Annual Report 2015/16

ANNUAL REPORT 2015/16

www.kumaribank.com

CONTENTS

4 About the company

7 Chairman’s Message

8 Board of Directors

10 Board of Director’s Report for 16th AGM

27 ACEO’s Message

28 Management Team

30 Product Review

32 Auditor’s Report

34 Schedules

76 Significant Accounting Policies

79 Notes to Account

94 Disclosure as per Basel II

100 ATM Locations

102 Branches ABOUT THE COMPANY

Kumari Bank Limited, came into existence as the fifteenth commercial Outward Remittance services, Online remit Services and bank of Nepal by starting its banking operations from Chaitra 21, 2057 various other banking services. B.S (April 03, 2001) with an objective of providing competitive and Visa Electron Debit Card, which is accessible in entire modern banking services in the Nepalese financial market. The bank VISA linked ATMs (including 46 own ATMs) and POS has paid up capital of NPR 2,699,166,532 of which 51% is contributed (Point of Sale) terminals both in Nepal and India, has from promoters and remaining from public. also added convenience to the customers. The bank has Kumari Bank Ltd has been providing wide - range of modern banking been able to get recognition as an innovative and fast services through 38 points of representations located in various urban growing institution striving to enhance customer value and and semi urban part of the country, 36 branches outside and inside the satisfaction by backing transparent business practice, valley; and 2 extension counters. The bank is pioneer in providing some professional management, corporate governance and of the latest / lucrative banking services like E-Banking and SMS Banking total quality management as the organizational mission. services in Nepal. The bank always focus on building sound technology The key focus of the bank is always center on serving driven internal system to cater the changing needs of the customers that unfulfilled needs of all classes of customers located enhance high comfort and value. The adoption of modern Globus Software, in various parts of the country by offering modern and developed by Temenos NV, Switzerland and arrangement of centralized competitive banking products and services in their door data base system enables customer to make highly secured transactions step. The bank always prioritizes the priorities of the in any branch regardless of having account with particular branch. Similarly valued customer. the bank has been providing 365 days banking facilities, extended banking hours till 7 PM in the evening, Utility Bill Payment Services, Inward and VISION

Our mission is to deliver innovative products and services to our customers, use these innovative products to achieve financial inclusion, and do so by exemplifying good corporate governance, proactive risk management practices, and superior corporate social responsibility.

MISSION

Our vision is to be the preferred financial partner to our customers, a center of career growth to our employees, and to maximize our shareholders’ value, while contributing to our nation’s financial sector and to its economic welfare.

KUMARI BANK LIMITED 7

CHAIRMAN’S MESSAGE

Dear Fellow Shareholders, of Narayangarh bazar to support security system in coordination of District Police Office, Chitwan. Besides, we have also made Fiscal year 2015/’16 has been a year of transition for the entire our presence in various socio-cultural programs including blood banking industry as the paid up capital target set by the Central donation program, school and colleges’ development programs, Bank made all commercial banks to accelerate its performance financial literacy programs and support to various clubs working in the way they never had in the past 33 years of Nepalese for social development on regular basis. And to the utmost, when banking history. Thus, working harder and smarter was the making loans to companies, we conduct assessments on how basic requirement this fiscal year which we delivered under they address environmental, social and other material risks. the stewardship of our Acting CEO, Mr. Rajib Giri aligning our activities to our mission statement strongly backed by the WAY FORWARD board in taking meaningful decisions. I am excited about the future as we look ahead to your Bank’s 17th year. Kumari has a clear strategy predicated on a highly POSITIONED FOR LONG TERM EXCELLENCE diversified, well-balanced business status within a clearly Kumari Bank has introduced products and services as per defined global footprint, and your Board is fully supportive of the customers’ requirement embedding technology. I believe, strategic direction that management has set. recently launched products such as Kumari Swastha Jeevan Bachat Khata, Share DEMAT account, ASBA procedure, On the other side, 2016/’17 isn’t going to be easy at this Internet and Mobile Banking, Credit cards and various other competitive landscape and regulatory framework for which we saving accounts with different facilities has made your banking will have to stay focused in our deliverables. Nevertheless, we experience even more smoother. We’ll continue to do so in have demonstrated time and again an ability to sail through the coming days too as it have been our working culture. uncertainties. In all things, we are guided by our belief that we can create an impact beyond banking and change lives for the Our efforts to position the bank for long term excellence is very better. In particular, as a bank operating in an industry at the cusp much aligned which is why we were able to announce needed of massive change, your bank will push forward to make banking return on shareholder’s investment of 21% bonus share from simpler and more seamlessly integrated into customers’ lives. its paid-up capital i.e. NPR 566.8 million and NPR 29.7 million cash dividend for tax purpose as proposed by the board of Although market cycles come and go, you can count on us to directors; i.e. total of 22.10% which makes total amount of NPR remain steady and solid. We will be here for you for generations 596.6 million as total dividend. to come. I am pleased with our progress on several fronts, including our improved financial results followed by our BEING SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE continued commitment to ethical banking and compliance. All In addition to the customer experience, we have to be persistently in all, I want to reassure our shareholders that Kumari’s renewed focused on earning the trust and goodwill of society at large. focus on performance and results will not come at the expense of This can only come from playing a pertinent role in people’s real hard-earned progress in key areas like ethics and compliance. needs - helping companies grow, helping individuals prosper Thus, this is one of the many reasons that I would like to thank and ultimately uplifting the entire community. our dedicated management team and Board members for

Therefore, your bank is aware of its social responsibilities along working tirelessly to ensure Kumari’s sustained success. I look with its professional intent as well. We have been providing forward to continuing this journey together in 2016/17. scholarship to children via HOPAD Child and Women Promotion Society (NGO). Further, we have also provided financial support to run health camp in Indrawatee Community Health Center at Sindhupalchowk. In fact, we have been successful to raise a fund of NPR 50,000.00 every year as educational sponsorship to Goddess Kumari of Kathmandu as a part of CSR. We have also been providing financial as well as other support for the puja of Yours Sincerely, Goddess Kumari on the occasion of Indrajatra festival every year. SANTOSH KUMAR LAMA We have provided support to place CC camera in different places Chairman, Kumari Bank 8 ANNUAL REPORT 2015/16

BOARD OF DIRECTORS

MR. SANTOSH KUMAR LAMA Chairman

DR. SHOVA KANT DHAKAL Director KUMARI BANK LIMITED 9

MR. NARESH DUGAR MR. UTTAM PRASAD BHATTARAI Director Director

ER. BINOD DAWADI MR. PUNARAM BHANDARI Director Director 10 ANNUAL REPORT 2015/16

BOARD OF DIRECTORS’ REPORT FOR SIXTEENTH ANNUAL GENERAL MEETING

Respected Shareholders,

On behalf of the Board of Directors, we would like to extend warm welcome to all our shareholders to the sixteenth Annual General Meeting of Kumari Bank Ltd.

We are delighted to present you this bank’s financial status of the fiscal year 2072/73, its achievement and future prospects in this Sixteenth Annual General Meeting. Learning lessons from our past experiences and facing utmost challenges in the banking sector, we have completed glorious 16 years of services. From its inception, this bank has been achieving continuous progress through modern banking technology and practices with its core objectives to provide excellent customer services, maximum return to our investors, maintain good corporate governance and moral values; and adhere to rules and regulations set forth by the government. In days to come, with techno-savvy service delivery we shall continuously put our effort for the optimum quality of banking solutions. We take your suggestions as our course of action, so that the bank can be more successful and sustained. We would like to present you the Bank’s main financial highlights as follows:

1 A holistic view of the transactions in the past years

Table 1 : Financial look at the bank’s past 5 years’ performance. Amount in NPR million

Fiscal year Particulars 068/69 069/70 070/71 071/72 072/73

Paid-up Capital* 1,603.80 1,828.33 2,431.68 2,699.17 3,265.99 Deposit 21,985.20 25,318.57 27,578.38 33,421.91 37,950.53 Loans, Borrowings & Advances 18,101.34 20,119.79 22,808.50 27,070.39 30,111.45 Investments 3,261.80 4,888.55 3,672.10 5,299.47 7,742.97 Fixed Asset (Net) 277.27 255.86 235.78 259.46 265.41 Total Assets 25,131.40 28,222.57 31,020.60 37,374.51 42,416.51 Net Interest Income 819.09 978.03 835.47 925.77 1,175.43 Other Income 203.36 237.05 330.83 297.55 338.61 Operating Expense 406.32 434.27 461.82 538.08 581.11 Operating Profit before loan loss provision 616.13 780.81 704.48 685.24 932.94 Net Profit/ (Loss) 275.5 291.45 341.65 394.79 716.06 Non-Performing Loan Ratio (%) 2.21 2.89 4.03 2.49 1.15

*Paid-up Capital includes Bonus Shares. KUMARI BANK LIMITED 11

Looking at the past year’s performance, it is evident that the bank’s financial business had a significant growth. Non-performing assets hasbeen well managed in these years and the business activities of the bank have been increased in limited rate on the basis of risk valuation. The bank has been planning for balanced and long term business growth despite of fluctuating condition of Nepal’s financial market, political context, industries, etc. A comparison between fiscal years 2071/72 and 2072/73 shows that bank achieved growth in loan, deposit and investment by 11.23%, 13.55% and 46.11% respectively to NPR. 30.11 billion, NPR 37.95 billion and NPR 7.74 billion only respectively. Similarly, net interest income increased by 27% to NPR 1.18 billion and total operating expenses increased by 8% to NPR 581.1 million. In fiscal year 2072/73, operating profit before loan loss provision increased by 36.15% and reached to 932.9 million. In fiscal year 2071/72, additional loan loss provision was NPR 55.8 million whereas the writeback of loan loss provision in fiscal year 2072/73 was NPR 254 million. In fiscal year 2072/73, loan of NPR 40 million was stated during enlistment of non-banking assets. Similarly, net profit in fiscal year 2072/73 increased by 81.38% and reached NPR 716.1 million whereas it was NPR 394.8 million in fiscal year 2071/72.

During the period, although the other operating income had declined by 10.06%; due to the incremental impact of net interest income by 10.81%; the total operating income of the bank had increased by 4.89%. Under operating expense, staff expenses and other operating expenses increased by 28.22% and 5.71% respectively; which led to increment in total operating expense by 16.51%. Net loan loss provision has been decreased by 65.16% in fiscal year 2071/72 than that of previous fiscal year. Similarly, Bank’s net profit had increased by 15.55% in FY 2071/72.

The bank’s major financial highlights of 5 years of performance as presented as follows:

PAID UP CAPITAL RESERVE & FUNDS

3500 3266 900 828 773 800 768 3000 2699 2432 700 648 2500 600 535 1828 2000 1604 500 400 1500 300 1000 200 500 100 0 0 68/69 69/70 70/71 71/72 72/73 68/69 69/70 70/71 71/72 72/73

CAPITAL ADEQUACY RATIO (%) NON-PERFORMING LOAN RATIO (%)

12.5 4.5 12.2 12.17 4.03 4 12 11.81 3.5 11.69 2.89 3 11.5 2.49 2.5 2.21 10.84 2 11 1.5 1.15 1 10.5 0.5

10 0 68/69 69/70 70/71 71/72 72/73 68/69 69/70 70/71 71/72 72/73 12 ANNUAL REPORT 2015/16

DEPOSIT LOAN & BORROWINGS

40000 37951 35000 30111 35000 33422 30000 27070 27578 30000 25319 25000 22809 25000 21985 20120 20000 18101 20000 15000 15000 10000 10000 5000 5000

0 0 68/69 69/70 70/71 71/72 72/73 68/69 69/70 70/71 71/72 72/73

TOTAL ASSETS NET INTEREST INCOME

45000 42417 1400 40000 37375 1175 1200 35000 31021 978 926 28223 1000 30000 819 835 25131 25000 800

20000 600 15000 400 10000 200 5000 0 0 68/69 69/70 70/71 71/72 72/73 68/69 69/70 70/71 71/72 72/73

OPERATING EXPENSE OPERATING PROFIT BEFORE LOAN LOSS PROVISION

700 1000 933 581 900 600 538 781 800 462 704 685 500 434 700 616 406 400 600 500 300 400 200 300 200 100 100 0 0 68/69 69/70 70/71 71/72 72/73 68/69 69/70 70/71 71/72 72/73 KUMARI BANK LIMITED 13

INVESTMENT 2 Reviewing international and national economy 9000 8000 7743 In the review year, decline in price of petroleum product 7000 and metallic objects, European non-residential problems caused by mid-eastern and Africa and decision to 6000 5299 4889 separate United Kingdom from European Union has 5000 3672 direct influence in national and international economy. The 4000 3262 growth rate of World’s economy in 2016 and 2017 would 3000 be 3.20% and 3.50% respectively as per the projection of 2000 International Monetary Fund. The economy of developed 1000 countries in 2016 would rise by 1.90% as per IMF. The growth rate of developing and emerging economy in 2016 0 and 2017 would be 4.10% and 4.60% respectively. As per 68/69 69/70 70/71 71/72 72/73 IMF, the economy of India and China in 2016 is expected to increase by 7.50% and 6.50% respectively.

OTHER OPERATING INCOME The inflation rate of emerging and developing economy is expected to be 4.50% in 2016 due to minimum price 400 level of petroleum products and metallic. The inflation rate of India and China in 2016 is expected to be 5.30% 350 331 339 298 and 1.80% respectively. 300 In fiscal year 2072/73, overall economic activities could 250 237 203 not be favorable despite of country’s overall economic 200 stability regarding major indicators; border blockade and 150 product distribution problem led to unfavorable capital 100 expenses and contraction in our economy. Moreover, agricultural sector could not grow as per the expectation 50 due to unfavorable climate. As a result, overall economic 0 growth rate of the country is minimal in fiscal year 2072/73. 68/69 69/70 70/71 71/72 72/73 GROSS DOMESTIC PRODUCT According to primary estimation by Central Bureau of NET PROFIT Statistics, for fiscal year 2072/73, Real Gross Domestic Product (GDP) rate based on actual base rate is 0.80% 800 and was 2.30% in the previous fiscal year. Similarly, GDP 716 700 in production price was 2.70% in previous year and is expected to be 0.60% in the review period. 600

500 In the review period, the growth rate in production from 395 agricultural sector and non-agricultural sector is 1.30% 400 342 and 0.60% respectively; whereas that in previous year 276 291 300 was 0.80% and 3.10% respectively. The growth rate in 200 industrial products in previous year was 1.50% whereas that in review year is expected to decline by 6.30%. After 100 devastating earthquake of April 2015, decline in demand 0 for products, shortage of power and strikes has caused 68/69 69/70 70/71 71/72 72/73 shortage in supply of petroleum and raw materials which 14 ANNUAL REPORT 2015/16

resulted in production of overall industrial sector. Growth rate In the review year, there is increase in import for means of in service sector in the review period is expected to be 2.70% transportation and its spare parts, gold, medicine, chemical whereas it was 3.60% in previous year. There was adverse fertilizers, means of communications and its spare parts; effect in tourism sector after earthquake and border blockade whereas the import for products such as petroleum products, that resulted in negative growth in hotel and business sector. silver, MS Willet, betel nut, palm oil, etc. has reduced.

Due to inadequate rainfall in the review year, there was decline in In the review period, total deficit in trade increased by 2.00% i.e production of major agricultural products; and border blockade, NPR 703.48 billionwhereas it increased by 10.80% last year. In strikes led to negative effect in economic growth rate. the review period, the ratio between total trade deficit and total domestic product decreased by 31.30% and was 32.50% last INFLATION year for the same. In fiscal year 2072/73, annual average inflation rate as per In the review year, export import ratio is 9.10% i.e. volume of Consumer Price Index (CPI) is 9.90% and that in previous import is higher by 11 times than that of export. Such ratio in year was 7.20%. As per annual point basis, Consumer inflation previous year was 11.00%. rate on Asadh end 2073 is 10.40% and was 7.60% in Asadh end 2072. There was pricing problem due to adverse affect SERVICE of Terai movements, border blockade and inefficient supply in In the review year, total income through service decreased by the review year. 7.20% and total expenditure increased by 5.70%; which led In the review period, annual average inflation rate as per to net service income saving declined by 64.30% to NPR 9.85 CPI of Kathmandu, Hilly region, Himalayan region and Terai billion. Previous year, the saving on net service income was is 11.60%, 10.40%, 8.80% and 8.60% respectively. Whereas NPR 27.62 billion. its growth rate last year was 7.20%, 7.30% and 7.10% in Income through tourism sector in the review year decreased by Kathmandu valley, Hilly region and Terai region respectively. 21.80% and increased by 15.20% in previous year. In the review year, income from sight viewing, travel and trekking agencies FOREIGN TRADE has reduced. The expenditure on tourism sector in the review In fiscal year 2072/73, there was deficit in total export by year increased by 6.10% and increased by 26.10% in last year. 17.80% and reached NPR 70.12 billion whereas that in In the review year, the expenses on education sector increased previous year diminished by 7.30%. In the review period, by 18.00%. deficit in total import in India and China is 29.30% and 24.60% respectively and surplus by 6.30% in other countries. In the REMITTANCE INFLOW review period, ratio of total export and total domestic product The remittance inflow increased by 7.70% and reached NPR declined to 3.10% and was 4.00% in previous year. 665.60 billion in the review period while it increased by 13.60% In the review period, there was deficit in total import by in the previous year. In the review period, the ratio of remittance 0.10% and reached NPR 773.60 billion due to decrease in inflow and total domestic product has reached 29.60% and import rate of petroleum products. Last year, such import was was 29.10% last year. The number of Nepalese moving for increased by 8.40%. Import except for petroleum product has foreign employment has reduced in the review year; affecting increased by 6.40%. In the review period, import from China remittance inflow. The number of Nepalese going for foreign has increased by 15.50% whereas that from India and other employment in fiscal year 2072/73 has reduced by 18.40%, countries declined by 2.90% and 1.20% respectively. In the while it was reduced by 2.80% last year. On the basis of review period, ratio of total import and total domestic product number of workers, there has been change in the structure declined to 34.40% and was 36.50% in previous year. of destination countries . In the review year, Saudi Arabia, Qatar and Malaysia has been first, second and third destined In the review period, there is an increase in export on product country; whereas previously it was Malaysia, Qatar and Saudi basis such as woolen carpets, black cardamom, pashmina, Arab respectively. readymade garments, peena (nepali term) whereas decrease in export products such as zinc sheet, GI pipe, polyester yarn, clothes, juice, etc. KUMARI BANK LIMITED 15

CURRENT ACCOUNT AND BALANCE OF PAYMENT GOVERNMENT EXPENDITURE On the basis of FOB price (Free on Board Price), even though In fiscal year 2072/73, total government expenditure on the basis there was increment in trade deficit decrement in net service of cash flow increased by 11.90% and reached NPR 569.57 and saving on income but due to increment in net transfer billion. In previous year, it increased by 22.00% and reached inflow, current account balance was in surplus by NPR 140.42 NPR 509.21 billion. billion in the review year. While current account balance was In fiscal year 2072/73, current expenditure on cash flow NPR 108.32 billion in last fiscal year. In the review year, surplus increased by 6.50% and reached NPR 356.50 billion and in BOP is NPR 188.95 billion due to increment in capital inflow increased by 12.90% in previous year. The current expenditure along with current account surpluswhile it was NPR 145.40 reached 73.60% of the expected budget. billion in previous year. In the review year, capital based transfer and foreign direct investment inflow is NPR 16.99 billion and In review year, capital based expenditure on the basis of cash NPR 5.92 billion respectively. Likewise, in previous year, capital flow increased by 37.90% than that of previous year and reached based transfer and foreign direct investment was NPR 14.81 NPR 111.70 billion. Last year, it was increased by 32.10%. The billion and NPR 4.38 billion respectively. expected capital expenditure budget reached NPR 209.00 billion i.e. 53.50%. FOREIGN CURRENCY RESERVE Total foreign currency reserve in Asadh end 2073 reached NPR DEPOSIT COLLECTION 1039.21 billion after the growth of 26.10% from Asadh end 2072 In the review year, deposit of Bank and Financial Institutions of NPR 824.6 billion. Out of total foreign currency reserve, reserve increased by 19.40% while it increased by 20.10% last year. In at NRB in Asadh 2073 increased by 26.20% to NPR 887.10 billion the review year, deposit of commercial bank and development than that of Asadh 2072. Similarly, foreign currency reserve of banks increased by 20.70% and 16.50% respectively whereas Banks and Financial Institutions (except NRB) has increased that of financial companies decreased by 12.00%. Similarly, by 25.80% and reached to NPR 152.20 billion. The portion of deposit of commercial bank and development banks increased reserve of Indian currency out of total reserve is 21.40%. by 21.40% and 15.20% respectively and that of financial companies decreased by 0.60% in previous year. In the review In the fiscal year 2072/73, foreign currency reserve of banking period, deposit of financial companies decreased due to merger. sector is adequate to cover product import requirement for 16.5 months and 14.1 month to cover both product and service import. LOAN FLOW In the fiscal year 2072/73, loan flow of BFIs in private sector GOVERNMENT REVENUE increased by 23.70% while it was 19.80% in previous year. There is an increase in disbursement of loans to private sectors due to In fiscal year 2072/73, revenue of Government of Nepal active economic activities since fourth quarter of the review year. increased by 18.90% and reached 482.75 billion. The targeted Loan disbursement to private sector through commercial banks government revenue budget was NPR 475.1 billion i.e. 101.60%. and development banks increased by 26.50% and 20.30% In previous year government income increased by 13.8% and respectively while that from financial companies decreased by reached NPR 405.85 billion. In the review year, ratio of taxes and 12.50%. gross domestic product is 21.50% whereas it was 19.10% in last fiscal year. In the review year, loan for transportation, communication and public service through BFIs increased by 39.80% while In the review year, portion of tax revenue and non-tax revenue it increased by 27.00% in previous year. Similarly, loan on out of total revenue is 87.30% and 12.70% respectively. Similarly, wholesale and retail business sector increased by 25.80%, loan portion of direct tax revenue and indirect tax revenue out of total on financial, insurance and fixed asset increased by 25.90%. tax revenue is 34.90% and 65.10% respectively. In previous In the previous year, it increased by 21.80% and 18.30% year, tax revenue and non-tax revenue out of total revenue respectively. was 87.70% and 12.30% respectively and portion of direct tax revenue and indirect tax revenue out of total tax revenue was 32.40% and 67.60% respectively. 16 ANNUAL REPORT 2015/16

