
Impa
irmen
t for
the
year
-
-
-
-
-
-
-
-
-
Dis
posa
ls
-
-
(58,
220)
(5,4
56)
(1,9
31,2
69)
(70
7,58
9) -
(4
05,
223)
(3,10
7,756
)
Adj
ustm
ent
-
-
-
-
-
1,18
6
-
-
1,18
6
As
on A
sar
end
2076
-
1,6
23,4
94
1
11,4
19,0
69
7
3,6
72,0
26
93,
858,
941
4
7,47
4,4
86
-
111
,59
3,13
8 4
39,6
41,15
4
Dep
reci
atio
n ch
arge
for t
he Y
ear
-
557
,49
4
34,
734,
777
24,
856
,934
2
8,12
3,9
36
11,1
78,8
68
-
31,
424
,44
5 1
30,8
76,4
53
Impa
irmen
t for
the
year
-
-
-
-
-
-
-
-
-
Dis
posa
ls
-
-
(2,8
99,
376)
(4,6
47)
(29,
96
1,41
0) (1
13,4
13)
-
(7,17
3,53
4) (4
0,15
2,37
9)
Adj
ustm
ent
-
-
(4,3
03,
107)
(538
,375
) (5
24,6
37)
(14
5,83
9) -
(1
,113,
332)
(6,6
25,2
91)
As
on A
sar e
nd 2
077
-
2,18
0,9
88
138
,951
,36
3 9
7,9
85,9
38
91,
49
6,8
29
58,
394,
102
-
134
,730
,717
5
23,7
39,9
37
Cap
ital W
ork
in P
rogr
ess
as o
n A
sar e
nd 2
076
-
-
12,
187,
360
-
-
-
-
-
1
2,18
7,36
0
Cap
ital W
ork
in P
rogr
ess
as o
n A
sar e
nd 2
077
-
-
2,0
36,4
19
-
-
-
-
-
2,0
36,4
19
Net
Boo
k Va
lue
36
7,10
5,0
00
1
02,
281,
766
2
49,
748,
379
1
10,3
69,
929
2
33,6
38,8
13
211
,323
,280
-
3
26,4
70,9
44
1
,60
0,9
38,11
3
As
on A
sar e
nd 2
076
77,
716
,250
2
3,9
41,6
30
16
6,13
0,31
2 7
8,4
65,
087
1
41,8
74,6
85
64,
90
3,58
4
-
19
3,6
39,4
29
74
6,6
70,9
78
As
on A
sar e
nd 2
077
36
7,10
5,0
00
1
02,
281,
766
2
49,
748,
379
1
10,3
69,
929
2
33,6
38,8
13
211
,323
,280
-
3
26,4
70,9
44
1
,60
0,9
38,11
3
Con
tinun
ed...
10th ANNUAL REPORT 2019/2020
140Mega Bank Nepal Limited
Part
icul
ars
Ban
k
Land
Bui
ldin
gLe
aseh
old
Prop
ertie
sC
ompu
ter &
A
cces
sorie
sVe
hicl
esFu
rnitu
re &
Fi
xtur
eM
achi
nery
Equi
pmen
t &
Oth
ers
As
at
15 J
uly
2020
Cos
tA
s on
Shr
awan
1, 2
075
77,7
16,2
50
25,
565,
124
232
,859
,39
0
113
,287
,452
2
16,10
2,0
54
97,6
06,
034
-
2
38,13
3,86
4 1
,00
1,27
0,16
8 A
dditi
on d
urin
g th
e Ye
ar
Acq
uisi
tion
-
-
30,
102,
242
35,
720,
076
2
1,037
,054
1
5,9
42,4
35
-
67,
377,
96
6
170
,179,
772
A
cqui
sitio
n th
roug
h bu
sine
ss c
ombi
natio
n -
-
-
-
-
-
-
-
-
Cap
italiz
atio
n -
-
-
-
-
-
-
-
-
D
ispo
sal d
urin
g th
e ye
ar -
-
(1
21,0
39)
(10,
203)
(5,2
92,
06
4) (1
,100,
646
) -
(9
20,12
0) (7
,444
,072
)A
djus
tmen
t/R
eval
uatio
n -
-
(7
97,0
02)
(475
,011
) (1
13,4
18)
(66
2,73
5) -
(5
82,11
4) (2
,630
,280
)B
alan
ce a
s on
Asa
r end
20
76 7
7,71
6,2
50
25,
565,
124
2
62,
04
3,59
1 1
48,
522,
313
231
,733
,626
1
11,7
85,0
88
-
30
4,0
09,
596
1
,161,
375,
588
Add
ition
dur
ing
the
Year
A
cqui
sitio
n -
7
3,13
2,42
1 9
4,47
7,29
3 3
5,51
3,78
1 8
4,16
6,6
00
3
6,45
2,87
9
-
76,
69
0,0
82
40
0,43
3,0
55
A
cqui
sitio
n th
roug
h bu
sine
ss c
ombi
natio
n 9
0,56
4,80
0
5,7
65,
209
3
1,412
,09
6
20,
66
0,28
1 4
4,77
7,733
1
21,3
48,0
21
-
90,
269,
173
40
4,79
7,31
2
Cap
italiz
atio
n -
-
-
-
-
-
-
-
-
D
ispo
sal d
urin
g th
e ye
ar -
-
(3
,80
2,6
76)
(8,3
05)
(39,
810,
798)
(331
,212
) -
(1
0,40
8,0
47)
(54,
361,0
38)
Adj
ustm
ent/
Rev
alua
tion
198,
823,
950
-
(7
97,0
02)
(77,6
04)
(113
,418
) (1
49,9
51)
-
(582
,114)
19
7,10
3,86
2 B
alan
ce a
s on
Asa
r end
20
77 3
67,
105,
00
0
104,
46
2,75
4
383
,333
,30
2 2
04,
610
,46
7 3
20,7
53,7
42
26
9,10
4,82
5 -
4
59,9
78,6
90
2
,109,
348,
779
D
epre
ciat
ion
and
Impa
irmen
tA
s on
Shr
awan
1,
2075
-
1,0
79,13
7 8
2,6
40,7
42
53,
473,
024
6
9,39
7,19
1 3
9,79
5,78
3 -
8
7,26
9,6
55
333
,655
,533
D
epre
ciat
ion
char
ge fo
r the
Yea
r -
5
44,3
56
28,
708,
355
19,
936
,237
2
5,9
19,5
95
8,3
47,9
22
-
24,
635
,726
1
08,
09
2,19
1 Im
pairm
ent f
or th
e ye
ar -
-
-
-
-
-
-
-
-
D
ispo
sals
-
-
(5
8,22
0) (5
,456
) (1
,931
,26
9) (7
07,
589)
-
(40
5,22
5) (3
,107,7
58)
Adj
ustm
ent
-
-
-
-
-
1,18
6
-
-
1,18
6
As
on A
sar
end
2076
-
1,6
23,4
94
1
11,2
90,
877
73,
40
3,80
5 9
3,38
5,51
6
47,
437
,30
3 -
1
11,5
00,
157
438
,641
,152
Dep
reci
atio
n ch
arge
for t
he Y
ear
-
557
,49
4 3
4,48
7,53
5 2
4,41
4,9
26
27,7
09,
767
11,1
33,6
70
-
31,3
33,6
44
129
,637
,034
Im
pairm
ent f
or th
e ye
ar -
-
-
-
-
-
-
-
-
D
ispo
sals
-
-
(2
,89
9,37
6) (4
,647
) (2
9,9
61,4
10)
(113
,413
) -
(7
,173,
534)
(40,
152,
379)
Adj
ustm
ent
-
-
(4,3
03,
107)
(538
,375
) (5
24,6
37)
(145
,839
) -
(1
,113,
332)
(6,6
25,2
91)
As
on A
sar e
nd 2
077
-
2,18
0,9
87
138
,575
,929
9
7,27
5,70
9
90,
60
9,23
6
58,
311,
721
-
134
,54
6,9
34
521
,50
0,51
5 C
apita
l Wor
k in
Pro
gres
s as
on
Asa
r 20
77 -
-
2
,036
,419
-
-
-
-
-
2
,036
,419
C
apita
l Wor
k in
Pro
gres
s as
on
Asa
r 20
76 -
-
1
2,18
7,36
0
-
-
-
-
-
12,
187,
360
N
et B
ook
Valu
e 3
67,
105,
00
0
10
2,28
1,76
7 2
46
,79
3,79
1 1
07,
334,
758
230
,144,
507
210
,79
3,10
4
-
325
,431
,756
1
,589
,884
,682
A
s on
Asa
r end
20
76 7
7,71
6,2
50
23,
941
,631
1
62,
94
0,0
73
75,
118,
508
138
,34
8,11
0
64,
347,
785
-
19
2,50
9,4
39
734
,921
,79
4
As
on A
sar e
nd 2
077
36
7,10
5,0
00
1
02,
281,
767
24
6,7
93,
791
10
7,33
4,75
8 2
30,14
4,50
7 2
10,7
93,
104
-
3
25,4
31,7
56
1,5
89,8
84,6
82
Not
es1.
Dur
ing
the
year
, the
Ban
k ac
quire
d P
rope
rty
Pla
nt a
nd E
quip
men
t to
the
aggr
egat
e va
lue
of N
PR
40
0,4
33,0
55/-
(20
19-
NP
R 1
70,17
9,77
2/-)
.
2. P
rope
rty,
Pla
nt a
nd E
quip
men
t al
so in
clud
es a
sset
s ac
quire
d on
bus
ines
s co
mbi
natio
n w
ith G
anda
ki B
ikas
Ban
k Li
mite
d du
ring
the
year
and
agg
rega
red
val
ue o
f N
PR
4
04,
797,
312/
- (w
ritte
n do
wn
Valu
e {C
ost l
ess
Acc
umul
ated
dep
reci
atio
n})
3. T
here
wer
e no
Pro
pert
y, P
lant
and
Equ
ipm
ent i
dent
ified
as
tem
pora
rily
idle
as
at th
e da
te o
f the
Sta
tem
ent o
f Fin
anci
al P
ositi
on.
4.
No
asse
ts h
ave
been
ple
dged
by
the
Ban
k.
5.
The
Ban
k m
easu
res
land
at r
eval
ued
amou
nts
with
gai
ns in
fair
valu
e be
ing
reco
gnis
ed in
Sta
tem
ent o
f Oth
er C
ompr
ehen
sive
Inco
me.
An
inde
pend
ent v
alua
tion
spec
ilists
was
en
gage
d to
ass
ess
the
fair
valu
e du
ring
the
year
for t
he re
valu
atio
n of
land
. Lan
ds w
ere
valu
ed b
y re
fere
nce
to m
arke
t -b
ased
evi
denc
e, u
sing
cam
para
ble
pric
e ad
just
ed fo
r sp
ecifi
c m
arke
t fac
tors
suc
h as
nat
ure,
loca
tion
and
cond
ition
of p
rope
rty.
6
. A
s a
resu
lt of
the
Cov
id -
19 o
utbr
eak
in t
he c
ount
ry in
mid
mar
ch 2
020
, it
has
been
con
clud
ed t
hat
ther
e is
no
adju
stm
ent
requ
ired
for
impa
irmen
t of
pro
pert
y, p
lant
and
eq
uipm
ent.
10th ANNUAL REPORT 2019/2020
141Mega Bank Nepal Limited
4.14 Goodwill and Intangible AssetsAmount in NPR
Particulars
Group
GoodwillSoftware
Other As at 15 July 2020Purchased Developed
Cost
As on Shrawan 1, 2075 - 70,250,202 - - 70,250,202
Addition during the Year - - - - -
Acquisition - 37,272,346 - - 37,272,346
Acquisition through business combination - - - - -
Capitalization - - - - -
Disposal during the year - (113,000) - - (113,000)
Adjustment/Revaluation - (45,200) - - (45,200)
Balance as on Asar end 2076 - 107,364,349 - - 107,364,349
Addition during the Year
Acquisition - 29,815,041 - - 29,815,041
Acquisition through business combination 207,849,581 975,528 - - 208,825,109
Capitalization - - - - -
Disposal during the year - - - - -
Adjustment/Revluation - (45,200) - - (45,200)
Balance as on Asar end 2077 207,849,581 138,109,717 - - 345,959,298
Amortization and Impairment
As on Shrawan 1, 2075 - 44,575,220 - - 44,575,220
Amortization charge for the Year - 8,372,549 - - 8,372,549
Impairment for the year - - - - -
Disposals - - - - -
Adjustment - - - - -
As on Asar end 2076 - 52,947,769 - - 52,947,769
Amortization charge for the Year - 16,085,428 - - 16,085,428
Impairment for the year - - - - -
Disposals - - - - -
Adjustment - - - - -
As on Asar end 2077 - 69,033,197 - - 69,033,197
Capital Work in Progress as at Asar end 2076 - - - - -
Capital Work in Progress as at Asar end 2077 - 195,000 - - 195,000
Net Book Value 207,849,581 69,271,520 - - 277,121,102
As on Asar end 2076 - 54,416,580 - - 54,416,580
As on Asar end 2077 207,849,581 69,271,520 - - 277,121,102
Continuned...
10th ANNUAL REPORT 2019/2020
142Mega Bank Nepal Limited
Particulars
Bank
GoodwillSoftware
Other As at 15 July 2020Purchased Developed
Cost
As on Shrawan 1, 2075 - 70,250,202 - - 70,250,202
Addition during the Year - - - - -
Acquisition - 36,811,596 - - 36,811,596
Acquisition through business combination - - - - -
Capitalization - - - - -
Disposal during the year - (113,000) - - (113,000)
Adjustment/Revaluation - (45,200) - - (45,200)
Balance as on Asar end 2076 - 106,903,599 - - 106,903,599
Addition during the Year
Acquisition - 29,331,966 - - 29,331,966
Acquisition through business combination 207,849,581 975,528 - - 208,825,109
Capitalization - - - - -
Disposal during the year - - - - -
Adjustment/Revaluation - (45,200) - - (45,200)
Balance as on Asar end 2077 207,849,581 137,165,892 - - 345,015,473
Amortization and Impairment
As on Shrawan 1, 2075 - 44,575,220 - - 44,575,220
Amortization charge for the Year - 8,354,165 - - 8,354,165
Impairment for the year - - - - -
Disposals - - - - -
Adjustment - - - - -
As on Asar end 2076 - 52,929,385 - - 52,929,385
Amortization charge for the Year - 15,968,305 - - 15,968,305
Impairment for the year - - - - -
Disposals - - - - -
Adjustment - - - - -
As on Asar end 2077 - 68,897,691 - - 68,897,691
Capital Work in Progress as at Asar end 2076 - - - - -
Capital Work in Progress as at Asar end 2077 - 195,000 - - 195,000
Net Book Value 207,849,581 68,463,202 - - 276,312,782
As on Asar end 2076 - 53,974,213 - - 53,974,213
As on Asar end 2077 207,849,581 68,463,202 - - 276,312,782
1. During the year, the Bank acquired intangible assets to the aggregate value of Rs. 29,331,966/- (2019- Rs.36,811,596/-).
2. Intangible assets also includes assets acquired on Business combinatation with Gandaki Bikas Bank Limited during the year and aggregared Value of Rs.975,528/- (Written down value {Cost less Accumulated depreciation}).
3. Goodwill arises on acquisition of Gandaki Bikas Bank Limited is explained in details in note 4.9.
10th ANNUAL REPORT 2019/2020
143Mega Bank Nepal Limited
4.15 Deferred TaxAmount in NPR
Particulars
Group Bank
As at 15 July 2020 As at 15 July 2020
Deferred Tax Assets
Deferred Tax Liabilities
Net Deferred Tax Assets/(Liabilities)
Deferred Tax Assets
Deferred Tax Liabilities
Net Deferred Tax Assets/(Liabilities)
Deferred tax on temporory differences on following items
Loan and Advance to B/FIs - - - - - -
Loans and advances to customers - - - - - -
Investment properties - - - - - -
Investment securities 26,496,459 - 26,496,459 26,496,459 - 26,496,459
Property & equipment - (92,133,216) (92,133,216) - (91,373,875) (91,373,875)
Employees' defined benefit plan 85,337,486 - 85,337,486 85,226,147 - 85,226,147
Lease liabilities 18,006,906 - 18,006,906 17,919,698 - 17,919,698
Provisions 3,286,478 - 3,286,478 3,906,700 - 3,906,700
Other temporory differences - - - - - -
Deferred tax on temporory differences 133,127,328 (92,133,216) 40,994,113 133,549,004 (91,373,875) 42,175,130
Deferred tax on carry forward of unused tax losses
- 639,710 639,710 - 639,709 639,709
Deferred tax due to changes in tax rate - - - - - -
Net Deferred tax asset/(liabilities) as on year end of 2077
- - 41,633,823 - - 42,814,840
Deferred tax (asset)/liabilities as on Shrawan 1, 2076
- - (77,846,888) - - (78,193,559)
Deferred tax (asset)/liabilities taken over on acquisition with Gandaki Bikas Bank Ltd.
- - (37,702,201) - - (37,702,201)
Adjusted balance at Shrawan 1, 2076 - - (115,549,089) - - (115,895,760)
Origination/(Reversal) during the year - - (73,915,266) - - (73,080,920)
Deferred tax expense/(income) recognised in profit or loss
- - (10,496,250) - - (11,330,597)
Deferred tax expense/(income) recognised in other comprehensive income
- - 84,411,516 - - 84,411,517
Deferred tax expense/(income) recognised in directly in equity
- - - - - -
10th ANNUAL REPORT 2019/2020
144Mega Bank Nepal Limited
Particulars
Group Bank
As at 16 July 2019 As at 16 July 2019
Deferred Tax Assets
Deferred Tax Liabilities
Net Deferred Tax Assets/(Liabilities)
Deferred Tax Assets
Deferred Tax Liabilities
Net Deferred Tax Assets/(Liabilities)
Deferred tax on temporory differences on following items
Loan and Advance to B/FIs - - - - - -
Loans and advances to customers - - - - - -
Investment properties - - - - - -
Investment securities 44,072,254 - 44,072,254 44,072,254 - 44,072,254
Property & equipment - (25,955,957) (25,955,957) - (25,609,287) (25,609,287)
Employees' defined benefit plan 44,933,404 - 44,933,404 44,933,404 - 44,933,404
Lease liabilities 10,037,542 - 10,037,542 10,037,542 - 10,037,542
Provisions 3,906,700 - 3,906,700 3,906,700 - 3,906,700
Other temporory differences - - - - - -
Deferred tax on temporory differences
102,949,900 (25,955,957) 76,993,943
102,949,900 (25,609,287) 77,340,613
Deferred tax on carry forward of unused tax losses - 852,946 852,946 - 852,946 852,946
Deferred tax due to changes in tax rate - - - - - -
Net Deferred tax asset/(liabilities) as on year end of 2076 - - 77,846,888 - - 78,193,559
Deferred tax (asset)/liabilities as on Shrawan 1, 2075 - -
(45,973,627) - - (45,973,627)
Origination/(Reversal) during the year - - 31,873,261 - - 32,219,932
Deferred tax expense/(income) recognised in profit or loss - -
(15,696,271) - - (16,042,942)
Deferred tax expense/(income) recognised in other comprehensive income
- - (16,176,990) - - (16,176,990)
Deferred tax expense/(income)recognised in directly in equity - - - - - -
Deferred tax assets have been recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.
