leading the way - av.sc.com

in Asia, Africa and the Middle East

Leading the way in A

sia, Africa and the M

iddle East

Annual Report and Accounts 2009-2010

Annual R

eport and Accounts 2009-2010

Leading the way

Our performance

Financial highlights

FYE 2009/10

Non-fi nancial highlights

Operational highlights

2298m

14.60%

1612m

42918

32.22%

40,213m

70%

Operating Income

(in NPR where applicable)

Points of representation

Capital Adequacy

Operating Profi t

Employees

Return on equity

Total Assets

Dividend

Stable Income Growth

Stable Profi t Growth

Robust balance sheet

Sound capital base

Sound risk management

Sustainable business

(IncludingBonus Shares)

Disclaimer

Standard Chartered Bank Nepal Limited is an Equal Employment Opportunity/ Affi rmative Action employers. Standard Chartered Bank Nepal Limited is committed to providing equal employment opportunities to every employee and every applicant for employment, regardless of, but not limited to, such factors as race, color, religion, sex, age, familial or marital status, ancestry, sexual orientation, veteran status or being a qualifi ed individual with a disability; within the legal framework of the country.

Standard Chartered Bank Nepal Limited undertakes no obligation to update any statement in this Annual Report 2009-2010 to refl ect events or circumstances after the date on which such statement is made. Information in this Annual Report is as of July 16, 2010.

Designed & Processed by: PowerComm, 5552987, Printed in Nepal

1www.standardchartered.com/np

About UsStandard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially

registered as a joint-venture operation. Today the Bank is an integral part of Standard Chartered Group

having an ownership of 75% in the company with 25% shares owned by the Nepalese public. The

Bank enjoys the status of the largest international bank currently operating in Nepal.

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially registered as a joint-venture operation. Today the Bank is an integral part of Standard Chartered Group having an ownership of 75% in the company with 25% shares owned by the Nepalese public. The Bank enjoys the status of the largest international bank currently operating in Nepal.

Standard Chartered PLC is a leading international bank, listed on the London, Hong Kong and Mumbai stock exchanges. It has operated for over 150 years in some of the world’s most dynamic markets and earns more than 90 per cent of its income and profits in Asia, Africa and the Middle East. This geographic focus and commitment to developing deep relationships with clients and customers has driven the Bank’s growth in recent years.

With 1,700 offices in 70 markets, Standard Chartered offers exciting and challenging international career opportunities for more than 80,000 staff. It is committed to building

a sustainable business over the long term and is trusted worldwide for upholding high standards of corporate governance, social responsibility, environmental protection and employee diversity. The Bank’s heritage and values are expressed in its brand promise, ‘Here for good’.

With 18 points of representation, 23 ATMs across the country and with more than 400 staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its customers through an extensive domestic network. In addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal.

Standard Chartered Bank Nepal Limited offers a full range of banking products and services in Wholesale and Consumer banking, catering to a wide range of customers encompassing individuals, mid-market local corporates, multinationals, large public sector companies, government corporations, airlines, hotels, SME’s as well as the DO segment comprising of embassies, aid agencies, NGOs and INGOs.

The Bank has been the pioneer in introducing ‘customer focused’ products and services in the country and aspires to continue to be a leader in introducing new products in delivering superior services. It is the first Bank in Nepal that has implemented the Anti-Money Laundering policy and applied the ‘Know Your Customer’ procedure on all the customer accounts.

Corporate Social Responsibility is an integral part of Standard Chartered’s ambition to become the world’s best international bank and is the mainstay of the Bank’s Values. Standard Chartered throughout its long history has played an active role in supporting those communities in which its customers and staff live. It concentrates on projects that assist children, particularly in the areas of health and education. Environmental projects are also occasionally considered. It supports non-governmental organisations involving charitable community activities The Group launched two major initiatives in 2003 under its ‘Believing in Life’ campaign- ‘Living with HIV/AIDS’ and ‘Seeing is Believing’.

2 Chairman’s Statement8 CEO & Director’s Report14 Our Approach to Corporate

Responsibility20 Here for people, Here for good People Strength:

Business review overview Corporate Governance Financial Statements and Notes

41 Auditor’s Report42 Balance Sheet43 Profit & Loss Account44 Profit & Loss Appropriation Account45 Statement of Changes in Equity46 Cash Flow Statement47 Schedules76 Significant Accounting Policies78 Notes to Accounts83 Disclosure as per Bank’s disclosure

policy under the Basel –II Capital Accord of Nepal Rastra Bank

86 Nepal Rastra Bank’s Approval and Directions

87 Five Years Financial Summary

26 Our Approach to Corporate Governance32 Additional Information36 Board of Directors38 Management Team40 Branches and ATM’s


Chairman’s Statement

“ Our in-depth understanding of this market, ability to quickly adapt to the changing landscape and the flair of our management to execute Bank’s strategy has played a crucial role in achieving a sustained growth. ”

– Neeraj Swaroop, Chairman

It is with great pleasure I report that Standard Chartered Bank Nepal Limited has once again maintained its track record of consistent performance and has registered an impressive result for the fiscal year ended 16 July 2010. Delivering record results in this challenging economic and socio-political environment is indeed a commendable accomplishment. The foundation of success has been built mainly on our ability to follow a consistent strategy and focus of business in the areas of our strength.

During the year under review, the Bank gave continuity to its projects involving footprint expansion. A Branch as well as three new ATMs were added during the year. We also launched various innovative products both under Consumer and Wholesale Banking. These steps have had a positive bearing on our overall performance.

During our presence in Nepal for over twenty three years, we have been able to consolidate our position by effectively blending our global capability, deep local knowledge and creativity to outperform our competitors. This ability has helped us to serve our customers well, it also makes us part of their community. Our in-depth understanding of this market, ability to quickly adapt to the changing landscape and the flair of our management to execute Bank’s strategy has played a crucial role in achieving a sustained growth.

Against the back-drop of a rapidly changing world, we have been working very closely with our people, customers, regulators, industry and the community. This has provided us with enormous strength to successfully handle the changing business & economic environment encompassing the country.


Business review overview

I would like to reiterate that our brand is the most valuable asset which is at the heart of our strategic intent i.e, to be the world’s best international Bank, leading the way in Asia, Africa and the Middle East. Recent launch of our new brand promise `Here for good’ has given our brand a new dimension. While the Bank now has a new brand promise, `Here for good’ is, in reality, its oldest belief. It is what we have been doing for the past 150 years, and its aims for the next. It complements the Bank’s strategy, and also its values – Trustworthy, International, Responsive, Courageous and Creative. This renewed thrust and commitment will ensure Standard Chartered to continue to remain the best brand in this market.

Results – A Synopsis Financial Highlights Net Profit after tax rose by 5.93 percent

to Rs.1.086 billion compared to Rs. 1.025 billion in the previous year

Earnings per share is lower by Rs. 32.34 due to increase in the number of shares last year

Risk Assets increased by 16.54 percent to Rs.16.18 billion compared to Rs. 13.88 billion last year

Deposits contracted by 0.5 percent to Rs. 35.18 billion

A Consistent PerformanceThe Bank has been consistently delivering good performance year on year. As a result of another good year, the Bank has contributed an amount of Rs. 466 million to the Government Exchequer as compared to Rs. 443 million last year on account of corporate tax.

In accordance with the statutory requirements, the Board recommends a transfer of Rs. 21,381,278 to Exchange Fluctuation Reserve from current year’s profits and the statutory transfer of Rs. 217,174,339 into General Reserve Fund. In line with the revised capital

requirements as stipulated by the Central Bank, the Board has proposed to increase the capital by issuing 15 percent bonus share for which Rs. 209,772,540 has been allocated from current year profit.

Our Tier 1 and Tier 2 Capital Adequacy Ratios were 12.61 percent and 1.99 percent respectively with an overall ratio of 14.60 percent, post appropriations. Our capital position is more than adequate to meet our business needs and exceeds the current Nepal Rastra Bank’s capital adequacy requirement under the Basel II capital accord and also exceeds the international norms.

Economic EnvironmentGlobal ScenarioWe are presently living in an increasingly dynamic economic environment. Apart from being the witness of upheavals of past couple of years, the year 2010 has also experienced an isolated Greek crisis metamorphosed into a pan-euro zone crisis – which resulted in the financial sector across the globe, questioning the sovereign debt fundamentals.

The timely intervention & prudent approach of regulators seems to be a step in the right direction. Extraordinary liquidity provision, combined with guarantees for bank liabilities, had addressed fears about banks’ survival. Meanwhile, low interest rates regime has helped in reviving economies and bringing business confidence back. Debate is increasingly focused on timing of Governments withdrawing stimulus – which will depend on the confidence that recovery has firmly been established.

However, we think that although we are past the worst - but yet to be out of the woods. Our markets – Asia, Africa and the Middle East – are bouncing back, but to sustain that momentum Western World too

needs to start growing. The global financial crisis made it conspicuous that the financial world is extraordinarily interconnected and interdependent to be viewed in silos.

NepalThe volatile political situation coupled with low economic growth, widening trade deficit, high inflation and liquidity crunch in the banking system continued to remain the major challenges. Liquidity crunch was mainly attributed to the slow down in remittances, funds getting locked up in non productive sectors and weakening of confidence resulting in lower deposit mobilization.

Owing to political conundrum, the Fiscal Budget for year 2010/11 remains pending. Nevertheless, with the objective of arresting the widening trade deficit, ensuring smooth flow of credit to productive sectors, addressing the illiquid market and boosting both employment & growth, Nepal Rastra Bank announced its annual monetary policy for 2010/11, which, inter alia, projected GDP at 5.5 percent and expects to contain inflation within 7 percent.

In FY 2009/10, Nepal’s GDP grew by 3.5 percent at constant prices. Agriculture, manufacturing and service sectors are estimated to have grown by 1.2 percent, 3.9 percent and 6.9 percent respectively.

In the eleven months of 2009/10 ending mid-June, revenue mobilization of the government grew by 26.7 percent to Rs. 153.59 billion. Similarly total government expenditure increased by 29.1 percent to Rs. 188.65 billion. The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure.

On a monthly basis, exports grew by 14.1 percent during the month of May–June over

Profit After Tax in Rs. Mio Market value per share in Rs.

3,77

5

5,90

0

6,83

0

6,01

0

3,27

9

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10


the previous month. However, compared to the corresponding period of previous year, the exports have declined by 9.8 percent to Rs. 55.37 billion. The merchandise imports, on the other hand, grew by 35.2 percent to Rs. 342.99 billion.

Despite the rise in trade deficit, the Balance of Payment (BOP) improved gradually from a record high deficit of Rs. 23.53 billion in mid-March to Rs. 15.07 billion by mid-June. This is attributed to a surplus generated in the transfer account that includes grants, pension receipts and remittance. As a result, the level of gross foreign exchange reserve improved to Rs. 247.42 billion in mid-June which is sufficient for financing merchandise imports of 8.1 months and service imports of 6.8 months.

The year on year (y-o-y) inflation as measured by the consumer price index moderated to 9.6 percent in mid-June 2010 compared to 12.3 percent in the corresponding period last year.

In line with the appreciation of the Indian Rupees against the US dollar, the Nepalese currency vis-à-vis the US dollar appreciated by 4.62 percent in mid-June 2010 compared to mid-July 2009. Nepalese rupee has a fixed parity of 1:1.6 with the Indian Rupee. The exchange rate of one US dollar stood at Rs. 74.60 in mid-June 2010 compared to Rs. 78.05 in mid-July 2009.

The Year AheadSCB Nepal‘s prudent funding, liquidity and high asset quality policies have stood it in good stead during the difficult times. During this period, the bank remained adequately liquid to support the credit needs of the clients from both the businesses viz. Wholesale and Retail. We will continue to manage our balance sheet in a conservative manner, maintaining high liquidity and strong capital ratios.

We believe that great opportunities lie ahead as the government is committed to attain accelerated growth rate in the economy and contain inflation. Needless to mention, it will largely depend upon the political stability and the security environment. We have a firm belief that the financial services sector, in which we are a player, will continue to grow and develop into a major pillar of the Nepalese economy.

The agriculture sector, which is largely dependent upon the weather conditions, is likely to experience a setback because of the late arrival of monsoon this year. However, this is likely to be mostly compensated by the ongoing expansion of cultivation area and enhancement in distribution of inputs and services in the rural areas owing to improving security situation. The industrial sector is estimated to grow at an average pace in the coming year. For the fact that the government has reiterated its commitment to increase infrastructural expenditure and improvement in the operating environment, some stability in the economy can be envisaged.

The year 2011 is being celebrated as `Visit Nepal Year.’ This is expected to provide some momentum in the tourism related activities.

Corporate GovernanceGovernance across the Bank is robust. As you may all appreciate, banking is a relationship business. We highly value the relationships that we have with our people, regulators, clients and the other stakeholders; all efforts will be made to further deepen this relationship.

We are committed to ensuring the integrity of governance. In addition to the established committees, we have committees on Diversity and Inclusion, Health and Safety, the Environment, Outserve Plus and

Community Partnership. The initiatives taken by these committees have added value to our stakeholders and delighted them. We believe good governance provides clear accountabilities, ensures strong controls, instills the right behaviors and reinforces good performance.

Mr. Anurag Adlakha, Mr. Sushen Jhingan and Mr. Sujit Mundul nominated by the Standard Chartered Grindlays Australia and Mr. Ram Bd. Aryal as Professional/Independent Director continue to be in the Board of SCB Nepal Limited. I, Neeraj Swaroop, continue to represent the Standard Chartered Group on the Board of Standard Chartered Bank Nepal Limited.

As on the date of this report, the Board is made up of the Non-Executive Chairman, one Executive Director and four Non-Executive Directors of which one is professional /independent Director appointed as per the regulatory requirement. Director, Mr. Arjun Bandhu Regmi, representing the public shareholders, has submitted his resignation from the post of Public Director citing personal reasons and the same has been accepted in the 264th Board meeting of the Bank held on 5th July 2010. The Board is currently in the process of fulfilling the vacant post as per the provisions of the Companies Act. I would like to thank Mr. Arjun Bandhu Regmi for his contribution during his tenure as Public Director of the Bank.

In Conclusion The global economy in 2010 started looking better than it did a year ago. Our markets – and particularly Asia – are better placed than most parts of the world to weather the risks, but they are not immune; so we cannot remain complacent. We must appreciate that the policymakers in most part of Asia have been effective in responding to the twists and turns of the crisis. Whilst the economic

Earning Per Share in Rs. Return on Total Assets

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

175.

85

167.

37

131.

92

109.

99

77.6

5

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2.56

2.42 2.

46

2.56

2.70



uncertainties continue, we start the year with a blend of caution and confidence.

Based on the data recently released by the government, economic indicators were just seen to be satisfactory during the review period. Key obstacles in resuscitating the weakening economy were seen to be the issues such as taming of inflation, creating investor-friendly environment and pushing the exports up to bridge the widening trade deficit. Despite the challenging situation, the Bank was able to record a satisfactory outcome due mainly to the commitment and focus exhibited by the management team in creating shareholders value.

Our top priority is to maintain our track record of delivering superior financial performance. To do this we need to sustain the momentum in both Wholesale and Consumer Banking. We are staying focused on the basics of banking; on the way we manage liquidity, capital, risks and costs. We are deepening our relationships by getting closer to our clients. We are also expanding the product capabilities and solutions we provide to them. For both the businesses, the depth and quality of our customer relationships are critical to our strategy and success.

We are cautious in expanding our risk assets portfolio and are satisfied the way we are growing in Wholesale and Consumer Banking. Under both the businesses, we have been following risk management techniques that minimize the likelihood of “any surprises”. Costs are well controlled. We are committed to stick to our strategy and will continue to focus on deepening our relationships with our clients.

Our brand is all about commitment. We are Here for good, to create value for our

shareholders, to support and partner our clients and to make a positive contribution to the broader community. We are here for the long term. Building a sustainable business is an integral part of our long-term strategy to enhance shareholder value. Many of our employees chose to get involved in community activities, and this further underpins our standing as being amongst the most customer and community caring institutions in Nepal.

Continued support and trust endowed upon us by our valuable customers, shareholders and other stakeholders has enabled us to remain the best Bank in Nepal. I sincerely appreciate their efforts to bestow us with their encouragement, trust and loyalty. SCB Nepal was the recipient of `Bank of the Year’ award for 2009 from the Financial Times; it is a testimony of this fact.

Our intention is to make meaningful contribution in accelerating the economic activities of the country to attain a higher growth rate. We are looking at the year ahead with cautious optimism. We have to remain vigilant, prudent and focused on the sound management of our balance sheet – this will remain key areas of focus.

Ministry of Finance and the Central Bank have been playing key roles in driving the financial sector reforms in Nepal. We welcome and appreciate the initiatives that are aimed at strengthening the overall financial system in the country. Support and guidance received from our Regulators and the high level of governance of the Standard Chartered Group have been the cornerstones for us in consistently delivering good results, in maintaining exemplary governance standards and in providing superior products and services.

“ We are Here for good, to create value for our shareholders, to support and partner our clients and to make a positive contribution to the broader community. ”

Being the only international Bank in the country with strong performance and values culture, SCB Nepal clearly edges past rest of the competition for being the `Employer of Choice’. The Bank aims at retaining this coveted position. We have been placing continuous focus on staff’s learning & development and in building their leadership capabilities. In an endeavor to address the diverse need of our people and to create a conducive work environment, we have been embracing work-life balance.

The Diversity and Inclusion Council, which is playing a key role in taking forward our D & I agenda, continued to address the different strands of diversity including women, and the differently-abled.

On behalf of SCB Nepal’s Board of Directors, I take this opportunity to thank all the stakeholders for their patronage. Let me take this opportunity to express my sincere appreciation towards our valued customers and shareholders for standing by us in our journey. I would also like to thank all our employees for their untiring efforts and loyalty towards the organization. They were instrumental in enabling us to deliver these good results.

What we achieved during this year will soon be history. There are good reasons for us to be thrilled about our past laurels but we now need to look forward and concentrate in delivering another good year. Whilst I do not underestimate the challenges and uncertainties before us, I am excited by the opportunities. We are equipped and are in a better position to deal with the emerging challenges.

Neeraj Swaroop Chairman

Total Shareholder Equity

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

1,75

4 2,11

6

2,49

3

3,05

2 3,37

0


Leading the way in helping realize local dreams


Krishna Textiles Udhyog


In Rs. ‘000s In Rs. ‘000s

16-Jul-10 15-Jul-09 % Change

Operating Profit 1,612,467 1,506,109 7%

Transfer to General Loan Loss Provision 76,974 56,635 36%

Provision for Tax 450,496 442,091 2%

Net Profit After Provision and Tax 1,085,872 1,025,115 6%

Issue of Bonus Shares 209,773 465,983 (55)%

Proposed Cash Dividend 769,166 465,983 65%

The CEO & Director presents this report together with the Balance Sheet and statement of Profit and Loss for the year ended 16 July 2010. The report is in conformity with the provisions of the Companies Act 2063 and Bank & Financial Institution Act 2063 including the directives issued by the Nepal Rastra Bank.

The Bank is in good shape and we have delivered yet another year of stable financial performance. Our strategy remains the same and through a disciplined execution of our strategy the Bank has been able to deliver on its promises. An increase in the net profit after tax of 6 percent over last year to Rs. 1.09 billion is commendable in the backdrop of an extremely challenging business environment. This has been achieved by relentless focus on cost and risk management while pursuing business growth.

There is an increase in the volume of risk assets by 16.54 percent to Rs 16.18 billion compared to Rs 13.88 billion last year. The Bank has been able to manage its credit portfolio better as a result of which the Non-performing credit to Total credit has reduced from 0.66 percent to 0.61 percent. The provisions made are adequate to cover all the potential credit losses of the Bank as of the balance sheet date.

After transfer to general reserve Rs.217.17 million, exchange fluctuation reserve Rs 21.38 million, proposed dividend Rs. 769.17 million, proposed issue of bonus shares Rs. 209.77 million and to other regulatory reserves Rs. 77.91 million, total retained earnings as at 16 July 2010 stood at Rs. 29.96 million. This performance reflects a good momentum

“ The Bank is in good shape and we have delivered yet another year of stable financial performance. ” – Sujit Mundul, CEO

CEO &Director’s Report



in the underlying businesses and disciplined management of risks and costs.

RepresentationAs at 16 July 2010, the Bank maintained eighteen points of representation which included fourteen branches and four extension counters. In addition to this, services were also extended to our customers through twenty three ATMs located at different parts of the country.

Wholesale BankingWB delivered another year of strong performance. What was achieved in the last one year is of significance because of the difficult operating environment, characterized by low economic growth, widening trade deficits, tight liquidity coupled with volatile political situation.

Opportunities that met our lending criteria were limited. WB was extremely careful in booking new exposures. At the same time we focused on select clients by actively providing enhanced level of facilities and the more sophisticated products viz. FX options, structured deposits, cross currency swaps, supranational trade finance, etc. This enabled our clients to hedge their FX and interest rate risks and undertake business that they would not have been able to close, had such product offerings not been available to them. It would be apposite to mention that we remained open for business “as usual” even during the most testing situation of liquidity crisis.

While it would be challenging to operate successfully in an environment which is expected to remain difficult– we are confident of maintaining the upward trajectory and at the same time will ensure that all risks be it credit, market, operational, etc. are well managed. We will continue to review our strategy so

that we remain ahead of competition and can respond to the changing dynamics of the market faster than anyone else.

Consumer BankingConsumer Banking continues to adopt customer and segment focused approach, balancing the banking solutions with appropriate risk control measures. Product and service innovation, sales through service excellence, appropriate risk based pricing and investment for the future are the essential ingredients of our operating business model.

During FY 2009/2010, the business continued to encounter numerous challenges stemming from the political conundrum and lackluster economic environment ranging from policy changes to load shedding, impacting adversely the overall operating environment. Whilst these challenges have been there for quite sometime, Liquidity crisis took the center stage decelerating the growth in deposits with further compression in margins.

To remain competitive, the Bank had to raise interest rates on its Structured Call and Fixed Deposits.

However, given our well managed balance sheet and Credit Deposit Ratio, the business continued to lend despite the liquidity challenges facing the market. SME, Auto, Mortgage, Personal Loans and Credit Cards showed steady growth. Auto and Mortgage loans contributed significantly to the Consumer Banking Lending Portfolio.

During the period under review, the Bank opened a branch in New Road and added three more ATMs.

Customer Charter Workshop in progress Launch of Priority Banking card

In line with the Consumer Bank’s transformation agenda, Customer Charter defining customer focus was rolled out to the entire Consumer Banking staff. The Customer Charter primarily focuses on Customers based on the following three principles:

Friendly, Fast and Accurate Service Solution to our Customers’ financial needs Recognition of overall banking relationship

with our Customers

As a testimony of our commitment towards Customer Charter, the Bank, inter alia, has launched the following:

Amulya Bachat Khata - A special Savings Scheme whereby higher interest rate up to the maximum of 6.5 percent p.a is given on the daily balances.

Added two more branches under the 365 days banking service - Naya Baneshwar Branch and New Road branch (former opens on all holidays and latter closes only on Saturdays).