LIQUIDITY MANAGEMENT MERGER/ ACQUISITION In the fiscal year 2072/73, NRB has retained liquidity of amount After implementation of “Bank and Financial Institutions Merger NPR 591.63 billion. Out of the aforementioned amount, liquidity and Acquisition By Laws, 2068”, merger among 108 BFIs led to is retained through frequent deposit collection of NPR 297.50 43 institutions till Asadh end 2073. Similarly, 2 commercial banks billion, reverse repo (on the basis of turnover) NPR 235.95 have acquired 4 finance companies and 1 development bank billion, NRB’s bond NPR 49.8 billion and outright sale NPR 9.10 has acquired another 1 development bank. billion. Similarly, in the previous year, liquidity was retained through deposit collection by NPR 155 billion, reverse repo by PRESENCE OF BANK AND FINANCIAL NPR 315.80 billion and outright sale by NPR 6 billion. INSTITUTIONS The number of BFIs under NRB has reached 179 till Asadh INTER BANK TRANSACTION AND USAGE OF end 2073 as a result of merger and acquisition. 28 commercial PERMANENT LIQUIDITY FACILITY banks, 67 development bank, 42 financial companies and 42 In the fiscal year 2072/73, interbank transaction of commercial micro-finance institutions are in operation till Asadh end 2073. banks and other financial institutions (except commercial banks) Though the number of BFIs has reduced, there has been a are NPR 961.72 and NPR 129.6 billion respectively. In the branch extension. Such number of branches has reached 4272 previous year, it was NPR 374.70 billion and NPR 226.91 billion till Asadh end 2073. respectively. In the review period, BFIs has taken advantage of permanent liquidity facility of NPR 14.3 billion. CAPITAL MARKET NEPSE Index’s annual basis points have reached 1,718.2 points INTEREST RATE in Asadh end 2073 while it was 961.2 points in Asadh end 2072. The weighted average interest rate of 91 days Treasury bill in Some of the major contributing factors for increment in share Asadh 2072 was 0.1739% whereas it remained 0.0456% in market index are: NRB policy to increase capital base of BFIs, Asadh 2072. Similarly, weighted average interbank interest rate share transactions through DEMAT account (paperless process) among commercial banks in Asadh 2072 was 1.01% whereas since Magh 2072 and expectation of investors towards end of that in Asadh 2073 is 0.69%. The weighted average interest political impacts. rate for inter-bank transactions of other financial institutions for In the fiscal year 2072/73, total share transaction increased Asadh 2072 was 3.89% whereas that in Asadh 2073 is 3.25%. by 151% and reached NPR 163.96 billion than previous year. In Asadh 2073, weighted average interest rate spread for (Source: Nepal Rastra Bank, Country’s Current Economic Status commercial banks is 4.85% and was 4.61% in Asadh 2072. of Fiscal Year 2072/73) Similarly, the average base rate of commercial banks in Asadh 2072 was 7.88% and that in Asadh 2073 is 6.54%. KUMARI BANK LIMITED 17

3 Review of the Bank’s operations in FY 2072/73

Analysis of the financial statement of review period clearly depicts growth in banking transaction, asset and profit. Such increse in transactionsled to increment of balance sheet size by 13.49%, which is NPR 42.41 billion in fiscal year 2072/73.

A. CAPITAL MANAGEMENT As per Nepal Rastra Bank’s capital requirement, bank had formulated following capital plan to adhere with the requirement of the Central Bank obligations. Amount in NPR million

Addition to Paid-up Capital of Bank Opening Closing Fiscal Year Balance Share Balance Right Share Aquistion Dividend

2072/73 2,699 567 - - 3,266

Fiscal Year Opening Kumari Bank’s Acquired Right Share Closing Balance 50% Right through Share after Dividend Balance Share Acquisition Acquistion

2073/74 3,266 1,350 1,640 900 844 8,000

Out of Bank’s current paid up capital of NPR 2.69 billion, total capital would reach NPR 4.61 billion after distribution of the share dividend of 21% i.e. NPR 566.8 million and 50% right share i.e. NPR 1.35 billion, in the fiscal year 2072/73. Similarly, additional paid up capital of NPR 1.64 billion from 4 acquiring financial institutions would be added up in the bank’s capital. In the current fiscal year 2073/74, share dividend from joint operation after acquisition would be NPR 840 million and right share would be NPR 900 million. The above mentioned right share is targeted to be included in consolidated capital after acquisition.

B. DEPOSIT The total deposit amount reached NPR 37.95 billion in Asadh end 2073, which increased by 13.55% as compared to the last fiscal year.

Table 2 : Comparative State of Deposits. Amount in NPR million

% of total FY % of total Increased Increased Deposit FY 072/73 deposit 071/72 deposit Amount Rate

Current 2,070 5.45 1,666 4.98 404 24.25 Savings 9,581 25.25 8,005 23.95 1,576 19.69 Call 8,771 23.11 9,281 27.77 -510 -5.49 Fixed 17,528 46.19 14,470 43.29 3,058 21.13 Total 37,951 100 33,422 100 4,529 13.55

C. LENDING AND ITS MANAGEMENT In fiscal year 2071/72, the bank’s total loan was NPR 27.7 billion, while at the end of review year, it increased by 11.23% reaching NPR 30.11 billion. The bank has diversified its lending into personal loan, education loan, small and medium scale business loan, agricultural and productive loan, deprived sector loan, organizational loans and development projects loan. During the review period, bank’s non- performing loan is 1.15%, but the gross non-performing loan ratio was only 0.12%. Certain improvements were noted in real estate sector lending in the current review period. In the current review period along with recoveries certain non performing loans were taken as non banking asset of the bank, which resulted in decline in non performing loan ratio in comparison to the previous year. We would like to inform you that we shall put continuous efforts to regularize these loans in the days to come. 18 ANNUAL REPORT 2015/16

D. INVESTMENT G. PRODUCTS AND SERVICES In accordance with the bank’s objective of getting returns Kumari bank has introduced products and services as per from overall resources by maintaining balanced liquidity, the customers’ requirement and change in technology. Recently bank has given continuity to its policy of investing in Nepal launched products such as Kumari Swastha Jeevan Bachat Government and Nepal Rastra Bank’s risk free securities Khata, Share DEMAT account, ASBAprocedure, Internet (Treasury bill, development bond, etc). and Mobile Banking, Prepaid card and various other saving accounts with different facilities have been popular. Bank The bank has been carefully investing in local and international has been providing remittance services in acquaintance with market and various organizations’ share and bonds. The bank 24 remit companies, out of which there are 7 international has invested NPR 1.28 billion in NG’s treasury bills, NPR 2.51 companies and 17 national companies. Bank has more than billion in development bonds; making the total investment of 220 remit agencies and more than 1200 remit payout locations. the bank to be NPR 7.74 billion by the end of FY 2072/73 . The bank has invested in shares of few institutions also. The bank is even more resilient to bring newer services and added features for easier access of products to the E. PROFIT customers. We have been continuously engaged in providing In the review year, there was good growth in revenue from competitive privileged products and services to our valued every sector along with growth in the Bank’s overall business. customers. Kumari Bank has been providing varied innovative Besides this in the review year, growth in operating expenses products since its inception and and has made distinct market has been limited to 8% and huge bad debts have been position in the industry. Visa Electron, Dollar Debit cards can recovered. Interest income from loan and investment in the be accessed via VISA network in Nepal, India and any other fiscal year 2072/73 increased by 11% and reached NPR 2.69 part of the world. billion and interest expenses increased by 0.64% to NPR 1.52 billion as compared to the fiscal year 2071/72. Bank’s H. BRANCH AND NETWORK EXPANSION net interest income increased by 27% and reached NPR In order to maintain paid-up capital as per the directive of NRB, 1.18 billion in the fiscal year 2072/73. Bank’s loan, deposit the bank has planned for merger and acquisition. Hence, the and income through fee and commission for other services bank has not extended branch network in the review year. increased by 14% and reached NPR 230 million in fiscal The plans for extension of branches of the bank would be year 2072/73 whereas foreign exchange income increased decided after accomplishment of merger and acquisition of by 14% and reached NPR 110 million. Similarly in the fiscal the bank. Recently, the bank has 11 inside valley branches year 2072/73, Bank’s total operating income has reached and 25 outside valley branches i.e. all together there are 36 NPR 1.51 billion which increased by 24% than previous year. branches operating throughout the country. Similarly, there Besides this, Bank’s staff expenses and other operating are 2 extension counters and 46 Automated Teller Machines expenses increased by 11% and 4% to NPR 320 million and (ATMs) operating throughout the country. NPR 260 million respectively. In fiscal year 2072/73, operating profit before loan loss provision increased by 36% than last I. CORPORATE GOVERNANCE fiscal year and reached NPR 930 million. In the review year, Banks and financial institutions are public organizations not there was additional loan loss provision NPR 180 million and only operated with shareholders’ funds but also through NPR 430 million was returned for loan loss provision. There institutional and public deposits. This implies that good were few loans which were required to be converted into corporate governance and moral character are two extremely non-banking assets with a book value of NPR 40 million.The sensitive issues that the bank takes into account. The Bank’s net income in fiscal year 2072/73 increased by 81% operational procedures of our bank are carried forward by and reached NPR 716 million as compared to the fiscal year considering good corporate governance as the guiding path 2071/72 which was NPR 390 million.. while board of directors is consistently giving their efforts to conduct its activities accordingly; and develop strong and F. CONTRIBUTION TO GOVERNMENT REVENUE transparent good corporate governance also in other activities In fiscal year 2071-72, the bank paid NPR 173.7 million of the bank. as corporate tax to the government and during the review period NPR 356 million was paid as advance corporate tax to the government. KUMARI BANK LIMITED 19

J. RISK MANAGEMENT exchange rates. Similarly, arrangements have also been A separate risk management sub-committee has been made for formulating necessary policies and regulation by established to identify, monitor and protect the bank from regular monitoring of market interest rates. The ALCO/ Pricing potential risks associated with different activities of the Committee is formulated and entrusted to control such risks. bank. Policies and regulations have also been formed and implemented to manage numerous risks associated with K. CORPORATE SOCIAL RESPONSIBILITY banking activities as well as other potential risks. The bank The bank is aware of its social responsibilities along with has taken policy to make internal control system more its professional intent as well. The bank has been providing effective and efficient by properly managing the bank’s loans, scholarship to children via HOPAD Child and Women operations, market and other risks. Promotion Society (NGO). The bank provided financial support to run health camp in Indrawatee Community Health Center at The bank has executive management that formulates required Sindhupalchowk. The bank has raised a fund of NPR 50,000.00 policies, regulations, and documentation related to loan every year as educational sponsorship to Goddess Kumari of management, customer recognition, stress test and daily Kathmandu as a part of CSR. The bank has also been providing transactions activities. financial as well as other support for the puja of Goddess a. Loan Risk Management : To identify and manage loan Kumari on the occasion of Indrajatra festival every year. The risks, the bank has set up a separate department. The bank has provided support to place CC camera in different department assesses risks associated before making any places of Narayangarh bazar to support security system in loan disbursements by keeping in mind of the possible risks coordination of District Police Office, Chitwan. Besides, the assessed with predefined standards and policies set by Nepal bank also made its presence in various socio-cultural programs Rastra Bank as well as bank’s internal policy to hedge risks. as blood donation program, school and colleges’ development This department studies and predicts contemporary and programs, financial literacy programs and support to various potential risks, modifies and recommends necessary internal clubs working for social development on regular basis. policies, reformulates loan portfolio, classifies borrower’s risk on the basis of loan amount, loan sector, L. COMMITTEES AND SUB-COMMITTEES b. Operating Risk Management : All the banking activities APPOINTED BY BOARD OF DIRECTORS directed towards operations of the bank is driven by given According to popular law and policies made under bank’s policies and guidelines with clearly defined work ethics, authority, following committees and sub-committees are in proper implementation and hedging of operational risk of place: the bank. To cope with operational risk, the bank has set up a. Audit committee: In accordance with Section 164 of the a separate operation risk management department. It works Company Act, an audit committee was in place comprising as an identifier of risk associated with internal workflows and of director Dr. Shobha Kant Dhakal and bank’s internal audit procedures, human resources related risks and provides head as member secretary under the convenorship of non- suggestive solutions for such risk minimization. Because of this, executive director Mr. Binod Dabadi. The bank’s internal audit we are confident that operating risks are being managed well. division reports directly to this committee. c. Liquidity Risk Management: Considering the scenario of b. Human resource sub-committee: In order to guide excess liquidity and liquidity crunch on time from previous management in performance comparison policy, job years, and impacts of the same on profitability of the bank, description for staffs including mission and development various financial sources and investment areas are determined and its analysis, manpower management including selection and utilized in order to maintain optimum balance of liquidity. of capable employees, recruitment, appointments, position In order to cope and balance liquidity scenario and profitability appointment, transfer, skill development, performance match, ALCO/ Pricing Committee is formed. appraisal, reward, punishment and policy relating to labor, d. Market Risk Management: Bank is always alert regarding their standards, analysis of formation of employee team and factors related to market risks and analyses those factors to succession planning; and related services/ facilities, and other prepare plan for the same. The bank has made policies and such matters, a human resource sub-committee comprising of devised working methods to monitor foreign exchange situation head of human resource department under the convener ship to minimize risks associated with fluctuations in foreign currency of director Dr. Shobha Kant Dhakal is in place. 20 ANNUAL REPORT 2015/16

c. Risk management sub-committee: In order to correctly discipline and performance review committee, procurement identify and eradicate the risks of the bank, a committee committee and bad loans recovery committee. The members comprising director Mr. Binod Dabadi, director Mr. Puna Ram of these committees are not provided any allowances or any Bhandari and head from the concerned department under the additional facilities. convenership of director Mr. Uttam Prasad Bhatarai is in place that formulates policies, regulations for the same. M. HUMAN RESOURCE Executives / staffs play a key role for the overall development of Such committees and sub-committees appointed by board any bank. The bank’s human resource policy appoints able and of directors have been conducting their activities within professional staffs while recruiting and to increase efficiency, the premises set by the Board, Company Act 2063 and professional ability, managerial techniques and productivity of in accordance to Nepal Rastra Bank’s directives. These staffs, the bank provides national and international level training committees and sub-committees’ work, duties authority, as well. The bank is currently focused in increasing efficiency conveners and member of the stated committees and sub- of manpower and bring new techniques, so that in the days committees are not been provided with any additional to come, the ratio between risk and result is balanced. The reimbursements and facilities except for meeting allowances. bank continually amends Executive Service Terms, 2064 so d. Other management level committees: Besides above that administration of the bank is always effective.In addition, mentioned committees and sub-committees appointed by the bank’s executive organizational structure is reviewed and Board of Directors, following committees and sub-committees new structure is put in its place so that the operation becomes have also been conducting their activities under convenership more effective. At the end of the review period, a total of 432 of CEO in order to implement bank’s activities more effectively: staffs are working in the bank (including 387 as permanent management committee, pricing committee / asset and liability and 45 as contract). During the review period, our staffs were management committee, labor relations, HR committee, also involved in various sporting and social activities as well.

Current year’s achievements and programs : These are the financial status of current year. (till the end of Poush month)

Table 3 : Current year’s financial glimpse. Amount in NPR million

2073 Poush 2072 Poush Titles Change (NPR) Change % month’s end month’s end

Paid-up Capital 2,699,167.00 2,431,682.00 267,485.00 11.00 Deposit 39,946,389.00 34,531,231.00 5,415,158.00 15.68 Loans, Borrowings and Advances 33,659,893.00 27,505,974.00 6,153,919.00 22.37 Investment (Net) 6,677,678.00 8,128,047.00 (1,450,369.00) -17.84 Interest Income 1,441,067.00 1,271,620.00 169,447.00 13.33 Interest Expense 886,024.00 806,914.00 79,109.00 9.80 Net Interest Income 555,043.00 464,706.00 90,337.00 19.44 Other Operating Income 187,972.00 160,265.00 27,708.00 17.29 Operating Expense 285,773.00 259,596.00 26,176.00 10.08 Operating Profit/ (Loss) before the loan loss provision 457,243.00 365,374.00 91,869.00 25.14 Net Profit 279,352.00 210,194.00 69,158.00 32.90 Non-Performing Loan Ratio 1.14% 2.55% -1.40% -55.07% Total Capital Fund 11.47% 11.50% -0.03% -0.26% Base Rate 8.07% 7.09% 0.98% 13.82% Spread Interest rate (as per NRB) 3.04% 3.93% -0.89% -22.65% KUMARI BANK LIMITED 21

PROGRAMS FOR CURRENT YEAR To make bank more efficient, it has planned to increase The bank has a target to attain paid up capital of NPR 8 potential of its assets, bring changes to deposit structure, billion through acquisition in the current fiscal year. The bank’s increase staffs’ productivity and also introduce quality financial planning besides business, revenue and expenses services for the benefit of customers. The bank has also due to acquisition is presented as follows: planned to fulfill financial requirements of customers by developing newer and modern services, bring financially In the current fiscal year, bank has targeted to increase its loan deprived population into banking circle, disburse loans to and investment respectively by 22.81% and 15.49% to NPR small scale industries and control risk factor and above all, 36.98 billion and NPR 8.94 billion respectively. Likewise, deposit contribute to economic development of the nation. The bank amount is targeted to increase by 16.76% at NPR 44.31 billion. plans to extend its banking activities to semi-urban and rural The Bank’s net interest income, other operating income and areas with additional branch set up and also via Kumari Mobile other operating expenses is expected to increase by 29.53%, Banking services and Kumari Branchless Banking Services. 26.36% and 28.48% to NPR 1.52 billion, NPR 430 million and The bank looks forward to newer technological advances and NPR 750 million respectively. Similarly, operating profit before to study the prospects of merging or being merged to a bank loan loss provision is expected to increase by 29% and reach or financial institution via Nepal Rastra Bank’s approval and NPR 1.20 billion. In the review period, Bank is able to decrease with shareholders’ suggestion, discussion and proposition non-performing loan ratio to 1.15% than that of previous year to tackle the challenges in banking sector, and other such i.e. 2.49%. In the current year, effect of recovery of loan loss programs. provision in profit and loss account is expected to be NPR 185.2 million. Bank’s net profit in the current fiscal year is expected to increase by 23.44% to reach at NPR 883.9 million.

4 Bank’s industrial and business relations

The bank has been maintaining cordial relationships with all concerned industrial and professional bodies and is committed to continue doing so in future as well.

5 Changes in Board of Directors and Reasons

Resignation of Director Mr. Rasendra Bahadur Malla, representing public shareholders was accepted by the board meeting held on Magh 17, 2073. We would like to thank Mr. Malla for their hard work and dedicated service towards the bank throughout their service tenure in the bank.