10th ANNUAL REPORT 2019/2020
145Mega Bank Nepal Limited
4.16 Other assetsAmount in NPR
4.17 Due to Bank and Financial InstitutionsAmount in NPR
4.18 Due to Nepal Rastra BankAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Assets held for sale - - - -
Other non banking assets - - - -
Bills receivable - - - -
Accounts receivable 69,014,629 17,610,943 60,140,622 17,610,943
Accrued income - - - -
Prepayments and deposit 57,310,408 36,538,181 56,756,669 36,271,718
Income tax deposit 20,316,801 20,316,801 20,316,801 20,316,801
Prepaid (deferred) employee expenditure 389,663,140 163,477,515 389,663,140 163,477,515
Other 462,424,162 290,889,455 462,424,162 290,724,593
a. Bullion stock settlement 375,108,442 - 375,108,442 -
b. Stock of Stationery 31,253,282 27,293,743 31,253,282 27,293,743
c. Others 56,062,438 263,595,711 56,062,438 263,430,850
Total 998,729,143 528,832,895 989,301,393 528,401,571
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Money market deposits - - - -
Interbank borrowing 216,541,805 - 216,541,805 -
Settlement and clearing accounts - - - -
Other deposits from BFIs 3,998,392,965 3,858,038,117 3,998,392,965 3,858,038,117
Total 4,214,934,770 3,858,038,117 4,214,934,770 3,858,038,117
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Refinance from NRB 614,534,631 731,802,989 614,534,631 731,802,989
Standing Liquidity Facility - - - -
Lender of last report facility from NRB - - - -
Securities sold under repurchase agreements - - - -
Other payable to NRB - - - -
Total 614,534,631 731,802,989 614,534,631 731,802,989
Others include deposit awating disposal,advance and others given to staff for official purpose.
The balances in accounts maintained with the Bank by other local financial institutions have been presented under this head. Interbank borrowing, interbank deposit, balances on settlement and clearing accounts as well as other amount due to bank and financial institution is presented under due to bank and financial institutions.
The amount payable to NRB shall include amount of refinance facilities, standing liquidity facility, lender of last resort, sale and repurchase agreements, deposit from NRB etc.
10th ANNUAL REPORT 2019/2020
146Mega Bank Nepal Limited
4.19 Derivative financial instrumentsAmount in NPR
4.20 Deposits from customersAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Held for trading - - -
Interest rate swap - - - -
Currency swap - - - -
Forward exchange contract - - - -
Others - - - -
Held for risk management - - -
Interest rate swap - - - -
Currency swap - - - -
Forward exchange contract - - - -
Other - - - -
Total - - - -
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Institutions customers: 57,176,755,958 39,047,239,044 57,192,644,757 39,111,710,368
Term deposits 36,777,769,520 19,043,636,905 36,777,769,520 19,043,636,905
Call deposits 10,835,194,612 15,000,543,654 10,851,083,411 15,065,014,978
Current deposits 8,718,115,218 4,294,253,020 8,718,115,218 4,294,253,020
Other 845,676,608 708,805,465 845,676,608 708,805,465
Individual customers: 70,700,979,445 38,889,156,925 70,700,979,445 38,889,156,925
Term deposits 36,410,010,926 17,331,482,151 36,410,010,926 17,331,482,151
Saving deposits 33,005,916,973 20,796,608,551 33,005,916,973 20,796,608,551
Current deposits 784,962,008 669,288,041 784,962,008 669,288,041
Other 500,089,538 91,778,182 500,089,538 91,778,182
Sub total 127,877,735,403 77,936,395,969 127,893,624,202 78,000,867,293
Interest payable 990,300 683,991,784 990,300 683,991,784
Total 127,878,725,703 78,620,387,753 127,894,614,502 78,684,859,077
A significant part of the derivatives in the portfolio are related to non-deliverable forwards (NDFs) for trading purpose and remaining part are of foreign exchange forward contract for servicing corporate clients and manage its exposures in their risk management to hedge, e.g. foreign currency exposures. These products are used by Bank as part of its own regular treasury activities. From a risk perspective, Foreign Exchange Forward Constracts and NDFs have been netted-off in the financial statement. Further, Previous year figures have been reclassified and presented in same manner.
10th ANNUAL REPORT 2019/2020
147Mega Bank Nepal Limited
4.20.1 Currency wise analysis of deposit from customersAmount in NPR
4.21 BorrowingAmount in NPR
4.22 ProvisionsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Nepalese rupee 127,278,271,947 77,059,351,001 127,294,160,746 77,129,802,838
Indian rupee - - - -
United State dollar 580,316,199 1,539,097,151 580,316,199 1,539,097,151
Great Britain pound 17,312,116 20,665,033 17,312,116 13,243,556
Euro 2,813,341 1,264,074 2,813,341 2,704,601
Japenese yen 12,100 10,495 12,100 10,931
Chinese yuan - - - -
Other - - - -
Total 127,878,725,703 78,620,387,753 127,894,614,502 78,684,859,077
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Domestic Borrowing
Nepal Government - - - -
Other Institutions - - - -
Other - - - -
Sub total - - - -
Foreign BorrowingForeign Bank and Financial Institutions 2,440,271,029 - 2,440,271,029 -
Multilateral Development Banks - - - -
Other Institutions - - - -
Sub total 2,440,271,029 - 2,440,271,029 - Total 2,440,271,029 - 2,440,271,029 -
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Provisions for redundancy - - - -
Provision for restructuring - - - -
Pending legal issues and tax litigation - - - -
Onerous contracts - - - -
Other - - - -
Total - - - -
Currency wise details include NPR equivalent value of deposit on different currencies as on reporting date. The conversion has been done at closing spot rate.
During the reporting period, the loan was borrowed on date 17th March 2020 and is due for repayment in full on16th March 2023. The bank loan carries interest rate at aggregate of the applicable Margin; and LIBOR percent per annum.
10th ANNUAL REPORT 2019/2020
148Mega Bank Nepal Limited
4.22.1 Movement in provisionAmount in NPR
4.23 Other liabilitiesAmount in NPR
4.23.1 Defined benefit obligations - GratuityAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Balance at Shrawan, 75 - - - -
Provisions made during the year - - - -
Provisions used during the year - - - -
Provisions reversed during the year - - - -
Unwind of discount - - - -
Balance at Ashadh end - - - -
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Liability for employees defined benefit obligations 182,302,790 95,312,702 181,806,738 95,090,586
Liability for long-service leave 102,631,007 54,687,426 102,280,420 54,687,426
Short-term employee benefits - - - -
Bills payable 52,546,965 59,593,251 52,546,965 59,593,251
Creditors and accruals 58,333,826 45,545,778 55,595,756 45,545,778
Interest payable on deposit - - - -
Interest payable on borrowing - - - -
Liabilities on defered grant income 9,060,968 11,109,887 9,060,968 11,109,887
Unpaid Dividend 274,306,401 160,071,003 274,306,401 160,071,003
Liabilities under Finance Lease - - - -
Employee bonus payable 291,596,402 258,904,052 291,596,402 258,105,030
Other 1,304,263,210 323,305,653 1,302,872,532 321,034,615
Total 2,275,041,569 1,008,529,753 2,270,066,182 1,005,237,576
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
The amounts recognised in the statement of financial position are as follows:
Present value of funded obligations 182,302,790 95,312,702 181,806,738 95,090,586
Total present value of obligations 182,302,790 95,312,702 181,806,738 95,090,586
Fair value of plan assets - - - -
Present value of net obligations 182,302,790 95,312,702 181,806,738 95,090,586
Recognised liability for defined benefit obligations 182,302,790 95,312,702 181,806,738 95,090,586
Liabilities relating to employees benefits like liabilities for defined benefit obligation gratuity and pension fund, liabilities for long-service leave,short-term employee benefits etc.,Creditors and accruals, unearned income, unpaid dividend etc. are presented under account head ”Other liabilities”. As at 15 July 2020, employment defined benefit obligation and long -service leave of the Bank was actuarially valued under Projected Unit Credit Method. Liability for the long service leave consists of annual leave & sick leave.
Items in sub-heading named “Other” includes margin good for payment, unidentified deposits, accounts payable etc.
10th ANNUAL REPORT 2019/2020
149Mega Bank Nepal Limited
4.23.2 Plan assetsAmount in NPR
4.23.3 Movement in the present value of defined benefit obligationsAmount in NPR
4.23.4 Movement in the fair value of plan assetsAmount in NPR
4.23.5 Amount recognised in profit or lossAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Plan assets comprise:
Equity securities - - - -
Government bonds - - - -
Bank deposit - - - -
Other - - - -
Total - - - -
Actual return on plan assets
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Defined benefit obligations at Shrawan 1 95,090,586 68,051,779 95,090,586 68,051,779
Actuarial losses (14,510,928) 8,195,366 (14,510,928) 8,195,366
Benefits paid by the plan (3,783,731) (4,023,010) (3,783,731) (4,023,010)
Current service costs and interest 30,879,142 22,866,451 30,879,142 22,866,451
Acquisition/Business Combination 74,131,669 - 74,131,669 -
Defined benefit obligations at Asar end 181,806,738 95,090,586 181,806,738 95,090,586
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Fair value of plan assets at Shrawan 1 - - - -
Contributions paid into the plan - - - -
Benefits paid during the year - - - -
Actuarial (losses) gains - - - -
Expected return on plan assets - - - -
Fair value of plan assets at Asar end - - - -
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Current service costs 22,520,954 16,882,404 22,520,954 16,882,404
Interest on obligation 8,358,188 5,984,047 8,358,188 5,984,047
Expected return on plan assets - -
Total 30,879,142 22,866,451 30,879,142 22,866,451
10th ANNUAL REPORT 2019/2020
150Mega Bank Nepal Limited
4.23.6 Amount recognised in other comprehensive incomeAmount in NPR
4.23.7 Actuarial assumptionsAmount in NPR
4.24 Debt securities issuedAmount in NPR
4.25 Subordinated LiabilitiesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Actuarial (gain)/loss (14,510,928) 8,195,366 (14,510,928) 8,195,366
Total (14,510,928) 8,195,366 (14,510,928) 8,195,366
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Discount rate 9% 9% 9% 9%
Expected return on plan asset 0% 0% 0% 0%
Future salary increase 8% 8% 8% 8%
Withdrawal rate 10% 10% 10% 10%
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Debt securities issued designated as at fair value through profit or loss - - - -
Debt securities issued at amortised cost - - - -
Total - - - -
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Redeemable preference shares - - - -
Irredemable cumulative preference shares (liabilities component) - - - -
Other - - - -
Total - - - -
10th ANNUAL REPORT 2019/2020
151Mega Bank Nepal Limited
4.26 Share capitalAmount in NPR
4.26.1 Ordinary sharesAmount in NPR
4.26.2 Ordinary share ownershipAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Ordinary shares 13,138,621,453 10,388,621,453 13,138,621,453 10,388,621,453
Convertible preference shares (equity component only) - - - -
Irredemable preference shares (equity component only) - - - -
Perpetual debt (equity component only) - - - -
Total 13,138,621,453 10,388,621,453 13,138,621,453 10,388,621,453
ParticularsBank
As at 15 July 2020 As at 16 July 2019
Authorized Capital 14,500,000,000 11,500,000,000
145,000,000 Ordinary share of Rs. 100 each 14,500,000,000 11,500,000,000
Issued capital 13,322,695,416 10,469,600,540
133,226,954.16 Ordinary share of Rs. 100 each 13,322,695,416 10,469,600,540
Subscribed and paid up capital 13,138,621,453 10,388,621,454
131,386,214.53 Ordinary share of Rs. 100 each 13,138,621,453 10,388,621,454
Total 13,138,621,453 10,388,621,454
Capial Structure and Paid Up CapitalThe capital Structure of the Bank has been presented as Under.a) The Changes in Paid up Capital of the Bank during FY 2076/77 is disclosed in the below table.
Particular Amount in NPR
Opening balance of Share Capital 10,388,621,453
Consideration transferred arising from the Capital increase of Mega Bank Nepal Limited 2,750,000,000
Proposed bonus share paid during the year -
Total 13,138,621,453
Particulars
Bank
As at 15 July 2020 As at 16 July 2019
Percent Amount Percent Amount
Domestic ownership
Nepal Government
"A" class licensed institutions
Other licensed intitutions
Other Institutions
Public 49.03 6,496,488,855 49.03 5,093,988,810
Other 50.97 6,642,132,598 50.97 5,294,632,643
Foreign ownership
Total 100 13,138,621,453 100 10,388,621,454
10th ANNUAL REPORT 2019/2020
152Mega Bank Nepal Limited
4.27 ReservesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Statutory general reserve 2,377,997,358 1,339,301,209 2,376,759,091 1,339,301,209
Exchange equilisation reserve 11,103,596 3,679,906 11,103,596 3,679,906
Corporate social responsibility reserve 18,852,030 21,937,688 18,728,203 21,937,688
Capital redemption reserve - - - -
Regulatory reserve 402,372,587 586,758,225 402,372,587 586,758,225
Investment adjustment reserve 12,000,000 7,500,000 12,000,000 7,500,000
Capital reserve - - - -
Assets revaluation reserve 176,668,240 37,491,475 176,668,240 37,491,475
Fair value reserve (61,825,071) (102,835,260) (61,825,071) (102,835,260)
Dividend equalisation reserve - - - -
Actuarial gain/(loss) (12,134,977) 4,982,761 (12,134,977) 4,982,761
Special reserve - - - -
Other reserve 2,593,372 2,593,372 2,593,372 2,593,372
Total 2,927,627,134 1,901,409,376 2,926,265,039 1,901,409,376
Statutory General Reserve:There is a regulatory requirement as per the provision of Bank and Financial Institution Act (BAFIA) 2073 to set aside 20% of the net profit every year as general reservel until thesuch reserve fund balance is twice the paid up share capital of the Bank. This is the statutory reserve and is restricted for use by the Bank. Exchange Equalisation reserve:As per the provision of BAFIA 2073, every financial year, BFI has to account for revaluation profit of foreign currency resulting from changes in foreign exchange rate, in its Profit or Loss Account at the end of its financial year. If such revaluation profit has been recognized in the profit or loss account at the end of financial year then 25% of such profit other than Indian Currency, must be appropriated to Exchange Equalizattion Reserve. Corporate Social Responsibility Reserve:Bank has regulatory requirement to set aside 1% of the net profit for corporate social responsibility activities. Regulatory reserve:As per the provision of NRB directives, there is a regulatory requirement to allocate the amount from retained earnings of the Bank to regulatory reserve account. The amount allocated to the this type of reserve are amount equal to the interest accrual but not received, deferred tax asset, Equity Investment Provision, Non-banking Asset Provision, etc. Amount in this account is not distributable until any guidance or approval received from the regulator. The interest on Loan & Advances accrued up to Asar end 2077 (15th July, 2020) but realized up to Ashwin end 2077 (16th October, 2020) has not been transferred to Regulatory Reserve in line with the provisions of Unified Directive 2077 issued by Nepal Rastra Bank. Such realized interest (Rs.1308,773,340.23) has been presented in Retained Earnings.Further, Provison of Non Banking Assets (Rs.132,980,000) previously carried in regulatory reserve has been transferred to retained earning as related Non Banking Assets (NBA) was disposed of after balance sheet date. However, Non Banking Asset has continued to reflect under Investment property as the asset subsist at Asar end 2077 (15th July,2020).
10th ANNUAL REPORT 2019/2020
153Mega Bank Nepal Limited
Assets revaluation reserve:The assets revaluation reserve represents the revaluation of land owned by the Bank where net of cumulative gain/loss transferred to retained earnings upon disposal. Fair value Reserve:The fair value reserve represents the cumulative gain and losses arising on the revaluation of investment in equity instruments designated at FVOCI, net of cumulative gain/loss shall be accounted using para 3.2.12, NFRS 9, upon disposal. Actuarial gain/(loss):Bank has apportioned actuarial gain/(loss) under this. In the event of loss the same amount has been charged to retained earnings and conversely, the amount of losses shall be credited to retained earning on actuarial gain. Other reserve:During FY 2072/73, the Bank in compliance with NRB Circular 12/72/73 had set aside Interest Capitalization Reserve of Rs. 2,593,372/-. Since the loans & advances qualifying under this provision of the circular (interest capitalization relaxation provision) have not been fully settled during this fiscal year, Interest Capitalization Reserve has not been changed.