Extended banking hours by one hour across the branch network between Sunday and Thursday and half an hour on Friday.

In order to gauge the satisfaction level of our customers and to continuously improve the way we work, regular feedback and surveys are undertaken. These feedback and surveys provide us with valuable insights about our products, services and people. This also enables us to improvise and introduce various policies, procedures, products and value added services that meet our customers’ needs whilst addressing the encompassing risk issues.


Our commitment to Treating Customers Fairly and our policies on Mis-selling and Mis- representation remain core to our values.

We will continue to invest in footprint expansion and our chosen segments. However, given the fluidity in the operating environment we will continue to remain cautiously optimistic in our approach.

As in the past we will strike a careful balance between risk and reward for a sustainable growth.

Outserve Plus - Continuously Improving the Way We WorkContinuously improving the way we work is one of the Bank’s five strategic priorities. The Bank has an Outserve Plus programme which works as the vehicle for continuously improving the way we work. Through Outserve Plus, we have made great progress in creating a culture of continuous improvement.

We have an Outserve Council which over the years, has acted as a catalyst for continuous improvement. Outserve Plus allows us to place greater focus on the underlying infrastructure and processes of the Bank that underpin customer service, productivity and control environment. The ambition for everyone in the Bank therefore is to work Simpler, Faster and Better.

Through Outserve Plus we will continue to look for the ways to be more efficient and effective in what we do, ensuring that we are “Here for good” and “Here for customers”.

Future PlansWe will continue to make appropriate investments in our franchise based on the operating environment. For the year 2010/2011, our key focus will be on Customer Service and SME. Bancassurance is another area where we will be making significant investment for generating fee income. Lending products like Auto, Mortgage, Credit Cards and Personal Loan will continue to be offered to our target segments and improvements in the turn-around time will receive our prime attention. Similarly we will continue to accelerate our deposit drive in order to maintain a better semblance in our balance sheet. We are also committed to providing easy banking solutions to our Visually Challenged customers within the existing framework and constraints.

We also intend to enhance our Online banking capabilities by adding additional features thereby obviating the need for customers to visit the bank for their basic banking requirements. Along with this, we will also be driving our e-statement agenda in order to ensure that customers receive their statements in a more efficient manner.

Inward remittances, an importance source of foreign currency earning, will continue to play a key role in the expansion of our consumer base.

On the WB side, we will continue to offer “total solutions” to our clientele with new products and seamless services. Our endeavor will be to further deepen our relationships

SCB Nepal was the recipient of ‘Bank of the Year’ award for 2009 by The Financial Times, London

CEO addressing a town hall to mark the launch of Bank’s refreshed brand promise - Here for good.



and achieve core banking status for all the corporate customers.

Nepal holds a huge potential to become a popular tourist destination. The year 2011, which is being celebrated as `Visit Nepal Year’, is expected to provide momentum to the tourism related activities. The steady economic growth of the two neighboring countries i.e. India and China is likely to offer opportunities for Nepal to act as a trade corridor. Suitable policy decisions to capitalize on these opportunities will help our agenda of achieving higher business growth. We will closely follow the opportunities for investment in infrastructural areas viz. hydropower, agriculture and other service sector industries.

In line with our revised brand promise, `Here for good’ we have full commitment to investing in our people, processes and systems with a view to improve the quality of our service for delighting our customers. As we have been doing in the past, we will continue to make a real difference to our communities. We will consciously drive and maintain our high level of governance. For our shareholders we shall strive to continue providing them with superior returns.

Credit EnvironmentThe risk management remained extremely challenging in the last fiscal year. The instability and uncertainty in the global economy brought about by the Western financial crisis persisted till recently. Though Nepal was believed to be relatively insulated from the

global financial crisis, its lagging effects were seen in the last FY in terms of deceleration in workers remittance, a key component in Nepal’s GDP, and decline in exports. During the past FY, Nepalese Economy witnessed low economic growth, widening trade deficit and liquidity shortage in the banking system. The continued security concerns and political uncertainty, double-digit inflation, growing energy crisis and nation-wide long strikes were some other key factors that affected the country’s credit environment. Decline in foreign exchange reserves, slowdown in deposit mobilization and reportedly aggressive flow of credit to unproductive sectors led to liquidity crisis, affecting the productive sectors in terms of inadequate credit support and high cost of borrowing.

Against the backdrop of a difficult political and economic environment, the Bank has been able to maintain its credit quality owing to its proactive risk management approach. The Bank continues to stick to the fundamentals of good banking. Clear strategy and discipline, strong relationship with the clients, rigors around the quality and debate on risk-return dynamics, etc are the few key elements that contributed to the success in the risk management. We are well disciplined in our liquidity management which is corroborated by our conservative C/D ratio and high capital adequacy.

AuditorM/S S. R. Pandey & Co., Chartered Accountants, were appointed as Statutory Auditors for FY 2009/10 by the 23rd Annual General Meeting of the Bank held on 4th

November 2009. We would like to thank them for their contribution made during their tenure as Auditors of the Bank. As per the recommendation of the Audit Committee, this meeting will decide on the appointment of the auditor for next year.

Proposed Dividend and Bonus SharesThe 266th meeting of the Board of Directors of the Bank has proposed dividend to the shareholders of the Bank for the year ended 16 July 2010 at the rate of 55 percent in cash and issue of bonus shares at the rate of 15 percent.

Sujit MundulDirector and CEO

The Bank has introduced extended banking hours across the branch network.

The Bank expanded its footprint by adding an ATM at the UN premises in Harihar Bhawan


Leading the way by touching lives


“ Talking sustainability is no longer optional for a bank due to the crisis that the banks have just been through. We have to prove that our business model is sustainable. We have to demonstrate that we make a positive contribution to sustainable growth and development. ”

We maintained our commitment to building a sustainable business as a bank, simultaneously creating value for our shareholders, supporting our customers and contributing to the communities in which we live and work. This has underpinned our strategy and success for over 150 years across Asia, Africa and the Middle East; and it will be the foundation for our future.

Talking sustainability is no longer optional for a bank due to the crisis that the banks have just been through. We have to prove that our business model is sustainable. We have to demonstrate that we make a positive contribution to sustainable growth and development.

We believe that through building a sustainable business we can deliver, broadly, three positive outcomes: contributing to the real economy; promoting sustainable finance; and leading the way in our communities. Our commitment, to our clients, investors, regulators, in our markets and to our staff, is to be Here for good.

Contributing to the real economyThe greatest impact we can make as an international financial institution to the societies in which we operate, is through our direct contribution to the real economy. By offering products and services that serve the needs of our customers we can assist individuals, corporates and other financial institutions to act as agents of economic activity.

Access to finance Many live within communities and their inability to raise finance has a direct impact on economic activity. The Bank is committed to improve access to financial services to such population of Nepal by helping them bring in the realm of financial services.

Our Approach toCorporate Responsibility

The Bank is the promoter of few rural development banks and Rural Microfinance Development Centre (RMDC) which underlines the Bank’s association with this business since long time. The Bank is represented in the Board of RMDC, an eminent wholesale lending micro finance entity. The Bank has also been lending to rural development banks and NGOs to facilitate onward lending to the rural population for the development of microfinance in Nepal.

Responsible selling and marketing Treating customers fairly has moved to the top of the agenda for many financial regulators around the globe. We welcome this development and will monitor and adopt new rules and regulations as they come into force in the markets in which we operate.

Clarity around the segmentation of customers has been increased and we have developed products and services based on clearly identified needs in Consumer Banking. In Wholesale Banking, we place much emphasis on treating our clients fairly and ensuring that they are sold appropriate products for their needs. It is also central to our strategy to become the ‘core’ bank for more clients.

Tackling financial crime We tackle financial crime in three ways: we minimize the risk that our products and services can be used by money launderers; we deny suspect terrorists access to our banking systems; and we build robust controls against fraud and corruption.

Great place to work We are truly a diverse organization with 125 nationalities represented among over 80,000 employees. We have on the ground presence in 70 markets and use our in-depth local knowledge and understanding of cultures to



Bank is the sponsor of prestigious ‘ProAm Surya Nepal Masters 2010’ golf tournament

Joining hands with Tilganga Eye Centre to provide eye care services to the poor & under priveleged

provide a unique service to our clients and customers.

Our culture and values are a source of competitive advantage which is hard to replicate. They are a key ingredient in what we believe is a unique emotional connection between the Bank and our employees, and between employees and our customers. In short, they encourage customers and employees to join us and stay with us.

Community InvestmentAs an international financial institution, the greatest contribution we can make to the societies in which we operate is through our direct contribution to the real economy. We believe in promoting sustainable finance to contribute to the challenges and opportunities presented by social and environmental risk.

SCB Nepal has constituted Standard Chartered Nepal Community Partnership Forum (SCNCPF) to undertake various community initiatives in Nepal. It is registered with District Administration Office and has received affiliation from Social Welfare Council.

The two major initiatives of the Bank launched in 2003 under its ‘Believing in Life’ campaign are ‘Seeing is Believing’ and ‘Living with HIV’.

Seeing is Believing Seeing is Believing is a public-private partnership that addresses avoidable blindness. Launched in 2003, the programme has gone from a simple staff –led initiative to raise enough money to carry out 28,000 cataract operations to $37 million global funding initiative. In 2008, we launched A New Vision, our latest commitment to Seeing is Believing. We will invest a further $20 million to provide sustainable eye-care services for 20 million people in deprived communities in 20 cities.

The Vitamin A Capsule (VAC) distribution program for 2010 in Kathmandu valley concluded successfully on 2-3 November 2009 and 19-20 April in April 2010. In line with our ‘Seeing is Believing’ initiative, our staff members from different branches joined the teams from Helen Keller International/Nepal (HKI/N) to raise awareness and provide support to community health volunteers during the distribution days after undergoing half a day training at HKI/N. Since 2007, Standard Chartered Bank’s ‘Seeing is Believing’ program has worked with HKI/N, the Ministry of Health and Population, and the Nepal Technical Assistance Group to strengthen Vitamin A awareness and distribution systems in the Kathmandu Valley. VAC distribution program in Kathmandu valley is being partially funded by the SCB Group.

World Sight Day was celebrated on 8th of October 2009. An agreement was signed between the Bank and Tilganga Eye Centre (TEC) to conduct 700 cataract surgeries to the poor and underprivileged people in different parts of the country in between October 2009- July 2010. In addition, an exhibition cum sale of handicraft goods produced by visually impaired people was held at the Bank’s Head office. The Bank has been instrumental in supporting restoration of sight to ~4,900 people till date, by sponsoring eye camps and intraocular lenses for cataract surgeries in partnership with Tilganga Eye Centre (TEC) and other local hospitals.

International Agency for the Prevention of Blindness (IAPB), a working partner of SCB Group under the Seeing is Believing program, signed an agreement on behalf of the Bank with Christian Blind Mission UK (CBM UK) in order for Eastern Regional Eye Care Programme (EREC–P), Biratnagar to receive USD 1 million worth of financial assistance

At a program organised to celebrate World Environment Day 2010


from the SCB Group. The assistance will be utilized towards construction, establishment of Eye Care Centres, Outreach Dept and Capacity building for local implementing partners. The project is progressing and SCB Nepal is closely monitoring developments of the project.

Standard Chartered Bank Nepal Walkathon is an annual fund raising event through which the Bank provides a platform to engage cross sections of our community to raise funds. We have been conducting this event since 2003 and it continues to remain a signature event of the Bank.

As a part of Wholesale Bank initiative, the Bank raised funds worth USD 3,400 through the sale of raffle tickets. The funds raised from the sale of raffle tickets will go to support the Bank’s ‘Seeing is Believing’ initiative.

Lazimpat Branch organized ‘Football for Hope & Vision’, a fund raising event for our ‘Seeing is Believing’ initiative targeted at raising funds from our staff members by screening World Cup football match live .

Living with HIVAIDS remains a global killer with no cure or vaccine. Over 33 million people are infected

by HIV and AIDS, with 6,800 new infections each day; 15-24-year-olds count for 45% of all new HIV infections. This pandemic has a devastating impact on many communities where we do business. Education is a key component of prevention strategies.

We have been running a workplace HIV education programme, called Living with HIV since 1999, which currently involves a network of more than 1,150 HIV Champions in 50 countries globally. In Nepal, we have 30 HIV Champions who work to raise awareness of HIV and AIDS in the Bank and with external organizations.

The Bank, in partnership with Nepal Banker’s Association, rolled out its Living with HIV program to the senior officials of various Banks. The program was successfully conducted by our Bank’s HIV Champions.

All our HIV Champions have been receiving refresher training through ‘Train the Trainer’ refresher sessions held at different intervals.

Like previous year, the Bank continued to support the under privileged women/ girls living with HIV /AIDs residing at Karuna Bhawan by sponsoring the cost of skill training program. The skill training program was

SCB staff volunteering during the Vitamin A Capsule distribution program

Patients after undergoing eye surgery at an eye camp held in Putali bazar, Syangja

Celebrating the festival of ‘Teej’ with our friends at Karuna Bhawan



The Bank supported Mahendra Shanti School, Balkot, Bhaktapur with 20 computers for computer education

Walking together for a noble cause-Walkathon 2009

imparted to these needy women/children so as to make them self reliant and to be capable of earning their livelihood.

The Bank also continued to sponsor education and living expenses of two LwHIV children at Maiti Nepal for three years.

Focus on Youth, Health, Education and Environment In line with our commitment to reiterate that the Bank is Here for good, we have undertaken various initiatives viz.:

The Bank continues to support to the deserving students of Shree Mahendra Shanti High School, Balkot by providing incentives/scholarships through VISCOSS – Nepal for the ninth consecutive year. The Bank also supported the school with 20 sets of computers to help them providing computer education to their students.

To mark the World Environment Day, Tree Plantation Campaign was organized by the Bank on 5 June to mark the World Environment Day. The staff planted altogether ~500 tree saplings at the Institute of Engineering, Pulchowk Campus.

The Bank was actively engaged in the International Cricket Council World Cup-

Staff displaying placards on environmental awareness at the Head Office

Div 5 matches held during 20th -27th February. The Bank is the co-sponsor of Nepal Cricket Team with branding rights.

Successful conclusion of the ‘Surya Nepal Masters Golf Tournament 2010’ which was held from 21-24 April. The event is considered to be one of the biggest professional golf tournaments organized in Nepal and generated good level of visibility for the Brand like in the past. The Bank was the ProAm sponsor of this tournament.

The Bank sponsored ‘Vow 6th Top College Women Competition 2009’ – an event that highlights the achievements of young, talented and versatile women students of Nepal and imparts them a platform to excel in their career. This was done mainly with a view to drive our D & I agenda and to strengthen the Brand amongst the young and college going students in Nepal – the Bank has been supporting the event for the last two years.

As a part of CB Credit initiative, the Bank raised funds worth USD 6,178 through the sale of raffle tickets. The funds raised from the sale of raffle tickets are intended to be utilized towards the support of under privileged children.


Leading with our sustainable business strategy


Bhotekoshi Power Company Pvt. Ltd.


Here for people, Here for goodPeople Strength:

New business initiatives supported by transformation created opportunities for new people with diverse background to take up challenging and exciting roles in the Bank. There were a total of 81 new hires to start their career in the Bank, majority inducted through job advertisements posted in our SCB Career Webpage.

Our people strength has increased by 7% making a total of 429 staff as of 16 July, 2010 as compared to 392 in 15 July, 2009. The current mix of male and female staff is 63:37.

During the year under review 14 of our employees completed 20 years, 4 completed 15 years, 3 completed 10 years and 24 employees completed 5 years of dedicated services to the Bank. The staff members completing their long service periods were felicitated on different occasions by the CEO with certificates and awards.

Right Start and Engagement programs for our 59 new joiners were conducted by the Bank at different dates. This was done with a view to motivate our new entrants to welcome them to work in a great place, live our culture and values and provide opportunity to build their career.

Our people strategy and priorities have remained consistent over the last few years.

Engagement:Recognizing the fact that an important part of sustaining business performance and driving productivity comes from engaging and motivating our employees, the Bank focused on employee engagement and proved successful in maintaining the engagement level in spite of a challenging market environment.

This high participation rate in Gallup Q12 Survey, which we use to measure engagement, reflects a strong commitment from employees to voice their opinions and demonstrates their trust in the process. Our overall score remained strong. We ensure that teams create `action plans’ and `follow through’ on their commitments. This involves regular conversations with managers with an objective to clarify what the expectations are thereby addressing the concerns and difficult questions, if any.

Learning Week:Learning Week was successfully organized in conjunction with the SCB Regional Organization Learning Team targeting all levels of employees in August. Various learning interventions, such as video sessions on “Even Eagles need a Push” were attended by 191 staff members. 28 of our employees attended a session on “Power of Vision”.

SCB Drama Mania A pan Bank drama competition ‘SCB Drama Mania’ was organized by the Bank during the year under review. A total of eleven teams with staff representation from all Branches and Units of the Bank participated in this popular event. The event created a very high level of engagement, excitement and unravelled enormous amount of hidden talents within the Bank. Preliminary rounds were held during the months of July and August with the finals of the event held in Kathmandu on 7th of August. All performances received great appreciation of the eminent external judges and a house full of audience on both the occasions. This event was followed by the annual staff party.

“ Recognizing the fact that an important part of sustaining business performance and driving productivity comes from engaging and motivating our employees, the Bank focused on employee engagement and proved successful in maintaining the engagement level in spite of a challenging market environment. ”



Honoring one of the women Gold medalists of 11th South Asian Games

External Extra Curricular Activities: Nine staff members representing various

departments and functions of the Bank participated in the coveted “Soaltee Crowne Plaza Super Sixes Cricket Tournament – 2009”.

Health and Safety Campaign week was celebrated in October with an objective to raise awareness and importance of these areas in order to provide our people with awareness, materials and basic tips and training.

Ten staff members representing various departments participated in the Inter Bank Volleyball Tournament 2010 organized by the Nepal Rastra Bank (NRB) on the occasion of its 55th Anniversary.

Employee Volunteering:It is crucial for the Bank to have our employees a deep understanding of the local markets and community where we operate. Our people have been playing a key role in appreciating the challenges and demonstrating the required commitment while working in partnership with the communities to overcome these challenges. As ambassadors of our brand, we have been empowering our employees by providing them opportunities to participate in various community programs through Employee Volunteering (EV) and champion networks. This activity is at the heart of our unique culture and is the reason why many of our people choose to work for us.

Employee Volunteering program is an internal initiative of the Bank whereby our staff members are encouraged to participate in community activities. As per the program, the staff are entitled for three days leave in addition to their annual leave to volunteer in the community related activities.

“Standard Chartered Nepal Walkathon 2009 – A Walk for a brighter tomorrow” is the Bank’s annual fund raising event conducted with an objective to raise funds for our various community initiatives, engage our staff and raise awareness around avoidable blindness, HIV/AIDS and environment. This event was organized successfully on 21st Nov 09 in which 90% of our staff in Kathmandu walked about 5 kms for this noble cause.

Seeing is Believing: About 20 staff volunteered 2 days each in

October ’09 and in April ’10 to distribute Vitamin A capsules in conjunction with Helen Keller Int’l and Nepal Technical Assistance Group. This is a SCB Group funded project in Nepal.

In partnership with Tilganga Eye Centre (TEC) our staff members in Kathmandu volunteered at eye camps held on 5th and 12th of June at Bhaktapur and Sindhupalchowk. Further our staff in branches outside Kathmandu have also volunteered in various eye camps in their areas.

Living with HIVOur HIV Champions have been constantly volunteering their time to conduct awareness and education sessions on HIV/AIDS on a bi-monthly basis to all new joiners in the Bank and also conducted similar sessions for other external organizations such as schools, colleges, Rotary Clubs, Rotaracts and manpower agencies.

World AIDS Day World AIDS Day was celebrated with a focus on awareness and educational activities

Induction Programs are designed for the new joiners to help them gain better understanding about the Bank.

Volunteers on a blissful note during ‘Clean Rani Pokhari Campaign’ under Employee Volunteering initiative


through engagement of our staff. Awareness and education workshops were conducted by our staff HIV Champions for our trainees/new-joiners. Similarly in association with Nepal Banker’s Association (NBA), this workshop was rolled-out to the representatives of 15 local banks. Voluntary Counseling and Testing (VCT) was organized for our staff members in the Bank premises. Staff creatively decorated their branches/departments with symbols, posters raising awareness on HIV/AIDS and displayed placards with messages on HIV awareness.

World Environment DayVarious programs were organized to mark the World Environment Day (WED) in June. Our employees made a difference by volunteering to plant 400 saplings at the premises of Pulchowk Engineering College, Pulchowk. Other activities included display of placards at the Bank entrance, Car Pooling and several internal broadcasts on environment to build awareness around the theme.

Building leadership capabilitiesStrong leadership is critical to our success. It is through our leaders that we motivate employees, drive performance and impart our unique culture.

We offer emerging leaders a series of programs and workshops to support their personal development, through one-on-one coaching; through our flagship Leadership Development Programs and our Great Managers workshops. An interactive session on “KFCI (Know, Focus, Care and Inspire) Awareness” was conducted for 42 managers and 19 of our Managers have completed a course on Leadership Essentials.

In order to build leadership from within, we have a number of specific programmes targeted at our high potential employees at each level, which help us to grow and develop them into our future leaders by providing mentors, networking opportunities, career discussions and specific learning opportunities. We provide support and skills to the Managers to help manage their talent pools. “Managing Talent in a Changing World” - a full day program was conducted for 12 People Managers. Senior Managers participated in the Country Leadership Team meetings conducted in the year under review. Nine of our employees were given opportunities outside Nepal for short term assignments. During the year under review, two employees took up roles in SCB Group points in other countries. Our talents were given opportunities to interact with Senior visitors from the Group to learn about the Group’s focus, priorities and leadership skills.

Training And Development OpportunitiesWe strongly believe in the need to “Keep Learning, Keep Growing” and with this belief Bank has been encouraging staff to actively involve in enhancing their knowledge and skills through various types of learning program be it through classroom programs, web based learning, on the job, self reading, assessments, attachment programs, sharing knowledge amidst each other. Number of learning opportunities - In-house trainings, Local programs by external trainers/ organizations, Global trainings, Short term attachment programs in the Group, On the job learning inside and outside the country were organized during this fiscal year through which our staff were able to develop their personal,

Roll out of ‘Know Focus Care & Inspire’(KFCI) workshop to staff

‘SCB Drama Mania’: The employees showcased their hidden talent through this event.

“ Strong leadership is critical to our success. It is through our leaders that we motivate employees, drive performance and impart our unique culture. ”



professional and leadership skills. A total of 995 mandays were spent in learning and development programs during the year under review.

Similarly, an impactful session on “Team Effectiveness” was conducted for the Bank’s management team.

Strengthening performance cultureTo reinforce our performance culture, we have launched a new global online system for managing performance which allows all employees to set their annual objectives online. This reinforces the basics of good people management and ongoing performance coaching by ensuring that all employees have stretching job objectives in place and are clear of what is expected of them.