6 Major issues affecting business

There was negative impact on bank’s activities in the review year due to border blockades and disturbances in supply of goods. There still exist problems regarding political instability, target to reach paid up capital of NPR 8 billion, instable liquidity status, untimely government expenditure, crisis of skilled manpower in industrial sector etc. Country’s industrial and business sector needs to develop as an effect of political stability in order to develop banking sector. Currently, the country is experiencing abnormal political situation after declaration of constitution. There exists lack of understanding among political parties, liquidity crisis for investment purpose which directly affects the bank’s financial activities. 22 ANNUAL REPORT 2015/16

7 Board of Directors’ Response to Auditor’s Report

Except for normal comments concerning bank’s regular business, no especially negative comments has been observed in the audit report. Instructions have also been given to the management to implement suggestions and advice of the audit report. The financial statements of fiscal year 2072/73 were accepted by Nepal Rastra Bank on Poush 29, 2073; comments and instructions have been included in the annual report. Bank has already given direction to its management team for implementation of received comments and instructions.

8 Dividend Declaration

In the fiscal year 2072/73, Kumari Bank announces 21% bonus share from its paid-up capital i.e. NPR 566.8 million and NPR 29.7 million cash dividend for tax purpose on bonus share as proposed by the board of directors; i.e. total of 22.10% which makes total amount of NPR 596.6 million as total dividend.

9 Forfeited shares

In the reported year, no shares have been forfeited.

10 Progress of the bank and its subsidiary companies

Progress of the bank has been presented under various headings in this report. The bank does not have any subsidiary companies.

11 Major businesses conducted by the bank and its subsidiary companies in FY 2072/73 and any important changes in business activities

The bank does not have any subsidiary companies and there are no major changes other than mentioned in this Annual Report.

12 Important information provided by valued shareholder

None.

13 Details of share holding by the company’s directors and office bearers in the previous FY and information provided by them about their involvement in the trading of company shares, if any

No information as such.

14 Information about any agreements concerning the bank that service the self interest of any director or people close to them

None. KUMARI BANK LIMITED 23

15 Details about re-purchase of shares

None.

16 Details about Internal Control System

There is a separate department to maintain the bank’s internal control systems. This department is always active to minimize risks associated with the Bank’s loans, operations and market risks. Monitoring of the effectiveness of the internal control systems is done on a regular basis by audit department while conducting its regular audit.

17 Details of Bank’s total operating costs

The Bank’s operating costs in FY 2072/73 were as follows:

Staff expenses: NPR 316,570,560 Other operating costs: NPR 264,538,894

Detailed description of the bank’s total operating costs has been stated in Annexure 4.23 and 4.24 of the Annual Report.

18 Information about audit committee

According to the Company Act, Section 164, audit committee is comprised of directors Dr. Shobha Kant Dhakal and bank’s internal audit department head, Mr. Ganesh Kumar K.C., as member secretary under the convenorship of non-executive director Er. Binod Dabadi. Bank’s internal audit department reports directly to this committee. This committee has had 21 sittings in FY 2072/73. Member of this committee have been provided with meeting allowance at par with other board members. This committee’s activities are conducted in accordance with Nepal Rastra Bank‘s directives and Company Act regulations. No serious remarks on the bank’s operations have been observed in the internal audit report. Audit committee has been conducting regular monitoring of internal control systems and regularly provides suggestions concerning implementation to management besides providing information regarding the same to board of directors. Management of the bank has been improving its daily activities regularly as per the suggestion provided by audit committee.

19 Information about any cash balance to be paid to the Bank by Director, Managing Director, Chief Executive Officer, Bank’s Promoters or their close relatives or firm associated with them, company or organization

None.

20 Details about salaries, allowances and facilities provided to directors, managing director, CEO and other executives

A. DIRECTORS The bank’s directors are paid meeting allowances for taking part in meetings of committees and sub-committees as set up according to applicable rules at the rate of Rs. 10,000 to the chairperson and Rs. 8,000 to other members. Also, Rs. 10,000 per month is being provided for media and daily newspapers for each board of directors. The bank has not provided directors with any other facilities than above. In FY 2072/73, NPR 3,939,761 has been paid as meeting and media allowances to the directors. 24 ANNUAL REPORT 2015/16

B. ANNUAL SALARY, ALLOWANCES AND SERVICES FOR CEO AND OTHER EXECUTIVES/ MANAGERS FOR THE F/Y 2072/73

Table 4 Amount in NPR million

S.No. Salary and Services CEO Managers

1 Salary 34,829,954 2 Allowances 10,412,653 3 Provident Fund 3,482,955 4 Vehicle maintenance 646,422 5 Medical Treatment (annual + accumulated ) 2,444,267 6 Dashain Allowance 3,485,810 7 Leave (annual + accumulated) 8,655,692 8 Gratuity 9,358,104 9 Others 1,199,607 Total NPR 74,515,463

NOTE: There is no Chief Executive Officer in fiscal year 2072/73. Above mentioned Salary and Allowances are applicable within Acting Chief Executive Officer to Assistant Manager Level and includes salary and allowances of ex-staffs and newly appointed staffs during the fiscal year 2072/73.

Other than above mentioned salary and allowances, other managers are also provided with following services:

1. Vehicle along with driver; vehicle loan, , fuel, and repair and maintenance allowance of vehicle to Acting Chief Executive Officer and Assistant General Manager; and vehicle loan, fuel and repair expenses according to the bank’s policy on transportation vehicles to other management office bearers.

2. Vehicle purchase, Home and real estate loans, personal loans to all permanent office bearers as per the bank’s staff service regulations.

3. Journals, telephone and mobile facilities as per the bank’s human resource policy.

4. Life insurance of staff members as per the bank’s policy.

21 Dividend yet to be taken by shareholders

Out of 12% cash dividend distributed in FY 2066/67 and 7% cash dividend distributed in FY 2068/69; shareholders are yet to collect the remaining amount of NPR 6,773,505.94 from distributed cash dividend till Asadh end 2073.

22 Details of asset sales and purchases as per Section 141 of the Company Act, 2063

None.

23 Details of business with associated companies as per Section 175 of the Company Act, 2063

None. KUMARI BANK LIMITED 25

24 Any other information necessary to be revealed in the Directors Report as per the Company Act, 2063, and applicable laws

None.

25 Other information

The bank’s board of directors accepted the resignation of CEO, Udaya Krishna Upadhyay effective from date Chaitra 18, 2071.

INFORMATION REGARDING MERGER

14th Annual General Meeting of the Bank had entrusted authority to the bank’s board of directors to seek for appropriate banks and financial institutions for merger and/or acquisition and proceed for merger and/or acquire by appointing auditor for the purpose of due diligence audit. In the same spirit, the bank had reached agreement for merger process with Nepal Credit and Commerce Bank Ltd, Infrastructure Development Bank Ltd, Apex Development Bank Ltd., Supreme Development Bank and International Development Bank Ltd. on Poush 29, 2072. After the accomplishment of DDA process, share exchange ratio dated Asadh 31, 2073; the bank’s Special General Meeting decided to discard the approval for merger. NRB granted final approval regarding discard of this merger on Ashwin 11, 2073.

Thenafter, the bank has processed for acquiring Kasthamandap Development Bank Ltd. (national level), Mahakali Bikash Bank Ltd. (regional level, 3-districts), Paschimanchal Finance Company Ltd. (national level) and Kakrebihar Bikash Bank Ltd. (regional level, 1-district); which was mutually accepted on Ashwin 16, 2073. NRB approved for this acquisition process on Poush 11, 2073. The final proposal including valuation of assets and liabilities of all these financial institutions through Due Diligence Auditor (DDA) along with its share swap ratio has been finalized. The joint meeting held for acquisition dated Magh 12, 2073 agreed to provide 85 units of Kumari Bank’s share for 100 units of share of other 4 institutions, as per the recommendation of DDA’s share swap ratio. The agreed share swap ratio was proposed to present as agenda in the Annual General Meeting for final approval as per the Bank’s Board meeting held on Magh 17, 2073. We have presented the agenda regarding share swap ratio in this Annual General Meeting for approval. If the share swap ratio is approved through the AGM, the bank targets to take final approval from NRB to start joint operation by Jestha 2074. The paid up capital of above mentioned 4 financial institutions before acquisition would be NPR 1.64 billion.

Vote of Thanks We would like to extend our heartfelt gratitude to respected shareholders, customers, executives from Nepal Rastra Bank, Office of Company Registrar, Nepal Securities Board, Nepal Stock Exchange Ltd., CDS & Clearing Ltd., general public and all other concerned who have continuously provided their support, encouragement and guidance. We would also like to thank our statutory auditor M/s BRS Neupane & Co. for conducting the audit on time and providing the bank with realistic professional advice. In addition, we wish to thank the bank’s management and staff members for considering the bank’s progress to be their own by providing dedicated services. Finally, by incorporating the principle that bank and its customers are two sides of the same coin, and that it is due to our customers’ affection and trust that the bank has succeeded in reaching its present position. We offer our heartfelt gratitude to them with the promise to be more committed to increase our strong relationship with our customers in the future.

Thank You, On behalf of the Board of Directors

DR. SHOBHA KANT DHAKAL SANTOSH KUMAR LAMA (Director) (Chairman)

DATE: Falgun 12, 2073 26 ANNUAL REPORT 2015/16 KUMARI BANK LIMITED 27

ACTING CHIEF EXECUTIVE OFFICER’S MESSAGE

Review Period 2015/16 COMMITMENT In this path to grow, we have set our standard very high that will With immense pleasure I would like to announce that Kumari Bank indeed challenge the status quo. To underpin, we’ll strengthen our Ltd. has registered yet another historically record performance in the corporate governance that will navigate us through the entire thick fiscal year 2015/16 with record profit, exceeding the overall budget and thins of the macro-economic scenario. and against the strategic priorities set by the bank. The strategic actions we have followed have nonetheless resulted in sustaining We have always remained innovative in coming out with empathetic growth adhering to all regulatory norms despite the challenging services as well as shifting the operational gear to make things easy macro-environmental scenario in the country. and accessible to serve the market place. We take pride in being the pioneer in digital banking services like internet banking and FINANCIAL PERFORMANCE SMS banking. We have also been able to come out with products The bank’s deposit portfolio rose to NPR 38 billion, recording a growth and services, which stands out from the market. of 13.55% Y-O-Y as at the fiscal year ending Mid July 2016. On the lending front, we were able to put up a growth of 11.23% exceeding Our response to the contemporary ways of digital trend will still be our NPR 30 billion mark in the same period despite impact on business utmost priority to strategically fit or stretch in order to remain competitive. due to obstructions at the Indo-Nepal border for almost half a year. We will pledge to make banking easier and better for our customers. There has been a remarkable progress in the field of recovery of bad Our journey to add automation at work and continuous improvement debts and disposing of Non Banking Assets (NBA), which has not thru process reengineering would continue to get prime focus. only contributed to overall record profit growth but also resulted in Non Performing Loan reducing massively to 1.15% of total loan as against Compliance would continue to get utmost priority, even greater 2.49% in the same period last year. The concerted effort put in by than making profits even at the adverse scenario. We shall try to team involved is praiseworthy. Likewise, our investment portfolio has make this bank one of the best places to work for our staff. We also witnessed a growth of 46.11% posting a total of NPR 7.74 billion. shall continue to provide adequate trainings and not just job but the career to our staff members. While the increase in operating expenditure has been contained at below 8% making a total of NPR 581.1 million, Net Interest Income LOOKING FORWARD (NII) has outpaced it recording a growth of nearly 27%. Coupled with Our success story in the past has been truly based on the strong other non fund based income and recovery the bank has posted foundation of sustainable business model. Just like we’ve always a net profit growth of 81.38% to post NPR 716 million during fiscal managed to navigate our way forward amidst the uncertainties, we will year 2015/16. The balance sheet size has exceeded NPR 42 billion do so in the coming days too. We would thus pledge to explore the new against NPR 37 billion in the previous year. Overall the bank’s financial business avenues to reach out to the wider spectrum of the society indicators exhibit encouraging performance. and promise to cater ultimate values to all the broader stakeholders.

Above financial pillars also display that the roadmaps we set before We take this as a platform to express our sincere appreciation are strategically placed to well position ourselves to sustainable to our staff members and their family behind supporting them. growth. This reflects the testament of the hard-work put forward by Likewise, we would like to extend our heartfelt gratitude to all our the entire work force in simplifying and transforming the business valued customers who are our bread and butter, regulators for their to all our customers. valuable comments and guidance; shareholders for their support and encouragement. SHAREHOLDER’S VALUE As we are able to manifest the sound financial health of our bank this A Big thanks to all and looking forward to be able to repeat similar fiscal year, it would never have been possible without the valuable record performance in the coming years!!! guidance of our Board, regulators and support from our promoters. The journey to comply with Central Bank directives to upscale the paid up capital to NPR 8 billion has been quite challenging not just for us but for the entire industry which will perhaps change the industrial dynamics of conducting the business in forthcoming days. Nevertheless, our contemplation of mergers and acquisition as our way forward is still With warm regards, undeterred with acquisition of four BFIs, which is at the advanced stage RAJIB GIRI of getting the final go ahead from the Central Bank. Acting Chief Executive Officer MANAGEMENT TEAM

From left (sitting) to right (standing)

MR. ANGIR MAN SINGH MR. RAJESH SHRESTHA Chief Risk Officer Chief Marketing Officer

MR. RAMESHWAR SHARMA ARYAL MR. NARAYAN P. GHIMIRE Chief Operating Officer Head – Information Technology

MR. RAJIB GIRI MR. NARENDRA P. CHHATKULI Acting Chief Executive Officer Head – Legal, Compliance and Company Secretary MR. BINOD N. SHRESTHA MR. PARMESHWAR PANT Head - Central Logistics Manager - Corporate Credit

MR. ROHIT SINGH MR. GANESH KUMAR K.C. Head - Human Resources Head – Internal Audit

MR. BISHWA MANI REGMI MR. BIKAS KHANAL Head - Retail Head – Corporate Credit 30 ANNUAL REPORT 2015/16

PRODUCT REVIEW

KUMARI BIG SAVINGS KHATA KUMARI SMART BACHAT KHATA Kumari Big Savings Khata as the name suggests, provides Kumari Smart Bachat Khata offers account opening facility higher rate of interest amongst the saving category at zero balance. We believe in providing banking access product & additional banking benefits. It is the premium to all hence, this is a very suitable account for everyone. saving account which provides higher rate of return and Besides the facility to open account in zero balance, the value added banking services to the saving accountholders. accountholders are offered various banking facilities.

KUMARI SAVINGS

KUMARI SAVINGS 50 PLUS SAVINGS Kumari Savings account is a special saving As the name suggests, this saving account is targeted to all the account that beholds the corporate name after individuals of 50 years and above. Interest rate is calculated on “Living Goddess Kumari”. The customers can daily balance and provided on quarterly basis. There are attractive avail various value added banking services in features associated with this account like 25% discount on locker, this account. ATM debit card, Internet/ Mobile banking facilities, etc.

SUBHA LAXMI SAVINGS TWINKLE STAR SAVINGS This saving account is especially designed for the Twinkle Star Savings is a saving account targeted to the women of 16 years and above. Attractive interest children 16 years and below. This is an ideal account for rate on daily balance is provided to encourage saving children to instill saving habit from a very young age. Account habit. Besides, other features like 50% discount in holders are offered interest on daily balance. Children receive locker, ATM debit card, accidental death insurance special gifts at the time of account opening with Kumari Bank and internet/ mobile banking facilities are also and are eligible for special discounts on education loan as per offered to the customers. the bank’s rule. KUMARI BANK LIMITED 31

KUMARI REMIT BACHAT KHATA Kumari Remit Bachat Khata is a saving deposit KUMARI SWASTHA JEEVAN BACHAT product targeted to the migrant workers and their KHATA relatives. It is a service via which the account holders Kumari Swastha Jeevan Bachat Khata (KSJBK) is a saving can send their hard earned money in a safe and deposit product being introduced to promote ‘saving habit’ secured way in their account and also send payment and ‘good health’ amongst the people. This product is being request to the bank for the payment of fund to the introduced with value addition of medical benefits along with beneficiary (his/ her relative) against ID details. modern banking services for a differentiation.

The accountholders of this product will be provided a “co- branded VISA Debit card” with privileged services and discounts in Medanta, Medicity- New Delhi, India; Norvic Hospital, Grande Hospital, Vayodha Hospital and Chirayu KUMARI SALARY SAVING National Hospital based in Kathmandu, Nepal. These partner ACCOUNT hospitals have offered discounts from 5% to 20% to KSJBK Kumari Salary Saving Account (KSSA) is a saving product account holders on several of its services when payment is specially designed for individuals with regular income made by co-branded debit card. (salaried people). The product focuses on making the product hassle free, easy, affordable and yet benefiting In addition, the account holders of KSJBK will also receive individual KSS accountholder NPR High interest rate and hospitalization insurance up to a sum of NPR. 10,000 per year attractive banking service package are the key benefits for free. And they also receive internet banking, ABBS without provided in this product. any charges as well. While the minimum balance to open KSJBK is NPR. 5,000 which provides attractive interest rates. 32 ANNUAL REPORT 2015/16 KUMARI BANK LIMITED 33 34 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Balance Sheet As at Ashad end 2073 (15 Jul 2016)

Capital and Liabilities Schedule Current Year (Rs.) Previous Year (Rs.)

1. Share Capital 4.1 3,265,991,503 2,699,166,532 2. Reserves and Funds 4.2 767,602,375 648,149,644 3. Debentures & Bonds 4.3 - - 4. Borrowing Outstanding 4.4 - 328,000,000 5. Deposit Liabilities 4.5 37,950,525,144 33,421,910,946 6. Bills Payable 4.6 52,058,841 32,782,142 7. Proposed Dividend Payable 29,786,944 14,078,156 8. Income Tax Liabilities - - 9. Other Liabilities 4.7 350,542,543 230,423,406 Total Capital and Liabilities 42,416,507,350 37,374,510,826

Assets Schedule Current Year (Rs.) Previous Year (Rs.)

1. Cash Balance 4.8 861,186,377 829,463,812 2. Balance with Nepal Rastra Bank 4.9 3,104,484,533 3,349,001,322 3. Balance with Banks/Financial Institution 4.10 545,524,722 812,509,759 4. Money at Call and Short Notice 4.11 1,600,000,000 436,880,592 5. Investment 4.12 6,142,965,791 4,862,590,135 6. Loans, Advances and Bills Purchase 4.13 29,486,505,624 26,246,038,476 7. Fixed Assets 4.14 265,414,426 259,463,477 8. Non Banking Assets 4.15 - - 9. Other Assets 4.16 410,425,877 578,563,253 Total Assets 42,416,507,350 37,374,510,826

Contingent Liabilities Schedule 4.17 Directors’ Declaration Schedule 4.29 Statement of Capital Fund Schedule 4.30 (A) Statement of Risk Weighted Assets Schedule 4.30 (B) Principal Indicators Schedule 4.31 Significant Accounting Policies Schedule 4.32 Notes to Accounts Schedule 4.33

Schedules 4.1 to 4.17 form an integral part of the Balance Sheet.

RAJIB GIRI UTTAM P. BHATTARAI NARESH DUGAR As per our report of event date Acting Chief Executive Officer Director Director

NIRMAL KUMAR KHATIWADA ER. BINOD DAWADI PUNA RAM BHANDARI Head- Finance, Planning & MIS Director Director CA. ANUP K. SHRESTHA Partner SANTOSH KUMAR LAMA DR. SHOBHA KANT DHAKAL BRS Neupane & Co. Chairman Director Chartered Accountants

Date : 3 January 2017 Place : Durbar Marg, Kathmandu KUMARI BANK LIMITED 35

KUMARI BANK LIMITED Profit and Loss Account From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016)

Particulars Schedule Current Year (Rs.) Previous Year (Rs.)

1. Interest Income 4.18 2,692,488,819 2,433,130,920 2. Interest Expenses 4.19 1,517,056,114 1,507,364,997 Net Interest Income 1,175,432,705 925,765,923 3. Commission and Discount 4.20 166,847,173 154,634,692 4. Other Operating Income 4.21 62,777,779 47,668,121 5. Exchange Fluctation Income 4.22 108,987,719 95,251,346 Total Operating Income 1,514,045,375 1,223,320,081 6. Staff Expenses 4.23 316,570,560 284,256,955 7. Other Operating Expenses 4.24 264,538,894 253,823,364 8. Exchange Fluctation Loss 4.22 Operating Profit before Provision for Possible Losses 932,935,921 685,239,763 9. Provision for Possible Losses 4.25 178,027,991 284,491,537 Operating Profit 754,907,930 400,748,226 10. Non Operating Income /(Expense) 4.26 (31,782,347) (7,020,620) 11. Loan Loss Provision Written Back 4.27 432,018,800 228,688,373 Profit from Regular Activities 1,155,144,384 622,415,979 12. Profit/Loss from Extra-ordinary Activities 4.28 - - Net profit after Considering All Activities 1,155,144,384 622,415,979 13. Provision for Staff Bonus 105,013,126 56,583,271 14. Provision for Income Tax 334,066,612 171,044,332 * Current Year’s 330,066,400 169,026,791 * Upto Previous year 7,754,559 * Deferred Tax (3,754,346) 2,017,541 Net Profit/Loss 716,064,646 394,788,376

Schedule 4.18 to 4.28 a form an integral part of Profit and Loss Account

RAJIB GIRI UTTAM P. BHATTARAI NARESH DUGAR As per our report of event date Acting Chief Executive Officer Director Director

Date : 3 January 2017 Place : Durbar Marg, Kathmandu 36 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Profit and Loss Appropriation Account From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016)

Particulars Current Year (Rs.) Previous Year (Rs.)