Particulars As at 16 July 2020 As at 16 July 2019
Accrued Interest income 231,479,499 143,727,415
Deferred tax Asset 42,175,130 78,193,559
Equity Investment provision 61,825,072 163,354,345
Depreciation - -
Non-Banking Asset 54,757,909 201,482,906
Actuarial Loss 12,134,977 -
Taken over of reserves as a result of business combination with Gandaki Bikas Bank Limited - 651,120,341
Total 402,372,587 1,237,878,565
Movement of Regulatory Reserve Presented as Under;
4.28 Contingent liabilities and commitmentsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Contingent liabilities 10,682,188,498 8,807,368,699 10,682,188,498 8,807,368,699
Undrawn and undisbursed facilities 6,470,865,934 3,034,109,106 6,470,865,934 3,034,109,106
Capital commitment 14,040,718 72,806,347 14,040,718 72,323,272
Lease Commitment 935,092,732 872,520,269 923,591,730 857,946,870
Litigation 73,320,457 41,064,286 73,320,457 41,064,286
Total 18,175,508,339 12,827,868,706 18,164,007,336 12,812,812,232
10th ANNUAL REPORT 2019/2020
154Mega Bank Nepal Limited
4.28.1 Contingent liabilitiesAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Acceptance and documentary credit 2,106,042,934 2,173,250,402 2,106,042,934 2,173,250,402
Bills for collection 214,233 232,310 214,233 232,310
Forward exchange contracts 4,701,369,759 3,583,546,000 4,701,369,759 3,583,546,000
Guarantees 3,874,561,572 3,050,339,987 3,874,561,572 3,050,339,987
Underwriting commitment - - - -
Other commitments - - - -
Total 10,682,188,498 8,807,368,699 10,682,188,498 8,807,368,699
4.28.2 Undrawn and undisbursed facilitiesAmount in NPR
4.28.3 Capital commitmentsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Undisbursed amount of loans 1,306,345,913 616,957,241 1,306,345,913 616,957,241 Undrawn limits of overdrafts 5,000,673,268 2,234,993,181 5,000,673,268 2,234,993,181 Undrawn limits of credit cards 163,846,752 182,158,684 163,846,752 182,158,684 Undrawn limits of letter of credit - - - - Undrawn limits of guarantee - - - - Total 6,470,865,934 3,034,109,106 6,470,865,934 3,034,109,106
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Capital commitments in relation to Property and EquipmentApproved and contracted for 12,169,068 72,806,347 12,169,068 72,323,272 Approved but not contracted for - - - - Sub Total 12,169,068 72,806,347 12,169,068 72,323,272 Capital commitments in relation to Intangible assetsApproved and contracted for 1,871,650 - 1,871,650 - Approved but not contracted for - - - - Sub Total 1,871,650 - 1,871,650 - Total 14,040,718 72,806,347 14,040,718 72,323,272
Capital expenditure approved by relevant authority of the bank but provision has not been made in financial statements.
10th ANNUAL REPORT 2019/2020
155Mega Bank Nepal Limited
4.28.4 Lease commitmentsAmount in NPR
ParticularsGroup Bank
As at 15 July 2020
As at 16 July 2019
As at 15 July 2020
As at 16 July 2019
Operating lease commitmentsFuture minimum lease payments under non cancellable operating lease, where the bank is lessee Not later than 1 year 143,686,671 139,457,371 140,409,448 136,384,975 Later than 1 year but not later than 5 years 472,441,186 418,917,341 464,217,406 407,416,338 Later than 5 years 318,964,876 314,145,557 318,964,876 314,145,557 Sub Total 935,092,732 872,520,269 923,591,730 857,946,870 Finance lease commitmentsFuture minimum lease payments under non cancellable operating lease, where the Bank is lessee Not later than 1 year - - - - Later than 1 year but not later than 5 years - - - - Later than 5 years - - - - Sub Total - - - - Grand Total 935,092,732 872,520,269 923,591,730 857,946,870
4.28.5 Litigation
The bank’s litigations are generally related to its ordinary course of business pending on various jurisdiction. Litigations are mainly in the nature of income tax which is explained in detail in Note 4.7.1. Other litigations include cases pending in various courts & tribunal in Nepal pertaining to recovery action initiated by the Bank against the borrowers.
4.29 Interest incomeAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Cash and cash equivalent 130,166,212 141,077,652 130,166,212 141,077,652
Due from Nepal Rastra Bank - 23,018,038 - 23,018,038
Placement with bank and financial institutions 18,089,359 10,410,837 2,324,275 9,400,876
Loan and advances to bank and financial institutions 414,310,392 265,152,261 414,310,392 265,152,261
Loans and advances to customers 9,115,399,934 8,484,587,221 9,115,399,934 8,484,587,221
Investment securities 631,438,124 358,468,802 631,438,124 358,468,802
Loan and advances to staff 95,787,281 92,979,527 95,787,281 92,979,527
Other - - - -
Total interest income 10,405,191,301 9,375,694,339 10,389,426,217 9,374,684,378
Interest income has been recognized on accrual basis except those interest income from loans and advances to customers amounting to Rs. 57,226,261/99- which are suspended as per the provisions of Interest Recognition Guidelines 2019 issued by Nepal Rastra Bank. Total Interest accrual has been Suspended till 15th July, 2020 is NPR 114,829,719.97. In terms of Central Bank Circular No.18/076/77 and Notice No. 21/076/77, the Bank has provided 10% interest rate rebate on Chaitra 2076 montly/quarterely interest and further, 2% interest rate rebate in subsequent months, Baisakh 2077 , Jestha 2077 and Asar 2077. The total rebate stood during the period was NPR 316,062,948.81.
10th ANNUAL REPORT 2019/2020
156Mega Bank Nepal Limited
4.30 Interest expenseAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Due to bank and financial institutions 93,471,310 129,856,233 93,471,310 129,856,233 Due to Nepal Rastra Bank 21,042,929 26,004,099 21,042,929 26,004,099 Deposits from customers 6,061,736,993 5,404,168,716 6,063,036,379 5,423,073,187 Borrowing 34,467,149 - 34,467,149 - Debt securities issued - - - - Subordinated liabilities - - - - Other - - - - Total interest expense 6,210,718,380 5,560,029,049 6,212,017,766 5,578,933,519
4.31 Fees and Commission IncomeAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Loan administration fees 193,988,977 204,314,739 193,988,977 204,314,739 Service fees 107,030,196 107,593,215 103,596,418 107,557,596 Consortium fees 4,603,963 6,292,510 4,603,963 6,292,510 Commitment fees 1,498,006 2,036,966 1,498,006 2,036,966 DD/TT/Swift fees 5,326,677 5,183,223 5,326,677 5,183,223 Credit card/ATM issuance and renewal fees 35,673,406 25,763,727 35,673,406 25,763,727 Prepayment and swap fees 19,081,114 16,728,634 19,081,114 16,728,634 Investment banking fees - - - - Asset management fees - - - - Brokerage fees - - - - Remittance fees 27,171,529 26,709,426 27,171,529 26,709,426 Commission on letter of credit 29,971,444 31,679,817 29,971,444 31,679,817 Commission on guarantee contracts issued 39,943,610 44,559,505 39,943,610 44,559,505 Commission on share underwriting/issue - - - - Other fees and commission income 61,878,040 60,290,412 61,878,040 60,290,412 Total fees and Commission Income 526,166,962 531,152,172 522,733,185 531,116,553
4.32 Fees and commission expenseAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
ATM management fees 17,781,002 18,244,089 17,781,002 18,244,089 VISA/Master card fees 20,452,102 15,049,757 20,452,102 15,049,757 Guarantee commission - - - - Brokerage - - - - DD/TT/Swift fees - - - - Remittance fees and commission - - - - Other fees and commission expense 13,198,784 13,200,426 13,198,784 13,200,426 Total fees and Commission Expense 51,431,889 46,494,272 51,431,889 46,494,272
Payouts on account of fee and commission for services obtained by the bank are presented under this account head. This account head includes card related fees, guarantee commission, brokerage expenses etc.
10th ANNUAL REPORT 2019/2020
157Mega Bank Nepal Limited
4.33 Net trading incomeAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Changes in fair value of trading assets 2,067,407 - - - Gain/loss on disposal of trading assets 12,321,958 - - - Interest income on trading assets - - - - Dividend income on trading assets - - - - Gain/loss foreign exchange transation 328,086,746 277,924,723 328,086,746 277,924,723 Other - - - - Net trading income 342,476,111 277,924,723 328,086,746 277,924,723
Trading income comprises gains less losses relating to trading assets and liabilities, and includes all realized interests, dividends and foreign exchange differences as well as unrealized changes in fair value of trading assets and liabilities are presented under this account head. Foreign exchange transactions results include gains and losses from spot and forward contracts and translated foreign currency assets and liabilities.
10th ANNUAL REPORT 2019/2020
158Mega Bank Nepal Limited
4.35 Impairment charge/(reversal) for loan and other lossesAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Impairment charge/(reversal) on loan and ad-vances to B/FIs 6,753,386 10,944,106 6,753,386 10,944,106
Impairment charge/(reversal) on loan and ad-vances to customer 799,685,656 415,676,537 799,685,656 415,676,537
Impairment charge/(reversal) on financial Investment - - - -
Impairment charge/(reversal) on placement with banks and financial institutions - - - -
Impairment charge/(reversal) on property and equipment - - - -
Impairment charge/(reversal) on goodwill and intangible assets - - - -
Impairment charge/(reversal) on investment properties - - - -
Total 806,439,042 426,620,643 806,439,042 426,620,643
Dividend income is recognised when the right to receive payment is established. This is the ex-dividend date for the listed equity securities, and usually the date when shareholders approve the dividend for unlisted eq-uity securities. The presentation of dividend income in the consolidated statement of profit and loss account depands on the classification and measurement of the equity investment. The bank has designated the eq-uity instruments at FVOCI ;therefore dividend income is presented under this head.
4.34 Other operating incomeAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Foreign exchange revauation gain 29,694,759 (4,526,593) 29,694,759 (4,526,593)
Gain/loss on sale of investment securities 21,112,183 - 21,112,183 -
Fair value gain/loss on investment properties - - - -
Dividend on equity instruments 19,627,365 19,268,113 19,136,831 19,268,113
Gain/loss on sale of property and equipment 9,344,055 41,222 9,344,055 41,222
Gain/loss on sale of investment property - 7,010,450 - 7,010,450
Operating lease income - - - -
Gain/loss on sale of gold and silver 5,176,078 15,748,911 5,176,078 15,748,911
Locker rent 1,467,825 2,093,475 1,467,825 2,093,475
Other 77,088,229 63,021,109 77,088,229 62,898,499
Total 163,510,495 102,656,686 163,019,960 102,534,076
10th ANNUAL REPORT 2019/2020
159Mega Bank Nepal Limited
4.36 Personnel ExpenseAmount in NPR
4.37 Other operating expenseAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Salary 535,796,281 469,274,513 531,954,705 466,964,839 Allowances 309,095,128 252,057,055 306,182,990 250,337,272 Gratuity expense 31,185,681 23,088,567 30,879,142 22,866,451 Provident fund 38,431,994 30,320,428 38,063,999 30,086,183 Uniform 5,699,000 10,131,133 5,699,000 10,131,133 Training & development expense 17,492,252 21,402,619 17,474,325 21,402,619 Leave encashment 6,536,897 24,675,609 6,536,897 24,675,609 Medical - - - - Insurance 20,660,502 15,747,872 20,660,502 15,747,872 Employees incentive - - - - Cash-settled share-based payments - - - - Pension expense - - - - Finance expense under NFRS 21,836,498 39,423,055 21,836,498 39,423,055 Other expenses related to staff 31,869,954 14,402,931 31,461,448 14,402,931 Subtotal 1,018,604,186 900,523,782 1,010,749,506 896,037,965 Employees bonus 251,391,414 258,904,052 249,406,613 258,105,030 Grand total 1,269,995,600 1,159,427,834 1,260,156,119 1,154,142,994
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Directors' fee 4,800,750 4,803,000 4,488,750 4,275,000 Directors' expense 8,094,990 3,161,087 8,049,458 3,082,968 Auditors' remuneration 1,796,700 1,638,500 1,740,200 1,582,000 Other audit related expense - - - - Professional and legal expense 777,390 318,300 777,390 318,300 Office administration expense 415,071,450 374,653,800 414,655,936 371,118,501 Operating lease expense 174,866,268 155,925,552 171,495,489 153,877,285 Operating expense of investment properties - - - - Corporate social responsibility expense - - - - Onerous lease provisions - - - - Others 93,272,861 95,202,034 91,125,425 94,910,438 Total 698,680,410 635,702,272 692,332,649 629,164,493
Provision for staff bonus is a mandatory requirement under the requirement of the Bonus Act, 2030.
All expenses related to employees of a bank has been included under this head. Expenses covered under this head include employees’ salary, allowances, pension, gratuity, contribution to provident fund, training expenses, uniform expenses, insurance, staff bonus, finance expense under NFRS, cash-settled share-based payments etc. Staff Loans are fair valued using the market rates.
All operating expenses other than those relating to personnel expense are recognized and presented under this account head. The expenses covered under this account head includes office administration expense, other operating and overhead expense, directors’ emoluments, remuneration and non audit fee paid to auditors, professional and legal expenses, branch closure cost expenses, redundancy cost expenses, expense of restructuring, impairment of non financial assets, expense of corporate social responsibility, onerous lease provisions, etc. No individual operating lease has terms and conditions that significantly affect the amount, timing and certainty of the consolidated cash flows of the Group.
10th ANNUAL REPORT 2019/2020
160Mega Bank Nepal Limited
4.37.1 Office administration expenseAmount in NPR
4.38 Depreciation & AmortisationAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Water & Electricity 31,430,136 30,616,775 31,190,600 30,515,467
Repair & Maintenance 15,030,290 20,411,018 15,030,290 20,411,018
Building 2,375,237 3,101,657 2,375,237 3,101,657
Vehicle 5,246,042 5,776,057 5,246,042 5,776,057
Office Equipment & Furniture 4,960,078 7,639,080 4,960,078 7,639,080
Computer & Accessories 2,448,933 3,894,224 2,448,933 3,894,224
Insurance 24,296,861 11,346,791 24,220,315 11,301,823
Postage, Telex, Telephone & Fax 45,628,557 45,537,156 45,344,616 45,390,849
Stationery and Printing 31,046,766 38,093,405 30,750,652 37,787,816
Newspaper, Periodicals and Books 3,204,484 614,402 3,194,053 608,433
Advertisement 47,294,849 28,526,098 47,065,727 27,147,254
Donation - 100,000 - 100,000
Security Expenses 137,913,237 121,512,853 137,553,897 121,408,046
Deposit Insurance Premium 20,649,113 17,696,310 20,649,113 17,696,310
Travel Allowance & Expense 10,189,439 15,353,088 10,189,439 15,141,215
Entertainment 4,225,701 4,004,566 4,225,701 4,004,566
Annual/Special General Meeting Expenses 3,040,373 2,725,802 3,040,373 2,725,802
Others 41,121,643 38,115,538 42,201,161 36,879,904
Bullion Related Expense - 1,086,428 - 1,086,428
Technical/Consultancy Services Fee 39,334,420 35,942,766 40,413,938 34,707,132
Write-Off Expense 1,787,223 1,086,344 1,787,223 1,086,344
Total 415,071,450 374,653,800 414,655,936 371,118,501
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Depreciation on property and equipment 130,876,453 109,092,190 129,637,034 108,092,191
Depreciation on investment property - - - -
Amortisation on intangible assets 16,085,428 8,372,549 15,968,305 8,354,165
Total 146,961,881 117,464,739 145,605,340 116,446,356
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. Amortiza-tion is the systematic allocation of the depreciable amount of an intangible asset over its useful life. Depre-ciation measured and recognized as per NFRS on property and equipment, and investment properties, and amortization of intangible assets is presented under this account head.
10th ANNUAL REPORT 2019/2020
161Mega Bank Nepal Limited
Amount in NPR4.39 Non operating income
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Recovery of loan written off - - - -
Other income 17,557,965 8,154,376 17,529,115 8,154,376
Share of profit of associates 3,943,994 2,560,645 - -
Total 21,501,958 10,715,021 17,529,115 8,154,376
The incomes that have no direct relationship with the operation of transactions are presented under this head.
4.40 Non operating expenseAmount in NPR
4.41 Income tax expenseAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Loan written off 8,152,904 19,666,562 8,152,904 19,666,562
Redundancy provision - - - -
Expense of restructuring - - - -
Other expense - - - -
Total 8,152,904 19,666,562 8,152,904 19,666,562
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Current tax expense 674,421,383 711,379,792 669,775,188 709,298,423
Current year 673,984,892 712,651,965 669,338,697 710,570,595
Adjustments for prior years 436,491 (1,272,172) 436,491 (1,272,172)
Deferred tax expense (10,496,250) (15,696,273) (11,330,597) (16,042,943)
Origination and reversal of temporary differences (10,496,250) (15,696,273) (11,330,597) (16,042,943)
Changes in tax rate - - - -
Recognition of previously unrecognised tax losses - - - -
Total income tax expense 663,925,133 695,683,520 658,444,591 693,255,480
The expenses that have no direct relationship with the operation of transactions are presented under this head. The expense covered under this account head includes loan written off, recovery of loan, redundancy provision, expense of restructuring etc.
The amount of income tax on net taxable profit is recognized and presented under this account head. This account head includes current tax expense and deferred tax expense/deferred tax income.
10th ANNUAL REPORT 2019/2020
162Mega Bank Nepal Limited
4.41.1 Reconciliation of tax expense and accounting profitAmount in NPR
ParticularsGroup Bank
Year ended 15 July 2020
Year ended 16 July 2019
Year ended 15 July 2020
Year ended 16 July 2019
Profit before tax 2,266,466,720 2,332,737,569 2,244,659,513 2,322,945,266
Tax amount at tax rate of 30% 679,940,016 699,821,271 673,397,854 696,883,580
Add: Tax effect of expenses that are not deductible for tax purpose 6,020,673 64,705,224 7,769,480 65,561,545
Less: Tax effect on exempt income (8,904,663) (51,874,529) (8,757,502) (51,874,529)
Add/less: Tax effect on other items (3,071,134) (3,071,134) -
Total income tax expense 673,984,892 712,651,965 669,338,697 710,570,595
Effective tax rate 30% 31% 30% 31%
10th ANNUAL REPORT 2019/2020
163Mega Bank Nepal Limited
4. Risk Management Disclosures and Additional Informations
4.1 Risk Management Risk is inherent in a financial business and such risks are managed through a process of continuous identification, measurement and monitoring, subject risk tolerance level and other controls. This process of risk management is critical to the bank continuing profitability. The bank is exposed to credit risk, interest rate risk, market risk, liquidity risk and operational risk. The Bank’s policy is to monitor those business risks through the Bank’s strategic planning process.
The Bank prepares long term strategic and annual plans which provide guidance on the future business prospects of the Bank. These documents establish the desired nature and size of the business portfolio at a future period. While preparing these documents, capital assessment is taken as one of the most important factors. Bank understands the various forms of risks associated with the business and the importance of capital in mitigating these risks. Hence, the present as well as future capital requirements of the Bank are thoroughly assessed to ensure that it is more than adequate to support the business needs of the Bank.