The system captures all employee performance and values objectives online so that managers and employees can agree and review them at the click of a button throughout the year. It also provides a structured method to capture progress and feedback from colleagues and managers. This is a key factor in high employee engagement and helps reinforce our culture.

Diversity and inclusionOur focus on diversity and inclusion provides us with a unique competitive advantage and we work hard to maintain this. We constantly strive to improve the way we work so that employees can balance their work and personal commitments, maximize their potential and perform to their best. Keeping this in mind, maternity leave period for our female staff members has been revised to 90

from 45 days so that they can spend quality time with their newborn babies.

Festival of women folks, ‘Teej’ was celebrated by our female staff by celebrating it in-house and also by visiting the HIV affected women shelter homes and providing them with clothes and sweets. ‘Bhai Tika’ was celebrated by women colleagues presenting a muffler as a token of friendship and appreciation to all male colleagues in the Bank.

International Women’s Day 2010International Women’s Day was celebrated by organizing various activities at the behest of D&I Council.

Throughout this day, women wore beautiful scarves presented to them by their male colleagues.

To make that special woman in their lives feel valued, staff expressed/dedicated their messages in poetry, quotes etc.

An exhibition cum sale was organized in the Bank’s premises of products made by trafficked children and women rescued by an NGO- The Esther Benjamins Trust.

HR Team visited one of the girls college and conducted an hour long interactive session sharing the importance of banking for women.

3 women who won medals at the SAF games were invited and felicitated at a Town Hall.

We believe that our strong focus on engaging our people around our brand, further embedding our unique culture and values will continue to provide us competitive advantage.

Senior Management in action during the ‘Team Effectiveness’ session

‘Going Green’: The Bank planted 5,000 trees at Bisankhunarayan in Lalitpur

“ We believe that our strong focus on engaging our people around our brand, further embedding our unique culture and values will continue to provide us competitive advantage. ”


Leading the way in nurturing the economy


Rolpa Carpet Industries


Our approach to corporate governance

A SynopsisFollowing are the steps taken by the management for strengthening Corporate Governance in the organization.

The Board of Standard Chartered Bank Nepal Limited is responsible and accountable to the shareholders and ensures that proper corporate governance standards are maintained.

The Audit Committee meets quarterly to review the internal and external inspection reports, control and compliance issues and provides feedback to the Board as appropriate.

The Manco (Management Committee) represented by all Business and Function Heads is the apex body managing the day to day operations of the Bank. Chaired by the CEO, it meets at least once a month for formulating strategic decisions.

The Annual General Meeting is used as an opportunity to communicate with all shareholders.

To ensure compliance with applicable laws, enhance resilience to external events and avoid reputational risk, the Board has adopted SCB Group policies and procedures.

Ultimate responsibility of effective Risk Management rests with the Board supported by Audit Committee, Manco, Country Operational Risk Group (CORG), Asset and Liability Committee (ALCO) and Risk Management Committee (RMC)

Embracing exemplary standards of governance and ethics wherever we operate is an integral part of our Strategic Intent. The Group Code of Conduct is adopted to help us meet this objective by setting out the standards of behavior we must follow with each other and with our customers, communities, investors and regulators.

AnalysisThe Board of Standard Chartered Bank Nepal Limited is responsible for the overall management of the Company and for ensuring that proper corporate governance standards are maintained. The Board is also responsible & accountable to shareholders.

The report describes how the Board has applied the principles and provisions of the Nepal Rastra Bank directives on Corporate Governance and the provisions of Companies Act, 2063 and Bank and Financial Institution Act, 2063 (the “Corporate Governance Code”). The directors confirm that:

Throughout FY 2066/067, the Company complied with all the provisions of the Corporate Governance Code. The Company complied with the listing rules of Nepal Stock Exchange Limited.

Throughout FY 2066/067, the Company was in compliance with the Securities Registration and Issuance Regulation, 2065

The Company has adopted a Code of Conduct regarding securities transactions by directors on further terms no less than required by the Nepal Rastra Bank Directives and the Companies Act and that all the Directors of the Bank complied with the Code of Conduct throughout FY 2066/067.

The BoardAs at the date of this report, the Board is made up of the Non-Executive Chairman, one Executive Director and four Non-Executive Directors of which one is professional /independent Director appointed as per the regulatory requirement. Director, Mr. Arjun Bandhu Regmi, representing the public shareholders, had submitted his resignation from the post of Public Director citing personal reasons and the same was accepted by the Board at 264th Board meeting of the Bank

“ The Group Code of Conduct is adopted to help us meet this objective by setting out the standards of behavior we must follow with each other and with our customers, communities, investors and regulators. ”

Corporate governance

Corporate Governance


Sharing a presentation with NRB on ‘Risk Management Strategies & Investment Products’

23rd AGM of the Bank in progress

held on 5th July 2010. The Board is currently in the process of fulfilling the vacant post as per the provisions of the Companies Act.

The Board composition complied with the regulatory requirements. Four Directors including the Non-Executive Chairman are nominated by the SCB Group to represent it in the Board in proportion to its shareholding. The Board meets regularly and has a formal schedule of matters specifically reserved for its decision. These matters include determining and reviewing the strategy of the Company, annual budget, overseeing statutory and regulatory compliance and issues related to the Company’s capital. The Board is collectively responsible for the success of the Bank.

During the year under review, the Board held 14 board meetings of which 1 was held by circulation. The Directors are given accurate, timely and clear information so that they can maintain full and effective control over strategic, financial, operational, compliance and governance issues.

The following table illustrates the number of Board and Audit Committee meetings held during the year under review:

Audit Board Committee Number of meetings 14 4 in FY 2066/067 Neeraj Swaroop 12* - Anurag Adlakha 4* 1 Sushen Jhingan* 9* 1 Sujit Mundul 14 - Ram Bahadur Aryal 14 4 Arjun Bandhu Regmi 10 -

* Chairman Mr. Neeraj Swaroop attended Six Board meetings through his alternate Director Mr. Aniruddha Bose and Mr. Sushen Jhingan attended two Board meeting through his alternate Director Mr. Peter Warbanoff.

Audit Committee As required by the local regulations, the Board has formed an Audit Committee with clear terms of reference. The Audit Committee meeting is normally held on a quarterly basis. The Committee reviews internal audit reports, Nepal Rastra Bank Inspection reports, Statutory Audit reports, Bank’s financial condition, internal audit/controls issues, compliance issues, etc. The Committee provides feedback to the Management through the Board of Directors as appropriate.

The Independent/Professional Director chairs the Committee for ensuring complete independence. The composition of the Audit Committee as on 16th July 2010 was as below:

Ram Bahadur Aryal - Non Executive Director- Chairman Anurag Adlakha - Director - Member Sushen Jhingan, Director - Member Gopi Krishna Bhandari - Member Pradip Shrestha - Member Secretary

All members of the Audit Committee are either non-executive directors or independent of business. The responsibilities of the Committee are in congruence with the framework defined by the NRB Directives and the Companies Act.

Management Committee (Manco)The Management Committee (Manco) represented by all Business and Function Heads of the Bank is the apex body that manages the Bank’s operation on a day to day basis. Manco meets formally at least once a month and informally as and when required. The strategies for the Bank are decided and monitored on a regular basis and decisions are taken jointly by this Committee. The CEO Chairs the Manco.

As at the date of this report, the composition of the Manco was as follows: Mr. Sujit Mundul, Chief Executive Officer Mr. Anurag Mishra, Head Wholesale Banking Ms. Anju Sharma, Head Consumer Banking Ms. Rakhi Singh, Chief Financial Officer Mr. Sudesh Khaling, Chief Information Officer Mr. Shobha Bd. Rana, Head, Legal and Compliance & Assurance Mr. Diwakar Poudel, Head, Corporate Affairs Ms. Bina Rana, Head, Human Resources Mr. Gopi Bhandari, Senior Manager Credit

Relations with Shareholders The Board recognizes the importance of good communications with all the shareholders. There is regular information, both financial as well as non-financial, published by the Company for the shareholder’s information. The AGM is used as an opportunity to communicate with all the shareholders.

The notice of the AGM, as required by the Companies Act, was sent to shareholders at least 21 days before the date of the meeting at their mailing addresses available in the Company’s records. In addition to that the notice and agenda of the AGM were also published twice in the national level daily newspaper for the shareholders information.

Internal ControlThe Board is committed to managing risks and in controlling its business and financial activities in a manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events. To achieve this, the Board has adopted the SCB Group policies and procedures of risk identification, risk evaluation, risk mitigation and control/monitoring.


functional level. Information is communicated through the functional, business committees to the Board which seeks to ensure that key risk issues are addressed at the appropriate levels and to provide assurance that standards and policies are being followed.

Credit Risk Credit risk is the risk that counterparty to a financial instrument will cause a financial loss to the Company by failing to discharge an obligation. Credit exposure includes individual borrowers and connected groups of counterparties and portfolios, in the banking and trading books. Standards are approved by the Board and the delegation of credit authorities are overseen by the CEO. Procedures for managing credit risk are determined at the business level with specific policies and procedures being adapted to different risk environment and business goals. Business risk officers are in place to maximize the efficiency on decision making. The Credit Risk is managed by Risk Management Committee, chaired by the CEO. This Committee, inter alia, reviews and monitors the Bank’s Assets Portfolio.

Market Risk Market risk is the exposure created by potential changes/volatility in market prices and rates. The Bank is exposed to market risk arising principally from customer driven transactions. The objective of the Bank’s market risk policies and processes is to obtain the best balance of risk and return while meeting our customers’ requirements. Market risk is managed by Asset and Liability Committee (ALCO) which agrees policies and levels of risk appetite.

Liquidity Risk Liquidity risk is defined as the risk that the Bank either does not have sufficient financial resources available to meet all its obligations and commitments as they fall due, or can access them only at excessive costs. It is the policy of the Bank to maintain adequate liquidity at all times and for all relevant currencies, and hence, to be in a position to meet all obligations as they fall due. The liquidity risk is managed both on a short term and a medium terms basis. In the short term, the focus is on ensuring that the cash flow demands can be met through asset maturities supported by customer deposits and wholesale borrowings where required. The Asset/Liability Management Committee (ALCO) under the chairmanship of CEO

meets at regular intervals to review the Deposit/Investment strategy of the Company and regulatory compliance. The ALCO is responsible for both statutory and prudential liquidity.

Operational RiskOperational Risk is the risk of direct or indirect loss due to an event or action resulting from the failure of internal processes, people and systems, or from external events. To ensure that the key operational risks are managed in a timely and effective manner, a framework of policies, procedures and tools has been established within the Bank to identify, assess, monitor, control and report such risks.

A robust Operational Risk Management and Assurance Framework (ORMAF) has been established as per SCB Group guidelines to supervise and manage the operational risk in the Bank. A Country Operational Risk Group (CORG) under the chairmanship of CEO is in place to supervise and direct the management of operational risk at country level whilst Business and Functional Operational Risk Groups are responsible for managing business and functional level operational risks in the Bank. Similarly, each unit in the Bank has a Unit Operational Risk Manager responsible for managing the operational risk at the unit level.

Bank’s existing operational risk management system has been further strengthened by creating a new role titled ‘Country Operational Risk Officer’ with responsibility to ensure end to end operational risk management across businesses and functions in the country and to drive the governance process.

Regulatory Risk Regulatory risk includes the risk of non-compliance with the regulatory requirements. The Bank has implemented appropriate compliance framework, policies and procedures and has effectively managed the regulatory risk. While compliance team is responsible for establishing and maintaining the compliance risk, compliance of such policies and procedures is the responsibility of each employee.

Legal Risk Legal risk is the risk of unexpected loss, including reputational loss arising from defective transactions or contracts, claims being made or some other event resulting in liabilities or other loss for the Bank, failure to protect the title to and ability to control

The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its Committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the Bank’s system of internal control during the year and provided feedback to the Board as appropriate.

The Internal Audit monitors compliance with policies/standards and the effectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports are periodically forwarded to the Audit Committee. The findings of all audits are reported to the Chief Executive Officer and Business Heads for initiating immediate corrective measures.

Risk Governance Through its risk management framework the Bank seeks to efficiently manage credit, market and liquidity risks which arise directly through the Bank’s commercial activities as well as operational, regulatory and reputational risks which arise as a normal consequence of any business undertaking.

As part of this framework, the Bank uses a set of principles that describe its risk management culture. The principles of risk management followed include:

Balancing risk and reward. Disciplined and focused risk taking to

generate a return. Taking risk with appropriate authorities and

where there is appropriate infrastructure and resource to manage them.

Anticipating future risks and ensuring awareness of all risks.

Efficient and effective risk management and control to gain competitive advantage.

Ultimate responsibility of the effective management of risks rests with the Board. The Audit Committee, within an authority delegated by the Board, reviews risk areas and monitors the activities of Management Committee (Manco), Country Operational Risk Group (CORG), Asset and Liability Committee (ALCO), and Risk Management Committee (RMC).

The committee governance structure seeks to ensure that risk management standards and policies are cascaded down through the organization from the Board to business and




the rights to assets of the Bank (including intellectual property rights), changes in the law, or jurisdictional risk. The Bank has appropriate legal framework, policies and procedures to effectively manage the legal risk. Legal risk is managed by the Legal Team.

Reputational Risk Reputational Risk is the risk of failure to meet the standards of performance or behaviors, expected by stakeholders in the way in which business is conducted. It is the Bank policy that, at all times, the protection of the Bank’s reputation should take priority over all other activities, including revenue generation. Reputational risk is not a primary risk, but may arise from the failure to effectively mitigate one or more of credit, liquidity, market, legal and regulatory and operational risks. It also arises from the failure to comply with social, environmental and ethical standards. A Reputational Risk Committee within the Bank has been established which meets at regular intervals to review and monitor this risk. All employees are responsible for day to day identification and management of reputational risk.

Capital Management The Bank’s capital management approach is driven by its desire to maintain a strong capital base to support the development of its business and to meet the regulatory capital requirements at all times.

As Capital is the centerpiece of the Bank’s performance matrix, a sound capital management forms the very core of the overall performance landscape to ensure that the Bank delivers on its objective of maximizing the shareholder’s value. The senior management of the company is engaged and responsible for prudent capital management at all times.

In compliance with the regulatory requirement of increasing the capital base as prescribed by the Central Bank, the Bank has a capital plan in place. The Bank is comfortable in meeting the minimum capital requirements and is very strongly positioned to meet the performance benchmarks as outlined in the plan.

The capital plan takes the following into account:

Regulatory Capital requirements Increase in the capital required due

to projected business growth, market uncertainties and stresses.

Available sources of capital and capital raising options

Crisis Management The Bank has in place a Crisis Management Plan and a Country Crisis Management Team to manage and resolve effectively serious crisis that may affect the operations of the Bank. In addition to this, the Bank has a detailed Business Continuity Plan (BCP) to manage disruptions of operations and a Disaster Recovery Plan (DRP) to manage Technological disruptions.

Health, Safety and SecurityWe consider the health and safety of our people and the integrity of our business as most important aspect of our operations. We regularly conduct audits of Health & Safety and Environment Management and conduct inspections of buildings and departments to provide assurance to all stakeholders that risks are being managed effectively and that there is a healthy and safety embedded working environment for both our staff and our customers. As part of Health & Safety corrective action plans, the Bank during the year has completed redesigning and renovating work areas in many parts of Head office building and other branches as well.

We believe these actions will help our brand stand out from our competitors. Ultimately they underpin our business and will help us to grow stronger.

Group Code of Conduct – Summary Comply with laws, regulations and

Group standards: Staff are individually responsible for complying with the spirit, not just the letter, of laws, regulations and Group standards.

Reject bribery and corruption: Staff must not give or accept bribes nor engage in any form of corruption.

Avoid being compromised by gifts and entertainment: Staff must not offer, give or accept inappropriate gifts or benefits to or from third parties. Definitive guidelines can be found in the Group Gifts and Entertainment Policy.

Speak up: Staff must Speak Up if they suspect, or know of, any actual, planned or potential behaviour that breaks, or may break, any laws, regulations or Group standards. Details are contained in the Speaking Up Guide.

Combatting financial crime: Staff must comply with laws, regulations and Group

standards on money laundering, terrorist financing and fraud prevention.

Avoid conflicts of interest: Staff are responsible for identifying conflicts of interest. Once these have been identified staff must take immediate steps to resolve the problem. Definitive guidelines can be found in the Group and Business Conflicts of Interest Policies and Procedures.

Do not deal in shares when in possession of inside information: Staff must comply with the Group’s Personal Account Dealing Policy to eliminate the risk of insider dealing.

Treat customers fairly (TCF): Staff must follow the Group’s seven TCF standards.

Respect customer confidentiality: Staff should not disclose customer or Group data unless authorised to do so.

Treat people fairly and with respect: All employees are entitled to a safe working environment that is free from discrimination, bullying and harassment.

Responsibilities to our communities and regulators: Staff must be responsive to their communities and demonstrate exemplary governance at all times.


Leading the way by enhancing industries


Dabur Nepal Pvt. Ltd.


Achievements of the current year as of

the date of preparation of the report,

and opinion of the Board of Directors on

future actionsUn-audited first month result of the current financial year is as follows:

(Rs.)

Risk Assets: 16.70 billionDeposits: 33.95 billionOperating profit: 916 millionProfit before bonus and taxes: 1013 millionNet profit for the period: 645 million

The bank will continue to invest in building the franchise and expand its footprints cautiously. It will continue to strike a fine balance between growth and revenue. Similarly strong vigilance will be maintained over the quality of assets. More innovative products will be introduced to add value to our customers by adhering to their needs. We shall be customer centric rather than product centric and will continue to improve the way we work to delight our customers and other stakeholders. We will continue to invest in our people through cross border placements, trainings and knowledge enhancement and other measures in order to promote a meritocratic work performance culture and with the objective of increasing overall productivity and grooming managers for the future.

A review of the business during the

previous year:Please refer the sections ‘Wholesale Banking’ & ‘Consumer Banking’ under CEO and Director’s Report.

Industrial or Professional Relations of the

CompanyThe Company maintains a good professional relationship with its customers, people and regulators. Senior managers of the Company represent in number of councils, committees and sub-committees of regulators’, professional organizations, associations, and forums.

The Company is a member of Nepal Bankers Association, Federation of Nepalese Chamber of Commerce & Industry, Nepal Britain Chamber of Commerce & Industry, Nepal India Chamber of Commerce & Industry, Management Association of Nepal and Nepal Institute of Company Secretary.

Changes made in the Board of Directors,

and reasons thereforePlease refer the section ‘Corporate Governance’ under Chairman’s Statement.

Main factors affecting the businessPlease refer the sections ‘A Challenging Environment’ and ‘Conclusion’ under Chairman’s Statement and ‘Credit Environment’ under CEO & Director’s Report.

Board of Directors’ Reaction to Remarks

made, if any, in the Audit ReportPlease refer the sections ‘A Challenging Environment’ and ‘Conclusion’ under Chairman’s Statement and ‘Credit Environment’ under CEO & Director’s Report.

The amount recommended for

distribution as dividendThe Board has recommended paying Rs. 209,772,540 by way of bonus shares and Rs. 769,165,980 by way of dividend to the shareholders.

Additional Information as required by section 109 of the Companies Act 2006




Forfeited SharesThere are no shares forfeited during the fiscal year.

Transaction between the Bank and its

Subsidiary Company and the Progress

made in the Business The Bank does not have a subsidiary company.

Main transactions carried out by the

company and its subsidiary company dur-

ing the financial year and any important

change in the business of the company

during the periodThe Bank does not have a subsidiary company and there is no significant change in the business of the company during the period.

Information furnished to the company by

its basic shareholders during the previous

financial yearThere are no basic shareholders in the bank as no shareholder, except the SCB Group, holds more than 1% of the paid up capital of the Company. There has been no information received from the SCB Group in this regard.

Particulars of the ownership of shares

taken up by the Directors and office-bear-

ers of the company during the previous

financial year, and information received

by the company from them about their

involvement, if any, in the transactions of

the shares of the companyNIL. Directors and office bearer have not involved in the shares transactions of the bank in FY 2066/67 as per the declaration provided by them to the Company.

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 yearThere are no such information furnished by the directors and any of their close relatives.

Purchase of own SharesThe bank has not purchased its own shares in the year under review.

Whether or not there is an internal control

system, and if there is any such system,

details there of Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Particulars of the total management ex-

penses of the previous financial yearThe management expenses of the financial year is Rs. 60,82,68,808.00 million (total of Staff Expenses and Other Operating Expenses as per Schedule 4.23 & 4.24 of the Financial Statements.)

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, of-

fered by the Committee.Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Remunerations, allowances and facilities:The Committee members and the Chairman have been paid meeting allowance of NPR


5000 and NPR 6000 per meeting respectively, except to the members representing the SCB Group and employees of SCB, Nepal. No remuneration and other facilities were provided to them. The total amount of Audit Committee meeting allowance paid during the fiscal year was NPR 24,000; this was paid to Mr. Ram Bahadur Aryal, the only member/chairman eligible to get meeting allowance, for attending the Audit Committee meetings as Chairman and member of the Committee.

Functions discharged by the Committee: Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Payments due, if any, to the company

from any Director, Managing Director, Ex-

ecutive 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 involvedNil

Remunerations, Allowances and Facilities

to the Directors, the Managing Director, the

Executive Chief and other Office-bearers

Directors have not been paid any remuneration and no facilities have been provided to them. Meeting allowance is paid at Rs.11,000 to the Chairman and Rs. 10,000 to Directors. However directors representing SCB Group are not entitled to meeting allowance as per the Company’s policy. Meeting allowances paid to the Directors are as follows:

Ram Bahadur Aryal 140,000.00 Arjun Bandhu Regmi 100,000.00

Remunerations, allowances and bonus paid to the CEO in FY 066/067, who also was a Director of the Board, is Rs. 2,28,27,810.00

Dividends yet to Be Collected By

ShareholdersTotal dividends yet to be collected by the shareholder amounts to Rs. 1,20,92,155.40.

Detail of property’s buy or sell as per

Clause 141Nil.

Detail of the transactions held between

Associated Companies as per Clause 175Nil.

Any other matter to be mentioned in the

Board of Directors’ report under

Companies Act, 2063Nil

Schedule- 13

(Related to Sub Rule (1) of Rule 22 of

Securities Registration and Issuance

Regulation, 2065

Details to be incorporated in Annual

Report Functions

1. Report of Board of DirectorsCovered in the previous texts of this annual report

2. Report of Auditor Included in the annual report

3. Audited Financial DetailBalance Sheet, Profit & Loss, cash flow detail and related schedules Included.

4. Detail relating to Legal Actions(a) If any case filed by Organized Institution

in the quarter, On 2066.05.30 a case of Mandamus or any other required Order and on 2066.06.01 a case of Mandamus were filed against the Bank

(b) If any case relating to commission of disobedience or criminal offence filed by or against the Promoter or Director of Organized Institution.

No Such information has been received.(c) If any case relating to commission

of financial crime filed against any Promoter or Director.

No Such information has been received.

5.Analysis of share transaction and

progress of Organized Institution(a) Management view on share transaction

of the Organized Institution happened at Securities Market.

