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Agricultural Development Bank Trust of farmers since 6 decades

Krishi Bikas Bank, which is investing in agriculture, industry, trade, commerce and household sectors, has been providing financial services to more than 1.2 million customers, and currently 33 percent of the bank's total lending is in the agricultural sector.
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The context is about 6 decades ago. It was the month of January. The then King Mahendra inaugurated a bank in Kathmandu Geopark. The name was - Agricultural Development Bank. From Raja Mahendra V.S. Democracy was hijacked in 2017. By ousting the two-thirds elected government, he implemented a one-party system.

Agricultural Development Bank Trust of farmers since 6 decades

America sent some people including Quint Lindsay, David to Nepal saying that 'China can dominate Nepal now, we have to protect Nepal'.

One of them, David, wrote a book about how Nepal can be developed. The product of that book was the cooperative bank at that time. V.No. Born in 2020, Sahakari Bank (formed from Bhoomi Samorar Savings Corporation) was converted into Krishi Bikas Bank on 7th January 2024. The experts who suggested that a separate bank is needed for the development of the agricultural sector in Nepal are American citizens Quint, David, Kulshekhar Sharma from Nepal, Bhesh Bahadur Thapa, Mohanman Sainju. It doesn't matter if the bank was established as a product of their thinking.

Photos: Angad Dhakal/Kantipur

'One hundred percent of people depend on agriculture. It is now necessary to give a new twist to the agricultural system here, to increase the availability of new methods, seeds and fertilizers to the farmers,' said the then Minister of Land Reforms, Food and Agriculture Rajeshwar Devkota at the bank opening program, 'as the agricultural production is increasing, the lack of markets and warehouses is starting to be felt, so all the farmers Agricultural Development Bank was opened to solve the problem. The bank will not only provide agricultural loans, but will also provide technical advice to those looking to invest. From 2027 to 2035, the Chairman and General Manager of the Krishi Bikas Bank Board of Directors, Delagraj Koirala. From the beginning, they provided banking services to the villages of Nepal, formed farmer groups under the Small Farmers Project, gave mortgage-free loans to group members, conducted adult education and child education, provided smokeless stoves, toilets, tubewells, irrigation troughs, fertilizers, seeds, and medicines. Shri Krishna Upadhyay, the former executive chairman of the Agricultural Development Bank, said, "Small farmers were served in the fields of milking cows, buffaloes, bulls, goats, poultry, and fish farming."

He said that the contribution of Kisan project is. At that time, the bank did not collect deposits from citizens, it collected resources through re-loans from the National Bank and subsidized loans and grants from various 27 donor countries. That amount was disbursed to farmers in the form of agricultural loans. Realizing the importance of the agricultural sector in the Nepalese economy, the then government established a separate bank for farmers.

vs. On December 25, 2034, the then King Birendra inaugurated the newly constructed building at Ramshahpath, which currently houses the head office of the Agricultural Development Bank. After that, all the programs of Krishi Bikas Bank started operating from that office. Along with the political changes in the country, there have been many ups and downs in the nearly 6-decade journey of the Agricultural Development Bank. By overcoming all these ups and downs, Krishi Bikas Bank is moving forward by competing with other banks and financial institutions.

Krishi Bikash Bank has been classified as early stage from 2020 to 2047, second stage from 2047 to 2063 and third stage from 2063 to present, i.e. the time when it became a full banking business. For the last one and a half decades this bank has been functioning as a full commercial bank like other commercial banks.

However, even now, more than a quarter of the bank's total loan portfolio is in the agricultural sector. According to the instructions of the National Bank, commercial banks should invest at least 15 percent of their total loans in the agricultural sector by the end of June 2084. However, Krishi Bikas Bank has disbursed 33 percent of total loans to the agricultural sector. Initially, the bank started working as a model in 7 locations including Kailali, Bardia, Palpa, Jhapa, Kathmandu, Chitwan. Later, it gradually spread throughout the country," said Upadhyay, former executive chairman of the Agricultural Development Bank. "Initially, this bank was established with the financial and technical support of the American government. The draft of the Bank's Act was done by American citizens who came to Nepal at that time.'

'Around 2040, 27 different donors were providing loans and grants to the Agricultural Development Bank. There were many conditions and complications in the support and grants given by donors and the National Bank also reduced the grant amount. "We started commercial operations in the year 2043 with the aim of making the bank less dependent on donors and survive on its own resources," said Upadhyay, "at that time we started collecting savings from citizens through 26 branches in villages and 10 in cities." After that, Krishi Bikas Bank like other commercial banks. He said that he started commercial business.

There was no doubt yesterday, nor today, that the development of the agricultural sector is essential for economic prosperity in Nepal. The contribution of the agriculture sector to the Gross Domestic Product (GDP) is the highest at 24.12 percent. 50.1 percent of Nepal's total population is engaged in agriculture. This also confirms the importance of agriculture sector in the economy.

The agricultural sector, which is the backbone of the economy, has not been prioritized by the state for development and expansion. The situation in the agricultural sector is exactly the same as the condition of a patient who does not take medicine at the prescribed time as per the doctor's advice. The state is not only aware but also confident that economic prosperity is not possible without the development of agriculture. The path of development is also known, but economists say that this sector has not been able to turn the corner when the state has become irresponsible.

As the name suggests, Krishi Bikas Bank is a fully commercial bank, but it has not abandoned its work. Until last February, all banks and financial institutions have disbursed 4 trillion 15 billion rupees in agricultural loans. This is slightly more than 8 percent of the total loans disbursed during the same period. According to the instructions of the National Bank, commercial banks have to provide 11 percent of total loans by June 2081, 12 percent by 2072, 13 percent by 2083 and 15 percent by 2084 to the agricultural sector. However, currently, Krishi Bikas Bank has disbursed 33 percent of total loans to the agricultural sector. In the financial year 2063/64, this ratio was 29 percent of total loans.