The changes in the business environment bring about changes in the risk profile of the Bank. Hence, periodic reviews are conducted to assess the impact of any such changes in the environment. Capital Adequacy Ratio is computed on a regular basis to ascertain its adequacy in terms of the associated risks. Furthermore, other quantitative and indicative tools are also studied and discussed amongst the Management and the Board. Various tools and indicators have been put into practice for analysis to support the Internal Capital Adequacy Assessment Process (ICAAP) of the Bank. Moreover, an ICAAP policy has been practiced for a systematic process of identifying, measuring, monitoring and controlling various risk aspects as to further put in place a sound capital assessment and management system.
The Board of Directors and the management realize the importance of effective risk management and are keen towards continuous improvement in its risk management function.
Risk unit has been placed independent from other business functions with direct reporting to the Risk Management Committee. The Unit is adequately manned and oversees all risk aspects including but not limited to Credit, Operational, Market and other risks. The Unit is guided by risk management frameworks and guidelines to monitor various risks in different departments. The Bank has also formulated Credit Risk Management Committee and Operation Risk Management Committee whose reports are further escalated to Risk Management Committee through Management Risk Monitoring Committee.
Besides this, the Bank has an Internal Audit Department to conduct audit & inspection of various activities of the Bank and directly reports to the Audit Committee. The Management on regular intervals studies and makes analysis to identify various inherent risks based on indicative facts, figures and statistics which is further presented and rigorously discussed in the Risk Management Committee headed by a Non-Executive member of the Board and further deliberated in the Board. The Internal Capital Adequacy Assessment Process (ICAAP) policy, a comprehensive risk/capital management document, Risk Management Guidelines and various risk frameworks act as guiding tools for the Bank to effectively manage various associated risks with the business. With the regular use of various measurement tools, risk management function has been brought and put into effective practice in the Bank.
4.2 Risk Management StructuresThe Board is primarily responsible for the risk management process. The risk management committee (RMC), which is a sub-committee of the Board has been established and delegated risk management responsibilities. This committee plays a pivotal role in establishing best practices concerning risk policies and practices within the bank.
The level of risks that the bank is willing to accept is decided at the RMC level, and the decisions made by this committee are communicated by the Board of Directors. The Board ratifies the risk management policies and risk tolerance levels agreed at the Risk management committee level.
The Committee fulfills the requirement set out in the Unified Directives No. 5/077 issued by the Central Bank of Nepal.
10th ANNUAL REPORT 2019/2020
164Mega Bank Nepal Limited
The Committee currently consists of 5 members i.e. 2 Non-Executive Directors and representation of Chief Operating Officer (COO) and Chief Risk Officer (CRO) as a member of the committee.
Risk Management Committee (RMC) is supported by various sub-committees such as the Assets and Liabilities Committee (ALCO) and Management Level Credit Committee, Audit Committee, and AML/CFT Committee, ICAAP Committee. ALCO is entrusted with the identification and managing of Market Risk and Liquidity Risk whereas other committees are responsible for ensuring and managing overall risk management framework and adequacy of existing risk management policies and practices in addressing and mitigating inherent risk in the businesses.
The Bank’s policy is to ensure that risk management processes throughout the bank are audited by the Internal Audit Function, which examines both the adequacy of the procedures and the bank‘s compliance with the procedures. The internal Audit division discusses the results of all assessments and reports its findings and recommendations to the Board Audit Committee.
4.2.1 Credit RiskCredit risk is the risk of financial loss that the Bank may face as a result of a borrower or counterparty not meeting its obligations in line with the original contract. Since the majority of the Bank’s assets are in the form of loans and advances, management of credit risk becomes the most crucial task. Bank's approach to Credit Risk Management is governed by the following Board’s approved policies and procedures. Through this policy, the Bank seeks to:
Bank has placed Credit Risk independent of the business generating units. Risk Management Policy, Credit Risk Management Framework, Credit Risk Strategy Paper are formulated to monitor and manage risk pertinent to credit.
Internal Risk Rating of borrowers is done to assess the financial health of the borrower
Risk Management Committee comprising of Non-Executive Directors has been enacted, which reviews various risk factors
periodically. In addition to reviewing associated risks, reports generated, and discussed on the Credit Risk Management Committee are escalated to the Risk Management Committee through the Management Risk Monitoring Committee.
Credit Policy guides all underwriting activities, which is periodically revised to ensure that all immediate and potential risks are addressed.
Loans and facilities are only sanctioned after the joint approval of the Risk Unit along with Business Units.
Lending authority is transparently and disseminated to the lending officials.
Review of concentrations and identification of potential as well problematic sectors for lending are discussed at various committees such as the Credit Risk Management Committee, Management Risk Monitoring Committee, Risk Management Committee (RMC), and Asset Liability Management Committee (ALCO).
Credit manuals and product papers are developed and implemented which guides the entire credit-related activities.
The investment portfolio is guided by the Investment policy of the Bank.
4.2.1.1 Impairment Assessment For accounting purposes, the bank uses an incurred loss model for the recognition of losses on impaired financials assets and impairment computed as per the provision of Central Bank’s Unified directive whichever is higher. In latter case, Loan loss provision has been assessed by applying directive no. 2 guidelines.
Under incurred loss model NAS 39, losses can only be recognized when objectives evidence of a specific loss events has been observed. Triggering events include the following:
Significant financial difficulty of the customer.
A breach of contract such as a default of payment
Where the Bank grants the customer a concession due to the customer experiencing financial difficulty.
10th ANNUAL REPORT 2019/2020
165Mega Bank Nepal Limited
It becomes probable that the customer will enter bankruptcy or encounter other financial difficulties.
Observable data suggests that there is a decrease in the estimated future cash flows from loans and advances.
Individually assessed allowancesThe Bank determines the allowances appropriate for each individually significant loans and advances on an individual basis, including any overdue payment of interests, infringement of the original terms of the contracts.
In compliance with a regulatory requirement, the bank has determined all the Non-performing loans and advances classified under Central Bank’s Unified Directives for measuring individual impairment.
Items considered when determining impairment allowance include the sustainability of the counterparty’s business plan, its ability to improve performance if it is in financial difficulty, projected receipts and the expected payout should ensure, the availability of other financial support, the realizable value of the collateral and the timing of the expected cash flow. Impairment allowances are evaluated every quarter.Collectively assessed allowancesAllowances are assessed collectively for losses on loans that are not individually significant including loans and Loans and Advances that have been assessed individually and found not to be impaired. Impairment allowances are evaluated at each quarter-end with each portfolio. For regulatory compliance, all the loans and advances assessed as performing loans under Central Bank’s Unified Directives have been measured for collectively assessed allowances.
The Collective assessment is made for a group of assets with
similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident in the individual loan assessment.
The Collective assessment takes accounts of data from the loan portfolio (such as historical losses on the portfolio, levels of arrears, credit utilization, loan to collateral ratios, and expected receipts and recoveries once impaired) or economic data.
4.2.1.2 Credit related Commitment riskThe risk arising from transactions related to contingent liabilities (Letter of Credit, Letter of Guarantees, and undrawn amount under approved authorization) is included under this. Notwithstanding the non-funded nature of these products, the Bank is prone to a resultant financial loss due to the nature of such products, i,e; claim on guarantees, negotiation of LCs and non – utilization of facilities.
4.2.1.3 Collateral and other credit enhancement
An assessment of the credit risk of an individual at the time of issuing or enhancing a facility shall be determined the amount and type of collateral that is required.
In the event of default, the Bank may, as a remedial measure, exercise its charge of the collateral obtained at the time of approval of credit facilities. Hence, the credit risk is eliminated to the extent of the net realizable value of such collateral, which has a weightage depending on nature of the collateral. Management monitors the market value of such collateral and requests additional collateral if required when reviewing the adequacy of the allowance for impairment losses.
10th ANNUAL REPORT 2019/2020
166Mega Bank Nepal Limited
4.2.1.4 Credit Quality by class of financial assets The credit quality of financial assets is managed by the Bank using internal credit ratings. The table below shows the credit quality by class of asset for all financial assets exposed to credit risk, based on the Bank’s internal credit rating system. The amounts presented are gross of impairment allowances.
4.2.1.4.1 Credit quality of neither past duen or impaired and past due or impairedThe table below shows the credit quality by a class of assets for all financial assets as at 31 Ashadh 2077 exposed to credit risk, based on the Bank’s internal credit rating system.
NPR in Million
ParticularsNeither past
due nor impaired
Past due less 90
days
Past due 91 to 180
days
Past due More than 180 days
Individually impaired Total
Financial AssetsAssets carried at Amortised CostCash and cash equivalent 8,109.86 - - - - 8,109.86Due from Nepal Rastra Bank 2,964.97 - - - - 2,964.97Placement with Bank and Financial Institutions 739.54 - - - - 739.54
Loans and advances to customers 61,812.80 8,631.27 - 6.61 673.55 71,124.23
Loan and advances to B/FIs 2,704.52 - - - - 2,702.28Investment securities except Investment in Equity 10,717.10 10,717.10
Fair Value through Profit and Loss (FVTPL)Derivative financial instruments. 83.70 - - - - 83.70Fair Value through OtherComprehensive Income (FVTOCI)Investment securities 778.98 - - - - 778.98Total 87,911.47 8,631.27 6.61 673.55 97,222.90
4.2.1.4.2 Credit quality of neither past due nor impaired and past due or impairedThe table below shows the credit quality by a class of assets for all financial assets as at 31 Asar 2076 exposed to credit risk, based on the Bank’s internal credit rating system.
ParticularsNeither past
due nor impaired
Past due less 90
days
Past due 91 to 180
days
Past due More than 180 days
Individually impaired Total
Financial Assets
Assets carried at Amortised Cost
Cash and cash equivalent 8,109.86 - - - - 8,109.86
Due from Nepal Rastra Bank 2,964.97 - - - - 2,964.97
Placement with Bank and Financial Institutions 739.54 - - - - 739.54
Loans and advances to customers 61,812.80 8,631.27 - 6.61 673.55 71,124.23
Loan and advances to B/FIs 2,704.52 - - - - 2,702.28
Investment securities except Investment in Equity 10,717.10 10,717.10
Fair Value through Profit and Loss (FVTPL)
Derivative financial instruments. 83.70 - - - - 83.70
Fair Value through Other
Comprehensive Income (FVTOCI)
Investment securities 778.98 - - - - 778.98
Total 87,911.47 8,631.27 6.61 673.55 97,222.90
10th ANNUAL REPORT 2019/2020
167Mega Bank Nepal Limited
Geographical Concentration Concentration of loans and advances by location is given below
NPR in Million
Province Balance %Province 1 11,100.18 9.75 Province 2 5,310.66 4.67 Bagmati 60,031.60 52.74 Gandaki 16,398.03 14.41 Lumbini 18,304.86 16.08 Karnali 567.74 0.50 Sudurpaschim 2,113.95 1.86 Total 113,827.02 100.00
Sector wise Break DownCash and
bank balances
Financial assets -fair
value through profit or loss
Loans and advances
Financial assets -fair
value through OCI
Other financials
assets
Total Finacial Assets
Government 7,734.43 14,466.29 22,200.72Bank and Financial service 14,658.31 77.12 16,035.06 709.32 16,872.70Agriculture & fishing 5,331.73 5,331.73Construction & Infrastructure 8,339.89 70.25 8,631.18Food, beverages & tobacco 7,185.03 7,185.03Production & Manufacturing 15,483.54 15,483.54Tourism 5,600.27 5,600.27Transport 2,542.66 2,542.66Consumption 28,822.16 28,822.16Service 4,707.61 221.03 4,707.61Other 19,779.06 19,779.06Total 22,392.74 77.12 113,827.02 1,000.60 14,466.29 151,763.83
NPR in Million
4.2.2 Operation Risk Operations Risk is risk of loss resulting from inadequate or failed internal processes, people and system or from external events. Bank is committed to continuous strengthening of internal controls. Standard Operating Procedures for all areas of Bank operations have
been formulated and implemented. For an effective management oversight and proper execution of operational risk management and control processes, the Bank has also formulated Management level Operations Risk Management Committee whose reports and discussions are further escalated
4.2.1.5 Maximum exposure to credit riskThe Bank has financial assets consisting mainly of loans & advances and investments at measured amortized cost. In these cases, the maximum exposure to credit risk is the carrying amount of the related financial assets.
Maximum exposure to credit risk is reviewed/monitored without taking account of any collateral and other credit enhancements.
The Concentration risk is monitored by industry. The following table shows the maximum exposure to credit risk for the components of the Statement of Financial Position, including sector.
Industry Analysis The following table shows the risk concentration by industry for the components of the Statement of Financial Position.
10th ANNUAL REPORT 2019/2020
168Mega Bank Nepal Limited
to Risk Management Committee through Management Risk Monitoring Committee. Further, to mitigate the operational risk:
Bank has policies and procedures that address the process for review and approval of new products, activities, processes and systems, which consider Inherent risks in the new product, service or activity, changes to the operational risk profile and appetite and tolerance, including the risk of existing products or activities, the necessary controls, risk management processes and risk mitigation strategies, new procedures to measure, monitor and manage the risk of the new product, service or activity.
Bank has Operations Risk unit to identify and suggest various issues identified in daily operations and Central Operation unit to ensure the consistency and accuracy in processing transactions as well as to review and identify any potential risk."
Processes are reviewed periodically so that their perfection can be weighed and any shortcoming can be addressed.
Operation Risk unit of the Risk Department is also continuously reviewing the risk aspect, understanding future changes, and potential or possible threats and concur on areas of highest priority and related mitigation strategyIn order manage risk relating natural disaster on data loss, the bank has placed DR server at Bhairahawa which is comparatively less seismic zone.
Bank has formulated and implemented a comprehensive Operation Risk Management Framework to ensure, manage, mitigate and strengthen the Operational Risk within the Bank.
In order to continuously improve the capabilities of the employees, training calendars are developed and implemented based on their need assessments.
Daily exhibit of operational activities are reviewed that is discussed in the management level of committees which is further escalated to Risk Management Committee.
The Bank in line with Basel provisions calculates risk exposure and allocates sufficient capital/ cushion for perceived operational risks.
4.2.3 Market Risk Market risk refers to the risk to a bank resulting from movements in market prices, in particular, changes in interest rates, foreign exchange rates, and equity and commodity prices. Market risk is defined as the risk of losses in on and off-balance sheet positions arising from movements in market prices. The risks subject to this requirement are:
a. Interest Rate Risk:Interest rate risk is a key constitute of the market risk exposure of the Bank due to adverse and unanticipated movements in future interest rate which arises from core business activities; granting of credit facilities, accepting deposits and issuing debt instruments.
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flow and /or, the fair values of financial instruments. Several factors give rise to interest rate risk; which arises due to the mismatches in the maturities of assets and liabilities; basis risk which is the threat to income arises due to differences in the bases on interest rates.
Excessive movements in market interest rate could result in severe volatility to bank’s net interest income and interest margin. Bank’s exposure to interest rate risk is primarily associated with factor such as;
Reprising risk arising from a fixed rate borrowing portfolio where reprising frequency is different to that of the lending portfolio. Yield curve risk arising from unanticipated shifts of the market yield curve.
b. Currency Risk:Foreign exchange risk is the potential for the Bank to experience volatility in the value of its assets, liabilities
10th ANNUAL REPORT 2019/2020
169Mega Bank Nepal Limited
and solvency and to suffer actual financial losses as a result of changes in value between the currencies of its assets and liabilities and its reporting currency.
c. Equity Price Risk:Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in equity prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or by factors affecting all similar financial instruments traded in the market. The Board of Directors of the Bank has laid down the investment policy to control and mitigate the risks of the equity portfolio. The Bank also adheres to the guidelines issued by Central Bank regarding the exposure to a single entity and the total exposure limited for the equity.
The major sources of market risk for the bank are interest rate risk, exchange rate risk and liquidity risk. Bank has an Assets Liability Committee and Investment Management Committee which meets regularly to identify and manage these risks as per the laid down policies and procedures. Treasury Back Office (TBO) and risk units regularly assess and monitor the financial position and transaction of the Bank. TBO analysed the net open position on a daily basis to mitigate all possible risk associated to foreign currency. Foreign Currency Assets and Liabilities are reported on weekly basis and ensured that the net position is within the tolerable limit (up to 30% of Core Capital). ALCO on regular interval evaluates the sensitivity of asset and liability towards interest rate. Further interest sensitivity analysis is conducted to act as a tool to mitigate possible interest rate risk. Movement of Bank's interest yield, cost and spread is calculated and analysed on daily
basis to identify, assess and mitigate possible risk exposure.
Overall investment made and necessary analysis of investments including appropriate suggestions, are issued from Treasury Middle Office (TMO) which reviews the portfolio periodically. TMO is independent from other Treasury units and reports to Chief Risk Officer. Any credit impairment in the investment books are accounted for, for fair assessment of the portfolio.
4.2.4 Liquidity Risk Liquidity risk refers to the availability of sufficient cash balances to meet the demands on deposits and new lending targets as well as provide a flow of net liquid assets to meet contractual borrowings and other commitments.
The Bank’s primary objective in liquidity risk management is to ensure adequate funding for its businesses throughout market cycles, including periods of financial stress. To achieves this objectives the asset and liability management committee (ALCO) analyses and monitors liquidity risk, and maintains an adequate margin of safety in liquid needs.
The bank maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of unforeseen interruption of cash flow. The bank can also access to lines of credit (Inter-bank loan) that it can meet liquidity needs. In addition, the Bank maintains the liquidity ratio prescribed by Central Bank of Nepal. The following table depicts the maturity profile of the investment portfolio on an undiscounted cash flow basis as on 31 Asar 2077 which is designed and managed to meet the required level of liquidity as and when liquidity outgo arises taking into consideration the time horizon of the financial liabilities of the business.
10th ANNUAL REPORT 2019/2020
170Mega Bank Nepal Limited
Particulars Less than 3 month
3 to 6 months 6 to 1 year More than
1 year Total
Assets
Cash and cash equivalent 18,741.58 - - - 18,741.58
Due from Nepal Rastra Bank - - - 3,599.95 3,599.95
Placement with Bank and Financial Institutions 30.28 - - 20.92 51.20
Derivative financial instruments. 77.12 - - - 77.12
Loan and advances to B/FIs 455.14 661.36 239.33 1,977.86 3,333.68
Loans and advances to customer 34,866.01 11,688.46 12,460.88 51,477.99 110,493.34
Investment securities 300.00 - 77.98 15,088.91 15,466.89
Investment in associates - - - 200.00 200.00
Investment in subsidiaries - - - 38.60 38.60
Investment Property - - - 219.90 219.90
Other Assets 499.15 - 363.46 2,361.11 3,223.73
Total 54,969.29 12,349.82 13,141.65 74,985.24 155,446.00
Liabilities
Due to Bank and Financial Institutions 4,214.93 - - - 4,214.93
Due to Nepal Rastra Bank 604.89 - 6.74 2.90 614.53
Derivative financial instruments - - - - 973.92
Deposits from customers 30,551.80 16,349.45 20,216.22 60,777.14 127,894.61
Borrowing - - - 2,440.27 2,440.27
Other liabilities 1,288.25 - 39.53 942.29 2,270.07
Debt securities issued
Total 36,659.88 16,349.45 20,262.49 64,162.60 137,434.42
Amount in NPR Million
The following table depicts the maturity profile of the investment portfolio on an undiscounted cash flow basis as on 31 Asar 2076 which is designed and managed to meet the required level of liquidity as and when liquidity outgo arises taking into consideration the time horizon of the financial liabilities of the business.