Since price and transactions of the Bank’s shares are being determined by the open share market operations through a duly established Stock Exchange, management view on this is neutral.

(b) Maximum, minimum and last share price of Organized Institution including total transacted number of shares and transacted day during each quarter of last year.

Ashwin end:Maximum- Rs. 6,500, Minimum- Rs. 3,479, Last- 3,680, and total transacted number of shares- 1,21,138 respectively.

Poush end:Maximum- Rs. 3,770, Minimum- Rs. 3,251, Last- Rs. 3,305, and total transacted number of shares- 69,170 respectively.

Chaitra end:Maximum- Rs. 3,333, Minimum- Rs. 2,799, Last- Rs. 2,895, total transacted number of shares- 76689 and transacted days-56 respectively.




Aashadh end:Maximum- Rs. 3,470, Minimum- Rs. 2,403, Last- Rs. 3,279, total transacted number of shares- 60,386 and transacted days-59 respectively.

6.Problem and ChallengeThe inflationary pressure has been a major internal challenge as it continues to push the cost of operations. Furthermore, the retention of talent and staff engagement in such a competitive market is also attracting much attention from the management.

The major external problems pertain to the unstable socio-political situation of the country and the deteriorating risk environment. The frequent strikes are a huge impediment to the smooth functioning of the economy as a whole. Alongside the repercussion of the fluid local business milieu, the contagion of the global financial crisis is also impacting the overall financial environment.

Your bank is well placed to monitor and proactively deal with the challenges posed by internal as well as external factors. We intend to continue being the pioneer in introducing new products and services to better serve the market and deal with the competition. Our portfolio is being managed well by emphasizing more on quality rather than quantity. The employees are engaged into various trainings and programs to continuously upgrade their performance and enhance their motivation level. A crisis management plan is in place to deal with exigencies.

7.Corporate GovernanceIncorporated in detail under the same chapter previously in this annual report.


Board of Directors


Sujit Mundul, (Chief Executive Officer)Sujit Mundul, the Director & CEO of SCB Nepal holds the degree of M. Sc., BA (Hons) in Economics & English, LLB, CAIIB and AIB. He has also served as a Lecturer in Kolkata and possesses more than 35 years of banking experience in SCB.

Neeraj Swaroop, (Chairman)Neeraj Swaroop, the Chairman of SCB Nepal is an MBA and BE with more than 26 years of experience in the banking sector of which 18 years in Indian Banking industry including Bank of America and HDFC bank. He is currently serving as the Regional Chief Executive, India and South Asia.

Anurag Adlakha, (Director)Anurag Adlakha, Director of the Bank, is a Chartered Accountant by profession. He has over 23 years of professional career of which 18 years in financial services industry including HSBC India. He is presently working as the Chief Financial Officer, India and South Asia.

Ram Bahadur Aryal, (Independent Director)Ram Bahadur Aryal, Independent/ Professional Director is an MA in Economics with more than 38 years experience in Nepal Rastra Bank (Central Bank of Nepal) holding senior positions in banking operation, planning, training, foreign exchange and Human Resources.

Sushen Jhingan, (Director)Sushen Jhingan, Director of this Bank, is an MBA with 13 years of banking experience in Strategic Sourcing and Corporate Real Estate Services, government and regulatory relations. He is presently working as a Resident Director - Public Affairs, India.

left to right


Management Team


Anju ShArmAHead - Consumer Banking

Sujit mundulChief Executive Officer

BinA rAnAHead – Human Resources

rAkhi Singh Chief Financial Officer

gopi BhAndAriSenior Manager – Credit

ShoBhA BAhAdur rAnAHead Legal and Compliance & Assurance

SudeSh khAlingChief Information Officer

sitting left to right standing left to right

diwAkAr poudelHead – Corporate Affairs

AnurAg miShrAHead – Wholesale Banking


SCB Nepal Head Office, New Baneshwor

New Road Branch

Lalitpur BranchLazimpat Branch

Branches

ATM sites

BhairahawaPO Box 14, Budha Chowk ColonyBurmeli Tole, Bhairahawa, Siddhartha Nagar977-71-524029, 524429977-71-524039

BiratnagarPO Box 201, Hanumandas RoadBiratnagar - 8, NepalTel. 977-21-528983Fax. 977-21-528982

BirgunjAdarsha Nagar-13,Birgunj, NepalTel. 977-51-529499, 529494Fax. 977-51-529677

ButwalMilan Chowk,Butwal, Municipality - 11Rupandehi, NepalTel. 977-71-546832, 549832Fax. 977-71-546882

DharanPanna Kamala ComplexWard No 7/100Ka, Buddha MargaDharan - 7 Sunsari, NepalTel. 977-25-520505, 530980Fax. 977-25-530981

Head OfficeP.O.Box 3990Naya Baneshwar, Kathmandu, NepalTel. 977-1-4782333, 4783753Fax. 977-1- 4780762

HetaudaBank Road, Hetauda - 4Makwanpur, NepalTel. 977-57-523019, 524972Fax. 977-57-525695

LalitpurPO Box 3990Jawalakhel, Lalitpur, NepalTel. 977-1-5540544, 5540566Fax. 977-1-5523266

LazimpatPO Box 3990Lazimpat, Kathmandu, NepalTel. 977-1-4418456Fax. 977-1- 4417428

NepalgunjSurkhet Raod, Ward No 13Nepalgunj Banke, NepalTel. 977-81-525514, 520022Fax. 977-81-525515

Pokhara, LakesidePO Box 08Lakeside BaidamPokhara, NepalTel. 977-61-462102, 462805, 461746Fax. 977-61-462318

Pokhara, New RoadP.O.Box 08New Road, Pokhara, NepalTel. 977-61-523875, 536230, 523876, 524297Fax. 977-61- 531676

NarayangarhLion's Chowk, Ward-4 Narayangarh,BharatpurTel. 977-56-571277, 571278Fax. 977-56-571279

New RoadP.O.Box 3990 People’s Plaza (Pako Wing), PakoNewroad, Kathmandu, NepalTel. 977-1-4157527,4157528 Fax. 977-1-415730

Bhairahawa Siddhartha Nagar, Hotel Pawan Building

Boudha, KathmanduBoudha, Near Boudhanath stupa

DharanBP Koirala Institute of Health Sciences

Itahari Chowk, SunsariBhu Pu Gorkha Departmental Store,

Jawalakhel, LalitpurStandard Chartered Bank Nepal Ltd

Lakeside, PokharaHotel Snowland, Lakeside

Lakeside, PokharaStandard Chartered Bank Nepal Ltd

Lazimpat, KathmanduStandard Chartered Bank Nepal Limited

Maharajgunj ATMShubham Departmental Store

Mangal Bazar, PatanPatan, Mangal Bazar

Narayangarh, BharatpurStandard Chartered Bank Nepal Limited

Naya Baneshwor, KathmanduStandard Chartered Bank Nepal Limited

New Road, PokharaNew Road, Pokhara

New Road, KathmanduBishal Bazar, New Road

Pulchowk, LalitpurNear UNDP Complex

Pulchowk, LalitpurUNDP Complex

Thamel, KathmanduArcadia Building, Near Yin Yang Restaurant

Thamel, KathmanduKathmandu Guest House

World Trade Center, TripureshworWorld Trade Center, Tripureshwor

New Road, KhichapokhariPeople's Plaza (Pako Wing)

Durbar MargHotel De'l Annapurna

Extension CountersUN Counter – LalitpurBP Koirala Institute of Health Sciences – DharanBritish Gurkhas PPO – PokharaManipal Counter - Pokhara

Report of the Independent Auditors To the Shareholders of Standard Chartered Bank Nepal Limited

We have audited the accompanying financial statements of Standard Chartered Bank Nepal Limited, which comprise the Balance Sheet as at Ashad 32, 2067 (July 16, 2010), and the profit and loss account, Statement of Changes in Equity, Cash Flow Statement and Notes to the Annual Account for the year then ended, Summary of significant Accounting Policies and other explanatory notes.

Management's Responsibility for the financial StatementsManagement is responsible for the preparation and fair presentation of these financial Statements in accordance with Nepal Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Nepal Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depended on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal control relevant to the Bank's preparation and fair presentation of the financial statements in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the Bank's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit evidence we obtained is sufficient and appropriate to provide a basis for our opinion.

OpinionOn the basis of our examination, we would like to report that:

I. We have obtained all the information and explanations, which were considered necessary for the purpose for our audit.Ii. In our opinion proper books of accounts as required by the law have been kept by the Bank.III. The Bank has accounted Interest Income from Loans & Advances on cash basis as per Nepal Rastra Bank's Directives which is not in line with

Nepal Accounting Standard 7- Revenue Recognition that prescribes accrual basis of accounting.iv. The Balance Sheet, Profit and Loss Account, Cash Flow Statement and attached Schedules dealt with by this report are prepared as per

Directives of Nepal Rastra Bank and are in agreement with the books of account maintained by the Bank.v. During our examination of the books of account of the Bank, we have not come across the cases where the Board of Directors or any member

thereof or any representative or any office holder or any employee of the Bank has acted contrary to the provisions of law or caused loss or damage to the Bank.

vi. The returns received from branches of the Bank were adequate for the purpose of our audit.vii. In our opinion, so far as appeared from our examination of the book, the Bank has maintained adequate capital funds and adequate provisions

for possible impairment of assets in accordance with the directives of Nepal Rastra Bank; viii. The Bank has written-off loans as per the policy approved by Nepal Rastra Bankix. The Bank has been functioning as per the directives of Nepal Rastra Bank.x. The Bank has not acted in a manner to jeopardise the interest and security of the depositors and shareholdersxi. The operations of the Bank were within its jurisdiction, andxii. We have not come across any fraudulence in the accounts.

In our opinion, except for matter referred to in para 4(iii) above, the accompanying financial statements give a true and fair view, in all material respects the financial position of Standard Chartered Bank Nepal Limited as at Ashad 32, 2067 (16 July, 2010) and of the results of its financial performance and its cash flows for the year then ended in accordance with Nepal Accounting Standards and comply with Company Act 2063, Banks and Financial Institutions Act, 2063 and Directives of Nepal Rastra Bank.

Bhakti Thapa Sadak, BijulibazarTel.: 4491187, 4462367

P.O. Box No. 2343Fax : 977-1-4462408

Kathmandu, NepalE-mail : [email protected]

S. R. PANDEY & Co.Chartered Accountants

Place: KathmanduDate: September 2, 2010

S. R. Pandey & Co.Chartered Accountants

Sudarshan Raj Pandey, FCAPartner


Balance Sheet

As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Capital & Liabilities Schedule This Year Previous Year

1. Share Capital 4.1 1,608,256,140 1,397,949,600 2. Reserves and Funds 4.2 1,761,453,304 1,654,520,131 3. Debentures and Bonds 4.3 - - 4. Loans and Borrowings 4.4 - 300,000,000 5. Deposit Liability 4.5 35,182,721,454 35,350,823,711 6. Bills Payables 4.6 89,219,655 72,941,748 7. Proposed Dividend 769,165,980 465,983,200 8. Income Tax Liability - 4,262,601 9. Other Liabilities 4.7 802,503,393 820,089,602

Total Liabilities 40,213,319,926 40,066,570,593

Rs. Rs.

Assets Schedule This Year Previous Year

1. Cash Balance 4.8 509,031,174 463,345,996 2. Balance with Nepal Rastra Bank 4.9 819,508,706 1,851,132,637 3. Balance with Banks/Financial Institutions 4.10 600,766,640 822,684,902 4. Money at Call and Short Notice 4.11 1,669,460,000 2,055,549,000 5. Investments 4.12 19,847,511,025 20,236,121,082 6. Loans, Advances and Bills Purchased 4.13 15,956,955,268 13,679,756,990 7. Fixed Assets 4.14 118,539,974 137,292,540 8. Non-Banking Assets 4.15 - - 9. Other Assets 4.16 691,547,139 820,687,446

Total Assets 40,213,319,926 40,066,570,593

Contingent Liabilities Schedule 4.17Declaration of Directors Schedule 4.29Capital Adequacy Table Schedule 4.30 (Ka 1)Statement of Credit Risk Schedule 4.30 (Kha)Statement of Eligible Credit Risk Mitigation Schedule 4.30 (Ga)Statement of Operational Risk Schedule 4.30 (Gha)Statement of Market Risk Schedule 4.30 (Nga)Key Indicators Schedule 4.31Significant Accounting Policies Schedule 4.32Notes to Accounts Schedule 4.33Statement of Loan Availed by Promoter Shareholders from Other Bank and FIs by Pledging Their Shares Schedule 4.34Comparision of Unaudited and Audited Financial Statements Schedule 4.35

Schedules 4.1 to 4.17 form integral part of the Balance Sheet

Rakhi Singh Sujit Mundul Sushen JhinganChief Financial Officer CEO & Director Director Sudarshan Raj Pandey Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants Ram Bahadur Aryal Director Kathmandu Date :2nd September, 2010

As per our report of even date

Financial Statements and Notes




Schedules 4.18 to 4.28 form integral part of this Profit and Loss Account

Profit and Loss Account for the period 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashadh 2067)

Rs. Rs.

Particulars Schedule This Year Previous Year

1. Interest Income 4.18 2,042,109,322 1,887,221,257 2. Interest Expenses 4.19 575,740,660 543,786,600 Net Interest Income 1,466,368,662 1,343,434,657

3. Commission and Discount 4.20 338,298,109 288,031,446 4. Other Operating Incomes 4.21 34,479,473 33,191,251 5. Exchange Fluctuation Income 4.22 458,564,032 427,468,313 Total Operating Income 2,297,710,276 2,092,125,667

6. Staff Expenses 4.23 312,964,286 253,055,504 7. Other Operating Expenses 4.24 295,304,522 276,326,674 8. Exchange Fluctuation Loss 4.22 - - Operating Profit Before Provision for Possible Loss 1,689,441,468 1,562,743,489

9. Provision for Possible Losses 4.25 76,974,254 56,634,631 Operating Profit 1,612,467,214 1,506,108,858

10. Non-Operating Income/ (Loss) 4.26 36,268,280 22,098,317 11. Provision for Possible Loss Written Back 4.27 58,292,849 101,075,167 Profit from Ordinary Activities 1,707,028,343 1,629,282,342

12. Income/(Expenses) from Extra Ordinary Activities 4.28 (17,024,392) (15,356,059)Net Profit after considering all Activities 1,690,003,951 1,613,926,283

13. Provision for Staff Bonus 153,636,723 146,720,571 14. Provision for Income Tax 450,495,534 442,091,176 Current Year's Tax Provision 465,685,661 443,119,138 Upto Previous Year's Tax Provision 22,675 - Current Year's Deferred Tax Income/Expenses (15,212,802) (1,027,962)

Net Profit/Loss 1,085,871,694 1,025,114,536


Profit and Loss Appropriation Account for the period 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashadh 2067)

Rs. Rs.

Particulars Schedule This Year Previous Year Income 1. Accumulated Profit up to Previous Year 239,494,642 383,287,577 2. This Year's Profit 1,085,871,694 1,025,114,536 3. Exchange Fluctuation Fund - -

Total 1,325,366,336 1,408,402,113

Expenses 1. Accumulated Loss up to Previous Year - - 2. Current Year's Loss - - 3. General Reserve Fund 217,174,339 205,022,907 4. Contingent Reserve - - 5. Institutional Development Fund - - 6. Dividend Equalisation Fund - - 7. Employees Related Reserves - - 8. Proposed Dividend 769,165,980 465,983,200 9. Proposed Issue of Bonus Shares 209,772,540 465,983,200 10. Special Reserve Fund - - 11. Exchange Fluctuation Fund 21,381,278 31,918,164 12. Capital Redemption Reserve Fund - - 13. Capital Adjustment Fund - - 14. Deferred Tax Reserve 76,281,207 - 15. Investment Adjustment Reserve 1,626,300 - Total 1,295,401,644 1,168,907,471

Accumulated Profit/(Loss) 29,964,692 239,494,642





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Cash Flow Statement

for the period 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashadh 2067) Rs. Rs.

Particulars This Year Previous Year (A) Cash Flow from Operating Activities (2,249,622,421) 6,948,938,465 1. Cash Receipts 2,359,799,519 2,128,177,260 1.1 Interest Income 1,605,148,047 1,480,241,128 1.2 Commission and Discount Income 338,094,639 238,616,592 1.3 Income from Foreign Exchange Transaction 373,038,919 352,358,259 1.4 Recovery of Loan Written off 9,038,441 23,770,030 1.5 Other Income 34,479,473 33,191,251

2. Cash Payments 2,076,472,587 1,963,910,721 2.1 Interest Expenses 535,333,144 521,840,234 2.2 Staff Expenses 306,659,170 254,218,116 2.3 Office Operating Expenses 286,794,401 250,890,193 2.4 Income tax Payment 481,702,672 440,908,086 2.5 Other Expenses 465,983,200 496,054,092 Cash Flow before Changes in Working Capital 283,326,932 164,266,539 Decrease/ (Increase) of Current Assets (1,896,058,135) 754,573,650 1. Decrease / (Increase) in Money at Call and Short Notice 386,089,000 141,988,600 2. Decrease / (Increase) in Short-term Investment - - 3. Decrease / (Increase) in Loan and Bills Purchase (2,321,942,516) 44,154,587 4. Decrease / (Increase) in Other Assets 39,795,381 568,430,463 (Decrease) /Increase of Current Liabilities (636,891,218) 6,030,098,276 1. (Decrease) / Increase in Deposits (168,102,257) 5,606,824,917 2. (Decrease) / Increase in Certificate of Deposits - - 3. (Decrease) / Increase in Short Term Borrowings (283,722,093) 285,544,727 4. (Decrease) / Increase in Other Liabilities (185,066,868) 137,728,632 (B) Cash Flow from Investment Activities 955,706,293 (5,990,481,198) 1. Decrease/ (Increase) in Long term Investment 388,610,057 (6,333,302,071) 2. Decrease/ (Increase) in Fixed assets 19,845,714 (24,719,699) 3. Interest Income from Long Term Investment 541,722,472 365,061,547 4. Dividend Income 5,528,050 2,479,025 5. Others - - (C) Cash Flow from Financing Activities 534,000 790,400 1. Increase/ (Decrease) in Long term Borrowings (Bond, Debenture etc) - - 2. Increase / (Decrease) in Share Capital 534,000 790,400 3. Increase / (Decrease) in Other Liability - - 4. Increase / (Decrease) in Refinance /Facilities received from Nepal Rastra Bank - - (D) Income/Expense from change in exchange rate in 85,525,113 127,672,654 Cash and Bank Balance (E) Current year's cash flow from all activities (1,207,857,015) 1,086,920,321 (F) Opening Cash and Bank Balance 3,137,163,535 2,050,243,214 (G) Closing Cash and Bank Balance 1,929,306,520 3,137,163,535

Rakhi Singh Sujit Mundul Sushen Jhingan Sudarshan Raj PandeyChief Financial Officer CEO & Director Director Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants Ram Bahadur Aryal Director Kathmandu Date :2nd September, 2010




Rs.

Share Ownership Details This Year Previous Year

% Share Capital % Share Capital 1. Domestic Ownership 25.00 349,620,900 25.00 232,991,600 1.1 Government of Nepal - - - - 1.2 "Ka" Class Licensed Institutions - - - - 1.3 Other Licensed Institutions - - - - 1.4 Other Entities 1.12 15,645,600 0.84 7,816,100 1.5 Individuals 23.79 332,711,700 24.07 224,343,700 1.6 Others 0.09 1,263,600 0.09 831,800 2. Foreign Ownership 75.00 1,048,862,700 75.00 698,974,800 Total 100.00 1,398,483,600 100.00 931,966,400

Details of the Shareholders holding 0.5 % or more of the Total Shares Rs.