Income 1. Accumulated Profit up to Last Year 13,393,941 26,270,265 2. This Year’s Profit 716,064,646 394,788,376 3. Exchange Fluctuation Fund 4. Bond Redemption Reserve 5. Capital Adjustment Fund 44,412,519 6. Investment Adjustment Reserve 20,000,000 7. Share Premium 8. General Reserve to Capital Adjustment Fund - - Total 793,871,106 421,058,641 Expenses 1. Accumulated Loss up to Last Year 2. Current Year’s Loss 3. General Reserve Fund 143,212,929 78,957,675 4. Contingent Reserve 5. Institution Development Fund 6. Dividend Equalization Fund 7. Staff Related Reserves 8. Proposed Cash Dividend 29,786,944 14,078,156 9. Proposed Bonus Share 566,824,972 267,484,972 9. Capital Adjustment Fund 33,769,969 44,412,519 10. Special Reserve Fund 11. Exchange Fluctuation Fund 5,209,591 3,580,984 12. Bond Redemption Reserve Fund 13. Previous Year’s Tax Adjustment 14. Deferred Tax Fund - (849,607) 15. Investment Adjustment Reserve 417,378 - Total 779,221,784 407,664,700 17. Accumulated Profit/(Loss) 14,649,322 13,393,941

RAJIB GIRI UTTAM P. BHATTARAI NARESH DUGAR As per our report of event date Acting Chief Executive Officer Director Director

Date : 3 January 2017 Place : Durbar Marg, Kathmandu KUMARI BANK LIMITED Statement of Changes in Equity From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016)

Capital Exchange Other Total Accumulated General Share Deferred Particulars Share Capital Adjustment Fluctuation Reserve & Amount Profit/Loss Reserve Fund Premium Tax Fund Fund Fund Fund (Rs.)

Opening Balance 2,699,166,532 13,393,941 546,371,157 44,412,519 - 23,972,027 - 20,000,000 3,347,316,176 Adjustments 566,824,972 1,255,382 143,212,929 (10,642,550) - 5,209,591 - (19,582,622) 686,277,702 Net Profit for the Period 716,064,646 716,064,646 Transfer to General Reserve (143,212,929) 143,212,929 - Capital Adjustment Fund 10,642,550 - (10,642,550) - Declaration of Dividend (29,786,944) (29,786,944) Exchange Fluctuation Fund (5,209,591) 5,209,591 - Right Share Issued - Transfer to Retained Earnings 20,000,000 (20,000,000) - Proposed Bonus Share 566,824,972 (566,824,972) - Debenture Redemption Reserve - Previous Year tax Adjustment - Deferred Tax Fund - - - Investment Adjustment Reserve (417,378) 417,378 - Share Premium - Closing Balance 3,265,991,503 14,649,322 689,584,086 33,769,969 - 29,181,619 - 417,378 4,033,593,878

RAJIB GIRI UTTAM P. BHATTARAI NARESH DUGAR As per our report of event date Acting Chief Executive Officer Director Director

Date : 3 January 2017 Place : Durbar Marg, Kathmandu 38 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Cash Flow Statement From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016)

Particulars Current Year (Rs.) Previous Year (Rs.)

(A). Cash Flow from Operating Activities 922,877,716 1,090,345,091 1. Cash Received 3,022,783,227 2,654,932,964 1.1 Interest Income 2,679,989,357 2,361,680,039 1.2 Commission and Discount Income 227,617,446 196,271,359 1.3 Income from Foreign Exchange Transaction 108,987,719 95,251,346 1.4 Recovery of Loan Written off 1.5 Other Income 6,188,705 1,730,221 2. Cash Payment (2,423,462,166) (2,220,592,324) 2.1 Interest Expenses (1,490,395,437) (1,493,595,392) 2.2 Staff Expenses (357,266,169) (333,971,134) 2.3 Office Overhead Expenses (206,854,813) (210,531,723) 2.4 Income Tax Paid (368,945,747) (182,494,075) 2.5 Other Expenses Cash Flow before Changes in Working Capital 323,556,656 656,004,452 Increase /( Decrease) of Current Assets (4,245,988,253) (5,206,880,378) 1.(Increase)/Decrease in Money at Call and Short Notice (1,163,119,408) 70,597,817 2. (Increase)/Decrease in Short Term Investment (109,176,920) (651,576,893) 3. (Increase)/Decrease in Loans, Advances and Bills Purchase (3,139,227,074) (4,271,467,947) 4. (Increase)/Decrease in Other Assets 165,535,149 (354,433,355) Increase /( Decrease) of Current Liabilities 4,569,544,909 5,862,884,830 1. Increase/(Decrease) in Deposits 4,528,614,197 5,843,534,801 2. Increase/(Decrease) in Certificates of Deposits 3. Increase/(Decrease) in Short Term Borrowings 4. Increase/(Decrease) in Other Liabilities 40,930,711 19,350,028 (B) Cash Flow from Investment Activities (1,060,578,822) (1,089,348,509) 1. (Increase)/Decrease in Long-term Investment (1,171,198,736) (1,046,387,352) 2. (Increase)/Decrease in Fixed Assets (51,728,958) (66,540,243) 3. Interest income from Long Term Investment 47,575,836 22,712,706 4. Dividend Income 873,036 866,381 5. Others 113,900,000 (C) Cash Flow from Financing Activities (342,078,156) 94,292,860 1. Increase/(Decrease) in Long term Borrowings (Bonds,Debentures etc) 2. Increase/(Decrease) in Share Capital - - 3. Increase/(Decrease) in Other Liabilities (14,078,156) (31,755,240) 4. Increase/(Decrease) in Refinance/Facilities received from NRB (328,000,000) 126,048,100

Cash Flow Statement continue... KUMARI BANK LIMITED 39

Cash Flow Statement continue...

Particulars Current Year (Rs.) Previous Year (Rs.)

(D) Income/Loss from Change in Exchange Rate in Cash & Bank Balances - - (E) This Year’s Cash Flow from All Activities (479,779,262) 95,289,442 (F) Opening Balance of Cash and Bank Balances 4,990,974,893 4,895,685,451 (G) Closing Balance of Cash and Bank Balances 4,511,195,632 4,990,974,893

RAJIB GIRI UTTAM P. BHATTARAI NARESH DUGAR As per our report of event date Acting Chief Executive Officer Director Director

Date : 3 January 2017 Place : Durbar Marg, Kathmandu

KUMARI BANK LIMITED Share Capital and Ownership As at Ashad end 2073 (15 Jul 2016) Schedule 4.1

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Share Capital 1.1 Authorized Capital 5,000,000,000 5,000,000,000 a) 50,000,000 Ordinary Shares of Rs. 100 each 5,000,000,000 5,000,000,000 b) ………...Non-redeemable Preference Shares of Rs……….. each - - c) …………Redeemable Preference Shares of Rs……….. each - - 1.2 Issued Capital 2,699,166,532 2,431,681,560 a) 26,991,665.32 Ordinary Shares of Rs. 100 each 2,699,166,532 2,431,681,560 b) ………..Non-redeemable Preference Shares of Rs……….. each - - c) …………Redeemable Preference Shares of Rs……….. each - - 1.3 Paid Up Capital 2,699,166,532 2,431,681,560 a) 26,991,665.32 Ordinary Shares of Rs. 100 each 2,699,166,532 2,431,681,560 b) ……….Non-redeemable Preference Shares of Rs……….. each c) …………Redeemable Preference Shares of Rs……….. each 1.4 Proposed Bonus Share 566,824,972 267,484,972 1.5 Calls in Advance - - 1.6 Total (1.3 + 1.4 + 1.5) 3,265,991,503 2,699,166,532 40 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Share Ownership As at Ashad end 2073 (15 Jul 2016)

Current Year (Rs.) Previous Year (Rs.) Particulars % Amount (Rs.) % Amount (Rs.)

A. Local Shareholders 1.1 Government of Nepal - - 1.2 “A” Class Licensed Institution - - 1.3 Other Licensed Institutions - - 1.4 Other Institutions (promoter and public both) 4.99 134,704,961 5.29 128,624,745 1.5 General Public (promoter and public both) 95.01 2,564,461,571 94.71 2,303,056,815 1.6 Others - - B. Foreign Shareholders Total 100 2,699,166,532 100 2,431,681,560

**Total shareholding ratio of promoter and public shareholders is 51:49.

KUMARI BANK LIMITED Share Capital and Ownership List of Shareholders holding share capital of 0.50% or more As at Ashad end 2073 (15 Jul 2016) ANNEXURE 1(A)

Current Year (Rs.) Previous Year (Rs.) S. No. Particulars % Amount (Rs.) % Amount (Rs.)

1 AMIR PRATAP J. B. RANA 7.45 201,032,600 4.76 115,811,000 2 JANUKI KUMARI J. B. RANA 4.25 114,714,500 1.00 24,316,700 3 SABITRI GURUNG 3.00 80,898,200 3.00 72,881,300 4 BIMALA DEVI AGRAWAL 2.75 74,296,100 2.75 66,983,500 5 RISHI AGRAWAL 2.30 62,004,800 2.40 58,360,300 6 MIN BAHADUR GURUNG 1.80 48,464,300 - - 7 RAJENDRA PRASAD SHRESTHA 1.39 37,578,200 1.39 33,854,200 8 BIDHYA KRISHNA SHRESTHA 1.34 36,053,100 1.34 32,480,300

ANNEXURE 1 (A) Continue... KUMARI BANK LIMITED 41

ANNEXURE 1 (A) Continue... ANNEXURE 1(A)

S. No. Particulars Current Year (Rs.) Previous Year (Rs.)

% Amount (Rs.) % Amount (Rs.)

9 YAGYA PRATAP RANA 1.31 35,439,900 1.31 31,927,800 10 MAHABIR PRASAD GOEL 1.15 30,916,000 1.28 31,061,000 11 GOVINDA DAS SHRESTHA 1.09 29,497,900 1.10 26,650,500 12 MANJU TAPARIA 1.00 27,047,200 1.01 24,541,700 13 PHURBA BANGDEL LAMA 1.00 27,046,600 1.00 24,366,400 14 PASHUPATI MURARKA 1.00 27,014,900 1.00 24,337,800 15 PRADEEP KUMAR MURARKA 1.00 26,995,300 1.00 24,320,200 16 SANTOSH KUMAR LAMA 0.91 24,696,500 0.91 22,249,100 17 ANUPAM RATHI 0.90 24,292,400 0.90 21,885,100 18 KUMUD KUMAR DUGAD 0.88 23,755,900 0.87 21,189,600 19 MANOJ KUMAR GOEL 0.88 23,752,500 0.90 21,904,400 20 SHIVA SHANKER AGRAWAL 0.88 23,644,400 0.88 21,301,400 21 BIRENDRA KUMAR SHAH 0.78 21,436,400 0.78 18,986,200 22 CIT CITIZEN UNIT SCHENE 0.75 20,243,700 0.75 18,237,600 23 SHREE NIWAS SHARDA 0.75 20,212,000 0.75 18,209,000 24 LIFE INSURANCE CORPORATION NEPAL LTD 0.75 20,195,500 0.75 18,194,300 25 SANJAY LAMA 0.74 19,974,200 0.74 17,994,700 26 BHIM KRISHNA UDAS 0.73 19,665,300 0.79 19,118,200 27 ANIL DAS SHRESTHA 0.73 19,665,300 0.73 17,716,400 28 PRABHU INVESTMENT P LTD 0.73 19,664,800 0.73 17,716,100 29 NARESH DUGAD 0.70 18,894,000 0.70 17,021,700 30 BIKASH DUGAD 0.70 18,894,000 0.70 17,021,700 31 ASHOK KUMAR BAHETI 0.61 16,547,600 0.65 15,721,300 32 JAGADISH PRASAD CHAUDHARY 0.60 16,194,900 0.60 14,590,000 33 DEV KISHAN MUDANDA 0.60 16,194,800 0.60 14,590,000 34 SHARMILA ARYAL 0.59 15,863,300 0.59 14,391,400 35 VIDUSHI RANA 0.58 15,655,200 0.58 14,103,700 36 JAMUNA MAHESWORI RATHI 0.57 15,454,600 0.57 13,923,100 37 RITA K.C. 0.52 14,163,500 0.52 12,749,900 38 UTTAM PRASAD BHATTARAI 0.50 13,495,700 0.50 12,158,300 39 RAKSHYA PAHADI 0.50 13,495,700 0.50 12,158,300 40 NOOR PRATAP J. B. RANA - - 6.50 158,059,200 41 PRAVA LAXMI RANA - - 0.53 12,935,700 42 LAXMAN SHRESTHA - - 1.23 29,811,400 43 SANTOO SHRESTHA - - 0.61 14,881,500 42 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Reserves and Funds As at Ashad end 2073 (15 Jul 2016) Schedule 4.2

Particulars Current Year (Rs.) Previous Year (Rs.)

1. General/Statutory Reserve Fund 689,584,086 546,371,157 2. Capital Reserve Fund 3. Capital Redemption Fund 4. Capital Adjustment Fund 33,769,969 44,412,519 5. Other Reserve & Funds 417,378 20,000,000 a. Contingent Reserve b. Institution Development Fund c. Dividend Equalization Fund d. Special Reserve Fund e. Assets Revaluation Fund f. Deferred Tax Reserve - - g. Other Free Fund h. Other Reserve Fund i. Investment Adjustment Reserve 417,378 20,000,000 j. Bond Redemption Reserve 6. Accumulated Profit/Loss 14,649,322 13,393,941 7. Exchange Fluctuation Fund 29,181,619 23,972,027 8. Share Premium Total 767,602,375 648,149,644

KUMARI BANK LIMITED Debenture and Bond As at Ashad end 2073 (15 Jul 2016) Schedule 4.3

Particulars Current Year (Rs.) Previous Year (Rs.)

1. ……….% Bond/Debentures of Rs……..…each - - Issued on …………… and to be matured on ………. 2. ………. - - Total (1+2) - - KUMARI BANK LIMITED 43

KUMARI BANK LIMITED Outstanding Loan (Borrowings) As at Ashad end 2073 (15 Jul 2016) Schedule 4.4

Particulars Current Year (Rs.) Previous Year (Rs.)

A. Domestic 1. Government of Nepal - - 2. Nepal Rastra Bank - 328,000,000 3. Repo Obligations - - 4. Inter Bank and Financial Institutions - - 5. Other Organized Institutions - - 6. Others - - Total (A) - 328,000,000 B. Foreign 1. Banks - - 2. Others - - Total (B) - - Total (A+B) - 328,000,000 44 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Deposit Liabilities As at Ashad end 2073 (15 Jul 2016) Schedule 4.5

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Non-Interest Bearing Accounts A. Current Deposit 1,812,992,349 1,446,060,927 1. Local Currency 1,736,419,557 1,380,725,206 1.1 Government of Nepal 1.2 “A” Class Licensed Institutions 13,646,895 17,925,801 1.3 Other Licensed Financial Institutions 294,307,886 302,149,120 1.4 Other Organized Institutions 1,267,222,616 893,913,938 1.5 Individuals 161,242,159 166,736,346 1.6 Others 2. Foreign Currency 76,572,792 65,335,721 2.1 Government of Nepal 2.2 “A” Class Licensed Institutions 9,075,151 5,572,724 2.3 Other Licensed Financial Institutions 2.4 Other Organized Institutions 67,491,751 59,757,406 2.5 Individuals 5,890 5,590 2.6 Others B. Margin Deposits 241,952,599 207,683,932 1. Employees Guarantee 8,868,800.00 15,352,975 2. Guarantee Margin 90,005,052 72,810,868 3. Margin on Letter of Credit 143,078,747 119,520,090 C. Others 15,126,014 12,281,186 1. Local Currency 15,126,014 12,281,186 1.1 Financial Institutions 1.2 Other Organized Institutions 1.3 Individuals 15,126,014 12,281,186 2. Foreign Currency - - 2.1 Financial Institutions 2.2 Other Organized Institutions 2.3 Individuals Total of Non-Interest Bearing Accounts (1) 2,070,070,963 1,666,026,045 KUMARI BANK LIMITED 45

KUMARI BANK LIMITED Deposit Liabilities (Continued….) As at Ashad end 2073 (15 Jul 2016)

Particulars Current Year (Rs.) Previous Year (Rs.)

2. Interest Bearing Accounts A. Saving Deposits 9,581,328,681 8,005,479,731 1. Local Currency 9,470,698,891 7,898,967,088 1.1 Organized Institutions 74,398,781 62,331,685 1.2 Individuals 9,396,300,110 7,836,635,403 1.3 Others 2. Foreign Currency 110,629,790 106,512,643 2.1 Organized Institutions 2.2 Individuals 110,629,790 106,512,643 2.3 Others B. Fixed Deposits 17,528,076,551 14,469,717,535 1. Local Currency 16,832,251,551 14,002,357,535 1.1 Organized Institutions 14,580,802,233 11,673,164,532 1.2 Individuals 2,251,449,318 2,329,193,003 1.3 Others 2. Foreign Currency 695,825,000 467,360,000 2.1 Organized Institutions 695,825,000 457,200,000 2.2 Individuals - 10,160,000 2.3 Others C. Call Deposits 8,771,048,949 9,280,687,635 1. Local Currency 8,272,648,457 9,040,048,625 1.1 “A” Class Licensed Institutions 1.2 Other Licensed Financial Institutions 4,723,218,813 4,832,152,198 1.3 Other Organized Institutions 3,432,967,468 4,081,208,165 1.4 Individuals 116,462,176 126,688,262 1.5 Others 2. Foreign Currency 498,400,492 240,639,010 2.1 “A” Class Licensed Institutions 2.2 Other Licensed Financial Institutions 2.3 Other Organized Institutions 498,400,492 240,639,010 2.4 Individuals 2.5 Others D. Certificate of Deposit - - 1. Organized Institutions 2. Individuals 3. Others Total of Interest Bearing Accounts (2) 35,880,454,181 31,755,884,901 Total Deposits (1+2) 37,950,525,144 33,421,910,946 46 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Bills Payable As at Ashad end 2073 (15 Jul 2016) Schedule 4.6

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Local Currency 47,597,434 25,976,295 2. Foreign Currency 4,461,407 6,805,847 Total 52,058,841 32,782,142

KUMARI BANK LIMITED Other Liabilities As at Ashad end 2073 (15 Jul 2016) Schedule 4.7

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Pension/Gratuity Fund 1,572,361 - 2. Employees Provident Fund - - 3. Employees Welfare Fund 23,359 162,972 4. Provision for Staff Bonus 105,013,126 56,583,271 5. Interest Payable on Deposits 77,405,937 50,397,482 6. Interest Payable on Borrowings - 347,778 7. Unearned Discount and Commission 4,832,865 6,840,372 8. Sundry Creditors 94,677,497 44,009,920 9. Branch Reconciliation Account 0 - 10. Deferred Tax Liability - 1,167,934 11. Dividend Payable 6,773,506 7,839,484 12. Others 60,243,892 63,074,193 a. Audit Fees 474,600 417,958 b. Others 59,769,292 62,656,235 Total 350,542,543 230,423,406

KUMARI BANK LIMITED Cash Balance As at Ashad end 2073 (15 Jul 2016) Schedule 4.8

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Local Currency (Including Coins) 848,061,993 815,520,186 2. Foreign Currency 13,124,384 13,943,626 Total 861,186,377 829,463,812 KUMARI BANK LIMITED 47

KUMARI BANK LIMITED Balance with Nepal Rastra Bank As at Ashad end 2073 (15 Jul 2016) Schedule 4.9

Local Foreign Currency in equivalent Rs. Current Year Previous Year Particulars Currency INR Convertible FCY Total Total (Rs.) (Rs.)

1. Nepal Rastra Bank 3,104,484,533 3,349,001,322 a. Current Account 3,096,300,070 8,184,463 8,184,463 3,104,484,533 3,349,001,322 b. Other Account - - -

KUMARI BANK LIMITED Balance with Banks/Financial Institution As at Ashad end 2073 (15 Jul 2016) Schedule 4.10

Local Foreign Currency in Rupee equivalent Current Year Previous Year Particulars Currency INR Convertible FCY Total Total (Rs.) (Rs.)