10th ANNUAL REPORT 2019/2020
171Mega Bank Nepal Limited
Particulars Less than 3 month
3 to 6 months 6 to 1 year More than
1 year Total
AssetsCash and cash equivalent 8,109.86 - - - 8,109.86Due from Nepal Rastra Bank - - - 2,964.97 2,964.97Placement with Bank and Financial Institutions - 60.36 658.20 20.98 739.54Derivative financial instruments. 83.70 - - - 83.70Loan and advances to B/FIs - - 384.80 2,290.45 2,675.25Loans and advances to customer 18,093.99 11,177.80 10,448.81 30,140.72 69,861.33Investment securities 65.49 900.97 9.73 10,519.89 11,496.08Investment in associates - - - 200.00 200.00Investment in subsidiaries - - - 13.60 13.60Investment Property - - - 201.48 201.48Other Assets 318.42 - 50.62 1,076.98 1,446.02Total 26,671.46 12,139.14 11,552.16 47,429.07 97,791.82LiabilitiesDue to Bank and Financial Institutions 3,858.04 - - - 3,858.04Due to Nepal Rastra Bank 722.69 7.16 1.95 - 731.80Derivative financial instruments - - - - 973.92Deposits from customers 15,948.92 9,273.52 10,607.52 42,854.89 78,684.86Borrowing - - - - -Other liabilities 438.53 - - 566.71 1,005.24Debt securities issuedTotal 20,968.18 9,280.69 10,609.48 43,421.60 84,279.93
Amount in NPR Million
4.2.4.1 Statutory Net Liquid Asset Ratio
As per Unified Directives of Central’s Bank of Nepal, the bank has to maintain minimum net liquid assets comprises of 20% of total deposit.
The Bank maintained a healthy statutory net liquid asset ratio throughout the year. The Bank has considers cash and bank balances, money at call & short notice, placement up to 90 days and investment in government securities and reimbursable amount from Nepal Rastra Bank for Government securities investment.Borrowings repayable up to 90 days is deducted from liquid assets to obtain net liquid assets.
Statutory Net Liquid Asset Ratio 2019/20 2018/19
Maximum 28.36 25.75
Minimum 21.48 20.49
Average 23.85 23.27
Closing 28.36 25.75
*Monthly data has been consider for above computation.
10th ANNUAL REPORT 2019/2020
172Mega Bank Nepal Limited
4.2.4.2 Credit to Core Capital and Domestic Deposits Ratio
As per Unified Directives of Central’s Bank of Nepal, the bank has to maintain maximum Credit to Core Capital and Domestic Deposit (CCD) ratio of 80 percent.The Bank stresses the importance of maintaining an adequate customer Deposit Base such as Term, Saving and Call Deposits as source of funds to finance Loans and Advances. They are monitored using the Credit to Core Capital and Domestic Deposits ratio.
Credit to Core Capital and Domestic Deposits Ratio 2019/20 2018/19
Maximum 79.85 79.96
Minimum 75.35 76.81
Average 77.69 79.13
Closing 75.35 78.94
*Monthly average data has been Considered for above computation.
4.2.5 IT RiskIT Risk is any risk related to information technology system. With an increase in awareness, risks relevant to IT are seen as critical factors in any organization especially financial institutions such as Banks for effective risk management. The risk can arise from result in loss of critical services and loss of sensitive data. IT risks management process is formalized and aligned with risk management processes of the Bank in order to promote a consistent approach to risk management and also have a comprehensive view of the Bank’s risk profile. For effective management of IT Risk,
Bank has adopted an internationally acclaimed Flexcube as the core banking software, which has excellent inbuilt control features. The software has been thoroughly tested and customized as per the Bank’s requirements; balancing both the business requirements and its control features. Large extent of the MIS requirements has been automated and efforts are always underway for further development/enhancement.
The Bank has established IT policies, Security policies, standards and procedures that are critical components of the framework as to manage technology risks and safeguard information.
Due to rapid changes in the IT operating and security environment, policies, standards and procedures have been
regularly reviewed and updated which includes people selection process, IT security awareness, Incident Management (including procedural measures), Root Cause Analysis, Impact Analysis and corrective and preventive measures.
The Bank has put in place a set of ongoing risk measurement and monitoring mechanisms which includes pre and post implementation review of IT projects, benchmarks for periodic review of system performance, reports of incidents and complaints about IT services, Report of internal/external audit, periodic review of service level agreements, impact analysis of new technology/ threats to software deployed and operation risk management controls. Further maintaining logs, restricting unauthorized access are key risk monitoring tools.
The Bank has been conducting IS audit on annual basis and VAPT at regular intervals.
In order to manage risk relating natural disaster on data loss, the bank has placed DR server at Bhairahawa which is comparatively less seismic zone.
4.2.6 Environment & Social RiskBank believes that balancing environmental and Social/Human rights issues with financial priorities is fundamental to sound risk management and a core part of corporate responsibility. Attention to environmental and social
10th ANNUAL REPORT 2019/2020
173Mega Bank Nepal Limited
(E&S) issues helps us to better manage risk, attract and retain critical talent, develop expertise and provide clients with suggested solutions to pressing sustainability issues in their businesses. For effective management of E&S Risk,
The Bank has established an Environment & Social Risk Management policy to manage and reduce E&S risks and impact associated with its lending/ refinancing activities.
Bank is committed to operational and promoting an appropriate Environmental and Social Management System (ESMS) for itself − as well as for the financial institutions it lends to − in order to effectively assess and manage the E&S risk exposure.
4.2.7 Legal & Compliance RiskLegal risk is the risk arising from legal weaknesses among others resulting from legal actions, absence of supporting provisions in laws and regulations or weakness of legally binding provisions such as failure to comply with legal requirements of contracts, etc. Legal Department supports the business units carrying the responsibility for minimizing and mitigating legal risks in all of the Bank's operational, institutional and administrative activities. The Compliance function assists the Bank in identifying, assessing, monitoring and reporting on compliance in matters of the Bank, its operations and the personal conduct of staff members. Compliance risk is the risk of legal or regulatory sanctions, material financial loss or loss to reputation due to failure to comply with laws, rules and standards. The Bank may face compliance risk from all its business activities. For effective management,
The Bank has in place and implements procedures for analysis of legal risk of new product and activities.
The Bank has a unit or group of Officers functioning as "Legal Watch" for those providing legal analysis/advice to all employees at every level of the Bank.
The Legal Unit/department, Risk Management Unit and risk-taking
units jointly assess the impact of changes in certain legal provisions or regulations on legal risk exposure.
The Bank has a code of ethics applied to all employees at every level of the Bank to improve compliance with internal and external regulations.
The Bank is committed to follow best practices and market standards in the areas of accountability, transparency and business ethics.
Bank also aims for a zero tolerance of misconduct and corruption. In the day-to-day operations, three lines of defense model define the roles and responsibilities for compliance and integrity risk in the Bank.
4.3 Capital Management
4.3.1 Qualitative disclosuresThe Bank has formulated and implemented the "Internal Capital Adequacy Assessment Process 2013" (Updated 2018) which has been approved by the Board of Directors. The ICAAP 2018 is a comprehensive paper furnishing detailed information on the ongoing assessment of the Bank’s entire spectrum of risks, how the Bank intends to mitigate those risks and how much current and future capital is necessary for the Bank, reckoning other mitigating factors. The purpose of this ICAAP document is to apprise the Board of Directors (BOD) of the Bank on these aspects as also to explain to NRB Bank’s Internal Capital Adequacy Assessment Process and the Banks’ approach to capital management. The ICAAP is based on the existing internal documentation of the Bank as well.
Assessment of Risk and its management is being performed by the Bank through prudent Banking practices and Nepal Rastra Bank guidelines. Bank has been following the approach for calculating capital requirement as required under Pillar I of Capital Adequacy Framework issued by NRB for credit, operational and market risk while this document outlines the process for identification, measurement, control/management of other possible risks partially covered or not covered by Pillar I along with other external factors together developing
10th ANNUAL REPORT 2019/2020
174Mega Bank Nepal Limited
prudent measures/system to mitigate them and ascertain the level of additional capital requirement. Moreover, this policy is intended to further strengthen and improvise the processes the Bank has been following until now.
ICAAP document covers risk management processes followed by the Bank, business strategy and capital plan to measure the level of required capital, types and identification of material risks the Bank is exposed to and how the Bank intends to access, monitor, report and control the same ensuring the adequate level of capital and possible sources. The document also covers the measurement process & quantifying techniques/tools for material risk, prescription of risk limits and assessment of aggregate risk to ascertain additional capital if required. The implementation, monitoring, reporting has also been defined along with the controlling aspect.
The capital requirement assessed under the ICAAP policy shall constitute Tier I and Tier II capital as prescribed by Basel III. The assessed capital of the Bank shall be managed by way of following actions based on cost-benefit analysis and legal requirement:
Further public offering Right shares Retention of recognized profit Dividend Policy of the Bank, if any Mergers and acquisition Issue of hybrid capital and debt instruments including bonds eligible for Tier I and Tier II capital
However, if the level of assessed capital is observed to be gradually exhausting and the CAR tending to move close to the minimum requirement, concrete plans shall be executed to implement the following mitigating actions in priority basis: Expansion of low risk business
volume. Diversification of assets/exposure
portfolio towards low risk area. Improving business processes or re-
engineering business process so that the Bank does not have to bear any
additional regulatory capital charges. Exploring new avenues of sources
of income like fee based income that require no capital or minimum capital.
Diversifying concentration of business segments.
Matching the assets and liabilities gap.
Controlling NPA threats accounts to flow towards NPA accounts.
Suggesting for changes in Dividend Policy of the Bank for addressing the regulatory requirements and business prospects, if any.
Hedging foreign currency risk or interest rate risk.
The Bank shall conduct a periodic stress testing for identified risks. Results of the tests shall be reflected in the Bank’s existing and future capital. The results of the stress testing shall be discussed in the RMC meeting and presented to the Board. It is to be noted that effectiveness of ICAAP is dependent upon conducting periodic stress testing and calibrating the results of the tests to the capital adequacy ratio (CAR) of the Bank.
10th ANNUAL REPORT 2019/2020
175Mega Bank Nepal Limited
4.3.2 Quantitative disclosures
a) Capital Structure and Capital Adequacyi. Tier 1 capital and a breakdown of its components
ii. Tier 2 capital and a breakdown of its components
iii. Detailed information about the Subordinated Term Debts with information on the outstanding amount, maturity, and amount rose during the year and amount eligible to be reckoned as capital funds. None
iv. Deductions from capital
S.N. Particulars Amount (NPR Million)
A Paid up Capital 13,138.62
B Share Premium / Capital Reserve 235.75
C Proposed Bonus Shares -
D Statutory General Reserve 2,376.76
E Retained Earnings 1,710.94
F Un-audited Current Year Cumulative Profit -
G Capital Redemption Reserve -
H Other Free Reserves -
I Less: Deferred Tax Assets 42.81
J Less: Goodwill 207.85
K Less: Investment in equity of institutions with financial interests 200.00
L Less: Purchase of land & building in excess of limit and unutilized -
M Less: Other Deduction -
Core (Tier-1) Capital 17,011.41
S.N. Particulars Amount (NPR Million)
A Subordinated Term Debt
B General Loan Loss Provision 1,011.03
C Exchange Equalization Reserve 11.10
D Investment Adjustment Reserve 12.00
E Assets Revaluation Reserve(only 2% of Tier 2 capital = Rs. 21.16 million eligible) 21.16
F Other Reserve 2.59
Supplementary (Tier-2) Capital 1,057.88
Particulars Amount (NPR Million)
Goodwill 207.85
Deferred Tax Assets 42.81
Investment in equity of institutions with financial interests (subsidiary Mega Capital Market) 200.00
Total 450.66
v. Total qualifying capital
S.N. Particulars Amount (NPR Million)
A Core Capital 17,011.41
B Supplementary Capital 1,057.88
Total Qualifying Capital (Total Capital Fund) 18,069.29
10th ANNUAL REPORT 2019/2020
176Mega Bank Nepal Limited
vi. Capital Adequacy Ratio Capital Adequacy Ratio of the bank as at 15 July 2020 stood at 13.24%
vii. Summary of Bank’s internal approach to assess the adequacy of capital to support current and future activities, if applicable
The Bank prepares a long term 5 year’s Strategy Plan and to achieve the long term plans the Bank prepares annual Budgets/ Operating/ Tactical plans as stipulated in the Budget Policy and strategy Document of the Bank. To ensure that the Bank’s capital adequacy commensurate to demand of the Bank’s capital required by the business planning, the Management and the Board prudently and proactively engage on ongoing process of capital and risk assessment, stress testing and scenarios testing, monitoring and reporting as per the ICAAP 2018.
The Bank has also formulated and implemented “Stress Testing Guidelines 2015” in order to assess of the vulnerability of the Bank under various stress situations typically, application of “what if” scenarios, especially in the problematic identification of low frequency but high severity events and identifying expected and unexpected losses. It focuses on capturing the impact of large, but still plausible events and understanding the overall risk profile in a coherent and consistent framework, including impact analysis on earnings, solvency and liquidity.
A formal monitoring and reporting mechanism has been established to provide the senior management necessary information on the risk profile, trends, and the capital requirements as per ICAAP 2018 and Stress Testing Guidelines 2015. Such reports are being prepared on a monthly and quarterly basis and circulated to relevant business units/departments, Integrated Risk Department (IRMD), and tabled in Assets Liability Committee (ALCO) meeting. Further quarterly reports are presented to the Risk Management Committee and the Board for review and discussions.
viii. Summary of the terms, conditions and main features of all capital instruments, especially in case of subordinated term debts including hybrid capital instruments
Ordinary share capital: The Bank has only one class of equity shares having a par value of Rs. 100 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Bank, holder of equity shares will be entitled to receive remaining assets of the Bank after distribution of preferential amount. The distribution will be in proportion to the number of equity shares held by the shareholders.