Sn Name of the Shareholders Number of Shares Held % of Total Shares Amount 1 Standard Chartered Grindlays Ltd, Sydney, Australia 6,992,418 50.00 699,241,800 2 Standard Chartered Bank, London, UK 3,496,209 25.00 349,620,900 3 Priyanka Agrawal 74,250 0.53 7,425,000 4 Avinash Agrawal 74,250 0.53 7,425,000 5 Komal Agrawal 74,250 0.53 7,425,000 6 Sashi Agrawal 74,250 0.53 7,425,000 7 Shankar Lal Agrawal 74,250 0.53 7,425,000 8 Pasupati Soap Industries 74,250 0.53 7,425,000 9 Arjun Bandhu Regmi 71,063 0.51 7,106,300

Schedule 4.1: Share Capital and Ownership As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. Share Capital

1.1 Authorised Capital 2,000,000,000 1,000,000,000 A) 20,000,000 Ordinary Shares of Rs. 100 each 2,000,000,000 1,000,000,000 B) Non-Redeemable Preference Shares of Rs. ........ each - - C) Redeemable Preference Shares of Rs. ......... each - - 1.2 Issued Capital 1,398,483,600 1,000,000,000A) 13,984,836 Ordinary Shares of Rs. 100 each 1,398,483,600 1,000,000,000 B) Non-Redeemable Preference Shares of Rs. ...... each - - C) Redeemable Preference Shares of Rs. ......... each - - 1.3 Paid Up Capital 1,398,483,600 931,966,400 A) 13,984,836 Ordinary Shares of Rs. 100 each 1,398,483,600 931,966,400 B) Non-Redeemable Preference Shares of Rs. ........ each - - C) Redeemable Preference Shares of Rs. ........ each - - 1.4 Proposed Bonus Share 209,772,540 465,983,200 1.5 Calls in Advance - -


Schedule 4.2: Reserves and FundsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. General Reserve Fund 1,412,491,048 1,195,316,709 2. Capital Reserve Fund - - 3. Capital Redemption Reserve - - 4. Capital Adjustment Fund - - 5. Other Reserves and Funds 77,907,507 - 5.1. Contingent Reserve - - 5.2. Institutional Development fund - - 5.3. Dividend Equalisation Fund - - 5.4. Special Reserve Fund - - 5.5. Assets Revaluation Reserve - - 5.6. Deferred Tax Reserve 76,281,207 - 5.7. Other Free Reserves - - 5.8. Other Reserves 1,626,300 - 6. Accumulated Profit/ (Loss) 29,964,692 239,494,642 7. Exchange Fluctuation Fund 241,090,057 219,708,780 Total 1,761,453,304 1,654,520,131

Schedule 4.3: Debentures and BondsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1 ...… Percent Bond/Debentures of Rs………each issued on ……………….and Matured on…… ……... (Outstanding balance of Redemption Reserves Rs…….. - - 2. ...… Percent Bond/Debentures of Rs………each issued on……………….and Matured on…………... (Outstanding balance of Redemption Reserves Rs…….. - - Total ( 1+2 ) - -

Financial Statements and Notes to Accounts continued

Schedule 4.4 : Loans and BorrowingsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year

A. Local 1. Government of Nepal - - 2. Nepal Rastra Bank - - 3. Repo Liabilities - - 4. Inter Bank and Financial Institution - 300,000,000 5. Other Institutions - - 6. Others - - Total A - 300,000,000 B. Foreign 1. Banks - - 2. Others - - Total B - - Total (A+B) - 300,000,000



Schedule 4.5 : Deposit AccountsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. Non-Interest Bearing Accounts A. CURRENT DEPOSITS 9,763,154,975 5,752,096,762 1. Local Currency 4,942,469,903 3,361,549,217 1.1 Government of Nepal 80,263,353 92,299,158 1.2 "Ka" Class Licensed Institutions 57,493,642 137,475,948 1.3 Other Licensed Institutions 6,025,650 21,349,191 1.4 Other Organised Institutions 4,315,182,370 2,678,423,732 1.5 Individuals 376,773,123 385,743,314 1.6 Others 106,731,765 46,257,874 2 Foreign Currency 4,820,685,072 2,390,547,545 2.1 Government of Nepal - - 2.2 "Ka" Class Licensed Institutions 37,030,564 25,501,017 2.3 Other Licensed Institutions - - 2.4 Other Organised Institutions 4,413,293,073 2,099,618,495 2.5 Individuals 217,557,235 219,974,380 2.6 Others 152,804,200 45,453,653 B. MARGIN DEPOSITS 251,242,284 377,959,072 1. Employees Guarantee 2. Guarantee Margin 85,440,813 114,647,316 3. Letter of Credit Margin 73,810,553 118,436,904 4. Others 91,990,918 144,874,852 C. OTHERS - - 1. Local Currency - - 1.1 Financial Institutions - - 1.2 Other Organised Institutions - - 1.3 Individuals - - 2. Foreign Currency - - 2.1 Financial Institutions - - 2.2 Other Organised Institutions 2.3 Individuals - - Total of Non-Interest Bearing Accounts 10,014,397,259 6,130,055,834


Schedule 4.5: Deposit Accounts (Continued)As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 2. Interest Bearing Accounts A. SAVING DEPOSITS 12,430,009,193 19,146,003,630 1. Local Currency 10,561,340,752 15,347,532,227 1.1 Organised Institutions 12,458,709 1,978,635,144 1.2 Individuals 10,548,556,916 13,266,664,995 1.3 Others 325,127 102,232,088 2. Foreign Currency 1,868,668,441 3,798,471,403 2.1 Organised Institutions 10,561,441 1,953,787,903 2.2 Individuals 1,851,694,718 1,809,147,447 2.3 Others 6,412,282 35,536,053 B. FIXED DEPOSITS 9,175,070,477 7,101,697,629 1. Local Currency 3,603,054,870 791,923,115 1.1 Organised Institutions 1,808,480,190 27,340,793 1.2 Individuals 1,793,174,680 105,071,746 1.3 Others 1,400,000 659,510,576 2. Foreign Currency 5,572,015,607 6,309,774,514 2.1 Organised Institutions 5,471,811,962 5,990,331,061 2.2 Individuals 100,203,645 319,443,453 2.3 Others - - C. CALL DEPOSITS 3,563,244,525 2,973,066,618 1. Local Currency 3,552,366,688 2,884,066,877 1.1 "Ka" Class Licensed Institutions - - 1.2 Other Licensed Institutions 200,379,894 257,491 1.3 Other Organised Institutions 2,338,145,668 2,451,950,342 1.4 Individuals 1,012,677,736 431,859,044 1.5 Others 1,163,390 - 2. Foreign Currency 10,877,837 88,999,741 2.1 "Ka" Class Licensed Institutions - - 2.2 Other Licensed Institutions - - 2.3 Other Organised Institutions 10,877,837 88,999,741 2.4 Individuals - - 2.5 Others - - D. CERTIFICATE OF DEPOSITS - - 1. Organised Institutions - - 2. Individuals - - 3. Others - - Total of Interest Bearing Accounts 25,168,324,195 29,220,767,877

Total Deposits (1+2) 35,182,721,454 35,350,823,711




Rs. Rs.

Particulars This Year Previous Year 1. Pension/Gratuity Fund 67,911,639 61,606,523 2. Employees Provident Fund - - 3. Employees Welfare Fund - - 4. Provision for Staff Bonus 153,636,723 146,720,571 5. Interest Payable on Deposits 94,906,385 54,442,157 6. Interest Payable on Borrowings - 56,712 7. Unearned Discount and Commission 20,464,057 30,718,324 8. Sundry Creditors 235,630,737 277,233,810 9. Branch Adjustment Account - - 10. Deferred Tax Liability 11. Dividend Payable 12,092,156 10,312,848 12. Others 217,861,696 238,998,657 a) Audit Fees Payable 557,500 446,000 b) Others 217,304,196 238,552,657 Total 802,503,393 820,089,602

Schedule 4.7 : Other Liabilities As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. Local Currency 36,606,241 60,773,754 2. Foreign Currency 52,613,414 12,167,994 Total 89,219,655 72,941,748

Schedule 4.6: Bills Payable As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. Local Currency (including coins) 471,554,724 416,767,782 2. Foreign Currency 37,476,450 46,578,214 Total 509,031,174 463,345,996

Schedule 4.8: Cash Balance As at 16 July, 2010 (32 Ashad 2067)



Foreign Currency Rs.

Local Currency Convertible Grand Total Previous Year

Particulars Rs. INR Foreign Currency Total Rs. Rs.

1. Nepal Rastra Bank 677,607,151 - 141,901,555 141,901,555 819,508,706 1,851,132,637 a) Current A/C 677,607,151 - 141,901,555 141,901,555 819,508,706 1,851,132,637 b) Other A/C - - - - - -

Schedule 4.9: Balance with Nepal Rastra Bank As at 16 July, 2010 (32 Ashad 2067)

Local Currency Foreign Currency (Rs.) Grand Total Previous Year

Particulars Rs. INR Convertible Total Rs. Rs.

Foreign Currency

1. Local Licensed 28,647,994 - - - 28,647,994 51,292,893 Institutions a. Current Account 28,647,994 - - - 28,647,994 51,292,893 b. Other Account - - - - - - 2. Foreign Banks - 161,577,798 410,540,848 572,118,646 572,118,646 771,392,009 a. Current Account - 161,577,798 410,540,848 572,118,646 572,118,646 771,392,009 b. Other Account - - - - - - Total 28,647,994 161,577,798 410,540,848 572,118,646 600,766,640 822,684,902

Schedule 4.10: Balance with Banks / Financial Institutions As at 16 July, 2010 (32 Ashad 2067)

Note: Balance as per the confirmation and statement received from respective banks is NPR 948,671,072 and the differences have been reconciled.



Rs. Rs.

Particulars This Year Previous Year 1. Local Currency - - 2. Foreign Currency 1,669,460,000 2,055,549,000 Total 1,669,460,000 2,055,549,000

Schedule 4.11: Money at Call and Short Notice As at 16 July, 2010 (32 Ashad 2067)

Schedule 4.12: InvestmentsAs at 16 July, 2010 (32 Ashad 2067)

Particulars Purpose This Year Previous Year

Trading Other Rs. Rs.

1. Government of Nepal Treasury Bills - 7,878,573,686 7,878,573,686 9,050,988,434 2. Government of Nepal Saving Bonds - 648,150,000 648,150,000 917,150,000 3. Government of Nepal - 4,795,839 4,795,839 30,615,124 Others Securities (Special Bond)4. Nepal Rastra Bank Bonds - - - - 5. Foreign Securities - - - - 6. Local Licensed Institutions - 380,000,000 380,000,000 250,613,524 7. Foreign Banks - 10,844,948,000 10,844,948,000 9,895,710,500 8. Corporate Shares - 106,925,500 106,925,500 106,925,500 9. Corporate Debenture and Bonds - 8,493,000 8,493,000 8,493,000 10. Other Investments - - - - Total Investments - 19,871,886,025 19,871,886,025 20,260,496,082 Provision 24,375,000 24,375,000 24,375,000 Net Investments - 19,847,511,025 19,847,511,025 20,236,121,082


Schedule 4.12(A): Investment in Shares, Debentures and Bonds As at 16 July, 2010 (32 Ashad 2067)

Particulars Cost Price As per Market Provision This Year Previous Year

Rs. Price Rs. Amount Rs. Rs. Rs.

1. Investment in Shares 106,925,500 - 24,375,000 106,925,500 106,925,500 1.1 Purwanchal Grameen 3,000,000 NA (Note - 3) - 3,000,000 3,000,000 Bikash Bank Ltd. 30,000 Ordinary Shares of Rs.100 each fully paid up

1.2 Sudur Paschimanchal Grameen 3,000,000 NA (Note - 3) 3,000,000 3,000,000 3,000,000 Bikash Bank Ltd. 30,000 Ordinary Shares of Rs.100 each fully paid up

1.3 Rural Micro Finance 52,190,000 NA (Note - 3) - 52,190,000 52,190,000 Development Centre Ltd. 521,900 Ordinary Shares of Rs.100 each fully paid up 1.4 Credit Information Centre Ltd. 1,235,500 NA (Note - 3) - 1,235,500 1,235,500 14,120 Ordinary Shares of Rs.100 each fully paid up (including 1,765 bonus shares fully paid up) 1.5 Taragaon Regency Hotels Ltd. 47,500,000 (Note - 4) 21,375,000 47,500,000 47,500,000 475,000 Ordinary Shares of Rs. 100 each fully paid up 2. Investment in Debentures 8,493,000 - - 8,493,000 8,493,000 and Bonds 2.1 Nepal Electricity Authority 8,493,000 NA (Note - 3) - 8,493,000 8,493,000 7.75%; 8,493 bonds of Rs. 1,000 each fully paid up, interest payable semiannually, maturity on 27th March 2013 Total Investment 115,418,500 - 24,375,000 115,418,500 115,418,500

3. Provision for Loss 3.1 Upto Previous year 24,375,000 24,375,000 3.2 Increase/Decrease this Year - - Total Provision 24,375,000 24,375,000

Net Investments 91,043,500 91,043,500

NOTE: 1. The following companies have not distributed dividends in the last three years : 1.1 Sudur Paschimanchal Grameen Bikash Bank Ltd. 1.2 Taragaon Regency Hotels Ltd. 2. Out of the total investment above, Nepal Electricity Authority Bond and shares of Purwanchal Grameen Bikash Bank Ltd. and Taragaon Regency Hotels Ltd. are listed at the Nepal Stock Exchange Ltd (NEPSE). 3. NA - In the absence of sufficient information and/or listing in NEPSE , the market value of the investments have not been shown. 4. Last trading price of Taragaon Regency Hotels Ltd. was Rs.78/share, but due to lack of sufficient volume and frequency, provision as per previous year is being maintained.




Schedule 4.12.1 : Business Investment (Held For Trading) As at 16 July, 2010 (32 Ashad 2067)

Particulars Cost Price Previous Market Current Market This Year Previous Year) Remarks

Price (a) Price (b) Profit/(Loss) Profit/(Loss

Rs. Rs. Rs (b-a) Rs. Rs. 1. Nepal Government's Treasury Bills 2. Nepal Government's Saving Bonds 3. Nepal Government's Other Securities 4. Nepal Rastra Bank Bond 5. Foreign Securites 6. Shares of Domestic Licensed Institution 7. Debenture and Bond Domestic Licensed Institution 8. Shares, Debentures and Bond of Domestic Entity 9. Foreign Bank Investment (Placement) 10. Interbank Lending 11. Other Investments Total Investment - - - - -

Schedule 4.12.2 :Investment Held To Maturity As at 16 July, 2010 (32 Ashad 2067)

Particulars Cost Price Impairment Impairment This Year Previous Year Remarks (a) till Date (b) this year (c) Profit/(Loss) Profit/(Loss) Rs. Rs. Rs. (a-b-c) Rs. Rs.

1. Nepal Government's Treasury Bills 7,878,573,686 - - 7,878,573,686 9,050,988,4342. Nepal Government's Saving Bonds 648,150,000 - - 648,150,000 917,150,0003. Nepal Government's Other Securities 4,795,839 - - 4,795,839 30,615,1244. Nepal Rastra Bank Bond - - - - -5. Foreign Securites - - - - -6. Shares of Domestic Licensed Institution - - - - -7. Debenture and Bond Domestic Licensed Institution - - - - -8. Shares, Debentures and Bond of Domestic Entity 8,493,000 - - 8,493,000 8,493,0009. Foreign Bank Investment (Placement) 10,844,948,000 - - 10,844,948,000 9,895,710,50010. Other Investments 380,000,000 - - 380,000,000 250,613,524

Total 19,764,960,525 - - 19,764,960,525 20,153,570,582


Particulars Cost Price Previous Current This Year Previous Year Remarks Market Market fund adj Profit/(Loss) Price (a) Price (b) (b-a) Rs. Rs. Rs. Rs. Rs. 1. Nepal Government's Treasury Bills 2. Nepal Government's Saving Bonds 3. Nepal Government's Other Securities 4. Nepal Rastra Bank Bond 5. Foreign Securites 6. Shares of Domestic Licensed Institution 58,190,000 - - - -7. Debenture and Bond Domestic Licensed Institution 8. Shares, Debentures and Bond of Domestic Entity 48,735,500 - - - -9. Foreign Bank Investment (Placement) 10. Other Investments

Total 106,925,500 - - - -

Schedule 4.12.3: Business Investment (Available For Sale) As at 16 July, 2010 (32 Ashad 2067)

In the absence of sufficient information and/or listing in NEPSE , the market value of the investments have not been shown.



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2

17,1

83,3

03

589

,558

1

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2

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,187

2

19,6

27,4

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200

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125

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9

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75,4

99

49,

138

7

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7

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,115

1

37,8

96,6

14

138

,352

,640

4.2

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3. S

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8,6

05,5

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8

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-

-

-

8,6

05,5

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26,5

36

4.

4 D

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ful

-

7

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2

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,654

-

9,6

75,6

54

-

-

-

9

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,654

4

5,00

6,19

3

4.5

Loss

-

532

,661

4

4,23

5,64

5

-

4

4,76

8,30

6

-

-

-

4

4,76

8,30

6

55,

801,

251

(C

)To

tal P

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sio

n up

to P

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ous

Year

-

12,

386,

159

1

80,9

38,8

02

9

193

,324

,970

4

9,13

8

7,5

71,9

77

7,6

21,1

15

200

,946

,085

2

45,3

86,6

20

-

(D) P

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r's

Pro

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tten

bac

k -

10,

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065

4

2,50

5,43

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6

52,

575,

501

-

5

,717

,348

5

,717

,348

5

8,29

2,84

9 1

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75,1

67

(E

) Thi

s Ye

ar's

ad

dit

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l pro

visi

on

2

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,470

7

3,20

0,69

7 4

62,6

67

76,

433,

834

540

,420

-

540

,420

7

6,97

4,25

4 5

6,63

4,63

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-

Net

Ad

just

men

ts o

f th

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ar

-

(7

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,595

) 3

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7

462

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540

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(5

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) (5

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) 1

8,68

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(44,

440,

535)

Net

Lo

an (A

-B)

-

4

50,8

36,3

55

15,

218,

340,

135

4

5,80

4,29

6

15,7

14,9

80,7

86

58,

366,

238

18

3,60

8,24

4

241,

974,

482

15

,956

,955

,268

13

,679

,756

,990


Schedule 4.13(A) :Securities Against Loan, Advance and Bills Purchased As at 16 July, 2010 (32 Ashad 2067)


Schedule 4.14: Fixed AssetsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year (A) Secured 16,176,582,758 13,880,703,075 1. Movable / Immovable Assets 12,178,299,840 9,159,793,509 2. Guarantee of Local Licensed Institutions - - 3. Government Guarantee - - 4. Guarantee of Internationally Rated Banks 102,566,996 299,204,033 5. Export Documents - - 6. Fixed Deposit Receipts 443,393,935 594,275,211 (a) Own FDR 38,771,038 193,655,080 (b) FDR of Other Licensed Institutions 404,622,897 400,620,131 7. Government Securities/ Bonds 263,466,765 301,314,808 8. Counter Guarantee - - 9. Personal Guarantee - - 10. Other Securities 3,188,855,222 3,526,115,514 (B) Unsecured - - Total 16,176,582,758 13,880,703,075

Particulars Assets

Freehold Vehicles Machinery Office Others This Year Previous Year

and Buildings Equipment Leasehold

Rs. Rs. Rs. Rs. Assets Rs. Rs. Rs.

1. At Cost a. Balance upto Previous Year 21,718,550 46,647,828 - 304,959,086 75,778,473 449,103,937 414,271,532 b. Addition this year - 1,123,589 - 12,354,156 8,915,772 22,393,517 57,372,262 c. Revaluation/Written-back this year - - - d. Sold this year - - - (2,068,986) - (2,068,986) (22,539,857) e. Written-off this year - - - Total Cost (a+b+c+d+e) 21,718,550 47,771,417 - 315,244,256 84,694,245 469,428,468 449,103,937

2. Depreciation a. Upto Previous Year 5,353,771 38,457,385 255,747,816 34,681,981 334,240,953 323,231,887 b. For this Year 432,016 5,464,842 18,690,274 5,059,950 29,647,082 24,318,709 c. Depreciation on Revaluation /

Written-back d. Depreciation adjustment/ write back - - (2,068,985) - (2,068,985) (13,309,643)

Total Depreciation (a+b+c+d) 5,785,787 43,922,227 - 272,369,105 39,741,931 361,819,050 334,240,953

3. Book Value (WDV)* (1-2) 15,932,763 3,849,190 - 42,875,151 44,952,314 107,609,418 114,862,984

4. Land 10,930,556 10,930,556 15,034,556

5. Capital Work in Progess - - - - - 7,395,000 (To be Capitalised)

6. Leasehold Assets - - - - - - -

Total (3+4+5+6) 26,863,319 3,849,190 - 42,875,151 44,952,314 118,539,974 137,292,540

* Written Down Value.



Schedule 4.15: Non-Banking Assets As at 16 July, 2010 (32 Ashad 2067)

Name and Date of Total Amount of Provision for Loss

Address of assuming Non Banking Net Non- Previous

Borrower or Non Banking Assets Banking Assets Year

Party Assets Rs. % Amount Rs. Rs. Rs.

- - - - - - - - - - - - - -

Total - - - - - -

Schedule 4.16: Other AssetsAs at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Particulars This Year Previous Year 1. Stock of Stationary 6,090,784 5,232,888 2. Income Receivable on Investments 115,153,351 219,914,548 3. Accrued Interest on Loan 136,165,591 - 117,646,865 Less: Interest Suspense Amount (136,165,591) - (117,646,865)4. Commission Receivable 2,519,986 2,316,516 5. Sundry Debtors 93,563,395 80,381,635 6. Staff Loan and Advances 185,343,913 182,487,582 7. Prepayments 15,763,967 38,871,378 8. Cash in Transit - - 9. Other Transit Items (Including Cheques) 126,413 15,169,292 10. Drafts Paid without Notice - - 11. Expenses Not Written-off 31,519,974 36,402,914 12. Branch Adjustment Account - - 13. Deferred Tax Assets 76,281,207 61,068,405 14. Others 165,184,149 178,842,288 a) Advance Income Tax (net of Provision) 11,731,735 b) Others 153,452,414 Total 691,547,139 820,687,446


Schedule 4.16(A) : Other Assets (Additional Statement)As at 16 July, 2010 (32 Ashad 2067)

Particulars This Year (Rs.)

Up to 1 1 to 3 Above 3 Total Previous Year

Year Years Years Rs.

1. Accrued Interest on Loans and Advances 88,094,118 219,745 47,851,728 136,165,591 117,646,865 2. Drafts Paid without Notice - - - - - 3. Branch Adjustment Account - - - - - 4. Local/Foreign Agency Account - - - - -


Schedule 4.17: Contingent LiabilitiesAs at 16 July, 2010 (32 Ashad 2067) Rs. Rs.

Particulars This Year Previous Year 1. Claims on Bank but not Acknowledged as Liabilities by the Bank - - 2. Letters of Credit (Full amount) 2,627,211,864 3,120,878,804 (a) Maturity period of less than 6 months 2,212,780,495 2,867,156,012 (b) Maturity period of more than 6 months 414,431,369 253,722,792 3. Rediscounted Bills - - 4. Unmatured Guarantees/Bonds 772,222,330 1,484,857,424 (a) Bid Bonds 30,734,175 358,686,280 (b) Performance Bonds 310,893,127 716,145,390 (c) Other Guarantee/Bonds 430,595,028 410,025,754 5. Unpaid amount on Investment in Shares - - 6. Outstanding Liabilities of Forward Exchange Contracts 1,223,147,045 1,332,125,612 7. Bills for Collection 223,011,774 672,008,031 8. Acceptance and Endorsements 426,181,956 1,016,660,739 9. Underwriting Commitment - - 10. Irrevocable Loan Commitments 1,406,267,137 1,215,235,221 11. Guarantee against Counter Guarantee of Internationally Rated Banks 2,357,068,525 2,098,631,210 12. Advance Payment Guarantee 15,200,000 97,500 13. Financial Guarantee 104,338,336 103,786,602 14. Contingent Liabilities on Income Tax 2,605,277 3,901,166 15. Others 530,070,650 123,808,727 Total 9,687,324,894 11,171,991,036

Rs. Rs.

Particulars This Year Previous Year A. On Loan, Advances and Overdraft 1,379,283,993 1,104,047,249 1. Loan and Advances 1,265,219,217 1,027,707,274 2. Overdrafts 114,064,776 76,339,975

B. On Investment 436,961,275 406,980,129 1. Government of Nepal Securities 436,304,870 406,325,553 a. Treasury Bills 381,899,432 348,126,573 b. Development Bonds 53,296,288 53,955,991 c. National Savings Certificates - - d. Special Bonds 1,109,150 4,242,989

2. Foreign Securities - - 3. Nepal Rastra Bank Bonds - - 4. Debenture and Bonds 656,405 654,576 5. Interest on Inter bank Investment - - a. Financial Institutions - - b. Other Organisations

C. On Agency Balances 480,823 1,867,239 1. Local Banks / Financial Institutions - - 2. Foreign Banks 480,823 1,867,239

D. On Money at Call and Short Notice 4,818,114 39,051,565 1. Local Banks / Financial Institutions - - 2. Foreign Banks 4,818,114 39,051,565

E. On Others 220,565,117 335,275,075 1. Certificate of Deposits - - 2. Inter-Bank / Financial Institution Loan 72,813,103 39,322,576 3. Placement with Foreign Banks 117,606,811 286,022,751 4. Others 30,145,203 9,929,748

Total 2,042,109,322 1,887,221,257

Schedule 4.18: Interest Incomefor the period 16 July 2009 to 16 July 2010

(1 Shrawan 2066 to 32 Ashad 2067)



Rs. Rs.

Particulars This Year Previous Year A. On Deposit Liabilities 561,725,321 520,761,481

1. Fixed Deposits 138,001,956 134,404,092 1.1. Local Currency 39,402,978 11,953,974 1.2. Foreign Currency 98,598,978 122,450,118

2. Savings Deposits 291,801,113 296,105,028 2.1.Local Currency 276,233,310 260,030,008 2.2.Foreign Currency 15,567,803 36,075,020

3. Call Deposits 131,922,252 90,252,361 3.1. Local Currency 125,124,699 84,999,297 3.2. Foreign Currency 6,797,553 5,253,064

4. Certificate of Deposits - - B. On Borrowings 9,555,199 18,531,766 1. Debentures and Bonds - - 2. Loans from Nepal Rastra Bank 4,093,401 1,584,935 3. Inter Bank /Financial Institutions Borrowings 5,461,798 16,946,831 4. Other Institutions - - 5. Other Loans - -

C. On Others 4,460,140 4,493,353 1. Premium on Development Bonds 4,460,140 4,493,353 2. Others - -

Total 575,740,660 543,786,600

Schedule 4.19: Interest Expensesfor the period 16 July 2009 to 16 July 2010



Rs. Rs.