1. Local Licensed Institutions 154,624,977 - 2,387,146 2,387,146 157,012,124 174,163,862 a. Current Account 154,624,977 2,387,146 2,387,146 157,012,124 174,163,862 b. Other Account - - - 2. Foreign Banks - 206,263,652 182,248,947 388,512,599 388,512,599 638,345,896 a. Current Account 206,263,652 182,248,947 388,512,599 388,512,599 638,345,896 b. Other Account - - - Total 154,624,977 206,263,652 184,636,093 390,899,745 545,524,722 812,509,759

Note: Total balance for which the confirmations are received from respective Banks is NPR. 550,761,740

KUMARI BANK LIMITED Money at Call and Short Notice As at Ashad end 2073 (15 Jul 2016) Schedule 4.11

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Local Currency - - 2. Foreign Currency 1,600,000,000 436,880,592 Total 1,600,000,000 436,880,592 48 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Investment As at Ashad end 2073 (15 Jul 2016) Schedule 4.12

Purpose Particulars Current Year (Rs.) Previous Year (Rs.) Trading Other

1. Treasury Bills of Nepal Government - 1,276,061,391 1,276,061,391 2,570,072,292 2. Saving Certificate of Nepal Government - - - 3. Other Bonds of Nepal Government - 2,090,000,000 2,090,000,000 1,335,670,164 4. Nepal Rastra Bank Bonds - 416,000,000 416,000,000 - 5. Foreign Bonds - - - 6. Local Licensed Institutions (FCY) - 299,740,000 299,740,000 - 7. Foreign Banks - 2,035,360,000 2,035,360,000 931,912,179 8. Shares of Organized Institutions - 25,804,400 25,804,400 24,935,500 9. Bonds and Debentures in Organized Institutions - - - 10. Other Investment - - - - Total Investment - 6,142,965,791 6,142,965,791 4,862,590,135 Provision - - - - Net Investment - 6,142,965,791 6,142,965,791 4,862,590,135

KUMARI BANK LIMITED Investment in Shares, Debentures and Bonds As at Ashad end 2073 (15 Jul 2016) Schedule 4.12 (A)

Cost Price Market Provision Current Year Previous Year Particulars (Rs.) Value (Rs.) (Rs.) (Rs.) (Rs.)

1. Investment in Shares 25,804,400 3,762,337 - 25,804,400 24,935,500 1.1 Credit Information Centre Limited 1,235,500.00 - - 1,235,500 1,235,500 36,599 Ordinary Shares of Rs. 100 each, fully paid Primary Shares 3530 Kitta of Rs. 100 each Right Shares 8825 Kitta of Rs. 100 each Bonus Shares 24,244 Kitta of Rs. 100 each 1.2 Nepal Clearing House Limited 2,500,000 - - 2,500,000 2,500,000 1.3 National Banking Training Institute 1,200,000 - - 1,200,000 1,200,000 1.4 National Microfinance Bittiya Sanstha Limited 20,000,000 - - 20,000,000 20,000,000 1.5 Hydroelectricity Investment and Development Company 868,900 3,762,337 - 868,900 - 2. Investment in Debentures and Bonds - - - - - Total Investment 25,804,400 3,762,337 - 25,804,400 24,935,500 3. Provision for Loss 3.1 Up to previous year - - - - - 3.2 Change in current year - - - - - Total Provision - - - - - Net Investment 25,804,400 3,762,337 - 25,804,400 24,935,500 KUMARI BANK LIMITED 49

KUMARI BANK LIMITED Investment Held for Trading As at Ashad end 2073 (15 Jul 2016) Schedule 4.12.1

Last Current This Year Previous Year (Rs.) Cost Particulars Market Market Remarks Price Gain / Loss Gain / Loss Price (A) Price (B) (B-A) (B-A)

1. Treasury Bill of Nepal Government - - - - - 2. Saving Bond of Nepal Government - - - - - 3. Other Bond of Nepal Government - - - - - 4. NRB Bond - - - - - 5. Foreign Bond - - - - - 6. Shares of Domestic Licensed Institutions - - - - - 7. Debenture & Bonds of Domestic Licensed Institutions - - - - - 8. Shares, Debentures & Bonds of Domestic Institutions - - - - - 9. Placement in Foreign Banks - - - - - 10. Interbank Lending - - - - - 11. Other Investments - - - - - Total Investment - - - - -

KUMARI BANK LIMITED Investment Held to Maturity As at Ashad end 2073 (15 Jul 2016) Schedule 4.12.2

Current Year This Year Previous Year (Rs.) Cumulative Particulars Cost Price (A) Gain / Loss Gain / Loss Remarks Loss (B) Loss (C) (A-B-C) (B-A)

1. Treasury Bill of Nepal Government 1,276,061,391 - - - - 2. Saving Bond of Nepal Government - - - - - 3. Other Bond of Nepal Government 2,090,000,000 - - - - 4. NRB Bond 416,000,000 - - - - 5. Foreign Bond - - - - - 6. Shares of Local Licensed Institutions - - - - - 7. Debenture & Bonds of Local Licensed Institutions - - - - - 8. Shares, Debentures & Bonds of Local Organised Bodies - - - - - 9. Placement in Foreign Banks 2,035,360,000 - - - - 10. Other Investments 299,740,000 - - - - Total Investment 6,117,161,391 - - - - 50 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Investment Available for Sale As at Ashad end 2073 (15 Jul 2016) Schedule 4.12.3

Closing Current Year Previous Year (Rs.) Prevailing Particulars Cost Price Market Remarks Market Price Adjustment Gain / Loss Price Reserve (B-A)

1. Treasury Bill of Nepal Government - - - - - 2. Saving Bond of Nepal Government - - - - - 3. Other Bond of Nepal Government - - - - - 4. NRB Bond - - - - - 5. Foreign Bond - - - - - 6. Shares of Domestic Licensed Institutions - - - - - 7. Debenture & Bonds of Domestic Licensed Institutions - - - - - 8. Shares, Debentures & Bonds of Domestic Corporate Bodies 25,804,400 3,762,337 - - - 9. Placement in Foreign Banks - - - - 10. Other Investments - - - - - Total Investment 25,804,400 3,762,337 - - - KUMARI BANK LIMITED Classification of Loans, Advances and Bills Purchase & Provision As at Ashad end 2073 (15 Jul 2016) Schedule 4.13

Loans & Advances Bills Purchased/Discounted

Domestic Current Year Current Year Particulars Priority Sector Foreign Total Domestic Foreign Total (Rs.) (Rs.) Other Insured Uninsured

1. Performing Loan - 1,385,651,065 28,347,029,879 - 29,732,680,944 24,641,000 8,767,308 33,408,308 29,766,089,251 26,396,391,553 1.1 Pass 1,385,651,065 27,836,741,858 - 29,222,392,923 24,641,000 8,767,308 33,408,308 29,255,801,231 26,087,311,288 1.2 Watch List 510,288,021 - 510,288,021 - 510,288,021 309,080,265 2. Non-Performing Loan - 664,706 344,691,453 - 345,356,160 - - - 345,356,160 673,998,907 2.1 Restructured - - - - - 66,689,228 2.2 Sub-Standard 31,394,674 31,394,674 - - - 31,394,674 49,918,549 2.3 Doubtful 21,764,973 21,764,973 - - - 21,764,973 41,819,310 2.4 Loss 664,706 291,531,806 292,196,512 - - - 292,196,512 515,571,821 A. Total Loan - 1,386,315,771 28,691,721,332 - 30,078,037,103 24,641,000 8,767,308 33,408,308 30,111,445,411 27,070,390,460 3. Loan Loss Provision 3.1 Pass - 13,856,511 279,410,005 - 293,266,515 246,410 87,673 334,083 293,600,598.32 260,873,113 3.2 Watch List - - 20,411,521 - 20,411,521 - - - 20,411,520.84 6,181,605 3.3 Restructured ------8,336,153 3.4 Sub-Standard - - 7,848,668 - 7,848,668 - - - 7,848,668.42 12,479,637 3.5 Doubtful - - 10,882,487 - 10,882,487 - - - 10,882,486.74 20,909,655 3.6 Loss - 664,706 291,531,806 - 292,196,512 - - - 292,196,512.34 515,571,821 B. Total Provisioning - 14,521,217 610,084,486 - 624,605,704 246,410 87,673 334,083 624,939,786.66 824,351,984 4. Provisioning up to previous year 4.1 Pass - 11,540,409 248,867,811 - 260,408,220 392,350 72,543 464,893 260,873,113 218,901,885 4.2 Watch List - - 6,181,605 - 6,181,605 - - - 6,181,605 4.3 Restructured - - 8,336,153 - 8,336,153 - - - 8,336,153 8,591,508 4.4 Sub-Standard - - 12,479,637 - 12,479,637 - - - 12,479,637 12,446,379 4.5 Doubtful - - 20,909,655 - 20,909,655 - - - 20,909,655 129,348,812 4.6 Loss - 664,706 514,907,114 - 515,571,821 - - - 515,571,821 541,099,299 C. Total provision till last year - 12,205,115 811,681,976 - 823,887,091 392,350 72,543 464,893 824,351,984 910,387,883 D. Written Back from last year provision - - (246,369,598) - (246,369,598) - - - (246,369,598) (134,221,990) E. Additional Provision in this year - 2,316,102 44,772,109 - 47,088,211 (145,940) 15,130 (130,810) 46,957,401 48,186,091 Change in this year - 2,316,102 (201,597,489) - (199,281,387) (145,940) 15,130 (130,810) (199,412,198) (86,035,899) Net Loan (A-B) - 1,371,794,554 28,081,636,845 - 29,453,431,400 24,394,590 8,679,635 33,074,225 29,486,505,624 26,246,038,476 52 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Security for Loan Advances and Bills Purchased As at Ashad end 2073 (15 Jul 2016) Schedule 4.13 (A)

Particulars Current Year (Rs.) Previous Year (Rs.)

A. Secured 1. Against Security of Movable/Immovable Assets 27,847,803,183 25,244,715,236 2. Against Guarantee of Local Licensed Institutions 3. Against Government Guarantee 146,623,989 147,321,989 4. Against Guarantee of Internationally Rated Bank 5. Against Security of Export Documents 6. Against Security of Fixed Deposit Receipts 39,955,097 104,968,292 a. Own FDR 39,955,097 104,968,292 b. FDR of Other Licensed Institutions 7. Against Security of Government Bonds 8. Against Counter Guarantee 9. Against Personal Guarantee 10. Against Other Securities 2,077,063,143 1,573,384,943 B. Unsecured - - Total 30,111,445,411 27,070,390,460 KUMARI BANK LIMITED Fixed Assets As at Ashad end 2073 (15 Jul 2016) Schedule 4.14

Assets Current Year Previous Year Particulars (Rs.) (Rs.) Building Vehicles Machinery Office Equipment Others

1. Cost Price a. Previous Year’s Balance 4,814,041 130,809,184 - 323,796,421 44,304,270 503,723,916 455,277,104 b. Addition This Year 16,653,200 21,450,105 1,751,190 39,854,496 59,877,420 c. Revaluation/Write Back This Year - - d. This Year Sold (10,730,000) (15,368) (10,745,368) (11,856,490) e. This Year Writte Off (403,201) (339,000) (742,201) - Total Cost (a+b+c+d+e) 4,814,041 136,732,384 - 344,827,957 45,716,460 532,090,842 503,298,034 2. Depreciation a. Up to previous year 1,726,766 60,426,826 - 245,586,394 40,214,432 347,954,417 318,217,685 b. For this year 154,364 14,628,484 22,467,676 2,650,035 39,900,559 34,411,363 c. Depreciation on Revaluation/Write off (6,073,783) (401,310) (339,000) (6,814,094) (4,674,630) d. Depreciation Adjusment/Add back - - Total Depreciation (a+b+c+d) 1,881,129 68,981,527 - 267,652,759 42,525,467 381,040,882 347,954,417 3. Book Value (WDV*) (1-2) 2,932,912 67,750,857 - 77,175,198 3,190,993 151,049,960 155,343,617 4. Land - - - - - 85,593,635 85,593,635 5. Capital Work In Progress (pending Capitalization) - - - - - 261,369 261,369 6. Leasehold Assets - - - - - 28,509,462 18,264,856 Total (3+4+5+6) 265,414,426 259,463,477

Leasehold Details Current Year (Rs.) Leasehold Details Current Year (Rs.)

opening value - gross 107,035,004 Depreciation for current year 5,884,098 Add - addition during the year 16,566,114 Total depreciation on asset write off/sale (4,683,851) Less - write off/sales during the year (4,695,381) Total depreciation 90,396,275 Total Cost 118,905,737 balance at the end of the year 28,509,462 Accumulated depreciation up to last year 89,196,028 54 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Non Banking Assets As at Ashad end 2073 (15 Jul 2016) Schedule 4.15

Acquired Total Provision for loss Net Previous Year Name & Address of Borrower or Party Date of Non Amount of Non Non Banking (Rs.) Banking Asset Banking Asset Percent Amount (Rs.) Asset (Rs.)

Shilu Housing and Developers Pvt Ltd 5-Jul-13 52,795,000 100 52,795,000 - 52,795,000 Opportunity Manpower Service 27-Jan-14 2,892,225 100 2,892,225 - 2,892,225 Everest Floriculture Pvt.Ltd. 5-Apr-15 20,546,677 100 20,546,677 - 20,546,677 Goodluck Store 11-Feb-16 6,756,974 100 6,756,974 - Sukunda Group 12-Feb-16 44,829,351 100 44,829,351 - Kavita International 29-Mar-16 18,610,000 100 18,610,000 - Sukunda Group 29-Mar-16 919,637 100 919,637 - Chandra Emporium 23-Jun-16 5,465,914 100 5,465,914 - Aayusha Developers 5-Jul-15 27,724,850 100 27,724,850 - 135,124,850 Sarita Rajbhandari (Vaidhya) 4-Dec-12 - 5,209,800 Sarita Rajbhandari (Vaidhya) 31-Mar-13 - 6,447 Total 180,540,628 180,540,628 - 216,574,998

KUMARI BANK LIMITED Other Assets As at Ashad end 2073 (15 Jul 2016) Schedule 4.16

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Stock of Stationery 5,341,560 5,605,510 2. Income receivable on Investment 28,291,191 12,422,551 3. Accrued Interest Receivable on Loan 6,357,273 41,433,647 Accrued Interest Receivable on Loan 147,464,301.56 252,895,774 Less:Interest Suspense Account (141,107,028.49) (211,462,128) 4. Commission Receivable - - 5. Sundry Debtors 13,105,288 15,511,818 6. Staff Loan & Advances 244,725,029 207,019,813 7. Pre Payments 17,020,908 15,783,855 8. Cash in Transit - - 9. Other Transit items (including Cheques) - - 10. Drafts payment without notice - - 11. Expenses not written off - - 12. Branch Reconciliation Account - 86,002 13. Deferred Tax Assets 2,586,412 14. Others 92,998,214 280,700,058 a. Advance Tax (net) 58,773,373 26,142,097 b. Others 34,224,841 254,557,962 Total 410,425,877 578,563,253 KUMARI BANK LIMITED 55

KUMARI BANK LIMITED Other Assets (Additional Statement) As at Ashad end 2073 (15 Jul 2016) Schedule 4.16 (A)

Current Year (Rs.) Previous Year Particulars Up to 1 Year 1 to 3 Year Above 3 Years Total (Rs.)

1. Accrued Interest Receivable on Loan 69,320,674 25,695,850 52,447,778 147,464,302 252,895,774 2. Drafts Payment without notice - - 3. Branch Reconciliation Account - - 86,002 4. Domestic/Foreign Agency Account - -

KUMARI BANK LIMITED Contingent Liabilities As at Ashad end 2073 (15 Jul 2016) Schedule 4.17

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Claims Lodged but not accepted by the Institution - - 2. Letter of Credit (Full Amount) 1,357,785,275 2,152,476,622 a. Maturity period up to 6 months 763,683,855 980,633,705 b. Maturity period more than 6 months 594,101,420 1,171,842,917 3. Rediscounted Bills 4. Unmatured Guarantees/Bonds 1,272,573,583 1,069,670,702 a. Bid Bonds 78,962,637 55,148,500 b. Performance Bonds 1,193,610,946 1,014,522,202 c. Other Guarantee/Bonds 5. Unpaid Shares Investment - - 6. Outstanding of Forward Exchange Contract Liabilities 1,686,360,255 1,870,505,918 7. Bills under Collection 8. Acceptance & Endorsement 267,397,214 410,780,664 9. Underwriting Commitment 10. Irrevocable Loan Commitment 2,129,709,209 1,210,163,679 11. Guarantees against Counter Guarantee of Internationally Rated Banks 12. Advance Payment Guarantee 625,318,757 446,300,237 13. Financial Guarantee for loan disbursement 14. Contingent Liabilities on Income Tax 15. Others 56 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Interest Income From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.18

Particulars Current Year (Rs.) Previous Year (Rs.)

A. On Loans, Advances and Overdraft 2,578,491,181 2,384,355,840 1. Loans & Advances 1,597,553,370 1,456,557,650 2. Overdraft 980,937,812 927,798,191 B. On Investment 85,488,784 41,231,293 1. Government Securities 85,488,784 41,231,293 a. Treasury Bills 27,338,740 18,518,587 b. Development Bonds 58,150,044 22,712,706 c. National Saving Certificates 2. Foreign Debt Papers - - a. ……… - - b. ……… - - 3. Nepal Rastra Bank Bonds - - 4. Debenture & Bonds 5. Interest on Interbank Investment - - a. Bank/ Financial Institutions - - b. Other Institutions - - C. On Agency Balances 1,081,804 407,238 1. Domestic Banks/ Financial Institutions - - 2. Foreign Banks 1,081,804 407,238 D. On Money at Call and Short Notice 27,427,051 7,136,550 1. Domestic Banks/Financial Institutions 13,675,221 3,664,183 2. Foreign Banks 13,751,829 3,472,367 E. On Others - - 1. Certificate of Deposits - - 2. Inter-Bank/ Financial Institution Loan - - 3. Others - - Total 2,692,488,819 2,433,130,920 KUMARI BANK LIMITED 57

KUMARI BANK LIMITED Interest Expenses From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.19

Particulars Current Year (Rs.) Previous Year (Rs.)

A. On Deposit Liabilities 1,514,721,866 1,506,003,864 1. Fixed Deposits 945,085,100 875,950,202 1.1 Local Currency 935,483,792 864,002,347 1.2 Foreign Currency 9,601,308 11,947,855 2. Saving Deposits 269,072,466 248,500,598 2.1 Local Currency 267,159,244 246,246,200 2.2 Foreign Currency 1,913,221 2,254,398 3. Call Deposits 300,564,300 381,553,065 3.1 Local Currency 292,884,833 375,868,731 3.2 Foreign Currency 7,679,467 5,684,334 4. Certificate of Deposits B. On Borrowings 2,334,248 1,361,133 1. Debentures & Bonds 2. Loan from Nepal Rastra Bank 1,221,759 1,361,133 3. Inter Bank /Financial Institutions Borrowing 1,112,490 4. Other Organized Institution 5. Other Loans C. On Others - - 1. - - 2. - - Total 1,517,056,114 1,507,364,997 58 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Commission and Discount Income From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.20

Particulars Current Year (Rs.) Previous Year (Rs.)