b) Risk Exposures
i. Risk weighted exposures for Credit Risk, Market Risk and Operational Risk
S.N. Risk Weighted Exposure Amount (NPR Million)
A Risk Weighted Exposure for Credit Risk 127,514.47
B Risk Weighted Exposure for Operational Risk 4,401.36
C Risk Weighted Exposure for Market Risk 639.96
Adjustments under Pillar II
Add 3% of net interest income to RWE 1,283.69
2% adjustment on Total RWE 2,651.11
Total Risk Weighted Exposure 136,490.60
10th ANNUAL REPORT 2019/2020
177Mega Bank Nepal Limited
ii. Risk Weighted Exposures under each of 11 categories of Credit Risk
SN Risk ClassificationNet Book Value RWE
(NPR Million)
A Cash Balance & Claims on Govt. and Central Bank 26,093.81 -
B Claims on other Financial Entities 4,577.20 926.49
C Claims on Banks 7,799.89 5,308.28
D Claims on Corporate and Securities Firm 52,658.92 52,658.92
E Claims on Regulatory Retail Portfolio 17,036.58 12,777.44
F Claims secured by Residential Properties 7,705.46 4,636.23
G Claims secured by Commercial Real State 10,960.25 10,960.25
H Past due Claims 353.23 529.85
I High Risk Claims 17,577.81 26,366.71
J Other Assets 9,164.37 8,695.50
K Off balance sheet items 16,680.54 4,654.81
TOTAL 170,608.06 127,514.48
10th ANNUAL REPORT 2019/2020
178Mega Bank Nepal Limited
c) Total risk weighted exposure calculation tableAmount in NPR in Million
A. Balance Sheet ExposureGross Book
Value (A)
SpecificProvision & Valuation
Adjustments (B)
Eligible CRM
Net Value (D) (A-B-C)
RiskWeight
(E)
Risk Weight Exposure
(D *E)
Cash Balance 4,074.21 - - 4,074.21 0% -Balance With Nepal Rastra Bank 7,734.43 - - 7,734.43 0% -Gold - - - - 0% -Investment in Nepalese Government Securities 14,285.17 - - 14,285.17 0% -All Claims on Government of Nepal - - - - 0% -Investment in Nepal Rastra Bank securities - - - - 0% -All claims on Nepal Rastra Bank - - - - 0% -Claims on Foreign Government and Central Bank (ECA 0-1) - - - - 0% -Claims on Foreign Government and Central Bank (ECA -2) - - - - 20% -Claims on Foreign Government and Central Bank(ECA -3) - - - - 50% -Claims on Foreign Government and Central Bank(ECA-4-6) - - - - 100% -Claims on Foreign Government and Central Bank(ECA -7) - - - - 150% -Claims On BIS, IMF, ECB, EC and on Multilateral Development Banks (MDB's) recognized by the framework
- - - - 0% -
Claims on Other Multilateral Development Banks - - - - 100% -Claims on Public Sector Entity (ECA 0-1) - - - - 20% -Claims on Public Sector Entity (ECA 2) - - - - 50% -Claims on Public Sector Entity (ECA 3-6) - - - - 100% -Claims on Public Sector Entity (ECA 7) 8.50 - - 8.50 150% 12.75Claims on domestic banks that meet capital adequacy requirements
4,568.70 - - 4,568.70 20% 913.74
Claims on domestic banks that do not meet capital adequacy requirements
- - - - 100% -
Claims on foreign bank (ECA Rating 0-1) 592.35 - - 592.35 20% 118.47Claims on foreign bank (ECA Rating 2) 3,700.15 - - 3,700.15 50% 1,850.07Claims on foreign bank (ECA Rating 3-6) 3,297.82 - - 3,297.82 100% 3,297.82Claims on foreign bank (ECA Rating 7) - - - - 150% -Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above their respective regulatory capital requirement
209.57 - - 209.57 20% 41.91
Claims on Domestic Corporates 52,658.92 - - 52,658.92 100% 52,658.92Claims on Foreign Corporates (ECA 0-1) - - - - 20% -Claims on Foreign Corporates (ECA-2) - - - - 50% -Claims on Foreign Corporates (ECA 3-6) - - - - 100% -Claims on Foreign Corporates (ECA 7) - - - - 150% -Regulatory Retail Portfolio (Not Overdue) 17,992.58 - 956.00 17,036.58 75% 12,777.44Claims fulfilling all criterion of regulatory retail except granularity - - - - 100% -Claims secured by residential properties 7,673.09 - - 7,673.09 60% 4,603.86Claims not fully secured by residential properties - - - - 150% -Claims secured by residential properties (Overdue) 53.17 20.80 - 32.37 100% 32.37Claims secured by Commercial real estate 10,960.25 - - 10,960.25 100% 10,960.25Past due claims (except for claim secured by residential properties) 1,297.74 944.51 - 353.23 150% 529.85High Risk claims (Venture capital, private equity investments, personal loans and credit card receivables)
17,586.65 8.84 - 17,577.81 150% 26,366.71
Lending against securities (bonds & shares) 1,810.02 - - 1,810.02 100% 1,810.02Investments in equity and other capital instruments of institutions listed in the stock exchange
834.03 24.55 - 809.47 100% 809.47
Investments in equity and other capital instruments of institutions not listed in the stock exchange
293.50 - - 293.50 150% 440.25
Staff Loan secured by residential property 868.99 - - 868.99 50% 434.49Interest receivable/claim on government securities 181.12 - - 181.12 0% -Cash in transit and other cash items in the process of collection - - - - 20% -Other Assets 6,225.07 1,023.80 - 5,201.27 100% 5,201.27TOTAL 156,906.03 2,022.52 956.00 153,927.51 - 122,859.65
10th ANNUAL REPORT 2019/2020
179Mega Bank Nepal Limited
Amount in NPR in Million
B. Off Balance Sheet Exposure Gross Book
Value (A)
SpecificProvision & Valuation
Adjustments (B)
Eligible CRM
Net Value (D) (A-B-C)
RiskWeight
(E)
Risk Weight
Exposure (D *E)
Revocable Commitments - - - - 0% -
Bills Under Collection 0.21 - - 0.21 0% -
Forward Exchange Contract Liabilities 4,701.37 - - 4,701.37 10% 470.14
LC Commitments With Original Maturity Up to 6 months (domestic counterparty)
1,409.05 - 77.10 1,331.94 20% 266.39
foreign counterparty (ECA Rating 0-1) - - - - 20% -
foreign counterparty (ECA Rating- 2) - - - - 50% -
foreign counterparty (ECA Rating 3-6) - - - - 100% -
foreign counterparty (ECA Rating-7) - - - - 150% -
LC Commitments With Original Maturity Over 6 months (domestic counterparty)
295.42 - 5.28 290.14 50% 145.07
foreign counterparty (ECA Rating 0-1) - - - - 20% -
foreign counterparty (ECA Rating-2) - - - - 50% -
foreign counterparty (ECA Rating 3-6) - - - - 100% -
foreign counterparty (ECA Rating-7) - - - - 150% -
Bid Bond, Performance Bond and Counter guarantee
(domestic counter party) 3,240.65 - 426.72 2,813.93 50% 1,406.97
foreign counterparty (ECA Rating 0-1) - - - - 20% -
foreign counterparty (ECA Rating-2) - - - - 50% -
foreign counterparty (ECA Rating 3-6) 5.51 - - 5.51 100% 5.51
foreign counterparty (ECA Rating -7) - - - - 150% -
Underwriting commitments - - - - 50% -
Lending of Bank's Securities or Posting of Securities as collateral - - - - 100% -
Repurchase Agreements, Assets sale with recourse (including repo/ reverse repo)
- - - - 100% -
Advance Payment Guarantee 155.14 - 2.69 152.45 100% 152.45
Financial Guarantee 473.27 - 34.04 439.23 100% 439.23
Acceptances and Endorsements 401.57 - - 401.57 100% 401.57
Unpaid portion of Partly paid shares and Securities - - - - 100% -
Irrevocable Credit commitments (Short term) 6,470.87 - - 6,470.87 20% 1,294.17
Irrevocable Credit commitments (long term) - - - - 50% -
Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above their respective regulatory capital requirement
- - - - 20% -
Other Contingent Liabilities 73.32 - - 73.32 100% 73.32
Unpaid Guarantee Claims - - - - 200% -
TOTAL 17,226.37 - 545.83 16,680.54 - 4,654.81
Total RWE for credit Risk (A) +(B) 174,132.21 2,022.52 1,501.83 170,607.86 - 127,514.47
Adjustments under Pillar II -Add: 10% of the loan and facilities in excess of Single Obligor Limits(6.4 a 3)
- - - - - -
Add: 1% of the contract(sale) value in case of the sale of credit with recourse (6.4 a 4)
- - - - - -
Total RWE for credit Risk (After Bank's adjustments of Pillar II) 174,132.21 2,022.52 1,501.83 170,607.86 - 127,514.47
10th ANNUAL REPORT 2019/2020
180Mega Bank Nepal Limited
d) Amount of NPAs (Both Gross and Net)
ParticularsCurrent Year Previous Year
Gross NPAs Net NPAs Gross NPAs Net NPAs
Restructured / Reschedule Loans - - - -
Sub Standard Loans 198,996.72 149,247.54 150,291.09 112,718.32
Doubtful Loans 289,210.38 144,605.19 246,074.48 123,037.24
Loss 824,042.83 - 313,495.34 -
Total NPAs 1,312,249.93 293,852.73 709,860.91 235,755.56
NPR in ‘000'
NPR in ‘000'
4.4 Classification of financial assets and financial liabilities
Financial assets NotesAs at 15-Jul-20 As at 16-Jul-19
Carrying Value Fair value Carrying Value Fair value
Assets
Assets carried at Amortised Cost
Cash and cash equivalent 4.1 18,741,583.62 18,741,583.62 8,109,864.96 8,109,864.96
Due from Nepal Rastra Bank 4.2 3,599,948.11 3,599,948.11 2,964,971.27 2,964,971.27
Placement with Bank and Financial Institutions 4.3 51,203.98 51,203.98 739,538.45 739,538.45
Loans and advances to customers 4.7 113,827,024.68 113,827,024.68 72,536,580.63 72,536,580.63
Investment securities except Investment in Equity 4.8 14,466,291.25 14,466,291.25 10,717,098.92 10,717,098.92
150,686,051.64 150,686,051.64 95,068,054.23 95,068,054.23
Fair Value through Profit and Loss (FVTPL)
Derivative financial instruments. 4.4 77,117.58 77,117.58 83,697.50 83,697.50
77,117.58 77,117.58 83,697.5 83,697.5
Fair Value through OCI (FVTOCI)
Investment in Equity 4.8 1,000,603.49 1,000,603.49 778,983.42 778,983.42
Liabilities
Liabilities carried at Amortised Cost
Due to Bank and Financial Institutions 4.17 4,214,934.77 4,214,934.77 3,858,038.12 3,858,038.12
Due to Nepal Rastra Bank 4.18 614,534.63 614,534.63 731,802.99 731,802.99
Deposits from customers 4.20 127,894,614.50 127,894,614.50 78,684,859.08 78,684,859.08
Borrowing 4.21 2,440,271.03 2,440,271.03 - -
Debt securities issued 4.24 - - - -
135,164,354.93 135,164,354.93 83,274,700.19 83,274,700.19
Fair Value through Profit and Loss (FVTPL)
Derivative financial instruments 4.19 - - - -
10th ANNUAL REPORT 2019/2020
181Mega Bank Nepal Limited
4.4.1 Fair Value of Financial Assets and Financial Liabilities
Particulars Fair value Hierarchy (Level) As at 15 July 2020 As at 16 July 2019
Fair Value through profit and loss
Forward exchange Contract - Financial Assets 1 77,117.58 83,697.50
Forward exchange Contract Financial Liabilities 1 - -
Fair Value through Other Comprehensive Income
Financial assets
Investment securities at OCI
- Quoted equity securities 1 702,393.66 495,996.10
- Unquoted equity securities 3 298,209.83 282,987.32
Investment in subsidiaries
Total 1,000,603.49 778,983.42
Financial Instruments held at amortised cost
Financial assets
Debt securities 3 - -
Government bonds 3 14,170,226.80 9,860,734.08
Government treasury bills 3 296,064.45 856,364.84
Nepal Rastra Bank bonds 3 - -
Loan and advances to B/FIs 3 3,333,683.52 2,675,253.52
Loans and advances to customers 3 110,493,341.16 69,861,327.11
Other Asset 3 989,301.39 528,401.57
Total 129,282,617.32 83,782,081.12
Financial liabilities
Due to Bank and Financial Institutions 3 4,214,934.77 3,858,038.12
Due to Nepal Rastra Bank 3 614,534.63 731,802.99
Deposits from customers 3 127,894,614.50 78,684,859.08
Borrowing 3 2,440,271.02 -
Other liabilities 3 2,270,066.18 1,005,237.58
Debt securities issued - -
Subordinated Liabilities - -
Total 137,434,421.11 84,279,937.77
10th ANNUAL REPORT 2019/2020
182Mega Bank Nepal Limited
4.5 Segment Analysis
4.5.1 General Information
Reportable SegmentsBusiness segments have been identified and reported taking into account, the target customer profile, the nature of products and services, the differing risks and returns, the organization structure, the internal business reporting system. The Bank operates in the following segments:
a) General BankingThis segment covers various generalized products and services of the Banks. All deposit accounts (Saving, Current, Call & Fixed) and Loans provided to Institutional and Individual customers except Micro Banking are categorized into General Banking. Major sources of revenue of the segment are interest income from loans & non-interest income (fee based income from fund based and non-fund based lending, foreign exchange income, other operating and non-operating incomes). Likewise, major components of expenditure of the segment are interest expense in deposits, staff Expenses, other office expenses, depreciation and provision for possible losses/Impairment.
b) Micro LendingThis segment covers various specialized lending products of the Banks provided to deprived sectors of the society directly (Saral Karja) or indirectly (Wholesale Lending) for the uplift of deprived or marginalized community. Micro lending services are provided through dedicated centralized micro lending department, micro assistants of various branches and branchless banking (BLB) outlets. Major sources of revenue of the segment are interest income from loans & fee based non-interest income from micro lending. Likewise, major components of expenditure of this segment are staff Expenses, BLB expenses, other office expenses, depreciation of the assets dedicatedly used by the micro lending department and provision for possible losses/Impairment of the micro lending portfolio.
c) RemittanceThis segment covers both domestic remittance and foreign inwards remittance facility served with a purpose to provide complete remittance solution to the valued customers of the Bank through a dedicated own remittance product named Mega Remit. Major sources of revenue of the segment are remit fee/commission income and foreign exchange income from remittances. Likewise, major components of expenditure of the segment are staff expenses, fee/commission paid to various agencies and depreciation of assets dedicatedly used by the remittance department.
d) Cards and Alternate ChannelsThis segment covers all technology based alternate service delivery channels of the Bank like Cards, Mobile Banking and Internet Banking. Major sources of revenue of the segment are fee based income like subscription charge, renewal charge and transaction fee. Likewise, major components of expenditure of the segment are fee/commission paid to various vendors of Cards, Mobile Banking and Internet Banking, staff expenses, other office expenses and depreciation of assets dedicatedly used by the Card department.
e) Treasury This segment covers investment and placement portfolio of the Banks especially in Government Bonds, Treasury Bills, placements, forex trading and shares & debentures of other organizations. Major sources of revenue of the segment are Interest income from Bonds and Placements, dividend income from shares, capital gain income from shares, foreign exchange income from trading NDF and various foreign currencies. Likewise, major components of expenditure of the segment are interest expenses of borrowings and premium expenses of Bonds, FCY Deals, staff expenses, other office expenses and depreciation of assets dedicatedly used by the Treasury front and Back office.
10th ANNUAL REPORT 2019/2020
183Mega Bank Nepal Limited
4.5.2 Segment reporting for the year ended 15 July 2020 is given below:
Particulars General Banking
Micro Lending Remittance
Card & Alternative Channels
Treasury Total
Segment Assets 124,448.91 6,748.83 17.32 97.55 24,133.39 155,446.00
Segment Liabilities 134,637.24 0.30 10.97 43.38 2,742.53 137,434.42
Interest Income 8,959.10 666.39 - - 763.93 10,389.43
Interest Expenses 6,149.20 - - - 62.82 6,212.02
Inter Segment Expenses/(Revenue) (407.91) 407.91 - - - -
Net Interest Income 3,217.81 258.49 - - 701.11 4,177.41
Total Fees And Commission 406.09 13.90 26.46 24.86 - 471.30
Net Interest, Fee And Commission Income 3,623.90 272.39 26.46 24.86 701.11 4,648.71
Net Trading Income - - 4.06 0.16 323.87 328.09
Other Operating Income 11.56 - - 74.44 77.02 163.02
Total Operating Income 3,635.46 272.39 30.51 99.47 1,101.99 5,139.82
Impairment Charge/(Reversal) For Loans And Other Losses 776.99 28.82 - 0.63 - 806.44
Net Operating Income 2,858.47 243.57 30.51 98.84 1,101.99 4,333.38
Personnel Expenses 1,194.71 36.35 7.12 14.04 7.94 1,260.16
Other Operating Expenses 684.64 0.01 - - 7.68 692.33
Depreciation And Amortization 145.17 0.06 0.09 0.18 0.11 145.61
Total Cost 2,024.52 36.42 84.62 14.22 15.72 2,098.09
Operating Profit 833.95 207.15 23.30 84.62 1,086.27 2,235.28
Non-Operating Income 17.53 - - - - 17.25
Non-Operating Expenses 8.15 - - - - 8.15
Profit Before Income Tax 843.33 207.15 23.30 84.62 1,086.27 2,244.66
Income Tax 238.04 62.15 6.99 25.39 325.88 658.44
Profit/Loss For The Year 605.28 145.01 16.31 59.23 760.39 1,586.21
NPR in Million
NPR in Million
NPR in Million
4.5.3 Measurement of operating segment profit or loss, assets and liabilitiesThe bank has identified the key segments of business on the basis of nature of operations that assists the Management Committee of the bank in decision making process and to allocate the resources. It will help the management to assess the performance of the business segments. The Segment has been identified on the basis of geographic location of the branches. Investment balances, NRB balance, income from investment, forex income are reported in Head office under Province 3. Intra segment revenue and costs are accounted as per the policy of the bank and eliminated in the Head Office
4.5.4 Reconciliation of reportable, segment revenues, profit or loss, assets and liabilities Revenue
Profit or Loss
Total revenue for reportable segments 13,981.81
Other revenues -
Elimination of intersegment revenues 2,612.45
Entity's revenue 11,369.36
Total profit or loss for reportable segments 2,244.66
Other profit or loss -
Elimination of intersegment profits -
Profit before income tax 2,244.66
10th ANNUAL REPORT 2019/2020
184Mega Bank Nepal Limited
NPR in Million
NPR in Million
Assets
Liabilities
Total assets for reportable segments 155,446.00
Other assets -
Total assets 155,446.00
Total liabilities for reportable segments 137,434.42
Other liabilities -
Total liabilities 137,434.42
4.5.5 Information about product and services
S.N. Departments Revenue
1 General Banking 9,306.32
A Corporate 2,695.41
B Mid Corporate 1,708.14
C Small and Medium Enterprises 1,636.13
D Consumer Lending 2,766.55
E Trade Finance 84.03
F Bancassurance 10.54
G Other Services 405.51
2 Micro Lending 680.29
A Direct Deprived Sector Lending: Saral Karja 221.09
B Indirect Deprived Sector Lending: Wholesale lending 459.21
3 Remittance 30.43
A Domestic Remittance & Foreign Inward Remittance 30.43
4 Card & Alternative Channels 187.52
A Mobile and Internet Banking 84.02
B Insta Buy Services 1.71
C Visa Debit and Card Service 101.79
5 Treasury 1,164.80
A Investments in T Bills and Government bonds 631.46
B Placement with BFIs 132.49
C Trading Gain ( NDF, FX , Gain/Loss on sale of Investment) 355.42
D Revaluation Gain 355.42
E Bullion Trading 5.18
Total 11,369.36
NPR in Million
10th ANNUAL REPORT 2019/2020
185Mega Bank Nepal Limited
4.5.6 Information about geographical areas Revenue from following geographical areas
NPR in Million(a) Domestic
Province 1 969.36
Province 2 590.89
Bagmati Province 7,435.31
Gandaki Province 643.44
Lumbini Province 1,440.30
Karnali Province 48.64
Sudurpaschim Province 241.44
(b) Foreign -
Total 11,369.38
4.5.7 Information about major customers Revenue from single customer doesn’t exceed 10% of total revenue.
4.6 Share Options and Share based Payment
The Bank do not have a policy for share options to its employees. Similarly, during the year the Bank has not made any payments or settlements by issuing new shares.
4.7 Contingent Liabilities and Commitment
4.7.1 Income Tax Liability
Inland Revenue Department, Large Tax Payer Office has amended income tax liability of previous years. Presented below is the status of amended assessment challenged in different judiciary bodies which also include the entities merged with this Bank.
Mega Bank Nepal Limited Large Tax Payer’s Office has made reassessment of income tax filed by the bank for the financial year 2067/68, 2068/69, 2069/70, 2070/71, 2071/72 and 2072/73 respectively. For Financial year 2067/68 and 2068/69, the bank has disputed the decision of Revenue Tribunal by applying at Supreme Court.
For Financial year 2069/70, 2070/71 & 2071/72, the case pending at the Revenue Tribunal.
For Financial year 2072/73, The Bank has received reassessment letter dated 04th Shrawan 2077 and has applied for Administrative Review of the additional tax liability as reassessed by the Tax Authority at Inland Revenue Department for reconsideration by depositing the one third of the disputed amount.The Contingent Liability established towards this reassessment of NPR 19,716,554.00 has been presented in the notes to financial statements.
Paschimancal Development Bank Limited (Erstwhile)For Financial year 2069/70 ,2070/71 and 2071/72, the bank has appealed the case at Revenue Tribunal.