A. Bills Purchased and Discounted 17,823,134 19,413,965 1. Domestic 388,883 907,464 2. Foreign 17,434,251 18,506,501

B. Commission 111,378,883 113,016,168 1. Letters of Credit 7,959,235 7,280,626 2. Guarantees 41,865,371 33,122,424 3. Collection Fees 3,109,664 3,994,042 4. Remittance Fees 38,541,783 37,049,477 5. Credit Cards 19,832,330 31,469,999 6. Share Underwriting/Issues - - 7. Government Transactions - - 8. E. Pra. Commission - - 9. Exchange Fees ( Batta Income) 70,500 99,600

C. Others 209,096,092 155,601,313 1. Management Fees 6,441,106 6,852,025 2. Loan Processing Fees 51,096,973 29,987,959 3. Ledger and Activity Fees 28,767,206 27,899,001 4. Commission on Travellers Cheque 7,176,576 6,683,472 5. Others (including income from Gold & Derivatives) 115,614,231 84,178,856

Total 338,298,109 288,031,446

Schedule 4.20: Commisssion and Discount for the period 16 July 2009 to 16 July 2010


Rs. Rs.

Particulars This Year Previous Year 1. Rental on Safe Deposit Locker 4,019,427 3,773,301 2. Issue and Renewals of Credit Cards 10,326,016 8,602,065 3. Issue and Renewals of ATM Cards 9,291,006 8,777,397 4. Telex /T.T. 7,975,830 7,921,513 5. Service Charges - - 6. Renewal Fees 505,415 456,973 7. Others 2,361,779 3,660,002

Total 34,479,473 33,191,251

Schedule 4.21: Other Operating Incomefor the period 16 July 2009 to 16 July 2010




Rs. Rs.

Particulars This Year Previous Year A. Revaluation Gain 85,525,113 127,672,653B. Trading Gain (except Batta) 373,038,919 299,795,660

Total Income (Loss) 458,564,032 427,468,313

Schedule 4.22: Exchange Fluctuation Gain/Lossfor the period 16 July 2009 to 16 July 2010


Rs. Rs.

Particulars This Year Previous Year 1. Salary 185,843,691 165,352,156 2. Allowances 1,132,786 743,710 3. Contribution to Provident Fund 9,126,093 8,115,518 4. Training Expenses 6,554,738 4,800,913 5. Uniform 219,685 161,355 6. Medical 4,082,920 3,009,449 7. Insurance - - 8. Pension and Gratuity Provision 32,628,645 12,738,534 9. Others 73,375,728 58,133,869 a) Staff Incentive 59,901,710 50,005,200 b) Others 13,474,018 8,128,669 Total 312,964,286 253,055,504

Schedule 4.23: Staff Expenses for the period 16 July 2009 to 16 July 2010



Rs. Rs.

Particulars This Year Previous Year 1. House Rent 44,589,574 39,725,664 2. Light, Electricity and Water 16,082,080 15,394,850 3. Repair and Maintenance 9,270,563 14,582,754 (a) Building 2,832,224 8,889,511 (b) Vehicles 1,466,807 923,782 (c) Others 4,971,532 4,769,461 4. Insurance 5,212,446 5,585,155 5. Postage, Telex, Telephone, Fax 41,866,562 43,913,129 6. Office Equipment, Furniture and Repair 35,872,647 32,978,690 (a) Office Equipment and Furniture (non capitalised item) 27,630,107 24,518,268 (b) Repairs 8,242,540 8,460,422 7. Travelling Allowances and Expenses 14,914,492 10,489,786 8. Stationery and Printing 13,442,417 11,868,187 9. Periodicals and Books 879,553 751,770 10. Advertisement 13,217,846 12,671,068 11. Legal Expenses 411,878 1,141,641 12. Donations 20,001 200,000 13. Expenses Relating to Board of Directors 487,451 524,927 (a) Meeting Allowance 264,000 284,000 (b) Others Expenses 223,451 240,927 14. General Meeting Expenses 1,113,456 1,753,078 15. Expenses Relating to Audit 849,921 731,826 (a) Audit Fees 565,000 452,000 (b) Other Expenses 284,921 279,826 16. Commission on Remittances - - 17. Depreciation on Fixed Assets 29,647,082 24,318,709 18. Amortization of Pre Operating Expenses - - 19. Share Issue Expenses - - 20. Technology Support Cost (Technical Services Fees ) 15,849,770 14,100,098 21. Entertainment 1,842,046 1,837,866 22. Written Off Expenses 22,685 179 23. Security Expenses 20,089,072 16,184,618 24. Credit Guarantee Premium - - 25. Commission and Discount 8,998,063 8,555,094 26. Others 20,444,917 19,017,585 (a) Software Expenses Charged Off 4,872,374 10,391,206 (b) Cleaning, Pest Control and Waste Management 5,098,629 2,550,013 (c) Others 10,473,914 6,076,366

Total 295,304,522 276,326,674

Schedule 4.24: Other Operating Expensesfor the period 16 July 2009 to 16 July 2010




Schedule 4.25 Provision for Possible Lossesfor the period 16 July 2009 to 16 July 2010


Rs. Rs.


1. Increase in Loan Loss Provision 76,974,254 56,634,6312. Increase in Provision for Loss on Investments - -3. Provision for Non-Banking Assets - -4. Provision for Other Assets - -

Schedule 4.26: Non Operating Income/ (Loss)for the period 16 July 2009 to 16 July 2010


Rs. Rs.


1. Profit (Loss) on Sale of Investment - -2. Profit (Loss) on Sale of Assets 30,740,230 19,619,292 3. Dividend (Net) 5,528,050 2,479,0254. Subsidies Received from Nepal Rastra Bank - - a. Compensation against Losses of Specified Branches - - b. Interest Indemnity - - c. Exchange Counter - -5. Others - - Net Non Operating Income/ (Loss) 36,268,280 22,098,317

Rs. Rs.

Particulars This Year Previous Year 1. Loan Loss Provision Written Back 58,292,849 101,075,167 2. Provision against Non-Banking Assets Written Back - - 3 Investment Provision Written Back - - 4. Provision against Other Assets Written Back - - Total 58,292,849 101,075,167

Schedule 4.27: Provision for Possible Loss Written Back for the period 16 July 2009 to 16 July 2010



Rs. Rs.

Particulars This Year Previous Year 1. Recovery of Loans Written Off 9,038,441 23,770,030 2. Voluntary Retirement Scheme Expenses - - 3. Unrecoverable Loan Write Off (Schedule 4.28A) (26,062,833) (39,126,089)4. Other Expenses/Income - - Total (17,024,392) (15,356,059)

Schedule 4.28: Income / (Expenses) from Extra-Ordinary Activities for the period 16 July 2009 to 16 July 2010


Schedule 4.28 A: Statement of Loans Written Off for the period 16 July 2009 to 16 July 2010


S.N Types of Written off Type of Security Basis of Valuation Loan Approving Initiations made Remarks

Loan Amount Rs. and Amount Rs. of Security Authority / for Recovery

Designation

1 Working Capital Loan - 2 Project Loan - 3 Fixed Capital Loan - 4 Personal Loan 6,641,816 None NA Manager Credit/ Follow up through Recoveries from

5 Other Loan 19,421,017 Head Consumer phone calls Current year write Bank & letters off is Rs. 230,600 a) Credit Cards 1,981,377 None NA Manager Credit/ Phone calls Recoveries from Head Consumer & letters Current year write Bank off is Rs. 343,540 b) Gramin Prathamik 1,612,949 None NA Manager Credit/ Phone calls Recoveries from Karja Head Consumer & letters Current year write Bank off is Rs. 443,487 c) Home Loan - - - - - - d) Auto Loan 15,826,691 Vehicle Valuation Report Manager Credit/ Phone calls/ Recoveries from from Approved Head Consumer Letters/Visits, Current year write Valuators & cost Bank Vehicle Repossession, off is Rs. 1,483,750 price at the time Auction Notice. of disbursement Securities sold by of Loan Negotiation/ Auction sale.

Total Loan 26,062,833

During the year, Bank has recovered the amount against the current year written off loans as shown under Remarks column. In respect of Auto Loan, the value of a vehicle in posession of the Bank is Rs. 1,990 thousand ( as per the valuation of approved valuators).



Schedule 4.29:Statement of Loans & Advances Extended to Directors/ Chief Executive Officer/ Promoters/Staff and Shareholders

As at 16 July, 2010 (32 Ashad 2067)

Rs. Rs.

Name of Promoter/ Balance upto Previous Year Recovery made This Year Additions during Balance as at Ashad end

Director/Chief Principal Interest Principal Interest the year Principal Interest

Executive Officer Rs. Rs. Rs. Rs. Rs. Rs Rs.

(A) Directors - - (B) Chief Executive Officer - - - - - - - (C) Promoters - - - - - - - (D) Staff - - - - - - - (E) Shareholders - - - - - - - Total - - - - - - -

The Statement of amount, included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Excecutive Officer, Promoters, Staff, Shareholders and to the individual members of their undivided family or against the guarantee of such persons or to the organisations or companies in which such individuals are managing agent, are as follows:

Note : As per clause 3 of the Nepal Rastra Bank (The Central Bank of Nepal ) Directive No. 6, loans given to executive officers and employees are as per Bank staff rules and hence not disclosed above.


Schedule 4.30 (Ka 1): Capital Adequacy Tableas at 16 July, 2010 (32 Ashad 2067)

1.1 RISK WEIGHTED EXPOSURES This Year Previous Year

A Risk Weighted Exposure for Credit Risk 20,779,883 18,758,432B Risk Weighted Exposure for Operational Risk 3,058,847 2,690,615C Risk Weighted Exposure for Market Risk 345,855 254,117

Adjustments Under Pillar-II

Add: 3% of the total RWE due to non Compliance to Disclosure (6.4 a 10) - - Add: ...% of the total deposits due to insufficient liquid assets (6.4 a 6 ) - -

Total Risk Weighted Exposures (A+B+C) 24,184,585 21,703,164

1.2 CAPITAL FUND This Year Previous Year

Core Capital (Tier 1) 3,050,712 2,832,761

a Paid up Equity Share Capital 1,398,484 931,966 b Irredeemable Non-cumulative preference shares - - c Share Premium - - d Proposed Bonus equity Shares 209,772 465,983 e Statutory General Reserves 1,412,491 1,195,317 f Retained Earnings 29,965 239,495 g Current year profit/loss - h Capital Redemption Reserve - - i Capital Adjustment Reserve - - j Dividend Equalization Reserves - - k Other Free Reserve - - l Less: Goodwill m Less : Fictitious Assets n Less: Investment in equity in licensed Financial Institutions - - o Less: Investment in equity of institutions with financial interests - - p Less: Investment in equity of institutions in excess of limits - - q Less: Investments arising out of underwriting commitments - - r Less: Reciprocal crossholdings - - s Less: Other Deductions - - - -

Adjustments Under Pillar-II

Less: Shortfall in provisions (6.4 a 1) - - Less: Loans and Facilities extended to related parties and restricted lending (6.4 a 2) - - - -

Supplementary Capital (Tier 2) 479,781 357,606

a Cumulative and/or Redeemable Preference Share - - b Subordinated Term Debt - - c Hybrid Capital Instruments - - d General loan loss provision 160,784 137,897 e Exchange Equilization Reserve 241,090 219,709 f Investment Adjustment Reserve 1,626 - g Assets revaluation reserve - - h Other Reserves (Deferred Tax Reserve) 76,281 -

Total Capital Fund (Tier 1 and Tier 2) 3,530,493 3,190,367

1.3 Capital Adequacy Ratios Current Period Previous Period

Tier 1 Capital to Total Risk Weighted Exposures (After Bank's adjustments of Pillar II) 12.61% 13.05%Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures (After Bank's Adjustments of Pillar II) 14.60 % 14.70%

Rs. in ‘000



Schedule 4.30 (Kha): Credit RiskAs at 16 July, 2010 (32 Ashad 2067)

Assets 16th July, 2010 (32 Asadh 2067) Previous Year

Balance Sheet Exposure Book Value Specific Eligible Net Value Risk Risk Weighted Net Value Risk

a Provision b CRM c d=a-b-c Weight Exposures Weighted

e f=d*e Exposures

Cash Balance 509,031 - - 509,031 0% - 463,346 - Balance With Nepal Rastra Bank 819,509 - - 819,509 0% - 1,851,133 - Gold 144,118 - - 144,118 0% - 178,349 - Investment in Nepalese Government Securities 8,531,520 - - 8,531,520 0% - 9,998,754 - All claims on Government of Nepal 207,807 - - 207,807 0% - 154,044 - Investment in Nepal Rastra Bank securities - - - - 0% - - - All claims on Nepal Rastra Bank - - - - 0% - - - Claims on Foreign Government and Central Bank (ECA Rating 0-1) - - - - 0% - - -Claims on Foreign Government and Central Bank (ECA Rating 2) - - - - 20% - - -Claims on Foreign Government and Central Bank (ECA Rating 3) - - - - 50% - - -Claims on Foreign Government and Central Bank (ECA Rating 4-6) - - - - 100% - - -Claims on Foreign Government and Central Bank (ECA Rating 7) - - - - 150% - - -Claims on BIS, IMF, ECB, EC & on Multilateral Development Banks (MDBs) recognised by the frame work - - - - 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) 101,093 - - 101,093 150% 151,640 83,793 125,690 Claims on domestic banks that meet 385,056 - 317,352 67,704 20% 13,541 35,554 7,111 capital adequacy requirementsClaims on domestic banks that do 23,592 - - 23,592 100% 23,592 32,177 32,177 not meet capital adequacy requirementsClaims on foreign bank (ECA Rating 0-1) 6,073,058 - - 6,073,058 20% 1,214,612 11,695,334 2,339,067 Claims on foreign bank (ECA Rating 2) - - - - 50% - 389,350 194,675 Claims on foreign bank (ECA Rating 3-6) 1,420,571 - - 1,420,571 100% 1,420,571 637,967 637,967 Claims on foreign bank (ECA Rating 7) - - - - 150% - - - Claims on Foreign bank incorporated in 5,592,897 - - 5,592,897 20% 1,118,579 - - SAARC Region operating with a buffer of 1% capital requirement above their respective regulatory Capital requirements Claims on Domestic Corporates 3,160,808 533 726,525 2,433,750 100% 2,433,750 2,743,934 2,743,934 Claims on Foreign Corporates (ECA rating 0-1) - - - - 20% - - - Claims on Foreign Corporates (ECA rating 2) - - - - 50% - - - Claims on Foreign Corporates (ECA rating 3-6) - - - - 100% - - - Claims on Foreign Corporates (ECA rating 7) - - - - 150% - - - Regulatory Retail Portfolio (Not Overdue) 5,569,522 1,735 - 5,567,787 75% 4,175,840 4,147,828 3,110,871 Claims fulfilling all criterion of regulatory 247,837 - - 247,837 100% 247,837 - - retail except granularity Claims secured by residential properties 3,149,494 - - 3,149,494 60% 1,889,696 2,513,718 1,508,231 Claims not fully secured by residential properties - - - - 150% - - - Claims secured by residential properties (Overdue) 25,759 4,138 - 21,621 100% 21,621 17,957 17,957 Claims secured by Commercial real estate 2,601,433 33,250 - 2,568,183 100% 2,568,183 2,068,506 2,068,506 Past due claims (except for claim secured 194,729 19,187 - 175,542 150% 263,313 152,263 228,395 by residential properties)High Risk claims 995,594 - 58,761 936,833 150% 1,405,250 908,124 1,362,186 Investment in equity and other capital instruments 50,500 21,375 - 29,125 100% 29,125 3,000 3,000 of institutions listed in the stock exchange Investment in equity and other capital instruments 56,426 3,000 - 53,426 150% 80,138 79,551 119,326 of institutions not listed in the stock exchangeOther Assets 1,094,953 498,086 - 596,867 100% 596,867 786,391 786,391

Total 40,955,307 581,304 1,102,638 39,271,365 17,654,155 38,941,073 15,285,484

Rs. in ‘000


16th July, 2010 (32 Asadh 2067) Previous Year

Off Balance Sheet Exposures Book Value Specific Eligible Net Value Risk Risk Weighted Net Value Risk a Provision b CRM c d=a-b-c Weight e Exposures Weighted f=d*e Exposures

Revocable Commitments - - - - 0% - - - Bills Under Collection 223,012 - 223,012 0% - 672,008 - Forward Exchange Contract 1,223,147 - - 1,223,147 10% 122,315 1,332,126 133,213 LC Commitments With Original 2,212,780 - 428,876 1,783,904 20% 356,781 1,851,796 370,359 Maturity Up to 6 months (domestic counterparty) 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% - - - L C Commitments With Original 414,431 - 142,233 272,198 50% 136,099 - - Maturity Over 6 months (domestic counterparty)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 299,668 - 35,823 263,845 50% 131,923 603,233 301,616 Counter Guarantee (domestic counterparty)Foreign Counterparty ECA Rating 0-1 747,885 - 598,308 149,577 20% 29,915 102,398 20,480 Foreign Counterparty ECA Rating 2 301,237 - 150,618 150,619 50% 75,309 498,281 249,141 Foreign Counterparty ECA Rating 3-6 593,496 - - 593,496 100% 593,496 337,252 337,252Foreign Counterparty ECA Rating 7 - - - - 150% - - - Underwriting commitments - - - - 50% - - - Lending of Bank's Securities or - - - - 100% - - - Posting of Securities as collateral Repurchase Agreements, Assets - - - - 100% - - - sale with recourseAdvance Payment Guarantee 702,239 - 384,165 318,074 100% 318,074 257,481 257,481 Financial Guarantee 115,561 - 23,624 91,937 100% 91,937 87,249 87,249 Acceptances and Endorsements 426,182 - 10,885 415,297 100% 415,297 999,440 999,440 Unpaid Portion of Partly paid - - - - 100% - - - shares and Securities Irrevocable credit commitments (short term) 1,406,268 - 166,364 1,239,904 20% 247,980 1,098,520 219,704 Irrevocable Credit commitments (Long Term) - - - - 50% - - - Other Contingent Liabilities 1,021,419 - 414,817 606,602 100% 606,602 493,090 493,090 Unpaid Guarantee Claims - - - - 200% - 1,961 3,923

Total 9,687,325 - 2,355,713 7,331,612 3,125,728 8,334,835 3,472,948

Total RWE for Credit Risk (A) +(B) 50,642,632 581,304 3,458,351 46,602,977 20,779,883 47,275,908 18,758,432

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 50,642,632 581,304 3,458,351 46,602,977 - 20,779,883 47,275,908 18,758,432 Bank's adjustments of Pillar II)

Rs. in ‘000

Schedule 4.30 (Kha): Credit Risk



Schedule 4.30 (Ga): Eligible Credit Risk MitigantsAs at 16 July, 2010 (32 Ashad 2067)

Credit exposures Deposits Deposits Gold Govt. G'tee of Sec/G'tee of G'tee of G'tee of Sec/ Total

with Bank with other & NRB Govt. of Other domestic MDBs G'tee of

banks/FI Securities Nepal Sovereigns banks Foreign

Banks

Balance Sheet Exposures

Cash Balance - - - - - - - - - - Balance With Nepal Rastra Bank - - - - - - - - - - Gold - - - - - - - - - - Investment in Nepal - - - - - - - - - - Government SecuritiesAll claims on Government of Nepal - - - - - - - - - - Investment in Nepal - - - - - - - - - - Rastra Bank securitiesAll claims on Nepal Rastra Bank - - - - - - - - - - Claims on Foreign Government - - - - - - - - - - and Central Bank (ECA Rating 0-1)Claims on Foreign Government and - - - - - - - - - - Central Bank (ECA Rating 2)Claims on Foreign Government - - - - - - - - - - and Central Bank (ECA Rating 3)Claims on Foreign Government and - - - - - - - - - - Central Bank (ECA Rating 4-6) Claims on Foreign Government and - - - - - - - - - - Central Bank (ECA Rating 7)Claims on Other Multilateral - - - - - - - - - - Development BanksClaims on Public Sector Entity (ECA 0-1) - - - - - - - - - - Claims on Public Sector Entity (ECA 2) - - - - - - - - - - Claims on Public Sector Entity (ECA 3-6) - - - - - - - - - - Claims on Public Sector Entity (ECA 7) - - - - - - - - - - Claims on domestic banks that meet 100,000 217,352 - - - - - - - 317,352 capital adequacy requirementsClaims on domestic banks that do not - - - - - - - - - - meet capital adequacy requirementsClaims on foreign bank (ECA Rating 0-1) - - - - - - - - - - Claims on foreign bank (ECA Rating 2) - - - - - - - - - - Claims on foreign bank (ECA Rating 3-6) - - - - - - - - - - Claims on foreign bank (ECA Rating 7) - - - - - - - - - - Claims on Foreign bank incorporated in - - - - - - - - - - SAARC Region operating with a buffer of 1% above their respective regulatory capital requirement Claims on Domestic Corporates 61,328 310,580 - 229,242 - - - - 125,375 726,525 Claims on Foreign Corporates (ECA 0-1) - - - - - - - - - - Claims on Foreign Corporates (ECA 2) - - - - - - - - - - Claims on Foreign Corporates (ECA 3-6) - - - - - - - - - - Claims on Foreign Corporates (ECA 7) - - - - - - - - - - Regulatory Retail Portfolio (Not Overdue) - - - - - - - - - - Claims fulfilling all criterion of regulatory - - - - - - - - - - retail except granularity Claims secured by residential properties - - - - - - - - - - Claims not fully secured by - - - - - - - - - - residential propertiesClaims secured by residential - - - - - - - - - - properties (Overdue)Claims secured by commercial real estate - - - - - - - - - - Past due claims (except for claim - - - - - - - - - - secured by residential properties)High Risk claims 22,553 - - - - - - - 36,208 58,761 Investment in equity and other capital - - - - - - - - - - instruments of institutions listed in the stock exchangeInvestment in equity and other - - - - - - - - - - capital instruments of institutions not listed in the stock exchangeOther Assets - - - - - - - - - -

Rs. in ‘000


Deposits Deposits Gold Govt. G'tee of Sec/G'tee of G'tee of G'tee of Sec/G'tee of Total

with Bank with other & NRB Govt. of Other domestic MDBs Foreign

banks/FI Securities Nepal Sovereigns banks Banks

Off Balance Sheet Exposures Forward Exchange Contract Liabilities - - - - - - - - - -

LC Commitments With Original 347,670 - - 81,206 - - - - - 428,876 Maturity Up to 6 months (domestic counterparty) Foreign Counterparty ECA Rating 0-1 - - - - - - - - - - Foreign Counterparty ECA Rating 2 - - - - - - - - - - Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - - L C Commitments With Original 142,233 - - - - - - - - 142,233 Maturity Over 6 months (domestic counterparty) Foreign Counterparty ECA Rating 0-1 - - - - - - - - - - Foreign Counterparty ECA Rating 2 - - - - - - - - - - Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - - Bid Bond, Performance Bond and 32,449 - - - - - 3,374 - - 35,823 Counter Guarantee (domestic counterparty)Foreign Counterparty ECA Rating 0-1 - - - - - - - - 598,308 598,308 Foreign Counterparty ECA Rating 2 - - - - - - - - 150,618 150,618 Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - - Underwriting commitments - - - - - - - - - - Lending of Bank's Securities or - - - - - - - - - - Posting of Securities as collateralRepurchase agreements, - - - - - - - - - - Assets sale with recourseAdvance Payment Guarantee - - - - - - - - 384,165 384,165 Financial Guarantee 15,768 - - - - - - - 7,856 23,624 Acceptance and Endorsements 10,885 - - - - - - - - 10,885 Unpaid Portion of Partly - - - - - - - - - - paid shares and SecuritiesIrrevocable Credit Commitments 86,984 8,014 - 49,866 - - - - 21,500 166,364 Other Contingent Liabilities 368,299 - - - - - - - 46,518 414,817

Total Eligible CRM 1,188,169 535,946 - 360,314 - - 3,374 - 1,370,548 3,458,351

Rs. in ‘000

Schedule 4.30 (Ga): Continue...