A. Bills Purchase & Discount 133,437 341,008 1. Local 133,437 341,008 2. Foreign B. Commission 60,454,637 51,965,227 1. Letters of Credit 20,078,072 15,636,883 2. Guarantees 20,894,905 17,439,721 3. Collection Fees 1,288,944 1,062,010 4. Remittance Fees 18,192,716 17,826,614 5. Credit Card 6. Share Underwriting/Issue 7. Government Transactions 8. E. Pra. Commission 9. Exchange Fee C. Others 106,259,098 102,328,457 Total 166,847,173 154,634,692

KUMARI BANK LIMITED Other Operating Income From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.21

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Safe Deposit Lockers Rental 2,228,071 2,215,454 2. Issue & Renewals of Credit Cards 3. Issue & Renewals of ATM Cards 37,320,466 28,422,535 4. Telex / T. T./ SWIFT 4,632,235 4,515,714 5. Service Charges 6. Renewal Fees 7. Others 18,597,008 12,514,418 Total 62,777,779 47,668,121 KUMARI BANK LIMITED 59

KUMARI BANK LIMITED Exchange Fluctuation Gain/Loss From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.22

Particulars Current Year (Rs.) Previous Year (Rs.)

a. From Revaluation 20,838,366 14,323,937 b. From Trading (except Exchange Fees) 88,149,353 80,927,408 Total Gain (Loss) 108,987,719 95,251,346

KUMARI BANK LIMITED Expenses Relating to Employees From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.23

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Salary 130,359,501 122,383,187 2. Allowances 102,381,340 79,977,791 a. Normal Allowance 41,238,012 37,565,922 b. Inchargeship Allowance 191,309 185,677 c. Relocation Allowance 479,582 333,462 d. Outstation Allowance 6,452,289 5,809,251 e. Dashain Allowance 13,746,086 11,074,130 f. Vehicle Maintenance Allowance 646,422 705,973 g. Leave Fare Allowance 38,912,697 23,640,954 h. International Deputation Allowance 714,945 662,420 3. Contribution to Provident Fund 12,613,312 12,033,321 4. Training Expenses 2,621,594 1,680,076 5. Uniform 3,026,846 3,101,195 6. Medical 9,782,596 8,230,016 7. Insurance 9,153,394 6,737,030 8. Gratuity Expenses 29,704,003 31,738,572 9. Others 16,927,974 18,375,767 a. Wages 9,232,054 7,031,589 b. Teller Risk Fund 801,181 804,477 c. Other Staff Benefits 4,812,668 3,603,501 d. Overtime 2,082,072 6,936,201 Total 316,570,560 284,256,955 60 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Other Operating Expenses From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.24

Particulars Current Year (Rs.) Previous Year (Rs.)

1. House Rent 63,997,826 59,544,865 2. Electricity & Water 17,851,762 18,832,223 3. Repair & Maintenance 2,177,832 1,969,128 a. Building 528,227 407,592 b. Vehicles 1,649,605 1,561,537 c. Others 4. Insurance 4,489,071 3,870,031 5. Postage, Telex, Telephone & Fax 17,443,430 17,919,152 6. Office Equipment, Furniture and Repair 4,046,785 4,326,106 7. Travelling Allowances & Expenses 2,902,412 1,864,106 8. Stationery & Printing 6,381,938 6,830,651 9. Periodicals & Books 499,030 524,568 10. Advertisements 6,987,245 6,554,921 11. Legal Expenses 740,633 763,652 12. Donations 220,000 5,127,500 13. Expenses relating to Board of Directors 3,939,761 3,632,860 a. Meeting Fees 3,128,667 3,175,033 b. Other Expenses 811,094 457,826 14. Annual General Meeting Expenses 1,004,469 759,603 15. Expenses relating to Audit 1,052,629 948,327 a. Audit Fees 474,600 423,581 b. Other Expenses 578,029 524,746 16. Commission on Fund Transfer - - 17. Depreciation on Fixed Assets 45,784,657 42,816,005 18. Amortization of Pre-operating Expenses - - 19. Share Issue expenses - - 20. Technical Services Reimbursment - - 21. Entertainment Expenses - - 22. Written Off Expenses - - 23. Security Expenses 29,273,464 25,547,199 24. Credit Guarantee Premium 7,052,490 6,315,780 25. Commission & Discount 26. Others 48,693,460 45,676,686 a. Transport 5,746,672 8,012,460 b. Professional Fees 549,340 432,684 c. Customer and Public Relation Expenses 1,678,847 1,349,747 d. Correspondent Banking Charges 2,059,551 960,135 e. Fees and Taxes 28,841,960 31,255,939 f. Miscellaneous 6,832,503 1,161,247 g. Janitorial 2,984,588 2,504,474 Total 264,538,894 247,507,584 KUMARI BANK LIMITED 61

KUMARI BANK LIMITED Provision for Possible Losses From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.25

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Increase in Loss Provision on Loans 119,990,356 142,652,474 2. Increase in Provision for Loss on Investment 3. Provision for loss on Non-Banking Assets 58,037,635 141,839,063 4. Provision for Other Assets Total 178,027,991 284,491,537

KUMARI BANK LIMITED Non-Operating Income / Loss From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.26

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Profit/ (Loss) on Sale of Investments 2. Profit/ (Loss) on Sale of Assets 6,647 (6,120) 3. Dividend 873,036 866,381 4. Subsidies received from Nepal Rastra Bank - - a. Compensation for losses of specified branches - - b. Interest Compensation - - c. Exchange Counter - - 5. Others (32,662,030) (7,880,881) Net Non-Operating Income (Loss) (31,782,347) (7,020,620)

KUMARI BANK LIMITED Write Back from Provision for Possible Losses (Fiscal Year 2015/16) Schedule 4.27

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Provision for Loan Loss Written Back 319,402,554 228,688,373 2. Provision against Non Banking Assets Written Back 112,616,247 3. Provision for Investment Written Back 4. Provision for other Assets Written Back Total 432,018,800 228,688,373 62 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Income/ (Expenses) from Extra Ordinary Transactions From 1st Shrawan 2072 to 31 Ashad 2073 (From 17 July 2015 to 15 July 2016) Schedule 4.28

Particulars Current Year (Rs.) Previous Year (Rs.)

1. Recovery of Written Off Loan - - 2. Voluntary Retirement Expenses - - 3. Irrecoverable Loan Write Off (4.28 (A)) 40,134,489 9,581,198 4. Other Expenses/Income - - 5. ……………………………………………… - - Total 40,134,489 9,581,198

KUMARI BANK LIMITED Statement of Loan Written-Off Fiscal Year 2072/73 (2015/16) Schedule 4.28 (A)

Loan Basis of Written off Type of Security Approving Initiations Made for S.N. Types of Loan Valuation of Remarks Amount & Value Authority & Recovery Collateral Level

1 Overdraft Loan 38,814,250.00 Land/Rs. 18.61 Independent Then CEO Verbal as well as written Kavita million Valuation follow up, a series of International meeting, call and auction Pvt. Ltd. notices. 2 Overdraft Loan and 1,320,238.55 Land & Building/ Independent Then CEO Verbal as well as written Goodluck Time Loan Rs.6.756 million Valuation follow up, a series of Store meeting, call and auction notices. Total 40,134,488.55 KUMARI BANK LIMITED 63

KUMARI BANK LIMITED Statement of Loans and Advances Extended to Directors/Chief Executive /Promoters/Employees and Shareholders As at Ashad end 2073 (15 Jul 2016) Schedule 4.29

The Statement of amount,included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Executive, Promoters, Employees, Shareholders and the individual members of ‘ their undivided family’ or against the guarantee of such person or to the organisation or, companies in which such individual are ‘managing agent’ are as follows: Amount in Rs.

Outstanding up to Recovered in Outstanding as of Name of Promoter/Director/ Additional Lending Last Year Current Year Ashad End 2071 Chief Executive in this year Principal Interest Principal Interest Principal Interest

A. Directors 1. …………………… 2. …………………… 3. …………………… B. Chief Executive 1. …………………… 2. …………………… C. Promoter

D. Employee

E. Shareholders

Total 64 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Table of Capital Fund End of Ashad 2073 (15 July 2016) Schedule 4.30 (A) Rs in ‘000

1.1. RISK WEIGHTED EXPOSURES This Year (Rs.) Previous Year (Rs.)

a Risk Weighted Exposure for Credit Risk 32,683,533 29,448,841 b Risk Weighted Exposure for Operational Risk 1,816,078 1,800,154 c Risk Weighted Exposure for Market Risk 91,603 89,998 Adjustments under Pillar II 34,591,215 31,338,993 Add: 3% of the total RWE due to non compliance to Disclosure Requirement Addition to RWE as per supervisiory review (4%) 1,383,649 940,170 Add RWE equvalent to reciprocal of capital charge of 4 % of gross income. 461,899 239,377 Add: ...% of Total Deposit due to Insufficient Liquid Assets Total Risk Weighted Exposure (After Bank’s adjustment of Pillar II) 36,436,763 32,518,540

1.2. CAPITAL This Year (Rs.) Previous Year (Rs.)

Core Capital (Tier I) 3,915,468 3,214,663 a Paid Up Equity Share Capital 2,699,167 2,431,682 b Irredeemable Non- cumulative Preference Share c Share Premium - - d Proposed Bonus Equity Share 566,825 267,485 e Statutory General Reserves 689,584 546,371 f Retained Earnings/Loss till Previous Year 14,649 13,394 g Un-audited current period profit/(loss) ( after all provision including tax) - - h Capital Redemption Reserve - - i Capital Adjustment Reserve 33,770 44,413 j Dividend Equalization Reserves k Other Free Reserves l Less: Deffered Tax Assets - - m Less: Goodwill n Less: Fictitious Assets o Less: Investment in equity in licensed Financial Institutions p Less: Investment in equity of institutions with financial interests q Less: Investment in equity of institutions in excess of limits r Less: Investments arising out of underwriting commitments s Less: Reciprocal crossholdings t Less: Purchase of land and building in excess of limit and unutilised (88,527) (88,681) u Less: Other Deduction

Schedule 4.30 (A) Continue... KUMARI BANK LIMITED 65

Schedule 4.30 (A) Continue...

1.2. CAPITAL This Year (Rs.) Previous Year (Rs.)

Adjustments under Pillar II - - Less: Shortfall in Provision Less: Loans & Facilities Extended to Related Parties & Restricted Lending Supplementary Capital (Tier II) 343,611 311,027 a Cumulative and/or Redemable Preference Share b Subordinated term debt - - c Hybrid Capital Instruments d General Loan Loss provision 314,012 267,055 e Exchange Equalization Reserve 29,182 23,972 f Investment Adjustment Reserve 417 20,000 g Assets Revaluation Reserve h Other Reserve Total Capital Fund (Tier I and Tier II) 4,259,079 3,525,690

1.3 CAPITAL ADEQUACY RATIOS This Year (Rs.) Previous Year (Rs.)

Tier I Capital to Total Risk Weighted Exposure (After Bank’s adjustment of Pillar II) 10.75 9.89 Tier I and Tier II Capital to Total Risk Weighted Exposure (After Bank’s adjustment of Pillar II) 11.69 10.84 End of Ashad 2073 (15 July 2016) Schedule 4.30 (B) Credit Risk Exposures Rs in ‘000

Current Year Previous Year (Rs.)

On Balance Sheet Exposures (A) Risk Weighted Gross Book Specific Eligible Net Value Risk Weight Risk Weighted Exposures Net Value Value (a) Provision (b) CRM (c) d=a-b-c (e) Exposures (f)=(d)*(e)

Cash Balance 861,186 861,186 0% - 829,464 - Balance With Nepal Rastra Bank 3,104,485 3,104,485 0% - 3,349,001 - Gold - - 0% - - - Investment in Nepalese Government Securities 3,366,061 3,366,061 0% - 3,905,742 - All Other Claims on Government of Nepal 146,624 - 146,624 0% - 146,624 - Investment in Nepal Rastra Bank Securities 416,000 416,000 0% - - - All Other Claims on Nepal Rastra Bank - 0% - - - Claims in Foreign Government & Central Bank (ECA rating 0-1) - 0% - - - Claims in Foreign Government & Central Bank (ECA rating 2) - 20% - - - Claims in Foreign Government & Central Bank (ECA rating 3) - 50% - - - Claims in Foreign Government & Central Bank (ECA rating 4-6) - 100% - - - Claims in Foreign Government & Central Bank (ECA rating 7) - 150% - - - Claims On BIS, IMF, ECB, EC and Claims On Multilateral Development Banks(MDB’s) Recognised By Standard Framework - 0% - - - Claims on Other MDB’s - 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) - 150% - - - Claims on Domestic Banks that meet Capital Adequacy requirements 1,999,139 1,999,139 20% 399,828 233,483 46,697 Claims on Domestic Banks that do not meet Capital Adequacy Requirements 57,613 57,613 100% 57,613 76,146 76,146 Claims on Foreign Bank (ECA Rating 0- 1) 514,238 514,238 20% 102,848 1,178,231 235,646 Claims on Foreign Bank (ECA Rating - 2) 319,674 319,674 50% 159,837 678,011 339,006 Claims on Foreign Bank (ECA Rating 3-6) - 100% - - - KUMARI BANK LIMITED 67 ------3,086 34,839 37,403 79,747 692,095 596,646 3,265,972 1,541,917 1,210,422 2,894,240 26,914,379 15,860,516 ------34,839 24,936 11,452 15,430 692,095 397,764 132,912 4,354,630 2,569,862 1,210,422 1,929,493 37,631,054 37,631,054 15,860,516 ------33,781 38,707 90,116 501,292 844,129 218,019 317,992 3,860,704 1,807,485 3,835,626 30,181,450 30,181,450 17,913,473 0% 60% 20% 20% 20% 50% 75% 60% 100% 100% 100% 100% 150% 150% 150% 150% 100% 150% 100% 150% 100% ------33,781 25,804 21,984 150,194 501,292 145,346 844,129 1,589,961 5,147,605 3,012,476 2,557,084 42,312,148 42,312,148 17,913,473 - - -

22,990 287,937 1,644,171 1,955,099

56,772 25,804 21,984 844,129 433,283 150,194 5,147,605 2,145,463 1,589,961 3,012,476 2,557,084 44,683,247 17,913,473 Cash in Transit and other cash items in the process of collection and other cash items in the process Cash in Transit Other Assets (as per attachment) Total Claims on Foreign Bank (ECA Rating - 7) Claims on Foreign operating with bank incorporated in SAARC region Claims on foreign regulatory capital requirement of 1 %above their respective a buffer Corporates (ECA 0 - 1) Claims on Foreign Regulatory Retail Portfolio (Not Overdue) Claims on Domestic Corporates Corporates (ECA 2) Claims on Foreign Corporates (ECA 3-6) Claims on Foreign Corporates (ECA - 7) Claims on Foreign regulatoryretail except granularity of Claims fulfilling all creterion properties by residential Claims secured properties by residential Claims not fully secured (Overdue) properties by residential Claims secured estate real by Commercial Claims secured properties) by residential Past due claims (except for secured High Risk claims Investment in equity and other capital instruments of institutions listed in the stock exchange Investment in equity and other capital instruments of institutions not listed in the stock exchange property by residential Loan secured Staff Receivable/ Claim on government Interest securities Schedule 4.30 (B) Continue...Schedule Schedule 4.30 (B) Continue...

Current Year Previous Year (Rs.)

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

Revocable Commitments 0% - - Bills Collection 0% - - Forward Exchange Contract Liabilities 1,686,360 1,686,360 10% 168,636 1,870,506 187,051 LC Commitments With Original Maturity Up to 6 months Domestic counterparty 763,684 44,256 719,428 20% 143,886 934,263 186,853 Foreign counterparty ECA Rating 0-1 - 20% - - - Foreign counterparty ECA Rating 2 - 50% - - - Foreign counterparty ECA Rating 3-6 - 100% - - - Foreign counterparty ECA Rating 7 - 150% - - - LC Commitments With Original Maturity over 6 months Domestic counterparty 594,101 8,216 585,885 50% 292,943 1,159,719 579,860 Foreign counterparty ECA Rating 0-1 - 20% - - - Foreign counterparty ECA Rating 2 - 50% - - - Foreign counterparty ECA Rating 3-6 - 100% - - - Foreign counterparty ECA Rating 7 - 150% - - - Bid Bond, Performance Bond and Counter Guarantee Domestic Counterparty 1,272,574 69,721 1,202,853 50% 601,426 1,010,298 505,149 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% - - - Underwriting commitments - 50% - - - Lending of Bank’s Securities or Posting of Securities as collateral - 100% - - - Repurchase Agreements, Assets sale with recourse - 100% - - - Advance Payment Guarantee 625,319 12,104 613,215 100% 613,215 439,876 439,876 Financial Guarantee - 100% - - - Acceptence and Endrosements 267,397 11,361 256,036 100% 256,036 393,642 393,642 Unpaid portion of Partly paid shares and securities - 100% - - - KUMARI BANK LIMITED 69 - - - - 242,033 2,534,462 29,448,841 29,448,841

- - - 7,018,467 1,210,164 44,649,521 44,649,521

- - - 425,942 2,502,084 32,683,533 32,683,533 - 20% 50% 100% 200%

- - 7,193,487 2,129,709 49,505,635 49,505,635 145,657 145,657 145,657 145,657

- 1,955,099 1,955,099

7,339,144 2,129,709 52,022,392 52,022,392 Irrevocable Credit Commitments (short term) Credit Irrevocable Commitments (long term) Credit Irrevocable Other Contingent Liabilities under Pillar II Adjustment Add:1% of the contract (sale) value in case sale credit with recourse Unpaid Guarantee Claims Total (A + B) Adjustment Risk before Credit for RWE Total Add:10% of the loan & facilities in excess Single Obligor Limits Risk Credit for RWE Total KUMARI BANK LIMITED Eligible Amount of Credit Risk Mitigation (CRM) End of Ashad 2073 (15 July 2016) Schedule 4.30 (C)

Deposits G’tee of Sec/G’tee G’tee of Sec/G’tee Deposit with Govt.&NRB G’tees of with other Gold Govt.of of other Domestic of Foreign bank Securities MDBs Credit exposures banks/FI Nepal Sovereigns Banks Banks Total

(a) (b) ( c ) (d) (e) (f) (g) (h) (i)

On Balance Sheet Credit exposures Claims on Foreign government and Central Bank (ECA-2) - Claims on Foreign government and Central Bank (ECA-3) - Claims on Foreign government and Central Bank (ECA-4-6) - Claims on Foreign government and Central Bank (ECA-7) - Claim on Other Multilateral Development Banks - Claims 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 capital adequacy requirement - Claims on domestic banks that do not meet capital adequacy requirement - Claims to a Foreign bank (ECA Rating 0-1) - Claims to a Foreign bank(ECA Rating 2) - Claims to a Foreign bank(ECA Rating 3-6) - Claims to a Foreign bank(ECA Rating 7) - Claims on foreign bank incorporated in SAARC region operating with a buffer of 1 %above their respective regulatory capital requiremente - Claims on Domestic Corporates - 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) - KUMARI BANK LIMITED 71 ------8,216 44,256

- - -

- - 8,216 44,256 Claims secured by residential properties properties by residential Claims secured properties by residential Claims not fully secured (Overdue) properties by residential Claims secured estate real by commercial Claims secured Past due claims properties) by residential (except for claim secured High Risk Claims Investment in equity and other capital instruments of institutions listed in the stock exchange Investment in equity and other capital instruments of institutions not listed in the stock exchange Other Assets (as per attachment) Total Claims fulfilling all creterion of regulatoryretail except granularity of Claims fulfilling all creterion 4.30 (C) Continue...Schedule Balance Sheet Exposures Off Exchange Contract Liabilities Forward LC Commitments With Original Maturity Up to 6 months domestic counterparty counterparty (ECA Rating 0-1) foreign counterparty (ECA Rating 2) foreign counterparty (ECA Rating 3-6) foreign counterparty (ECA Rating 7) foreign L C Commitments With Original Maturity Over 6 months domestic counterparty counterparty (ECA Rating 0-1) foreign counterparty (ECA Rating 2) foreign counterparty (ECA Rating 3-6) foreign 72 ANNUAL REPORT 2015/16 ------Total 69,721 12,104 11,361 145,657 145,657 145,657

- - (i) Banks Sec/G’tee of Foreign of Foreign

- - (h) MDBs G’tees of

- - (g) Banks G’tee of Domestic

- - (f) of other Sec/G’tee Sovereigns

- - (e) Nepal Govt.of Govt.of G’tee of

- - (d) Securities Govt.&NRB Govt.&NRB

- - ( c ) Gold - - (b) banks/FI Deposits with other

69,721 12,104 11,361 bank 145,657 145,657 145,657 145,657 Deposit with (a) Credit exposures Credit Bid Bond and Performance Bond(Domestic) counterparty (ECA Rating 0-1) foreign counterparty (ECA Rating 2) foreign counterparty (ECA Rating 3-6) foreign counterparty (ECA Rating 7) foreign Underwriting commitments Advance Payment Guarantee Financial Guarantee Acceptances and Endorsements Unpaid portion and securities of partly paid shares Commitments - short Credit Irrevocable Commitments -long Credit Irrevocable Other Contingent Liabilities Unpaid Guarantee Claims Total Schedule 4.30 (C) Continue...Schedule counterparty (ECA Rating 7) foreign Securities or Posting of as collateral Lending of Bank’s salewith resourse Agreements,Assets Repurchase Total Grand KUMARI BANK LIMITED 73

Form No. 5 : Other Assets Rs in ‘000

Gross Specific Net SN Other Assets Amount Provision Balance

1 Miscellaneous Expenditure not written off 2 Fixed Assets 265,414 265,414 3 Interest Receivable on Other Investment 6,307 6,307 4 Interest Receivable on Loan 147,464 141,107 6,357 5 Non Banking Assets 180,541 180,541 - 6 Reconcilation Account - - 7 Draft Paid Without Notice - 8 Sundry Debtors 13,105 4 13,101 9 Advance payment and Deposits 17,021 17,021 10 Staff Loans & Advance 94,531 94,531 11 Stationary 5,342 5,342 12 Other 1,415,737 1,322,520 93,218 Total 2,145,463 1,644,171 501,292

KUMARI BANK LIMITED Risk Weight Exposure for Operational Risk End of Ashad 2073 (15 July 2016) Schedule 4.30 (D) Rs in ‘000

Year 1 Year 2 Year 3 Previous Particular (2012/13) (2013/14) (2014/15) Year (Rs.)