For Financial year 2072/73, The Bank has received reassessment letter dated 04th Shrawan 2077 and has applied for Administrative Review of the additional tax liability as reassessed by the Tax Authority at Inland Revenue Department for reconsideration by depositing the one third of the disputed amount. The Contingent Liability established towards this reassessment of NPR 11,709,929.00 has been presented in the notes to financial statements.
Tourism Development Bank Limited (Erstwhile)For Fiscal Year 2070/71, the bank has disputed the administrative review decision by applying at Revenue Tribunal.
10th ANNUAL REPORT 2019/2020
186Mega Bank Nepal Limited
Particulars As at 15-Jul-20 As at 16-Jul-19Claims on Bank but not Accepted by the BankLetter of Credit (Full Amount) 1,704.47 1,884.17 a. Letter of Credit With Maturity Less than 6 Months 1,409.05 1,809.64 b. Letter of Credit With Maturity More than 6 Months 295.42 74.54Rediscounted Bills - -Unmatured Guarantees/Bonds 3,240.65 2,930.21 a. Bid Bonds 121.13 77.38 b. Performance Bonds 3,119.52 2,364.22 c. Other Guarantee/Bonds - -Unpaid Shares in Investment - - Forward Exchange Contract Liabilities 4,701.37 3,583.55Bills under Collection 0.21 0.23Acceptances and Endorsements 401.57 289.08Underwriting Commitments - - Irrevocable Loan Commitments 6,470.87 3,034.11Guarantees issued against Counter Guarantee of In'lly Rated Foreign Banks
5.51 -
Advance Payment Guarantees 155.14 120.13Financial Guarantees 473.27 488.61Contingent Liabilities on Income Tax 73.32 41.06Unpaid Guarantee Claims - -Total 17,226.37 11,882.54
NPR in Million
4.8 Related Party Disclosures Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, or one other party controls both. The definition includes subsidiaries, associates, directors, key management personnel. The Bank identifies the following as the related parties under the requirements of NAS 24.
Particulars Relationship RemarksMega Capital Markets Limited Wholly owned subsidiary Sparsha Lagubittiya Sastha Limited AssociateAviyan Laghubitta Bittiya Sanstha Limited AssociateMr. Bhoj Bahadur Shah ChairmanMr. Gopal Khanal DirectorMr. Madan Kumar Acharya DirectorMr. Mukti Ram Pandey DirectorMr. Indra Bahadur Malla Thakuri DirectorMr. Bal Krishna Siwakoti Director Ms. Shiva Devi Kafle Independent DirectorMs. Anupama Khunjeli, CEO Key Management PersonnelMs. Raveena Desraj Shrestha, DCEO Key Management PersonnelMr. Tulsi Ram Pokhrel, Senior DGM Key Management PersonnelMr. Manoj Khadka, AGM Key Management PersonnelMs. Pragya Pandey, AGM Key Management PersonnelMr. Amit Shrestha, AGM Key Management PersonnelMr. Rajesh Sharma, AGM Key Management PersonnelMr. Chhabindra Nath Sharma, AGM Key Management PersonnelMs. Deny Shrestha, Chief Global Markets Key Management PersonnelMs. Jenu Thapa, AGM Key Management Personnel
4.7.2 Contingent Liability
10th ANNUAL REPORT 2019/2020
187Mega Bank Nepal Limited
4.8.1 Board Member Allowances and FacilitiesThe Board of Directors have been paid board meeting fees including other committees and sub-committees of NPR. 4,488,750 /- during the fiscal year. There were 31 Board Meetings conducted during the fiscal year.
The Chairperson and other members of the Board are paid NPR 17,250/- and NPR 13,800/- per meeting respectively for Board and Board Level Committees meeting.
As approved by the 9th Annual General Meeting held on 15th November 2019, effective from 25th December 2019,
Key management personnel are also provided with the following benefits:
i) Benefits as per the Employee Terms of Service By-laws,ii) Bonus to staff as per the Bonus Act
The Salary and benefits paid to the CEO are as follow:
S.N Particulars Amount in NPR
1 Short Term Employee Benefits 49,983,201.69
2 Post-Employment Benefits -
3 Other Long Term Benefits -
4 Termination Benefits (Gratuity and Leave Encashment) -
5 Share Based Payment -
Total of Key Management Personnel Compensation -
Particulars Amount in NPR
Anupama Khunjeli, Chief Executive Officer 17,519,728.26
Total 17,519,728.26
each Board Members have been provided with a monthly allowance of NPR 12,000/- for telephone, newspaper and mobile expenses.
4.8.2 Loans and Advances extended to Promoters The Bank has not disbursed any loans to promoters during the year.
4.8.3 Compensation Details for Key Management Personnel The compensation paid to the members of Key Management Personnel except CEO has been depicted in table below;
The CEO is provided with vehicle, fuel, driver, reimbursement of mobile bill and entitlement for statutory bonus as per the service contract and same has been included in the above remuneration.
Transaction with Key Management Personnel
1. Meeting Fee provided to the Directors: NPR 4,488,750
i. Board: 2,739,750
ii. Committees/Sub- Committees: 1,749,000
2. Other allowances paid: NPR 841,810.34
10th ANNUAL REPORT 2019/2020
188Mega Bank Nepal Limited
Transaction with Subsidiaries (Mega Capital Markets Limited)
S.N Particulars Amount in NPR
Transaction with subsidiary
1 Interest paid to subsidiary 1,299,386.33
2 Share Registrar paid to subsidiaries 1,400,000
Year-end balance
3 Receivable from Subsidiaries -
4 Payable to subsidiaries -
5 Deposit received from subsidiary 15,888,798.84
6 Investment in shares 200,000,000
Intra-group related figures have been excluded for presentation of the financial statement of the Group.
4.9 Merger and AcquisitionThe business combination of Mega Bank Nepal Limited and Gandaki Bikas Bank Limited was announced on and the acquisition agreement was signed by both parties as on 25th September 2019 (08th Ashwin 2076 ) laying the cornerstone for two banks. The Shareholders adopted a resolution approving two banks business combination at the Special General Meeting on 03 June 2020 (21st Jestha 2077).The final agreement approval from the Central Bank was obtained on 24th June 2020 (10th Asar 2077).
The business combination was to be effected by way of acquisition, with the assets of Gandaki Bikas Bank Limited being transferred to Mega Bank Nepal Limited. In return, the shareholders of Gandaki Bikas Bank Limited were to receive shares in Mega Bank Nepal Limited as part of a capital increase. The exchange ratio for the shares held by the shareholders of Gandaki Bikas Bank Limited was based on the Share Swap Ratio of the two institutions.
As intended by both Boards of Directors, Gandaki Bikas Bank Limited was fully merged (100 percent of the voting shares) into Mega Bank Nepal Limited in a spirit of partnership. The merger was entered in the commercial register on 23thJuly 2020 (08th Shrawan 2077).
Gandaki Bikas Bank Limited was a prominent name in the Nepalese banking sector. The bank was promoted by prominent business persons and professionals from diversified areas with a prime objectives of easy & prompt service to all kind of customers with customer friendly services. The bank is dedicated to excellence in delivery of an entire range of financial services in order to achieve sound business
growth and maximize stakeholders’ value by energetic team spirit, progressive technology and corporate governance.
As part of the business combination between Mega Bank Nepal Limited and Gandaki Bikas Bank Limited was renamed Mega Bank Nepal Limited.
Mega Bank Nepal Limited acquired control (as defined by NFRS 10) over Gandaki Bikas Bank Limited with effect from 24th June 2020 (10th Asar 2077). Mega Bank Nepal Limited was deemed to have control when it was exposed, or had rights, to variable returns from its involvement with Gandaki Bikas Bank Limited and had the ability to affect those returns through its power over Gandaki Bikas Bank Limited. When assessing whether control exists, all aspects and circumstances are considered (such as approval from the relevant authorities).
After control was obtained, the transaction was completed on 04th July 2020 (20th Asar 2077) and joint operation of both banks have started from 05th July 2020 (21st Asar 2077). To simplify matters and due to the immaterial measurement differences between 04th July 2020 (20th Asar 2077) and 15th July 2020 ( 31st Asar 2077), the Gandaki Bikas Bank Limited was consolidated for the first time in the Annual financial report of the Mega Bank Nepal Limited as at 15th July 2020 (31st Asar 2077).
Under NFRS 3, all identifiable assets and liabilities of the acquired entity had to be measured at their fair value on the date of acquisition.The fair value of the consideration transferred was NPR 4,097.50 million and fair value of net assets acquired was NPR 3,889.65. The goodwill of NPR 207.85 million
10th ANNUAL REPORT 2019/2020
189Mega Bank Nepal Limited
that arose between the fair value of net assets acquired and the higher balance of the consideration transferred measured at fair value was recognized as Goodwill and Intangible assets in the statement of financial position and conversely, difference between the fair value of acquiree (Gandaki Bikas Bank Limited) ordinary share and face value of acquiree ordinary shares plus reserve and surplus (other components of equity) arise from the business combination was recognized as share premium in the change in
equity. Mega Bank Nepal Limited determined the transferred consideration from the capital increase using the fair value. The fair values of each individual asset and liability in existence were determined in accordance with the provisions of NFRS 3 in conjunction with NFRS 13.
The following table shows the purchase price allocation relating to Business combination as at 4th July 2020 (20th Asar 2077).
Fair Value of the assets acquired and liabilities assumed
Fair value of the consideration transferred
Particular Amount in NPR
Consideration transferred arising from the Capital increase of Mega Bank Nepal Limited. 4,097,500,000.00
Consideration transferred 4,097,500,000.00
Particular Amount in NPR
Cash and cash equivalent 4,487,875,003.67
Due from Nepal Rastra Bank 5,379,761,187.10
Placement with Bank and Financial Institutions -
Derivative financial instruments -
Other trading assets -
Loan and advances to B/FIs 359,112,719.62
Loans and advances to customers 27,935,717,332.42
Investment securities 1,687,682,596.16
Current tax assets 99,809,617.83
Investment in subsidiaries -
Investment in associates -
Investment property 15,983,409.89
Property and equipment 587,194,017.44
Goodwill and Intangible assets 1,080,686.30
Deferred tax assets -
Other assets 153,009,275.33
Total Assets Acquired 40,707,225,845.75
Due to Bank and Financial Institutions 1,170,681,479.39
Due to Nepal Rastra Bank 2,898,379.81
Derivative financial instruments -
Deposits from customers 34,766,980,939.16
Borrowing -
Current Tax Liabilities -
Provisions -
Deferred tax liabilities 17,047,305.62
Other liabilities 859,967,322.41
Debt securities issued -
Subordinated Liabilities -
Total liabilities Assumed 36,817,575,426.39
Net assets acquired 3,889,650,419.36
10th ANNUAL REPORT 2019/2020
190Mega Bank Nepal Limited
Determination of Goodwill
Particular Amount in NPR
Considreation transferred 4,097,500,000.00
Less: fair value of identifiable net assets acquired 3,889,650,419.36
Goodwill 207,849,580.64
The consideration transferred was paid in the form of a capital increase by Mega Bank Nepal Limited by issuing 275,00,000 registered par-value shares with an fair value of NPR. 4,097,500,000.00 and by distributing the shares in Mega Bank Nepal Limited held by Gandaki Bikas Bank Limited with an fair value of NPR. 4,097,500,000.00 to the former shareholders of Gandaki Bikas Bank Limited. For commercial reasons, the capital increase was recognized simultaneously with the first-time consolidation as at 15th July 2020 (31st Asar 2077). The capital increase became legally effective on 23rd July 2020 (08th Shrawan 2077) when it was entered in the commercial register. To comply with the statutory and regulatory requirements for BFIs and in absence of specific instructions on consolidation of other components of equity such as General Reserve, Exchange Equalisation Reserve, Regulatory Reserve, Fair Value Reserve, Revaluation reserve, Retained Earnings and Other Reserves are taken over on acquisition has been consolidated in the same heading of acquirer’s other components of equity. The treatment has resulted net share premium amount of Rs. 207,849,580.64, which would otherwise have been Rs. 1,347,500,000.00.
The Deposits from Customers acquired as a result of the business combination of Mega Bank Nepal Limited and Gandaki Bikas Bank Limited were subdivided into other deposits from BFIs under Due to Banks and Financial Institutions and Deposits from Customers. As at 20th Asar 2077, the fair value of the acquired other deposits from BFIs was NPR 1170.68 million. Similarly, the fair value of acquired Deposits from Customers was NPR 34,766.98 million.
The loans and advances acquired as a result of the business combination between Mega Bank Nepal Limited and Gandaki Bikas Bank Limited were subdivided into loans and advances to banks and loans and advances to customers. As at 20th Asar 2077, the fair value of the acquired loans and advances to banks was NPR 359.11 million. The gross amount of
the loans and advances to banks and financial institutions came to NPR. 362.67 million. The fair value determined for the acquired loans and advances to customers as at 20th Asar 2077 was NPR 27,935.72 million, with a corresponding gross amount of 28,437.74. Contractually agreed cash flows totaling NPR 6.35 million were derecognized.
The fair values of the loans and advances to banks and financial institution and loans and advances to customers acquired as part of the business combination totaled NPR 28,294.83 million as at 20th Asar 2077, the main components of which were relating to overdraft loans, residential personal home loan and other loans were secured by real estate. The gross amount of the contractually agreed loans and advances to banks and loans and advances to customers came to a total of NPR 28,800.40 million.
The contractually agreed cash flows derecognized were accounted for largely by hire purchase loan and deprived sector loan.
In the context of the business combination, no contingent liabilities were identified that would have to be recognized as a liability.
As at the acquisition date, there were business relationships between the Mega Bank Nepal Limited and the Gandaki Bikas Bank Limited that, in accordance with NFRS 3.51, constituted business relationships that existed before the business combination. Mega Bank Nepal Limited has recognised a financial liability in respect of the deposits amounting NPR. 1,734,736,374.44 had been derecognized at the acquisition date.
4.10 Additional Disclosures of non-consolidated entities
The Bank has one subsidiary and two associate as at 15th July 2020. Mega Capital Markets Limited is consolidated for the year ended 15th July 2020. There are no such entities which are required to be consolidated but not done during the year.
10th ANNUAL REPORT 2019/2020
191Mega Bank Nepal Limited
4.11 Events after reporting dateThe outbreak of COVID -19 in the country during late march 2020 and subsequent lock down in the county resulted disruptions to the business operations of the Bank. In support of government efforts to contain the spread of pandemic, the bank adopted work from home policy w.e.f 24th March 2020.
With the relaxation and changes in modality of lock down in some parts of country, operation of the bank was opened up for public ensuring measures for health and safety of employees and customers. Subsequently to lifting of lock down in the different parts of country, the bank recommenced its normal business operations gradually with strict adherence to the social distancing and precautionary measures.
In terms of Central Bank Notice No. 21/076/77, the bank is in the process of providing a debt moratorium to the customers which includes deferral of accumulated overdue interest, restructuring and rescheduling of loans and advances.The disruption to the normal conduct of the business during the pandemic and availing of the debt moratorium by eligible customers is expected to have a negative impact on revenue streams of the bank.
The management has assessed the existing and anticipated effects of COVID -19 on the bank and Group and the appropriateness of the use of going cercern basis.The bank has evaluated the resilience of its businesses considering a wide range of factors under multiple stress test scanerios, relating to expected revenue streams, cash flow streams, cost management, profitability, the ability to defer non essential capital expenditure, debt repayment schedules, potential sources of financing facilities if required and the ability to continue services to ensure business continuity. Having considered the outlook of the bank and after due consideration of the range and likelihood of outcomes, the Board of Directors are satisfied that the Bank, its subsidiaries and associates have adequate resources to continue in operational existence for the foreseeable future and continue to adopt the going concern basis in preparing and presenting these financial statements. In determining the above significant management judgements, estimates and assumptions the impact of the COVID-19 pandemic has been considered as of reporting date and specific considerations have been disclosed under the relevant notes.
All adjusting events are adjusted in the books with additional disclosures and non-adjusting material events are disclosed in the notes with possible financial impact, to the extent ascertainable.
There are no material events that have occurred subsequent to 15th July 2020 till the signing of this financial statement on 17th December, 2020.
4.12 Non-Banking AssetsNon-Banking Assets (NBA) has been shown under investment property. It has been recognized at lower of fair value or amount due at the time of acquisition of NBA.
10th ANNUAL REPORT 2019/2020
192Mega Bank Nepal Limited
Name of Borrower Date of assuming Non-Banking Assets As at 15 July 2020 As at 16 July 2019Min Bahadur Ghale 11/09/2015 1,320 1,320Blue Bird Training Centre P.L. 8/13/2015 815 815Prem Khaniya 11/9/2015 0.1 0.1Bishnu Gurung 11/9/2015 0.1 0.1Mohan Majakoti 11/9/2015 0.1 0.1Shankar Pariyar 11/9/2015 0.1 0.1Biresh Kumar Rumba 11/9/2015 0.1 0.1Sangita Bhujel 11/9/2015 0.1 0.1Sidhhant Chaudhary 11/9/2015 0.1 0.1Sanjib Lama 11/9/2015 0.1 0.1Mina Kumari Mahato 11/9/2015 0.1 0.1Dipendra Lamichhane 11/9/2015 0.1 0.1Ramesh Chaudhary 11/9/2015 0.1 0.1Asha Ram Mahato 11/9/2015 0.1 0.1Chet Nath Gharti 11/9/2015 0.1 0.1Jit Bahadur Gharti 11/9/2015 0.1 0.1B.S Bricks And Tiles Industries 02/26/2015 26,807 26,807Anurodh Kukhura Tatha Bangur Firm 03/05/2018 743 743Arjun Kumar Shrestha 03/18/2018 766 766Shrestha Emporium And Order Suppliers 03/18/2018 1,560 1,560Prime Edible Pvt Ltd 07/15/2018 1,32,980 1,32,980Cosmos Organic Agrotech Pvt Ltd 07/15/2018 2,090 2,090Rose New Enterprises/Nabin Tanbe 6/17/2016 33,100 33,100Asmita Gift House 10/26/2016 1,301 1,301P & P Marketing 12/30/2019 2,431 -Asharaf Ali Miya And Ashifa General Store 3/17/2020 15,983 -Total 219,897 201,483
NPR’000
4.13 Earnings per shareThe Bank measures earning per share on the basis of the earning attributable to the equity shareholders for the period. The number of shares is taken as the weighted average number of shares for the relevant period as required by NAS 33 Earnings per Share.