Schedule 4.30 (Gha): Operational RiskAs at 16 July, 2010 (32 Ashad 2067)

SN Particulars 16.07.2010 15.07.2009 15.07.2008 15.07.2009

1 Net Interest Income 1,466,369 1,343,435 1,119,466 2 Commission and Discount Income 338,298 288,031 276,432 3 Other Operating Income 34,479 33,191 32,594 4 Exchange Fluctutation Income 458,564 427,468 345,653 5 Additional/ Deduction Interest 18,519 2,166 (66,972) Suspense during the period

Gross Income (a) 2,316,229 2,094,291 1,707,173

Fixed Percentage (b) 15% 15% 15%

Gross Income as per Fixed 347,434 314,144 256,076 Percentage[ c=(a*b)]

Capital Requirement for Operational 305,885 269,061 Risk(d) (average of c)

Risk Weight (reciprocal of capital 10 10 requirement of 10%) in times (e)

Equivalent Risk Weight Exposure for 3,058,847 2,690,615 Operational Risk[f=(d*e)]

Pillar-II Adjustments

If Gross Income for all the last three years is negative (6.4 a 8)

Total Credit and investments - - (net of Specific Provision) Capital Requirement for - - operational risk (5%) Risk Weight (reciprocal of capital - - requirement of 10%) in time Equivalent Risk Weight Exposure (g) - -

Equivalent Risk Weight 3,058,847 2,690,615Exposure [(h=f+g)]

Rs. in ‘000


As on 16 July, 2010

Previous Year

S. No. Currency Open Position Open Position Relevant Open Relevant Open Position

(FCY) (NPR) Position (NPR) (NPR) as on 15.07.2009

1 INR 362,486 580,249 580,249 476,573 2 USD (1,199) (89,708) 89,708 10,617 3 GBP (19) (2,235) 2,235 5,744 4 EUR (44) (4,273) 4,273 2,185 5 CAD 56 4,029 4,029 4,703 6 DKK 134 1,743 1,743 2,517 7 CNY 11 116 116 80 8 SEK 62 635 635 538 9 CHF (13) (914) 914 100 10 JPY 813 698 698 333 11 HKD 101 968 968 1,677 12 SGD 34 1,848 1,848 793 13 SAR 60 1,195 1,195 240 14 THB 42 97 97 136 15 MYR 6 135 135 54 16 AED 16 322 322 272 17 AUD 36 2,359 2,359 1,489 18 QAR 9 187 187 184

Total Open Position (a) 691,711 508,235

Fixed Percentage (b) 5% 5%

Capital Charge for Market Risk [c=(a*b)] 34,586 25,412

Risk Weight (reciprocal of capital requirement of 10%) in times (d) 10 10

Equivalent Risk Weight Exposures for Market Risk [e=(c*d)] 345,855 254,117

Rs. in ‘000

Schedule 4.30 (Nga): Market Risk As at 16 July, 2010 (32 Ashad 2067)



Schedule 4.31: Key Indicators

Particulars Indicators FY FY FY FY FY

2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 1. Net Profit/Gross Income Percent 37.06 34.55 34.94 36.84 36.47 2. Earning Per Share Rs. 175.84 167.37 131.92 109.99 77.65 3. Market Value Per Share Rs. 3,775 5,900 6,830 6,010 3,279 4. Price Earning Ratio Ratio 21.47 35.25 51.77 54.64 42.23 5. Dividend (including bonus) on Share Capital Percent 140 130 130 100 70 6. Cash Dividend on Share Capital Percent 130 80 80 50 55 7. Interest Income/Loan & Advances Percent 6.19 7.11 6.65 8.54 8.78 8 Staff Expenses/Total Operating Expenses Percent 24.29 23.75 24.28 23.58 26.43 9. Interest Expenses on Total Deposit and Borrowings Percent 1.31 1.65 1.59 1.53 1.64 10. Exchange Fluctuation Income/Total Income Percent 15.95 15.44 14.75 15.36 15.40 11. Staff (statutory) Bonus/Total Staff Expenses Percent 35.83 33.71 34.63 36.70 32.93 12. Net Profit/Loan and Advances Percent 7.63 6.75 6.24 7.93 6.91 13. Net Profit/Total Assets Percent 2.56 2.42 2.46 2.56 2.70 14. Total Credit/Deposit Percent 39.92 43.78 46.95 39.27 45.98 15. Total Operating Expenses/Total Assets Percent 2.69 2.94 2.78 2.68 2.94 16. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital Percent 12.99 13.77 11.52 13.05 12.61 b. Supplementary Capital Percent 1.94 1.94 1.63 1.65 1.99 c. Total Capital Fund Percent 14.93 15.71 13.15 14.70 14.60 17. Liquidity (CRR) Ratio 6.86 5.46 5.84 8.18 6.74 18. Non-performing Credit/Total Credit Percent 2.13 1.83 0.92 0.66 0.61 19. Weighted Average Interest Rate Spread Percent 4.10 3.95 4.01 3.98 3.44 20. Book Net-worth Rs'000 1,754,139 2,116,353 2,492,548 3,052,470 3,369,709 21. Total Shares No. 3,746,404 4,132,548 6,207,840 9,319,664 13,984,836 22. Total Staff No. 345 351 377 392 429 23. Networth Per Share Rs. 468.22 512.12 401.52 327.53 240.95

Note : Adequacy of Capital Fund on RWA for FY 2007-08 onwards is as per Basel II Capital Accord of Nepal Rastra Bank.


Schedule 4.32: Significant Accounting Policies

Financial Year 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashad 2067)

1. General InformationStandard Chartered Bank Nepal Ltd (the “Bank”) is a limited liability company domiciled in Nepal. The address of its registered office is G.P.O. Box 3990, Naya Baneshwor, Kathmandu, Nepal. The Bank has a primary listing on the Nepal Stock Exchange Limited. The Bank is a subsidiary company of Standard Chartered Bank PLC, London.

The Bank carries out commercial banking activities in Nepal under license from Nepal Rastra Bank (the Central Bank of Nepal) as Class “Ka” licensed institution.

2. Summary of Significant Accounting PoliciesThe principal accounting policies applied in the preparation of the financial statements of the Bank are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Statement of ComplianceThe financial statements have been prepared in accordance with Nepal Accounting Standards (NAS) issued by the Accounting Standards Board of Nepal (ASB) except for exceptions as mentioned below, generally accepted accounting principles, the provisions of Bank and Financial Institution Act, 2063, directives issued by Nepal Rastra Bank (Central Bank) and the Company Act, 2063.

Recognition of interest income on Loans and advances is on Cash basis, proposed dividend and extraordinary items (if any) are accounted for as per the directives issued by Nepal Rastra Bank.

2.2 Basis of PreparationThe financial statements have been prepared under the historical cost convention. The preparation of the financial statements in conformity with NAS and generally accepted accounting principles require the use of certain critical accounting estimates. It also requires the management to exercise judgement in the process of applying the Bank’s accounting

policies.

2.3 Interest IncomeInterest income on Loans and advances is treated as per Para 2.1.

Interest income on Investments is recognised on accrual basis.

2.4 Commission Income Income from usance export bills is accounted for on accrual basis whereas earning from sight bills is accounted upfront.

Commission income exceeding Rs. 100,000 earned on guarantees covering more than a year is accounted for on accrual basis over the period of the guarantee.

2.5 Dividend IncomeDividend is recognised as income when the right to receive the payment is established.

2.6 Foreign Exchange Transactions Assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated at mid-point exchange rates of the Nepal Rastra Bank after adjustment for effective trading rate.Net difference arising from the conversion of foreign currency assets and liabilities is accounted for as revaluation gain. In conformity with the Directives of Nepal Rastra Bank, 25% of the total revaluation gain is transferred to Exchange Fluctuation Fund by charging to Profit and Loss Appropriation Account.

Income realised from the difference between buying and selling rates of foreign currencies is accounted for as trading gains.

2.7 Interest Expense Interest on deposit liabilities and borrowing from other banks are accounted for on accrual

basis.

2.8 Loans and Advances including Bills

Purchased Loans and advances including bills purchased include direct finance provided to the customers such as bank overdrafts, credit card, personal loans, term loans, hire purchase finance and loans to deprived sectors. All loans are subject to regular review and are graded according to the level of credit risk and classified as per Nepal Rastra Bank’s Directives. Loans and advances including bills purchased are disclosed net of loan loss provisions.

2.9 Staff Loans Loans and advances granted to staff in accordance with the staff loan scheme are reflected under Other Assets.

2.10 Loan Loss Provision Provision is made for possible losses on loans and advances, overdraft and bills purchased at 1% to 100% on the basis of classification of loans and advances, overdraft and bills purchased in accordance with the directives of Nepal Rastra Bank.

2.11 Loans & Advances Write offUnrecoverable loans and advances are written off in accordance with the Loan Write-off Bye Law 2062 of the Bank approved by the Nepal Rastra Bank.

Amounts recovered against loans written off in earlier as well as current year is recognized as income in the year of recovery.

2.12 Investments Investment in Treasury Bills, Government of Nepal Development Bonds and Special Bonds are those, which the Bank has purchased with the positive intent and ability to hold until maturity. Such securities are recorded at cost or at cost adjusted for amortisation of premiums or discounts.

Investments in shares held for strategic purpose are stated at lower of cost or market value with additional provisions for possible diminution in value as estimated by the management on prudence basis. Investments in shares have been classified as Available for Sale due to their undefined maturity. Accordingly 2% of the net value of the portfolio has been created towards



Investment Adjustment Reserve from profit and loss appropriation account and has been included as part of supplementary capital.

All investments are subject to regular review according to the directives of Nepal Rastra Bank.

2.13 Fixed Assets and Depreciationa. Fixed assets are stated at historical cost less depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the assets.

b. Vehicles, equipment, furniture and fixtures with a unit value of Rs. 400,000 or less are expensed off in the year of purchase.

c. Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

d. Costs on improvements and renovation of leasehold premises are depreciated over the remaining period of that lease.

e. For additions during the year, depreciation is charged from the month the assets is put to use and for disposed assets, depreciation is charged up to the month immediately preceding the month of disposal.

2.14 Intangible AssetsSoftware applications purchased by the Bank, costing greater than Rs. 40,000,000 are amortised over a period of thirty-six months from the month of purchase. Software costs with a unit value of Rs. 40,000,000 or less are expensed off in the year of purchase.

Licence fees paid by the Bank are amortised over the period of the licence.

S.N. Assets Types Life of an Asset

1. Equipment 36 months2. Furniture & Fittings/Fixtures 36 months3. Vehicle 36 months4. Computers – PC, Printer, Laptop etc. 36 months5. Computers – Server 60 months6. Computer – ATM 84 months7. Premises Freehold 600 months

2.15 Lease RentalPremises are taken as operating leases which are cancellable in nature. The total payments made under operating leases are charged to Other Operating Expenses in the profit and loss account on a monthly basis.

2.16 Retirement Benefits The Bank has schemes of retirement benefits namely Gratuity and Provident Fund. Provision for expenses on account of Gratuity and Provident Fund is made on accrual basis with the amount of gratuity computed by the Bank in accordance with its applicable scheme. Contributions to approved retirement fund are made on a regular basis as per the Retirement Fund rules and regulations.

2.17 Income Taxa. Current Income TaxProvision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules as amended.

b. Deferred TaxDeferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

The principal temporary differences arise from depreciation of fixed assets, provision for diminution in the value of investment in shares, provisions for gratuity, performance bonus and premium on development bonds.

Deferred tax assets are recognised where it is probable that future taxable profit will

be available against which the temporary differences can be utilised.

2.18 StationeryStationery purchased is accounted for on cost and expended as and when it is issued for consumption on a weighted average basis.

2.19 Non Banking AssetsNon Banking Assets are accounted for as per the directives of Nepal Rastra Bank.

2.20 Provisions, Contingent Liabilities and Contingent AssetsThe Bank creates a provision when there is a present obligation as a result of past events that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. 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.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.

Liabilities on account of derivative contracts are reported under Contingent liabilities under subheading Outstanding Liabilities for Forward Exchange Contract. These include notional principal on outstanding forward rate agreements and currency swap transactions.

3. Rounding off and Comparative FiguresThe financial statements are presented in Nepalese Rupees, rounded off to the nearest rupee. Previous year amounts have been reclassified to facilitate comparison; detail of which is provided in the Notes to Accounts.


1. Provision for Bonus Provision for bonus has been calculated and provided for at 10% of net profit, after making adjustments for loan loss provision and bonus.

2. Staff Housing Fund As the terms of service of the staff has a provision for extending housing loans to the eligible staff, a separate housing fund has not been created in accordance with Labour Act, 2048.

3.Tax Settlement OutstandingSelf assessment return filed by the Bank for the financial year 2005-06 (2062-63 BS) has been opened by the Large Tax Payer Office (LTPO) and an assessment order has been issued for Rs. 2,605,277 as additional tax. The Bank had contested the assessment order and had applied for an Administrative Review at the Office of the Director General of Inland Revenue Department, who upheld the decision of the LTPO. Bank has now filed an Appeal at Revenue Tribunal for the settlement of the case. Pending resolution of the matter, a contingent liability has been raised for the additional tax amount. Self assessment returns for the financial years 2006-07 (2063-64 BS), 2007-08 (2064-65 BS) and 2008-09 (2065-66 BS) are pending for assessment at the Large Tax Payer Office.

4. Provision for Gratuity During the year, the Bank has provided Rs. 32,628,645 (Previous Year Rs. 12,738,534) on account of gratuity. Out of the amount provided, Rs 21,166,384 has been funded (previous year Rs 10,472,391) and Rs. 5,157,145 (previous year Rs. 3,428,755) has been paid to the staff at the time of separation.

5. Performance BonusThe Bank’s reward programmes recognize world-class performance and behaviour in support of the Bank’s values across all job levels. The Bank’s total reward consists of fixed and variable compensation. Performance Bonus is a variable component based on the Bank’s overall performance and individual employee’s annual performance. It is provisioned on the basis of the individual targets set and paid in line with the actual achievements. A total of Rs. 47,569,046 has been provided for the performance bonus in this year.

6. Dividend and Bonus The Board has recommended 55% cash dividend and 15% bonus shares as appropriation for the reported year. This proposal of the Board has been shown under Proposed Dividend for the cash portion and under Share Capital for the Proposed Bonus Shares issue respectively.

7. Unpaid DividendAs on the balance sheet date, unpaid dividend over five years amounts to Rs. 2,411,021.

8. Paid up Share CapitalPaid up share capital of the Bank has moved over the years as follows:

9. Sale of Land and Building The Bank has sold its land at Birgunj, Parsa during the year for Rs. 34,844,230 at a profit of Rs. 30,740,230.

10. Deferred TaxDeferred tax is calculated on temporary differences using an effective tax rate of 30.00%.

The items attributable to deferred tax assets and liabilities and their movement are as follows:

Schedule 4.33: Notes to Accounts

Financial Year 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashad 2067)

Financial Year Cumulative Paid up Remarks Capital Rs.

1987-88 (2044-45 BS) 30,000,000 Opening Share Capital at Rs. 60 paid up

1990-91 (2047-48 BS) 50,000,000 Capitalisation of Reserve Rs. 100 paid up1992-93 (2049-50 BS) 100,000,000 Issuance of 100% Bonus Shares1994-95 (2051-52 BS) 150,000,000 Issuance of 50% Bonus Shares1996-97 (2053-54 BS) 225,571,800 Issuance of 50% Bonus Shares1997-98 (2054-55 BS) 339,548,800 Issuance of 50% Bonus Shares2002-03 (2059-60 BS) 374,640,400 Issuance of 10% Bonus Shares2005-06 (2062-63 BS) 413,254,800 Issuance of 10% Bonus Shares2006-07 (2063-64 BS) 620,784,000 Issuance of 50% Bonus Shares2007-08 (2064-65 BS) 931,966,400 Issuance of 50% Bonus Shares2008-09 (2065-66 BS) 1,398,483,600 Issuance of 50% Bonus Shares



Additional information: a) Key Management Personnel includes 2 expatriate staff.b) Key Management Personnel are also provided with the following benefits:i) Benefits as per Staff Service Bye-laws,ii) Bonus to local staff as per Bonus Act,iii) Performance Bonus depending on performance of the individual,iv) Car Allowance as per Bank's Car Scheme.

Apart from above Rs. 264,000 was paid as meeting fees to the Public and Professional Directors in the financial year.

The Bank being a subsidiary of an International Bank avails of support services from its global support functions governed by approved agreements. Foreign currency funds have mainly been placed with Standard Chartered Bank (SCB) network points. These funds are all under the management of Standard Chartered Group with high governance levels and acceptable country risks and returns. As on the balance sheet date, the amount placed with SCB Group is NPR 7.5 Billion.

Total of Key Management Personnel Compensation Rs. 38,739,828

A) Short Term Employee Benefits Rs. 33,989,235 (Salary, Allowance, PF)B) Post Employment Benefits NILC) Other Long Term Benefits NILD) Termination Benefits Rs. 4,750,593 (Gratuity)E) Share Based Payment NIL

Balance Movement BalanceDeferred Tax Assets 15 Jul 2009 during the year 16 Jul 2010 Fixed Assets 29,084,203 3,628,959 32,713,162Gratuity Provision 18,481,957 1,891,535 20,373,492Provision for Performance bonus 6,189,745 422,738 6,612,483Provision for investment impairment 7,312,500 - 7,312,500Premium on Development Bond - 9,269,570 9,269,570Total Deferred Tax Assets 61,068,405 15,212,802 76,281,207Deferred Tax Liabilities - - - Net – Deferred Tax Asset 61,068,405 15,212,802 76,281,207

The net deferred tax movement during the year is debited / credited to the profit and loss account.

11. Related Party DisclosuresCompensation Details for Key Management Personnel

12. Operating Lease Commitment The future minimum lease payment under non-cancellable operating leases, where the bank is lessee is NIL.

13.Restatement of Prior Period Balances

Schedule Reference Reported in FY Restatement Restated Balance Remarks 2008-09 in 2009-10

4.5 Deposit Liability 35,871,721,127 (520,897,416) 35,350,823,711 To facilitate comparisonProposed and Unpaid Dividend 476,296,048 (10,312,848) 465,983,200 Regulatory requirement4.7 Other Liabilities 809,776,754 10,312,848 820,089,602 Regulatory requirement4.16 Other Assets 1,341,584,862 (520,897,416) 820,687,446 To facilitate comparison4.20 Commission & Discount 235,468,846 52,562,600 288,031,446 To facilitate comparison4.22 Exchange Fluctuation Income 480,030,913 (52,562,600) 427,468,313 To facilitate comparison


Rs. in '000

Particulars Amount

Loans Disbursed 9,317,390 Loans Recovered 7,020,647 Loans Written-off 26,063Interest Written-off 2,070

15 Summary of Loans and Advances Disbursed, Recovered and Principal and Interest Written-off during the year:

Rs. in '000Particulars Balance as at Received/ Balance as at 15/07/2009 Withdrawn) 16/07/2010

Current and Margin Accounts 6,130,056 3,884,341 10,014,397 Saving Account 19,146,004 (6,715,995) 12,430,009 Call Deposits 2,973,066 590,179 3,563,245 Fixed Deposits 7,101,698 2,073,372 9,175,070 Total 35,350,824 (168,103) 35,182,721

16 Summary of Changes in Deposit Liabilities :

Particulars Rate %

a. Weighted average yield on loans and investments & Cash balance 5.56 b. Average Cost of local currency deposits plus borrowing after factoring CRR 2.12 c. Spread (Yield -cost) ie. C=b-a 3.44

17 Weighted Average Interest Spread:

Rs. in '000

Particulars Amount

Software Costs - Licence Fees 621 Premium on Development Bonds 30,899

Total 31,520

18 Particulars of Amortised Expenses yet to be Expensed Off:

19 Summary of Concentration of Exposure:

Rs. in '000

Particulars Loans & Advances Deposits & Contingent

and Bills Borrowings

Total Amount as on 16 July 2010 16,176,583 35,182,721 9,687,325 Highest Exposure to Single unit 608,236 4,482,728 937,293Highest % of Exposure to Single unit 3.76 12.74 9.68

The reasons for differences are fully identified and are being addressed in regular course of business.