Net Interest Income 978,025 835,473 925,766 Commission and Discount income 138,200 188,725 154,635 Other Operating Income 41,862 56,945 47,668 Exchange Fluctuation Income 56,993 85,155 95,251 Addititon / (Deduction) Interest Suspense during the period 65,445 30,585 (68,573) Total Gross Income (a) 1,280,525 1,196,884 1,154,747 Alfa (b) 15% 15% 15% 15% Fixed Percentage of Gross Income {C= (axb)} 192,079 179,533 173,212 Capital Requirement for operational risk (d) = ( average of c) 181,608 180,015 Risk Weight ( reciprocal of capital requirement of 10 %) in times (e) 10 10 Equivalent Risk Weight Exposure {f=(dxe)} 1,816,078 1,800,154 Adjustments under Pillar II SRP 6.4a (8) (If Gross Income for the last three years is negative) Total Credit and Investment (net of Specific Provision) - Capital Requirement for Operational Risk (5% of net credit and investment) - Risk Weight (reciprocal of capital requirement of 10%) in times (g) - Equivalent Risk Weight Exposure [h=f+g] 1,816,078 74 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Risk Weight Exposure for Market Risk End of Ashad 2073 (15 July 2016) Schedule 4.30 (E) Rs in ‘000

Year 1 Year 2 Year 3 Previous S.No Currency (2012/13) (2013/14) (2014/15) Year (Rs.)

1 INR (104,465) (167,222) 167,222 166,523 2 USD 69 7,415 7,415 6,097 3 GBP 3 363 363 412 4 EUR 10 1,226 1,226 84 5 THB (20) (62) 62 31 6 CHF (0) (5) 5 - 7 AUD 6 518 518 1,095 8 CAD (1) (91) 91 416 9 SGD (2) (120) 120 18 10 JPY 453 457 457 475 11 HKD (9) (118) 118 2 12 DKK 21 330 330 175 13 SEK (3) (38) 38 36 14 SAR (86) (2,459) 2,459 2,125 15 QAR (32) (933) 933 868 16 AED (27) (795) 795 549 17 MYR (24) (652) 652 822 18 KRW (566) (53) 53 26 19 CNY (13) (202) 202 24 20 KWD (0) (146) 146 216 21 BHD (0) (2) 2 3 Total Open Position (a) 183,207 179,997 Fixed Pecentage (b) 5% 5% Capital Charge for Market Risk [c=(aXb)] 9,160 9,000 Risk Weight (reciprocal of capital requiremnet of 10%) in times (d) 10 10 Equivalent Risk Weight Exposure {e=(cXd)} 91,603 89,998 KUMARI BANK LIMITED 75 - - 385 0.00 149 26.53 1.10% 4.00% 7.20% 2.38% 1.69% 1.37% 0.94% 8.74% 1.15% 3.59% 8.56% 21.00% 47.29% 54.48% 24.91% 79.34% 10.75% 11.69% 2015/16 32,659,915 Schedule 4.31

380 392 138 23.41 16.24 0.58% 4.47% 7.79% 1.46% 1.06% 1.44% 0.96% 7.48% 2.49% 3.17% 8.81% 9.89% 11.00% 32.27% 52.83% 16.60% 81.00% 10.84% 2014/15 26,991,665

536 362 162 28.68 18.69 1.74% 5.67% 7.30% 1.50% 1.10% 1.49% 0.96% 4.03% 3.71% 33.00% 13.62% 29.29% 10.19% 48.01% 18.32% 82.70% 10.85% 11.81% 2013/14 24,316,816

260 377 166 14.31 18.17 0.74% 5.87% 4.69% 1.45% 1.03% 1.54% 0.93% 2.89% 4.62% 14.00% 12.43% 23.99% 11.72% 46.93% 17.03% 79.47% 11.24% 12.17% 2012/13 Fiscal Year Fiscal 18,283,320

242 327 148 14.09 17.18 0.00% 7.00% 7.38% 4.32% 1.52% 1.10% 1.62% 0.90% 2.21% 4.27% 2011/12 13.52% 26.95% 12.26% 16.84% 82.33% 11.30% 12.20% 47.82% 16,038,000

266 347 138 16.98 15.67 8.44% 0.44% 5.74% 8.88% 4.20% 1.68% 1.23% 1.86% 1.41% 1.12% 3.92% 2010/11 28.70% 13.75% 17.55% 87.87% 12.35% 13.76% 44.20% 16,038,000

468 364 137 19.31 24.24 8.02% 6.66% 4.48% 2.12% 1.59% 1.69% 2.05% 0.50% 3.28% 12.00% 12.00% 37.39% 11.58% 24.20% 79.45% 10.29% 12.34% 41.49% 13,060,159 2009/10

% % % % % % % % % % % % % % % % % Rs. Rs. Rs. Ratio Ratio Number Number Indicators Assets Capital a. Core b. Supplementary Capital Capital Fund c. Total 4. Price Earning Ratio capital 5. Stock Dividend on share Capital 6. Cash Dividend on share 2. Earnings Per Share per Share 3. Market Value Income/Loans & Advances 7. Interest Deposit and Borrowings Expenses to Total 9. Interest Income 10. Exchange Fluctuation Gain/Gross Employee Expenses Bonus/ Total 11. Staff & Advances 12. Net Profit/Loans Total Assets 13. Net Profit/ Credit/Deposit 14. Total Assets Operating Expenses/Total 15. Total 16. Adequacy of Capital Fund on Risk Weightage 17. Liquidity (CRR) Loans 18. Non Performing Loans/Total Rate Spread Interest Average 19. Weighted 20. Book Net worth Per Share Shares 21. Total Employees 22. Total Particulars Income 1. Net Profit/Gross 8. Employee Expenses/Total Operating Expenses 8. Employee Expenses/Total rincipal Indicators rincipal KUMARI BANK LIMITED KUMARI BANK P (For 7 years) 76 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Significant Accounting Policies Financial Year 17 July 2015 to 15 July 2016 (1 Shrawan 2072 to 31 Ashad 2073) Schedule 4.32

1 General Information 3.3 INTEREST INCOME Interest income on loans and advances is recognised on Kumari Bank Limited (the “Bank”) is a public limited company, cash basis as per the directive issued by NRB, which is incorporated on10 December 1999 and domiciled in Nepal. The not in accordance with Nepal Accounting Standards. address of its registered office is Durbar Marg, Kathmandu, Nepal. The Bank is listed in Nepal Stock Exchange Limited. Due interest on loans that is realised after Ashad end 2073 and till 15 Shrawan 2073 has been recognised as interest The Bank carries out commercial banking activities in Nepal under income on deferred cash basis which is in compliant with license from Nepal Rastra Bank (the central bank of Nepal) as Class NRB circular. Interest income so recognised on deferred “A” licensed institution. cash basis is Npr. 6,357,273.07.

Interest for the moratorium period on some term loans 2 Date of Authorization of Financial Statement as stated in point no 21 of Notes to Accounts has been recognised as income after capitalising it on loans which The Financial Statements for the year ended on 15 July 2016 is is in accordance with NRB approval. approved by Board of Directors (BOD) of the Bank on 3 January 2017. Interest income on investments is recognised on accrual basis provided that premium on government bonds has 3 Summary of Significant Accounting Policies been netted off against interest income from such bonds. 3.4 COMMISSION INCOME The Significant accounting policies applied in the preparation of the Guarantee commission up to Npr. 100,000 is recognised financial statements of the bank are set out below. These policies have as commission income on cash basis. Commission been consistently applied to all the years presented, unless otherwise income on guarantee covering more than one fiscal year stated. and commission amount above Npr.100,000 is booked 3.1 STATEMENT OF COMPLIANCE on accrual basis. The financial statements have been prepared in accordance with Other commission incomes are recognised as income Nepal Accounting Standards (NAS) issued by the Nepal Accounting on accrual basis. Recognition of guarantee commission Standard Board (NASB) except for exceptions as mentioned below, income is not in accordance with NAS 07 - “Revenue”. generally accepted accounting principles, and the provisions of Bank and Financial Institution Act, 2063, directives issued by Nepal Rastra 3.5 DIVIDEND INCOME Bank and the Company Act, 2063. Dividend is recognised as income when the bank’s right to receive payment is established. It is recognised as 3.2 BASIS OF PREPARATION income at net of withholding tax. The financial statements have been prepared under the historical cost convention. Use of certain critical accounting estimates and exercise 3.6 FOREIGN EXCHANGE INCOMES judgement in the process of applying the Bank’s accounting policies i. Foreign currency assets and liabilities as at the Balance have been done, wherever required, in conformity with NAS and Sheet date have been translated at the mid rate (average generally accepted accounting principles. KUMARI BANK LIMITED 77

of buying and selling rate) of exchange rates prevalent as 3.11 LOANS & ADVANCES WRITE OFF on the Balance Sheet date. Unrecoverable loans and advances are written off in accordance with the by-laws of the Bank approved by Bank’s BOD and NRB. ii. Foreign currency trading gain/loss realised in the foreign currency transactions is accounted for on the Amounts recovered against loans written off in earlier years are date of transaction and based on transaction rate. recognized as income in the year of recovery. iii. Revaluation gain arising due to fluctuation in exchange 3.12 INVESTMENTS rate of foreign currencies is accounted for and shown as Investments in Government Securities are valued at cost. “Revaluation Gain/Loss”. Amount equivalent to 25% of Placements with maturity period up to 7 days and more than 7 days are revaluation gain of the current year is appropriated to classified as money at call and investments respectively. Exchange Fluctuation Reserve as per directive issued by

Nepal Rastra Bank. Investment in shares, debenture and bonds are valued at cost or market value, whichever is lower. Necessary reserves for certain investments 3.7 INTEREST EXPENSES have been created as per NRB directive. Interest expense on deposit liabilities, bonds and borrowings are accounted for on accrual basis. 3.13 FIXED ASSETS AND DEPRECIATION a) Fixed assets are stated at historical cost. Historical cost includes 3.8 LOANS AND ADVANCES, OVERDRAFT AND expenditures that are directly attributable to the acquisition of individual BILLS PURCHASED asset item. Loans and advances, overdrafts and bills purchased include direct finance provided to the customers as b) Below mentioned fixed assets are depreciated on Straight Line per the Bank’s policy and product papers such as bank Method at the rates mentioned below - overdrafts, personal loans, term loans, hire purchase loans and loans to deprived sectors. All the loans are Asset Rate subject to regular review and are graded according to the level of credit risk and classified as per NRB Directives. Computer Software 20% Total Loans and advances are stated net of loan loss Leasehold 20% provisions in the Balance Sheet. Battery 33.33%

3.9 STAFF LOANS c) Depreciation on newly acquired fixed assets is charged from the Staff loan has been provided as per the bank’s policy and next month of booking. Depreciation of an asset ceases when it is shown under the head ‘Other Assets’ as per NRB Directives. derecognised at the time of its disposal.

3.10 LOAN LOSS PROVISION d) Depreciation on below mentioned assets is charged on the basis of Provision is made for possible losses on loans and diminishing value method at the rates mentioned below - advances, overdraft and bills purchase at 1% to 100% in accordance with the directives issued by NRB. Asset Rate

Loss provision on non-performing loans (NPL) which Building 5% are settled between Shrawan 01, 2073 and till the date Office Equipments 25% of signing the balance sheet by bank’s BOD, has been Furniture & Fixtures (Wooden & Metal) 25% credited in profit and loss accounts. Provision reversed Computer 25% due to NPL settlement after Aswin end 2073 has been Vehicles 20% transferred to Capital Adjustment Fund. 78 ANNUAL REPORT 2015/16

e) Assets costing more than NRs. 10,000 and/or having useful life more 3.18 STATIONERY than 1 year are booked under fixed assets. Stationery purchased for consumption is charged as expense on consumption basis. FIFO method of 3.14 AMORTISATION OF SOFTWARE COST AND LEASEHOLD stationery valuation has been adopted by the bank. ASSETS a) Computer software are capitalised at the cost that is incurred to 3.19 NON-BANKING ASSETS acquire specific software. Bank amortises such cost over a period of Non-banking Asset is booked at lower of market price or useful life, estimated as 5 years from the date of acquisition. total dues, on the day before booking and provision for the asset has been made as per NRB directive. b) Leasehold properties are capitalised at the cost that is incurred to set up such assets. Such assets are amortised over the period of 5 years. The details of non-banking assets as on Ashad end 2073 have been stated in Schedule 4.15 of Financial 3.15 LEASE RENTAL Statement. The lease agreements entered into by the Bank for office buildings are operating lease agreements. The total payments made under operating 3.20 PROVISIONS AND CONTINGENT LIABILITIES leases are charged to Rent Expenses in the profit and loss account. The Bank creates a provision when there is a present obligation as a result of past events that probably requires 3.16 EMPLOYEE RETIREMENT BENEFITS an outflow of resources and a reliable estimate can be The Bank has schemes of retirement benefits namely Provident Fund made of the amount of the obligation. A disclosure for and Gratuity Fund. Provision for expenses on account of Provident and contingent liability is made when there is a possible Gratuity Funds is made on accrual basis with the amount of liabilities obligation or a present obligation that may, but probably computed by the bank in accordance with its applicable schemes. will not, require an outflow of resources. When there is a Contributions to retirement fund are made on a regular basis as per its possible obligation or a present obligation in respect of rules and regulations. which the likelihood of outflow of resources is remote, no 3.17 INCOME TAX provision or disclosure is made. a. Current Income Tax 3.21 STAFF BONUS Provision for current income tax is made in accordance with the Provision for staff bonus is made as per the NRB Directive. provisions of the prevailing Income Tax Act, 2058 and Rules as amended.

b. Deferred Income Tax Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. It is determined using tax rates (and laws) that have been enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. KUMARI BANK LIMITED 79

KUMARI BANK LIMITED Notes to Accounts Financial Year 17 July 2015 to 15 July 2016 (1 Shrawan 2072 to 31 Ashad 2073) Schedule 4.33

1 Provision for staff bonus of 2% is created instead of 100% which was created up to FY 2071-72.

Provision for staff bonus has been provided at 10% of net profit before providing for income tax provision. This 6 Tax Settlement Outstanding / Contingent provision has been made as per NRB directive. Liability

Tax settlement up to the FY 2066/67 has been completed. Against tax 2 Staff Housing Fund reassessment order of FY 2067/68 and FY 2068/69, the bank has filed a case for Administrative Review. Staff Home Loan is provided as per the bank’s policy. A separate housing fund in accordance with Labour Act, 2048 has not been created. 7 Gratuity Expenses

During the year, the Bank has provided NPR. 29,704,003/- (Previous 3 General Reserve Year NPR. 31,738,572/-) on account of gratuity expenses. Out of total gratuity expenses, NPR. 1,572,360.50 is set aside as a provision As per the requirement of Nepal Rastra Bank, 20% of current against those employees who are not yet eligible for gratuity. year’s profit has been transferred to General Reserve.

8 Dividend and Bonus 4 Capital Adjustment Fund Bank’s BOD meeting held on 3 January 2017 has decided to propose Interest realised after Shrawan 15, 2073 has not been 21 % stock dividend and 1.10% cash dividend (for tax purpose) from recognised as interest income on balance sheet date. So, the profit and free reserves of the FY 2072/73. no Capital Adjustment Fund has been created for such incomes.

Loan loss provision of Rs. 14,825,503.12 written back 9 Unpaid Dividend due to complete settlement of NPL after Aswin end 2073 Out of total cash dividend proposed in the FY 2066/67 & FY 2068/69 has been transferred to Capital Adjustment Fund. which were distributed in FY 2067/68 & FY 2069/70 respectively, cash Interest income recognised by way of capitalizing interest dividend of NPR. 6,773,506/- is still payable because shareholders in the case of Nepal Health Care Co-operative Ltd. of have not yet collected the dividend. The unpaid dividend amount stood Rs.4,007,609.00 and Rs. 14,936,857.31 of Electrocom at NPR. 7,839,484/- in FY 2071/72. and Research Center Ltd has been transferred to Capital Adjustment Fund as per the requirement of NRB. 10 Loan Disbursed, recovered and outstanding during the year. 5 Investment Adjustment Reserve The loan disbursed, recovered and outstanding during the year is In accordance with NRB Directives, Bank has created given below: Investment Adjustment Reserve equal to 2% of its investment NPR. In Million available for sale except the exempted investments. Opening Balance Total Disbursed Total Settled Outstanding As National Microfinance Bittiya Sanstha is listed on 27,070 23,200 20,159 30,111 Nepal Stock Exchange, Investment Adjustment Reserve 80 ANNUAL REPORT 2015/16

11 Summary of Changes in deposit during the year

Growth in deposits during the year is given below: NPR. In Million

Particulars This Year (Rs.) Last Year (Rs) Changes in amount

1) Current Deposit 1,828 1,458 370 a) Local Currency 1,752 1,393 359 b) Foreign Currency 77 65 11 2) Saving Deposit 9,581 8,005 1,576 a) Local Currency 9,471 7,899 1,572 b) Foreign Currency 111 107 4 3) Fixed Deposit 17,528 14,470 3,058 a) Local Currency 16,832 14,002 2,830 b) Foreign Currency 696 467 228 4) Call Deposit 8,771 9,281 (510) a) Local Currency 8,273 9,040 (767) b) Foreign Currency 498 241 258 5) Margin Deposit 242 208 34 a) Local Currency 242 208 34 b) Foreign Currency - - - Total Deposit 37,951 33,422 4,529

12 Average Interest Rate Spread (as per NRB guideline)

Particulars Percentage

The weighted average yield rate on loans and investments 7.93 The weighted average cost rate on deposits and borrowings 4.23 The weighted average interest rate spread 3.70

13 Summary of amortizable expenses yet to be written off

No such item.

14 Summary of concentration of exposure

No balance sheet and off balance sheet transaction have been highly concentrated to a single person, firm, organization or to a particular sector. Detail of highest exposure to a single person or organization is as follows: NPR. In Million

Maximum concentration to a single customer Particulars Total Exposure Amount %

Loans & Advances 30,111 594 1.98 Deposits 37,950 2,055 5.42 Off Balance Sheet Items 3,523 385 10.93 KUMARI BANK LIMITED 81

15 Classification of Assets and Liabilities based on Maturity

NPR. In Million

1-90 91-180 181-270 271-365 More than S.No Particulars Total days days days days 1 year

Assets 1 Cash Balance 861 - - - - 861 2 Balance with Banks & FIs 3,650 - - - - 3,650 3 Investment in Foreign Banks 1,220 119 696 - - 2,035 4 Call Money 1,600 - - - - 1,600 5 Government Securities 505 119 364 288 2,090 3,366 6 Nepal Rastra Bank Bonds - - - 416 - 416 7 Inter Bank & FI Lending 300 - - - - 300 8 Loans & Advances 8,952 4,257 3,743 2,336 10,824 30,111 9 Interest Receivable 155 1 6 0 14 176 10 Reverse Repo ------11 Acceptance Receivable ------12 Payments under S.No. 20,21 & 22 795 343 - 319 1,810 3,267 13 Others 187 62 62 243 294 848 Total (A) 18,225 4,900 4,872 3,602 15,032 46,630 Liabilities 14 Current Deposits 932 311 311 311 207 2,070 15 Saving Deposits (including call) 4,588 918 918 918 11,011 18,352 16 Fixed Deposits 5,274 3,576 4,250 3,235 1,193 17,528 17 Debentures/Bonds ------18 Borrowings ------Call/Short Notice ------Inter-bank/Financial Institutions ------Refinance ------Others ------19 Other Liabilities and Provisions 137 10 10 10 - 166 Sundry Creditors ------Bills Payable 26 9 9 9 - 52 Interest Payable 77 - - - - 77 Provisions ------Others 33 1 1 1 - 37 20 Acceptance Liabilities 229 39 - - - 267 21 Irrevocable Loan Commitment 319 453 453 453 453 2,130 22 Letter of Credit/Guarantee 1,428 826 258 353 391 3,256 23 Repo ------24 Payable under s.no.11 ------25 Others 133 44 44 44 - 266 Total (B) 13,039 6,175 6,243 5,322 13,255 44,036 Net Financial Assets (A-B) 5,185 (1,275) (1,372) (1,721) 1,777 2,595 Cumulative Net Financial Assets 5,185 3,910 2,539 818 2,595 82 ANNUAL REPORT 2015/16

16 Borrowings by the bank against the collateral of own assets

The bank has no such borrowings.