Particulars Units Year ended15-Jul-20
Year ended16-Jul-19
Profit attributable to equity shareholders (a) NPR.'000 1,586,214 1,629,690
Weighted average of number of equity shares used in computing basic earnings per share (b) (Restated) Nos. 104,714,982 103,886,215
Basic and diluted earnings per equity share of Rs 100 each (a/b) (Restated) Rs 15.15 15.69
As there is no potential ordinary shares that would dilute current earning of equity holders, basic EPS and diluted EPS are equal for the period presented.
4.14 Proposed Distributions (Dividends and Bonus Shares)
The Board of Directors in its meeting dated 17th December, 2020 (2nd Poush 2077) has proposed a resolution recommending for distribution of cash dividend at 3.05%, equivalent to amount NPR. 406,342,210.19 from retained earnings and Bonus Share (stock dividend)
at 10.00%, equivalent amount of NPR. 1,332,269,541.60 (NPR. 1,304,372,503.72 from the remaining retained earnings NPR. 1,304,600,346.39 and from share premium NPR. 27,897,037.88) of current Paid Up capital of NPR. 13,322,695,416 which includes unsubscribed right share allotted through auction process dated 1st November 2020 (16th Kartik 2077). Hence, the total proposed dividend at 13.05%, equivalent of NPR. 1,738,611,751.79 is subject to approval from NRB and passed by 10th Annual General Meeting of the Bank.
10th ANNUAL REPORT 2019/2020
193Mega Bank Nepal Limited
4.15 Unpaid Dividends As at the reporting date, unpaid dividend over years amounts to as follows.
Particulars Year ended15-Jul-20
Year ended16-Jul-19
Cash Dividend Declared 406,342.21 1,220,663.02
Bonus Shares 1,332,269.54 -
Total 1,738,611.75 1,220,663.02
Particulars Year ended15-Jul-20
Year ended16-Jul-19
Dividend Payable 274,306 28,891
Total 274,306 28,891
NPR. '000
NPR. '000
4.16 Non-performing assetsThe Banks’ non-performing assets ratio stood at 1.15% as at balance sheet date. The total loan loss provision calculated as per NRB directives is NPR. 2,604,610,237/-
NPR. '000
NPR. '000
Particulars This Year Previous YearChange
Amount %
Pass Loan (pass & watch list) 112,429,668.10 72,033,682.87 40,395,985.24 56.08%
Restructured/rescheduled 70,746.25 - 70,746.25 100%
Non-Performing Loans (NPL) 1,312,249.93 709,860.91 602,389.02 84.86%
Restructured/rescheduled - - - -
Substandard 198,996.72 150,291.09 48,705.63 32.41%
Doubtful 289,210.38 246,074.48 43,135.89 17.53%
Loss 824,042.83 313,495.34 510,547.49 162.86%
Gross Loans & Advances 113,812,664.28 72,743,543.78 40,998,374.25 56.46%
NPL ratios:Gross NPL to Gross Loans & Advances 1.15% Net NPL to Net Loans & advances 0.26%
4.17 Concentration of Deposits, Loans & Advances and Contingents
ParticularsLoans & Advances and Bills
Purchased Deposits & Borrowings Contingent Liabilities
CY PY CY PY CY PY
Total Amount Outstanding 113,812,664.28 72,743,543.78 131,892,017.17 81,858,905.41 5,980,604.51 5,223,590.39
Highest Exposure of a Single Unit 1,886,896.52 785,166.82 3,938,324.50 4,042,952.41 115,559.71 161,447.57
Concentration of exposure 1.66% 1.08% 2.99% 4.94% 1.93% 3.09%
* CY= Current Year, PY = Previous Year
For the calculation of concentration, loans and advances is total loans extended to the customers and BFIs except staff loans and interest accruals on loans and the deposits is total deposits from the customers and BFIs excluding interest payables.
Single Obligor Limit and Sector-wise Limit (Directive No. 3) for both funded and non-funded are within the limit as prescribed by NRB directives.
10th ANNUAL REPORT 2019/2020
194Mega Bank Nepal Limited
Particulars Total ≤ 1 Year > 1 ≤ 3 Years > 3 Years
Branch Reconciliation - - - -
Agency Reconciliation 393,530,528.21 383,423,591.56 6,742,562.62 3,364,374.03
Amount in NPR
4.19 Disclosure of Actuarial Valuation for Leave and Gratuity
Particulars2020 2019
Gratuity Leave(Unfunded) Gratuity Leave
(Unfunded)
Expenses Recognized In Income Statement: 22,520,954.00 17,041,629.00 16,882,404.00 10,830,491.00
Current service cost 8,358,188.00 4,575,964.00 5,984,047.00 3,139,247.00
Interest cost - - - -
Expected Return on Plan Assets - - - -
Past Service Cost - - - -
Net Actuarial Losses/ (Gains) - (15,080,696) - 10,705,871.00
Expenses recognized in the Profit & Loss A/c 30,879,142.00 6,536,897.00 22,866,451.00 24,675,609.00
Expense recognized in Other Comprehensive Income
Actuarial (Gain)/Loss (14,510,928.00) - 8,195,366.00 -
Change in Present Value Obligations:
PV of Obligation at beginning of the year 95,090,586.00 54,687,426.00 68,051,779.00 39,749,222.00
Adjustment to opening liability - - - -
Interest cost 8,358,188.00 4,575,964.00 5,984,047.00 3,139,247.00
Current Service Cost 22,520,954.00 17,041,629.00 16,882,404.00 10,830,491.00
Benefit paid (3,783,731.00) (7,686,760.00) (4,023,010.00) (9,737,405.00)
Actuarial (Gain)/ Loss (14,510,928.00) (15,080,696.00) 8,195,366.00 10,705,871.00
Acquisition/Business Combination/Divestiture 74,131,669.00 48,742,857.00 - -
Liability at the end of the year 181,806,738.00 102,280,420.00 95,090,586.00 54,687,426.00
Change in Fair Value of Plan Assets:
FV of Plan Asset at Beginning of the Year - - - -
Adjustments to the opening fund - - - -
Interest Income - - - -
Contribution by Employer - - - -
Benefit paid - - - -
Actuarial Gain/(Loss) on Plan Assets - - - -
Fair Value of Plan Asset at End of the Year - - - -
Amount Recognized in SOFP:
Present Value of Obligations at Year End 181,806,738.00 102,280,420.00 95,090,586.00 54,687,426.00
Fair Value of Plan Assets at Year End - - - -
Unfunded Status 181,806,738.00 102,280,420.00 95,090,586.00 54,687,426.00
Amount in NPR
4.18 Reconciliation Status
10th ANNUAL REPORT 2019/2020
195Mega Bank Nepal Limited
4.20 Principal Indicators
Particulars IndicatorsAs per NRB reporting As per NFRS Reporting
2072/2073 2073/2074 2074/2075 2075/2076 2076/2077
1. Percent of Net Profit/Gross Income % 40.17 37.51 43.64 34.90 30.76
2. Earnings Per Share NPR 17.00 17.31 12.81 15.68 15.15
3. Market Value per Share (as on Ashad end) NPR 565.00 458.00 163.00 213.00 201.00
4. Price Earnings Ratio Times 33.23 26.47 12.73 13.58 13.27
5. Dividend (including bonus) on share capital % 17.27 15.21 6.85 11.75 1,305.00
6. Cash Dividend on Share Capital % 0.86 - 6.85 11.75 3.05
7. Interest Income/Loans & Advances % 9.69 11.27 13.17 13.32 12.10
8. Staff Expenses (excluding staff bonus)/ Total Operating Expenses % 45.57 49.43 52.34 54.58 54.67
9. Interest Expenses/Total Deposit and Borrowings % 4.02 6.00 7.57 7.86 6.93
10. Exchange Gain/Total Income % 4.98 5.75 4.84 5.86 6.94
11. Staff (Statutory) Bonus/ Total Staff Expenses (excluding bonus) % 32.08 31.30 37.13 28.81 24.68
12. Net Profit/Loans & Advances % 2.55 2.37 3.17 2.48 2.01
13. Net Profit/Total Assets % 1.79 1.74 2.34 1.68 1.64
14. Total Credit/Deposit % 90.50 90.38 89.45 89.45 82.94
15. Total Operating Expenses/Total Assets % 1.76 1.60 1.67 1.69 1.91
16. Adequacy of Capital Fund on Risk Weightage Assets
a. Core Capital % 11.94 13.80 16.97 14.34 12.46
b. Supplementary Capital % 1.00 1.00 0.94 0.93 0.78
c. Total Capital Fund % 12.95 14.80 17.91 15.27 13.24
17. Liquidity (CRR) % 9.42 5.49 5.68 4.82 6.63
18. Non Performing Credit/Total Credit (as per NRB provision) % 0.79 1.36 0.82 0.98 1.15
19. Base Rate (For the month of Asar) % 6.58 11.00 11.38 9.98 8.32
20. Weighted Average Interest Rate Spread (As Per NRB Guideline) % 4.32 3.85 3.91 4.33 4.39
21. Book Net worth NPR 4,168,995,273 5,845,412,471 12,634,226,955 13,511,898,192 18,011,575,668
22. Total Shares No. 32,405,751 45,823,130 102,855,266 103,886,215 131,386,215
23. Networth Per Shares % 128.65 127.56 122.84 130.06 137.09
24. Total Parmament Employees No. 441 478 779 958 1,666
25. Cost to Income Ratio (for NFRS cost excludes staff bonus and impairment provisions)
% - - 0.71 0.71 0.71
26. Branches No. 45 47 100 102 206
27. ATM No. 47 47 74 101 142
28. Branchless Banking Outlets No. 54 61 95 119 90
10th ANNUAL REPORT 2019/2020
196Mega Bank Nepal Limited
Comparison Unaudited and Audited Financial Statements as of FY 2076/77NPR in '000'
Particulars
As per unaudited Financial
Statement
As per Audited Financial
Statement
Variance
Reasons for Variance In amount In %
AssetsCash and cash equivalent 18,717,425 18,741,584 24,158 0.13
Due from Nepal Rastra Bank 3,599,948 3,599,948 - -
Placement with Bank and Financial Institutions 51,328 51,204 (124) (0.24)
Derivative financial instruments 517,814 77,118 (440,696) (85.11) Foreign forward receivables have been netted-off against forward payables .
Other trading assets - - - -
Loan and advances to B/FIs 3,323,593 3,333,684 10,090 0.30 Interest receivable on Loan and advances to BFIs has been reclassified.
Loans and advances to customers 110,604,128 110,493,341 (110,787) (0.10) Impact additional Loan loss Provision.
Investment securities 15,451,741 15,466,895 15,154 0.10 Adjustment of Investment in mutual Fund alloted during the year.
Current tax assets 350,651 325,413 (25,238) (7.20) Impact of Remittance Fees which has increased tax liability.
Investment in susidiaries 200,000 200,000 - -
Investment in associates 38,600 38,600 - -
Investment property 219,897 219,897 - -
Property and equipment 1,379,784 1,589,885 210,100 15.23 Revaluation of Land.
Goodwill and Intangible assets 67,675 276,313 208,638 308.29 Impact of Business Combination.
Deferred tax assets 102,586 42,815 (59,771) (58.26)Impact of Share Valuation after adjusted of Bonus share and revaluation of land during the period.
Other assets 499,680 989,301 489,622 97.99 Government Fund has been netted -off to account eligible amount in LCY Deposit & Other PL adjustment Entry.
Total Assets 155,124,850 155,445,997 321,146 0.21
LiabilitiesDue to Bank and Financial Institutions 4,214,935 4,214,935 - -
Due to Nepal Rastra Bank 614,535 614,535 - -
Derivative financial instruments 440,696 - (440,696)
(100.00)
Foreign forward receivables have been netted-off against forward payables .
Deposits from customers 127,894,615 127,894,615 0 0.00
Borrowing 2,440,271 2,440,271 - -
Current Tax Liabilities - - - -
Provisions - - - -
Deferred tax liabilities - - - -
Other liabilities 1,915,507 2,270,066 354,560 18.51 Government Fund has been netted -off to account eligible amount in LCY Deposit & Other PL adjustment Entry.
Debt securities issued - - - -
Subordinated Liabilities - - - -
Total liabilities 137,520,558 137,434,421 (86,137) (0.06)
EquityShare capital 13,138,621 13,138,621 - -
Share premium 27,897 235,747 207,850 - Impact of Business Combination
Retained earnings 1,117,180 1,710,943 593,762 53.15 Impact of Prior Period Income routed Throught Pl account.
Reserves 3,320,594 2,926,265 (394,329) (11.88) Impact of Share Valuation after adjusted of Bonus share received during the period.
Total equity attributable to equity holders 17,604,293 18,011,576 407,283 2.31
Non-controlling interest
Total equity 17,604,293 18,011,576 407,283 2.31
Total liabilities and equity 155,124,850 155,445,997 321,146 0.21
10th ANNUAL REPORT 2019/2020
197Mega Bank Nepal Limited
Particulars
As per unaudited Financial
Statement
As per Audited Financial
Statement
Variance
Reasons for Variance In amount In %
Interest income 10,383,066 10,389,426 6,361 0.06 Adjustment Entry of Interest Rebate.
Interest expense 6,212,018 6,212,018 - -
Net interest income 4,171,048 4,177,408 6,361 0.15
Fee and commission income 522,189 522,733 544 0.10 Adjustment Entry of Remittance Fees income.
Fee and commission expense 50,848 51,432 583 1.15 Recalssification and Readjustment
Net fee and commission income 471,341 471,301 (39) (0.01)
Net interest, fee and commission income 4,642,389 4,648,710 6,321 0.14
Net trading income 328,087 328,087 - -
Other operating income 140,138 163,020 22,882 16.33 Recalssification and Readjustment
Total operating income 5,110,613 5,139,816 -
Impairment charge/(reversal) for loans and other losses 888,536 806,439 (82,097) (9.24) Adjustment of Loan loss Expense
Net operating income 4,222,077 4,333,377 111,300 2.64
Operating expense
Personnel expenses 1,250,827 1,260,156 9,329 0.75 Change in Staff Bonus
Other operating expenses 665,683 692,333 26,650 4.00
Depreciation & Amortisation 151,066 145,605 (5,461) (3.61) Adjustment of excess depreciation recognized.
Operating Profit 2,154,500 2,235,283 80,783 3.75
Non operating income 9,947 17,529 7,582 76.23 Recalssification and Readjustment
Non operating expense 8,153 8,153 - -
Profit before income tax 2,156,294 2,244,660 (88,365) (4.10)
Income tax expense 635,701 658,445 22,744 3.58
Current Tax 646,062 669,775 23,713 3.67 Prior Period tax Income adjusted
Deferred Tax (10,361) (11,331) (970) 9.36
Profit/(loss) for the period 1,520,593 1,586,215 65,622 4.32
10th ANNUAL REPORT 2019/2020
199Mega Bank Nepal Limited
1. Necessary arrangements shall be made to gradually improve the observations mentioned in the audit report and to prevent from recurrence of such observations.
2. There is no share investment exceeding the limit prescribed by Nepal Rastra Bank’s Directives, thus not applicable to the Bank.
3. There is no promoter shareholder holding exceeding the limit prescribed by the directive of Nepal Rastra Bank, thus the direction is not applicable.
4. Goodwill amount generated from merger and acquisition and share premium amount in respect of such goodwill shall be earmarked until impairment or adjustment of such goodwill.
Implementation Status of NRB Directions and Bank’s response in respect of directions given in approval letters issued by Nepal Rastra Bank:
10th ANNUAL REPORT 2019/2020
200Mega Bank Nepal Limited
Amendment in Memorandum of Association of Mega Bank Nepal Limited(Related with proposal presented at Annual General Meeting to be held on 2077/09/29)
S.N. Existing Provision Proposed Amendment/Additions Reason for Amendments
1
Section 6(a):
The Authorized Capital of the Bank shall be Rs. 14,500,000,000 (Fourteen Billion and Five Hundred Million rupees). Such shares shall be divided into 145,000,000 (One Hundred Forty Five Million) units of ordinary share with each share of Rs. 100 par value.
Section 6(a):
The Authorized Capital of the Bank shall be Rs. 15,000,000,000 (Fifteen Billion rupees). Such shares shall be divided into 150,000,000 (One Fifty Million) units of ordinary share with each share of Rs. 100 par value.
Share capital of the Bank shall increase after issue of bonus shares
2
Section 6(b):
The Issued Capital of the Bank shall be Rs. 13,322,695,416 (Thirteen Billion and Three Hundred Twenty Two Million, Six Hundred Ninety Five Thousand and Four Hundred Sixteen rupees). Such shares shall be divided into 133,226,954.16 (One Hundred Thirty Three Million, Two Hundred Twenty Six Thousand, Nine Hundred Fifty Four and sixteen hundredths) units of ordinary share with each share of Rs. 100 par value.
Section 6(b):
The Issued Capital of the Bank shall be Rs. 14,654,964,957.60 (Fourteen Billion and Six Hundred Fifty Four Million, Nine Hundred Sixty Four Thousand, Nine Hundred Fifty Seven rupees and sixty hundredths). Such shares shall be divided into 146,549,649.57 (One Hundred Forty Six Million, Five Hundred Forty Nine Thousand, Six Hundred Forty Nine and fifty seven hundredths) units of ordinary share with each share of Rs. 100 par value.
3
Section 6(c):
The Paid Up Capital of the Bank shall be Rs. 13,322,695,416 (Thirteen Billion and Three Hundred Twenty Two Million, Six Hundred Ninety Five Thousand and Four Hundred Sixteen rupees). Such shares shall be divided into 133,226,954.16 (On Hundred Thirty Three Million, Two Hundred Twenty Six Thousand, Nine Hundred Fifty Four and sixteen hundredths) units of ordinary share with each share of Rs. 100 par value.
Section 6(c):
The Paid Up Capital of the Bank shall be Rs. 14,654,964,957.60 (Fourteen Billion and Six Hundred Fifty Four Million, Nine Hundred Sixty Four Thousand, Nine Hundred Fifty Seven rupees and sixty hundredths). Such shares shall be divided into 146,549,649.57 (One Hundred Forty Six Million, Five Hundred Forty Nine Thousand, Six Hundred Forty Nine and fifty seven hundredths) units of ordinary share with each share of Rs. 100 par value.
10th ANNUAL REPORT 2019/2020
201Mega Bank Nepal Limited
Note:==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
10th ANNUAL REPORT 2019/2020
202Mega Bank Nepal Limited
Note:==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================
==========================================================================================================================================================================================================================================================================================