Rs. in '000

Particulars Total Amount < 3 Months >3<9 Months > 9 Months Branch Adjustments Accounts - - - - Agency Accounts 373,615 369,228 4,387 -

14 Reconciliation Status:



Rs. in '000

Particulars Total Amount Upto 1 year 1 to 3 years Above 3 years

Agency Accounts - - - -

20 Classification of Assets and Liabilities based on Maturity:

Rs. in '000

Particulars 1-90 Days 91-180 Days 181-270 Days 271 Days - 1 Year Over 1 Year Total Assets Cash Balance 509 509 Balance with Banks 1,420 1,420 Investment in Foreign Banks 4,486 4,657 1,243 1,530 599 12,515Government Securities 4,362 2,376 - 1,145 648 8,531 Nepal Rastra Bank Bonds - Inter Bank Lending 380 380 Loans, Advances & Bills Purchased 3,961 873 861 721 9,541 15,957 Other Assets 57 31 12 8 793 901 Total Assets 15,175 7,937 2,116 3,404 11,581 40,213

Liabilities Loans and Borrowings - - Current Deposits 2,930 7,084 10,014 Saving Deposits 7,160 5,270 12,430 Fixed Deposits 5,943 3,006 288 1,758 1,743 12,738 Debentures - Other Liabilities, Capital & Reserves 1,661 3,370 5,031 Total Liabilities 17,694 3,006 288 1,758 17,467 40,213 Net Financial Assets (2,519) 4,931 1,828 1,646 (5,886) - Cumulative Net Financial Assets (2,519) 2,412 4,240 5,886 -

21 Statement of age-wise agency account reconciliation pending items

22 Borrowing by Bank against the collateral of own assets is Nil.

Shares under the ownership Description of Loan of Promoter

S.No. Name of

Promoter/ Name of otherbank/

Shareholders financial institution

under Promoters' Total no. Percentage of from which loan Loan amount No. of shares

Group of shares paid up capital has been taken Rs. pledged Remarks

1 2 3 4 5

Schedule 4.34: Statement of loan availed by bank's promoter/promoters' group from other bank and financial institutions by pledging their shares. as on 16th July 2010 (32 Ashad 2067)


Schedule 4.35 : Comparison of Unaudited and Audited Financial Statement as of FY 2066/67

Rs. in'000S. No. Particulars As per Unaudited As per Audited Variance Reasons for Variance Financial Statement Financial Statement In Amount In % 1 Total Capital and Liabilities (1.1 to 1.7) 40,213,320 40,213,320 - 0.00%1.1 Paid up Capital 1,398,484 1,608,256 (209,773) (15.00%) As per the proposed appropriation1.2 Reserve and Surplus 2,740,392 1,761,453 978,939 35.72% As per the proposed appropriation1.3 Debenture and Bond - - - 0.00%1.4 Borrowings - - - 0.00%1.5 Deposits (a+b) 35,182,722 35,182,722 - 0.00% a. Domestic Currency 22,846,284 22,846,284 - 0.00% b. Foreign Currency 12,336,438 12,336,438 - 0.00%1.6 Income Tax Liability - - - 0.00%1.7 Other Liabilities 891,722 1,660,889 (769,166) (86.26%) As per the proposed appropriation 2 Total Assets (2.1 to 2.7) 40,213,320 40,213,320 - 0.00% 2.1 Cash and Bank Balance 1,929,307 1,929,307 - 0.00%2.2 Money at Call and Short Notice 1,669,460 1,669,460 - 0.00%2.3 Investments 19,847,511 19,847,511 - 0.00%2.4 Loans and Advances* 15,956,955 15,956,955 - 0.00%2.5 Fixed Assets 118,540 118,540 - 0.00%2.6 Non Banking Assets - - - 0.00%2.7 Other Assets 691,547 691,547 - 0.00% 3 Profit and Loss Account 3.1 Interest Income 2,042,110 2,042,110 - 0.00%3.2 Interest Expense 575,741 575,741 - 0.00%

A. Net Interest Income (3.1 - 3.2) 1,466,369 1,466,369 - 0.00% 3.3 Fees, Commission and Discount 338,299 338,299 - 0.00%3.4 Other Operating Income 34,479 34,479 - 0.00%3.5 Foreign Exchange Gain/Loss (Net) 458,564 458,564 - 0.00%

B. Total Operating Income (A+3.3+3.4+3.5) 2,297,711 2,297,711 - 0.00% 3.6 Staff Expenses 312,964 312,964 - 0.00%3.7 Other Operating Expenses 295,305 295,305 - 0.00%

C. Operating Profit Before Provision (B -3.6 - 3.7) 1,689,442 1,689,442 - 0.00% 3.8 Provision for Possible Losses 76,974 76,974 - 0.00%

D. Operating Profit (C -3.8) 1,612,468 1,612,468 - 0.00%

3.9 Non Operating Income/Expenses (Net) 36,268 36,268 - 0.00%3.10 Write Back of Provision for Possible Loss 58,293 58,293 - 0.00%

E. Profit from Regular Activities (D+3.9+3.10) 1,707,029 1,707,029 - 0.00%

3.11 Extraordinary Income/Expenses (Net) (17,024) (17,024) - 0.00%

F. Profit before Bonus and Taxes (E +3.11) 1,690,005 1,690,005 - 0.00% 3.12 Provision for Staff Bonus 153,637 153,637 - 0.00%3.13 Provision for Tax 450,496 450,496 - 0.00%

G. Net Profit/Loss (F - 3.12 - 3.13) 1,085,872 1,085,872 - 0.00%

* Loans and advances are shown net of provision



1. Capital structure and capital adequacy a. Tier 1 capital and a breakdown of its

components; As on 16.07.2010 Core Capital (Tier 1) 3,050,711,879

a Paid up Equity Share Capital 1,398,483,600b Proposed Bonus Equity Share 209,772,540c Statutory General Reserves 1,412,491,047d Retained Earnings 29,964,692

b.Tier 2 capital and a breakdown of its com-

ponents;

As on 16.07.2010Supplementary Capital (Tier 2) 479,782,034

a General loan loss provision 160,784,471b Exchange Equalization 241,090,057 Reservec Investment Adjustment 1,626,300 Reserved Other Reserve (Deferred 76,281,207 Tax Reserve)

c. Detailed information about the Subordi-

nated Term Debts with information on the

outstanding amount, maturity, and amount

raised during the year and amount eligible to

be reckoned as capital funds. • Not applicable.

d. Deductions from capital; • NIL.

e. Total qualifying capital; • NRs 3,530,493,915

f. Capital adequacy ratio;

• 14.60%.

g. Summary of the bank’s internal approach to

assess the adequacy of its capital to support

current and future activities, if applicable; and

Board and Senior Management Oversight

Bank management is responsible for understanding the nature and level of risk taken by the bank and relating the risk to the capital adequacy level. The Credit Risk Committee reviews the Credit Risk, analyzes the trend, assesses the exposure impact on capital and provides a summary report to the Management Committee.

In respect of operational risk, the Consumer Banking, Wholesale Banking and each Support Function Business Operational Risk Manager provide operational loss data to Country Operational Risk Assurance Manager who in turn analyzes the trend and provides a summary report to the CORG & the Management Committee. Finance & Strategic Planning checks the capital charge on operational risk.

With regard to market risk, the Financial Markets Operation maintains net open position of all currencies on a daily basis and provides data to Head WB who reviews and analyzes the trend, assesses the exposure impact on capital and provides a summary report to the Management Committee. The net open position report is also discussed at the ALCO.

Management Committee reviews the summary reports received from CRC, CORAM and the HWB and provides a synopsis to the Board along with its view on the risks exposure and the adequacy of capital, for review and noting.

Sound Capital AssessmentIn order to ensure a sound capital assessment process, all three risks that have direct impact on the capital adequacy level are managed in a structured manner with clear roles and responsibilities. For managing the Credit Risk the Country Underwriting

Standards, Country Credit Policy, Credit Policy Manual, and Product Development Documents have been prepared and implemented. Any exception to the standards get escalated and approved by the appropriate authorities as stipulated in the standards, policy manual and the PDD, with audit trail.

Operational Risk Management & Assurance Framework (ORMAF) has been implemented for managing operational risks. In line with ORMAF, the 3 lines of assurance ensure effective management of all operational risks. In the 3 lines of assurance, business is the first line which is primarily responsible for managing the risk whilst compliance & assurance and Group Audit occupy the second and the third lines respectively to ensure an independent assurance to the Board and Senior Management on the effectiveness of the risk management.

The market risks are managed in line with the Bank’s market risk and other related policies, giving due consideration to the prevalent market conditions.

Comprehensive assessment of risksCredit risk The credit risk of individual borrowers or counterparties as well as at the portfolio level is assessed. The credit review assessment cover risk rating systems, portfolio analysis, large exposures and the risk concentrations. All Corporate and Institutional borrowers including SME borrowers, at individual and group level, are assigned internal credit rating that supports identification and measurement of risk and integrated into overall credit risk analysis.

Operational RiskOperational Risk Management and

Assurance Framework (ORMAF) adopted by the bank provides comprehensive

Disclosure as per Bank’s disclosure policy under the Capital Adequacy Framework of Nepal Rastra Bank


reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events.

The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the internal control system during the FY 2066/67 and reported on its review to the Board. The Internal Audit monitors compliance with policies and standards and the effectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports regularly to the Audit Committee. The findings of all adverse audits are reported to the Chief Executive Officer and Business Heads for immediate corrective actions.

h. Summary of the terms, conditions and main

features of all capital instruments, especially

in case of subordinated term debts including

hybrid capital instruments.• Bank has fully paid equity shares as qualifying capital..

2. Risk exposures a. Risk weighted exposures for Credit Risk,

Market Risk and Operational Risk

risk management tools for managing operational risk. The Operational Risk Management and Assurance Framework (ORMAF) defines how risks are managed, how Operational Risk policies and controls are assured, how effective governance is exercised as well as the key roles required to manage the underlying processes.

The governance structure of OR is as follows:

• Operational Risk governance ensures consistent oversight across all levels regarding the execution and effectiveness of ORMAF.

• Operational risks are identified and graded at the unit level. Mitigating controls are put in place and mitigation progress is monitored. These risks are reported to the Business Operational Risk Group (BORG).

• BORG (as a committee) assign ownership, require actions to be taken and monitor progress of risks identified, in addition to confirming the risk grading provided at the unit level. Risks categorized as High or Medium are reported to the Country Operational Risk Group (CORG) and escalated to Business Operational Risk Committees (ORCs) at the Regional level.

• CORG determines final risk grading and ensures appropriateness of risk ownership, required actions and progress to date. Risks graded high, are escalated to Group Operational Risk Committee (GORC) through Group Operational Risk Assurance (GORA) team.

• The Business / Function Operational Risk Committees (ORCs) at Regional level oversee operational risks within businesses and functions across the Region.

• The GORC oversees operational risks at Group level with the support of the GORA team. The team assesses risks escalated by CORGs and Business / Function ORCs

Market Risk Risks arising out of adverse movements in exchange rates, interest rates, liquidity and equity are covered under market risk management. In line with capital framework

prescribed by NRB, the bank focuses on exchange risk management for managing/computing the capital charge on market risk. In addition the interest rate risk, liquidity risk and equity risk are assessed at a regular interval to strengthen market risk management. The market risk is managed within the tolerance limit set by the Board.

Other risks In addition to the credit, operational and market risk, the bank identifies, assesses and monitors strategic and reputational risks at a regular interval. While strategic risk is managed by the CEO, the Reputational Risk Committee is responsible for the management of reputational risk.

Monitoring and Reporting All risks, including credit, operational and market risks are identified, escalated, monitored and mitigated to the satisfaction of the risk type owner. The risk type owner is responsible for ensuring that risks are adequately identified, escalated monitored and mitigated. The bank has adequate system for monitoring and reporting risk exposures and assessing how the changing risk profile affects the need for capital. The Credit Risk Committee reviews and assesses the credit risk and provides a report to the Management Committee. Similarly, the CORG provides Country Operational Risk profile and the Reputational Risk Committee provides the Reputational Risk profile to the Management Committee. All other risks are identified and reported by the respective risk type owner.

Internal Control Review manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or

RISK WEIGHTED As onEXPOSURES 16.07.2010A Risk Weighted Exposure 20,779,882,793 for Credit RiskB Risk Weighted Exposure 3,058,846,861 for Operational RiskC Risk Weighted Exposure 345,855,288 for Market Risk

Total Risk Weighted Exposures (a+b+c) 24,184,584,943

b. Risk Weighted Exposures under each of 11 categories of Credit Risk

No. Particulars Claim as on RWE as on 16.07.2010 16.07.2010 Rs.

1 Claims on govt. and central Bank 9,558,835,525 - 2 Claims on other official entities 101,093,000 151,639,500 3 Claims on Banks 13,495,174,640 3,790,895,316 4 Claims on corporate and securities firm 3,160,808,086 2,433,750,130 5 Claims on regulatory retail portfolio 5,817,358,443 4,175,840,295 6 Claim secured by residential properties 3,175,253,114 2,159,154,066 7 Claims secured by commercial real state 2,601,433,032 2,568,183,031 8 Past due Claims 194,728,878 263,312,055 9 High risk claims 1,102,519,673 1,514,512,572 10 Other Assets 1,094,953,360 596,867,589 11 Off Balance sheet Items 9,687,324,894 3,125,728,239

Total 49,989,482,644 20,779,882,793



c. Total risk weighted exposure calculation

table;Please refer Schedule 4.30 (Kha), 4.30 (Ga), 4.30 (Gha) and 4.30 (Nga) of the financial statements for details.

d. Amount of NPAs (both Gross and Net) • Restructure/Reschedule Loan NIL• Substandard Loan Gross value Rs. 50,940,153, Net values

Rs. 38,205,115• Doubtful Loan Gross value Rs. 2,175,186 Net value

Rs 1,087,593• Loss Loan Gross value Rs. 45,020,388 Net value:

NIL

e. NPA ratios • Gross NPA to gross advances 0.61 %• Net NPA to net advances 0.25 %

f. Movement of Non Performing Assets Year on year upward movement of Rs.

7,094,071.

g. Write off of Loans and Interest Suspense Loans Write off during the year is Rs. 26,062,833 and interest suspense balance as on year end is Rs 136,165,591.

h. Movements in Loan Loss Provisions and

Interest Suspense Year on year upward movement in Loan Loss Provisions of Rs. 18,681,405.Year on year upward movement in Interest suspense of Rs. 18,518,726.

i. Details of additional Loan Loss Provisions Provisions due to growth in the volume have been added. No major additional provisions have been made.

j. Details of additional Loan Loss Provisions

3. Risk Management Function a. For each separate risk area (Credit, Market and Operational risk), banks must describe their risk management objectives and policies, including:

• Strategies and processes;

• The structure and organization of the relevant risk management function;

• The scope and nature of risk reporting and/or measurement systems; and

• Policies for hedging and/or mitigating risk and strategies, and processes for monitoring the continuing effectiveness of hedges/mitigants.

Credit Risk Management strategies include effectively managing the risk of financial loss arising out of booking an exposure on counterparty and also ensuring independence of the Credit Risk Management function from the origination and sales function.

Credit risk under both Consumer Banking and Wholesale Banking is managed through a defined framework which sets out policies and procedures covering the measurement and management of credit risk. There is a clear segregation of duties between transaction originators in the businesses and the approvers in the risk functions. All credit exposure limits are approved within a defined credit approval authority framework.

A standard alphanumeric credit risk grade system is used for quantifying the risk associated with the counterparty for corporate and institutional clients (including SME). The grading is based on a probability of default methodology, with customers analyzed against a range of quantitative and qualitative measures. In addition to nominal aggregate exposure, Loss Given Default is used in the delegation of credit approval authority and must be calculated for every transaction to determine the appropriate level of approval. Significant exposures beyond the authority of Credit Officers in both WB and CB are approved by CEO on behalf of Risk Committee after support from the respective credit risk function at the group level. The SCB Nepal Board delegates its authority to approve credit, market and other risks exposures (“Risk Authorities”) to the Management Committee for onward delegation of these Risk Authorities to the Risk Committee.

Credit function in consumer banking uses standard application forms which are processed in central units and credit approval process is guided by product development document (PDD) and credit operating manual. The probability of default is calculated using portfolio delinquency flow rates and judgement, where applicable.

There are risk officers for both Consumer Banking and Wholesale Banking businesses. They have their primary reporting line into the group functional level and CEO Nepal. Credit approval authorities are delegated by Risk Committee to individual risk officer in WB and CB. We have a manual approval process in CB (other than SME) and on-line approval process in WB and SME, CB.

The scope and nature of risk reporting and/or measurement procedures are covered in the Country Portfolio Standards approved by the board, PDD and credit operating manual and other group level policies & procedures adopted after the board approval. The Risk Management Committee chaired by the CEO, reviews the portfolio exposure, portfolio quality, country level risk triggers, etc at least on a quarterly basis.

Country Portfolio standards and PDD / credit operating manual outlines the Bank’s policies and processes for hedging and/or mitigating and monitoring risk. Collaterals which are eligible for risk mitigation and valuation of the same are reviewed every year, Portfolio Standards also prescribe the frequency of valuation for different collateral types. Collateral held against impaired loans is maintained at fair value.

The Risk Committee which formed by and received authority from the Management Committee is responsible for ensuring the effective risk governance and management of credit, market and operational risk throughout the bank.

b. Types of eligible credit risk mitigants used

and the benefits availed under CRM.

No. Credit Risk Mitigant As on 16.07.2010

1 Deposits with Bank 1,188,169,8632 Deposits with other banks/FI* 535,946,1003 Govt. & NRB Securities 360,313,5824 G'tee of Domestic Banks* 3,374,0925 Sec/G'tee of Foreign Banks* 1,370,548,684

Total 3,458,352,322

* net of supervisory haircut

Investment Portfolio Net Amount (NPR)

Held For Trading NILHeld To Maturity 19,764,960,525Available For Sale 82,550,500


Nepal Rastra Bank’s Approval and Directions

Nepal Rastra Bank has granted permission to the Bank to publish the Financial Statements along with Balance Sheet; Profit & Loss Account and the related schedules for the Fiscal Year 2066/67 along with the following direction vide Letter no. Bai. Su.Bi /Offsite/AGM 10/067/68 dated 2067/05/28 (13th September 10) and to distribute as proposed by Board, the Cash Dividend of 55% and 15% of Bonus Shares on the basis of approval of the Annual General Meeting:

To rectify the comments raised by Statutory Auditor and to ensure that the comments are not repeated.



Five years Financial SummaryBalance Sheet

Particulars 2062-63 2063-64 2064-65 2065-66 2066-67 2005-06 2006-07 2007-08 2008-09 2009-10Assets Cash and Bank Balance 1,276,241 2,021,021 2,050,243 3,137,164 1,929,307 Money at Call and Short Notice 1,977,271 1,761,152 2,197,538 2,055,549 1,669,460 Investments 12,838,555 13,553,233 13,902,819 20,236,121 19,847,511 Loans and Advances 8,935,418 10,502,637 13,718,597 13,679,757 15,956,955 Fixed Assets 101,302 125,591 117,272 137,293 118,540 Other Assets 638,565 633,055 1,349,319 820,687 691,547 Total Assets 25,767,352 28,596,689 33,335,788 40,066,570 40,213,320 Liabilities Borrowings - 400,000 - 300,000 - Deposits 23,061,032 24,647,021 29,743,999 35,350,824 35,182,721 Other Liabilities 952,181 1,433,315 1,099,242 1,363,277 1,660,889 Total Liabilities 24,013,213 26,480,336 30,843,241 37,014,101 36,843,610 Shareholders Fund Paid Up Capital 374,640 413,255 620,784 931,966 1,398,484Proposed Bonus Shares 112,392 206,627 310,392 465,983 209,773Reserve (including Exchange Reserve) 896,522 991,746 1,178,084 1,415,025 1,731,489Undistributed Profit 370,585 504,725 383,287 239,495 29,965 Total Shareholders Fund 1,754,139 2,116,353 2,492,547 3,052,470 3,369,710 Contingent Liabilities Letter of Credit 1,837,398 1,861,944 1,857,994 3,120,879 2,627,212Guarantees 2,046,063 2,389,969 2,800,467 3,687,373 3,248,829Forward Exchange Contracts 362,646 1,121,870 193,985 1,332,126 1,223,147Other Contingent Liabilties 938,720 1,480,339 1,287,338 3,031,614 2,588,137 Total Contingent Liabilties 5,184,827 6,854,122 6,139,784 11,171,991 9,687,325

(figures in Rs. thousands)


Five years Financial SummaryProfit & Loss Account

Particulars 2062-63 2063-64 2064-65 2065-66 2066-67 2005-06 2006-07 2007-08 2008-09 2009-10 Interest Income 1,189,603 1,411,982 1,591,196 1,887,221 2,042,109 Interest Expenses 303,198 413,055 471,730 543,787 575,741 Net Interest Income 886,405 998,927 1,119,466 1,343,435 1,466,368 Commission and Discount 222,929 221,207 276,432 288,031 338,298 Other Operating Incomes 25,442 28,785 32,594 33,191 34,479 Exchange Fluctuation Income 283,472 309,087 345,653 427,468 458,564 Total Operating Income 1,418,247 1,558,006 1,774,145 2,092,125 2,297,709 Staff Expenses 168,231 199,778 225,256 253,056 312,964 Other Operating Expenses 221,087 228,451 230,571 276,327 295,305 Exchange Fluctuation Loss - - - Operating Profit Before Provision for Possible Loss 1,028,930 1,129,776 1,318,318 1,562,743 1,689,440 Provision for Possible Losses 47,730 36,809 69,885 56,635 76,974 Operating Profit 981,200 1,092,968 1,248,432 1,506,108 1,612,466 Non-Operating Income/ (Loss) 1,433 9,492 1,683 22,098 36,268 Provision for Possible Loss Written Back 53,090 20,160 90,635 101,075 58,293 Profit from Ordinary Activities 1,035,723 1,122,620 1,340,750 1,629,282 1,707,027 Income/(Expenses) from Extra Ordinary Activities (2,411) (4,915) (28,039) (15,356) (17,024) Net Profit after considering all Activities 1,033,312 1,117,705 1,312,710 1,613,926 1,690,003 Provision for Staff Bonus 93,937 101,610 119,337 146,721 153,637 Provision for Income Tax 280,619 324,427 374,452 442,091 450,496 Net Profit/Loss 658,756 691,668 818,921 1,025,114 1,085,872 Accumulated Profit up to Previous Year 251,336 370,585 557,724 383,288 239,495 This Year's Profit 658,756 691,668 818,921 1,025,115 1,085,872 Capital Adjustment Fund upto Previous Year - 74,928 Total 910,092 1,062,253 1,376,645 1,408,402 1,325,367 General Reserve Fund - 77,229 163,784 205,023 217,174 Proposed Dividend 487,033 330,604 496,627 465,983 769,166 Proposed Issue of Bonus Shares 37,464 206,627 310,392 465,983 209,773 Exchange Fluctuation Fund 15,011 17,996 22,554 31,918 21,381 Capital Adjustment Fund - - - Other Appropriations 77,908

Accumulated Profit/(Loss) 370,585 429,797 383,288 239,495 29,965

(figures in Rs. thousands)

Our performance

Financial highlights

FYE 2009/10

Non-fi nancial highlights

Operational highlights

2298m

14.60%

1612m

42918

32.22%

40,213m

70%

Operating Income

(in NPR where applicable)

Points of representation

Capital Adequacy

Operating Profi t

Employees

Return on equity

Total Assets

Dividend

Stable Income Growth

Stable Profi t Growth

Robust balance sheet

Sound capital base

Sound risk management

Sustainable business

(IncludingBonus Shares)

Disclaimer

Standard Chartered Bank Nepal Limited is an Equal Employment Opportunity/ Affi rmative Action employers. Standard Chartered Bank Nepal Limited is committed to providing equal employment opportunities to every employee and every applicant for employment, regardless of, but not limited to, such factors as race, color, religion, sex, age, familial or marital status, ancestry, sexual orientation, veteran status or being a qualifi ed individual with a disability; within the legal framework of the country.

Standard Chartered Bank Nepal Limited undertakes no obligation to update any statement in this Annual Report 2009-2010 to refl ect events or circumstances after the date on which such statement is made. Information in this Annual Report is as of July 16, 2010.

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Annual R

eport and Accounts 2009-2010

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