The former executive officer of Krishi Bikas Bank, Anil Kumar Upadhyay claims that Krishi Bikas Bank has been continuously working as the successor of the then Cooperative Bank in accordance with the main objective of ADBN Act to increase the production and productivity of the country's agricultural sector and to provide institutional credit. "The latest amendment in the said Act gave the bank the right to extend the scope to provide credit to small farmers under collective responsibility and to promote domestic industry," he said, "the amendment also allowed the bank to engage in commercial banking activities for mobilizing indigenous resources."

In recent times, the Banks and Financial Institutions Act (BAFIA) has brought all banks and financial institutions under its umbrella and has repealed all laws related to banks and financial institutions, including the ADBN Act, 1967. At present, Krishi Bikas Bank Limited, registered as a public limited company under the Companies Act, 2006 and has been operating as a licensed organization of 'A Class Financial Institution' from Nepal Rastra Bank since 2006.

Since its inception, Krishi Bikas Bank has been working as an organization providing loans in major rural areas of the country. With a glorious history of 57 years, this bank is one of the leading commercial banks in the country. This bank, which is investing in agriculture, industry, trade, commerce and household sectors, has been providing financial services to more than 1.2 million customers. At present, out of the total loans disbursed by this bank, 1 trillion 95 billion rupees have been invested as agricultural loans.

Chief Executive Officer of Agricultural Development Bank Govind Gurung .

Govind Gurung, the chief executive officer of the bank claims that although the commercial banking activities have intensified over time, the priority of this bank is the agricultural sector and its development. He said that the bank is also conducting the 'Value Chain for Inclusive Transformation of Agriculture-VITA' project in partnership with the International Fund for the Development of Agriculture and the Forest Project Program for Prosperity in partnership with the World Bank.

However, like other banks, this bank's bad loans have increased in recent quarters and profitability is also under pressure. Employee organizations in banks are more active than necessary. In some cases, they are also seen as obstacles in the progress of the bank's work.

As of last February, among the bank's total loans, the second was business and the third was consumer goods. In the same period, the maximum 46.35 percent of the total agricultural loans were invested in food crops and services, 15.22 percent in vegetable production, and 9.50 percent in animal husbandry.

Similarly, the bank has been distributing Kisan cards for the past 3 years. Farmers can purchase seeds, fertilizers and other necessary items from this card. Cash is not required as it is linked with the farmer's loan account. The bank has also launched Kisan app for agricultural information and online payment.

'Priority in agricultural credit'

Govind Gurung

Chief Executive Officer, Agricultural Development Bank

How do you remember the nearly 6-decade-long journey of the bank established to give agricultural credit to farmers?

This bank was established 57 years ago to increase the production and productivity of agriculture and modernize agriculture to make farmers self-reliant in technology. The bank has always been working with agriculture as a top priority, which is why even now more than 33 percent of the bank's total loans are invested in the agricultural sector.

How did it come to a situation where it has to leave its purpose and suddenly have to provide loans in the commercial sector like other commercial banks?

The bank has not completely abandoned its priority areas . The purpose of the bank is not to leave agriculture and connect others. Even now, the bank's priority is in credit investment in the agricultural sector. As a commercial bank, it has to provide services in all areas, and accordingly it has to manage its loan portfolio and provide competitive returns to investors.

In recent years, the share of agriculture in the total lending of the bank is continuously decreasing, now the agricultural sector has become a low priority.

The main objective of the bank is to provide financial services for the overall development of the agricultural sector, so the main objective is to increase the investment of agricultural loans. However, in the last few years, due to the lack of growth in commercial agricultural projects, we have invested enough in the total amount of agricultural loans, even though there has been no growth as expected.

Agricultural loans are being provided only traditionally. Is it not possible to invest with the latest thinking?

In recent years, we have been using the latest technology in commercial agriculture. The bank is also increasing the loan flow towards the necessary investment in terms of modernizing agriculture and making it technological. In addition, the bank has launched Kisan Card and Kisan App to professionally connect farmers with digital technology.

The performance of the bank in the last quarters does not seem to be successful . Bad loans have increased. Net profit is negative . Why did this happen?

Now there is an increase in bad loans in the entire banking sector. However, our bank's bad loans in the second quarter are lower than the overall banking sector average. That is, there is only 3.02 percent of bad loans. Although the profit was negative in the first quarter of the current financial year, in the financial statement of the second quarter, the bank has a profit of 1.86 billion.

How likely is it to lead the bank back to the old style, i.e. lending only to the agricultural sector?

yesterday and today's situation is different . According to the bank's capital structure after becoming a company, 49 percent of ordinary investors have shares. Therefore, shareholders expect competitive returns. For that, the entire banking, i.e. business in all areas, needs to be done . Now we don't have the freedom to invest only in the same type of business . Therefore, we are also investing loans in other areas prioritized by the government of Nepal. However, we have not stopped the campaign of increasing credit in the agricultural sector that the bank has been doing since its inception.

Bank is also making a five-year strategic plan . What is the main plan?

We are in the process of creating a five-year strategic plan for the next five years. Especially considering the challenges seen in the banking sector, we have adopted the development in banking technology to provide fast banking services to the customers by using the latest technology . We are also planning to achieve commercial goals by making timely transformations in human resources, banking technology, professionalism, customer service and compliance compliance.

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