17 Related Parties

KEY MANAGEMENT PERSONNEL Key Management Personnel of the Bank includes Chief Executive Officer and members of the Board of Directors of the Bank, as follows:

Mr. Santosh Kumar Lama Mr. Naresh Dugar Mr. Rajib Giri Chairman (Promoter) Director (Promoter) Acting Chief Executive Officer

Dr. Shobha Kant Dhakal Mr. Puna Ram Bhandari Director (Public) Director (Public)

Mr. Uttam P. Bhattarai Er. Binod Dawadi Director (Promoter) Director (Promoter)

COMPENSATION TO KEY MANAGEMENT PERSONNEL - CEO OF THE BANK Amount in NPR.

Categories Current Year

Short-term employee benefits 6,636,611 Signing bonus - Post-employment benefits - Other long-term benefits - Termination benefits - Share-based benefits - Total 6,636,611

Above figure is the salary and other allowances provided to Acting CEO of the bank that does not include bonus as per Nepalese Bonus Act.

In addition to the above, the bank bears the expenses relating to mobile facility, fuel for vehicles and insurance premium for group endowment and accidental insurance policies.

TRANSACTION WITH KEY MANAGEMENT PERSONNEL (BOD) OF THE BANK The following provides transactions between the Bank and then Key Management Personnel (Directors) of the Bank during the year –

Amount in NPR.

Nature of Transaction Current Year

Meeting Allowances 3,128,667 Other expenses 811,094 Total 3,939,761 KUMARI BANK LIMITED 83

18 Paid up Share Capital

Paid up share capital of the Bank has changed over the years as follows: Amount in NPR.

Cumulative Fiscal Year Paid up Remarks Capital

2057/58 350,000,000 2058/59 350,000,000 2059/60 350,000,000 2060/61 500,000,000 Initial Public Offering of NPR. 150 million 2061/62 625,000,000 Right share issue of NPR. 125 million (25%) 2062/63 750,000,000 Bonus share issue of NPR. 125 million (20%) 2063/64 900,000,000 Bonus share issue of NPR. 150 million (20%) 2064/65 1,070,000,000 Right share issue of NPR. 180 million (20%). NPR. 170 million capitalized on balance sheet date and balance on subsequent year. 2065/66 1,186,099,200 In the fiscal year 2064/65, the bank had proposed 10 % bonus share and 15 % right share. 10 % bonus share had been capitalized as on balance sheet date pending issuance of right share. 2066/67 1,306,015,920 In the FY 2065/66, the bank had issued 10% bonus share including to those who were released from black list during the year. Further, right share of NPR. 1,080,000 issued on FY 2064/65 relating to blacklisted shareholders are included in current year’s capital subsequent to their release from black list. 2067/68 1,603,800,000 In the FY 2067/68, the bank capitalized NPR. 178,200,000 (15%) share capital which was approved for issuance in fiscal year 2064/65. Further, the bank auctioned 7841 numbers of shares that include right and bonus shares of subsequent years relating to right share approved in FY 2064/65 but issued only in FY 2067/68. Bonus share at the rate of 8% (NPR. 118,800,000) had been proposed in the FY 2067/68. 2068/69 1,603,800,000 - 2069/70 1,828,332,000 14% bonus share of NPR. 224.532 million issued in the FY 2069/70. 2070/71 2,431,681,560 33% bonus share of NPR. 603,349,560 issued in the FY 2070/71 2071/72 2,699,166,532 11% bonus share of Rs. 267,484,972 issued in the FY 2071/72 2072/73 3,265,991,503 21% bonus share of Rs. 566,824,972 issued in the FY 2072/73

19 Sale of Land and Building

Bank has not sold its land or building during the year. 84 ANNUAL REPORT 2015/16

20 Deferred Tax

Component of Deferred Tax Assets Amount in NPR.

Particulars As per financial statement As per Income Tax act Taxable temporary difference

Fixed assets base 179,559,422 172,387,188 (7,172,234) Provision for Gratuity 1,572,361 0 1,572,361 Provision for Leave Encashment 14,221,248 0 14,221,248 Total 195,353,031 172,387,188 8,621,375 Current Deferred Tax Asset 2,586,412 Opening Deferred Tax Liability (1,167,934) Adjustment 3,754,346

Deferred tax is calculated considering the existing tax rate of 30%.

21 Bank reconciliation Status (nostro accounts) Amount in NPR.

Particulars Upto 1 Year Above 1 Year to 3 Years More than 3 Years Grand Total

They Credit 5.15 - - 5.15 We Debit 0.15 - - 0.15 They Debit 45.30 - - 45.30 We Credit 57.54 0.00 - 57.54 Total 108.14 0.00 - 108.14

22 Details of Software Application Amount in NPR.

Net Opening Balance Additions during the year Amortization during the year Net Closing Balance

4,089,838 1,751,190 2,650,035 3,190,993

23 Interest Capitalisation

Following are the loans, interest on which is capitalised to recognise income in accordance with NRB approval. These loans are the project loans interest on which were capitalised for moratorium period. Detail of such loans and interest recognised in FY 2072/73 is as follows –

Amount in NPR.

SN Name of the client Type Capitalized Interest NRB approval date

1 Nepal Health Care Co-operative Ltd. Term Loan 4,007,609 25/03/2072 2 Electrocom and Research Center Pvt Ltd Term Loan 14,936,857 Grace Period Extended due to Earthquake 3 Mandakini Hydropower Ltd. Term Loan 6,856,094 08/17/2071 Total 25,800,560 KUMARI BANK LIMITED 85

Interest income recognised by way of capitalizing interest in the case of Nepal Health Care Co-operative Ltd. and Electrocom and Reasearch Center Ltd has been transferred to Capital Adjustment Fund as per the requirement of NRB.

24 Interest income recognised on deferred cash basis

Of the total amount of interest due as on Ashad end 2073, interest of Rs. 6,357,273 is realised in cash by 15 of Shrawan 2073. This interest realisation has been recognised as interest income on balance sheet date which complies with NRB directive regarding recognition of interest income on deferred cash basis.

25 Capital Work in Progress (WIP)

Carrying amount of capital work-in-progress includes cost incurred for the soil testing work for building construction site at Naxal. As of the balance sheet date, the carrying amount of WIP is NPR. 261,369.

26 Lending to problematic financial and other institutions

The bank has no lending against the financial and other institutions that are declared as problematic by Nepal Rastra Bank.

27 Rounding off and Comparative Figures

Figures are rounded to nearest rupees. Previous year’s figure has been regrouped or rearranged where necessary. KUMARI BANK LIMITED Statement of loan availed by bank’s promoter/promoters’ group from other bank and financial institutions by pledging their shares. As at Ashad end 2073 (15 Jul 2016) Schedule 4.34

Promoter Shares under the ownership Details of Loan of Promoter S.No. Promoter’s/ Shareholders’s Name Remarks % of Total Loan Amount Number of Paid-up Lending Bank Shares (Rs.) Share Pledge capital

1 RAJENDRA DAS SHRESTHA 19,741 0.07 CENTRAL FINANCE LIMITED - 3,000 Now, No credit facilities is in utilization MACHHAPUCHHERE BANK - 5,160 LIMITED 2 BHIM KRISHNA UDAS 196,653 0.73 NIC ASIA BANK LIMITED 12,000,000.00 175,696 Pledged against the credit facilities availed by Mr. Bhim Krishna Udas & Mr. Ranjan Udas. 3 PHURBA BANGDEL LAMA 196,651 0.73 NABIL BANK LIMITED 194,140.66 21,468 Pledged as additional security against the credit facilities availed by Atlas International Relocation Pvt.Ltd. SANIMA BANK LIMITED 4,300,000.00 87,358 Pledged against the credit facilities availed by Mr. Phurba Wangel Lama. Ranjan Udas. 4 GOVINDA DAS SHRESTHA 294,979 1.09 BANK OF KATHMANDU LUMBINI *2,71,93,000 114,252 Pledged as additional security against the Credit LTD **1,01,83,000 Facilities availed by * Himalayan Travels & Tours Pvt. Ltd. and ** Oriental Firm Pvt.Ltd. NABIL BANK LIMITED # 3,52,31,223.89 43,200 #Pledged as additional security against the credit facilities availed by Himalayan Travels & Tours Pvt.Ltd. 5 BIDHYA KRISHNA SHRESTHA 360,531 1.34 BANK OF KATHMANDU LUMBINI *2,71,93,000 95,862 Pledged as additional security against the Credit LTD **1,01,83,000 Facilities availed by *Himalayan Travels & Tours Pvt. Ltd. and ** Oriental Firm Pvt.Ltd. NABIL BANK LIMITED # 3,52,31,223.89 69,800 #Pledged as additional security against the credit facilities availed by Himalayan Travels & Tours Pvt.Ltd. 6 ANIL DAS SHRESTHA 196,653 0.73 BANK OF KATHMANDU LUMBINI *2,71,93,000 71,668 Pledged as additional security against the Credit LTD **1,01,83,000 Facilities availed by *Himalayan Travels & Tours Pvt. Ltd. and ** Oriental Firm Pvt.Ltd. NABIL BANK LIMITED # 3,52,31,223.89 20,800 #Pledged as additional security against the credit facilities availed by Himalayan Travels & Tours Pvt.Ltd. KUMARI BANK LIMITED 87

Remarks Pledged against the credit facilities availed by Pledged against the credit Santoo Shrestha Mr. facilities availed by Pledged against the credit Santoo Shrestha Mr. N/A Pledged as additional security against the credit facilities availed by Nepal Escort and engineering service pvt.Ltd. N/A only This is the portionlimit provided of credit of Kumari Bank Limited against the shares facilities availed by Pledged against the credit Vivek Tater Mr. Pledged as additional security against the credit Concern facilities availed by Ananda Trade Facilities availed by Pledged against the Credit pvt ltd *Urga Venture facilities availed by Goma Pledged against the credit Devi Neupane 9,000 9,000 2,337 9,441 22,361 13,799 14,176 66,113 25,614 51,788 Number of Share Pledge Share 500,000.00 525,786.21 (Rs.) 1,635,299.98 1,635,299.98 6,278,097.90 1,500,000.00 3,816,524.00 49,394,000.00 75,078,000.00 101,521,691.84 Loan Amount

Details of Loan Lending Bank RELIABLE DEVELOPMENT BANK LIMITED RELIABLE DEVELOPMENT BANK LIMITED LUMBINI LEASING AND FINANCE LIMITED COMPANY COMMERCIAL BANK CENTURY LIMITED YETI DEVLOPMENT BANK LIMITED SOCIETY DEVELOPMENT BANK LIMITED PRABHU BANK LIMITED SBI BANK LIMITED NEPAL NABIL BANK LIMITED BANK LIMITED SIDDHARTHA

0.07 0.07 0.35 0.09 0.01 0.29 0.22 0.22 % of capital Paid-up 3,933 of Promoter 19,664 94,393 23,858 78,660 58,996 58,920 19,665 Total Promoter Shares Shares Promoter Shares under the ownership under the ownership MADHAV KUMAR BASNET MADHAV SOPHIE UPADHAYA PEGI PANDEY KANCHAN SHARMA BACHHA RAJ TATER ANANDA KUMAR RUNGATA BALRAM NEUPANE SUNIL NANDA SINGH PRADHAN Promoter’s/ Shareholders’s Name Shareholders’s Promoter’s/ 8 9 7 10 11 12 13 14

S.No. Schedule 4.34 Continue...Schedule Schedule 4.34 Continue...

15 GANGA AMATYA 98,326 0.36 PRIME COMMERCIAL BANK 1,624,427.66 22,264 Pledged against the credit facilities availed by NEPAL LIMITED Mr.Samir Kapil 16 BIJAY BAHADUR MANANDHAR 19,644 0.07 UNION FINANCE LIMITD - 5,760 Now, No credit facilities is in utilization 17 DEVI LAL BISTA 982 0.00 BHIMESHOR CO-OPERATIVE 69,281.00 524 This is the protion of credit limit provided only LIMITED against the shares of Kumari Bank Limited 18 SHAMBHU KUMAR BASNET 982 0.00 BHIMESHOR CO-OPERATIVE 669,516.00 583 This is the protion of credit limit provided only LIMITED against the shares of Kumari Bank Limited 19 RAJENDRA PRASAD SHRESTHA 353,180 1.31 LAXMI BANK LIMITED 12,008,000.00 152,596 Pledged against the credit facilities availed by Bhatbhateni Supermarket and Departmental Store P. Ltd. 20 SABITRI GURUNG 786,614 2.91 LAXMI BANK LIMITED 12,008,000.00 353,675 Pledged against the credit facilities availed by Bhatbhateni Supermarket and Departmental Store P. Ltd. 21 JEEVAN NEPAL 39,331 0.15 SRIJANA FINANCE LIMITED 1,050,000.00 21,210 N/A 22 BODH PRASAD TRIPATHI 99,367 0.37 NIC ASIA BANK LTD 895,234.59 11,685 N/A 23 PRABHU INVESTMENT P.LTD 196,442 0.73 PRIME COMMERCIAL BANK 28,431,831.61 160,634 This is the protion of credit limit provided only NEPAL LIMITED against the shares of Kumari Bank Limited 24 PRADEEP KUMAR MURARKA 196,753 0.73 PRABHU BANK LIMITED 31,836,186.25 93,245 Pledged against the credit facilities availed by Mr. Sirish Murarka. 25 PASHUPATI MURARKA 196,753 0.73 PRABHU BANK LIMITED 31,836,186.25 93,245 Pledged against the credit facilities availed by Mr. Sirish Murarka. 26 AMRITA PARAJULI 55,062 0.20 NIC ASIA BANK LTD 6,295,461.90 49,476 Pledged against the credit facilities availed by Mr. Ananta Raman Parajuli & Mrs. Amrita Parajuli 27 ANANTA RAMAN PARAJULI 62,930 0.23 NIC ASIA BANK LTD 6,295,461.90 56,563 Pledged against the credit facilities availed by Mr. Ananta Raman Parajuli & Mrs. Amrita Parajuli 28 ANUPAM RATHI 176,987 0.66 LAXMI BANK LIMITED 1,110,000.00 151,948 This is the protion of credit limit provided only against the shares of Kumari Bank Limited KUMARI BANK LIMITED 89 Remarks This is the protion of credit limit provided only limit provided of credit This is the protion of Kumari Bank Limited against the shares only limit provided of credit This is the protion of Kumari Bank Limited against the shares facilities availed by Gyatri Pledged against the credit Ltd. Investment and Management P. only limit provided of credit This is the protion of Kumari Bank Limited against the shares facilities availed by Pledged against the credit dugar and kumud kumar mr.naresh facilities availed by Pledged against the credit Dugar and Kumud Kumar MrNaresh 17,716 35,664 35,433 348,929 233,857 122,756 124,016 Number of Share Pledge Share (Rs.) 1,785,415.26 9,446,861.15 37,166,504.60 13,000,000.00 10,000,000.00 10,000,000.00 23,800,000.00 Loan Amount

Details of Loan Lending Bank SIDDHARTHA BANK LIMITED SIDDHARTHA BANK LIMITED SIDDHARTHA DEVELOPMENT INTERNATIONAL BANK LIMITED SANIMA BANK LIMITED SUNRISE BANK LTD SUNRISE BANK LTD SANIMA BANK LIMITED

0.07 6.05 0.96 0.15 0.62 0.51 0.15 % of capital Paid-up of Promoter 40,364 39,330 19,664 Total 259,581 167,701 137,657 Promoter Shares Shares Promoter Shares 1,634,190 under the ownership under the ownership Amir Pratap J.B Rana MAHABIR PRASAD GOEL Ashok Kumar Vaidya KUMUD KUMAR DUGAR VIKAS DUGAR Jeewan Kumar Agrawal TARA RANA TARA Promoter’s/ Shareholders’s Name Shareholders’s Promoter’s/ 30 31 32 33 34 35 29

S.No. 90 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Comparison of Unaudited and Audited Financial Statement as Ashad 2073 of FY 2072/73 Fiscal Year 2072/73 (2015/16) Schedule 4.30 (E) Rs in ‘000

As per As per Variance Unaudited Audited Reasons for S.No Particulars Financial Financial Variance Statement Statement In Amount In %

1 Total Capital and Liabilities (1.1 to 1.7) 43,041,775 43,041,447 (328) 0.00% 1.1 Paid Up Capital 2,699,167 3,265,992 566,825 21.00% Declaration of stock dividend 1.2 Reserve and Surplus 1,388,260 767,602 (620,658) -44.71% Change in profit and declaration of stock dividend 1.3 Debenture and Bond - - - - 1.4 Borrowings - - - - 1.5 Deposits (a+b) 37,950,525 37,950,525 - - a. Domestic Currency 36,569,097 36,569,097 - - b. Foreign Currency 1,381,428 1,381,428 - - 1.6 Income Tax Liability - - - 1.7 Other Liabilities 1,003,823 1,057,328 53,505 5.33% Change in LLP, provision for staff bonus, adjustment for expenses provision & deferred tax liability. 2 Total Assets (2.1 to 2.7) 43,041,775 43,041,447 (328) 0.00% 2.1 Cash & Bank Balance 4,511,196 4,511,196 - - 2.2 Money at Call and Short Notice 1,600,000 1,600,000 - - 2.3 Investments 6,142,966 6,142,966 - - 2.4 Loans and Advances (a+b+c+d+e+f) 30,111,445 30,111,445 - - a. Real Estate Loan 1,720,735 1,720,735 - - 1. Residential Real Estate Loan 621,586 621,586 - - 2. Business Complex & Residential Apartment 278,533 278,533 - - Construction Loan 3. Income Generating Commercial Complex - - - Loan 4. Other Real Estate loan 820,616 820,616 - - b. Personal Home Loan of Rs.10 million 3,421,760 3,421,760 - - c.Margin Type Loan 993,761 993,761 - - d.Term Loan 6,468,669 6,468,669 - - e.Overdraft Loan/TR Loan/WC Loan 15,850,226 15,850,226 - - f. Others 1,656,296 1,656,296 - -

Schedule 4.30 (E) Continue... KUMARI BANK LIMITED 91

Schedule 4.30 (E) Continue... Rs in ‘000

As per As per Variance Unaudited Audited Reasons for S.No Particulars Financial Financial Variance Statement Statement In Amount In %

2.5 Fixed Assets 265,389 265,414 26 0.01% Depreciation adjustment 2.6 Non Banking Assets - - - - 2.7 Other Assets 410,780 410,426 (354) -0.09% Change in tax provision, booking of income receivables, recovery of interest and adjustment of deferred tax assets. As per As per 3 Profit and Loss Acccount In Amount In % Unaudited Audited 3.1 Interest Income 2,692,489 2,692,489 - - 3.2 Interest Expenses 1,517,056 1,517,056 - - A. Net Interest Income (3.1-3.2) 1,175,433 1,175,433 - 0.00% 3.3 Fees, Commission and Discount 166,752 166,847 95 0.00 Adjustment 3.4 Other Operating Income 62,706 62,778 72 0.11% Booking of income receivables 3.5 Foreign Exchange Gain/ Loss (Net) 108,988 108,988 - - B. Total Operating Income (A.+3.3+3.4+3.5) 1,513,879 1,514,045 167 0.01% Above reasons 3.6 Staff Expenses 316,477 316,571 94.05 0.03% Adjustment 3.7 Other Operating Expenses 261,230 264,539 3,309 1.27% Adjustment of provision C. Operating Profit Before Provision (B.- 3.6-3.7) 936,172 932,936 (3,236) -0.35% Above reasons 3.8 Provision for Possible Losses 153,037 178,028 24,991 16.33% Additional Provision D. Operating Profit (C-3.8) 783,135 754,908 (28,227) -3.60% Above reasons 3.9 Non Operating Income/Expenses (Net) (31,791) (31,782) 9 -0.03% Adjustment 3.10 Write Back of Provision for Possible Loss 432,019 432,019 - 0.00% E. Profit from Regular Activities (D+3.9+3.10) 1,183,362 1,155,144 (28,218) -2.38% Above reasons 3.11 Extraordinary Income/Expenses (Net) - - - F. Profit before Bonus and Taxes ( E. + 3.11) 1,183,362 1,155,144 (28,218) -2.38% Above reasons 3.12 Provision for Staff Bonus 107,578 105,013 (2,565) -2.38% Above reasons 3.13 Provision for Tax 335,673 334,067 (1,607) -0.48% Above reasons G. Net Profit/Loss (F.-3.12-3.13) 740,111 716,065 (24,046) -3.25% Above reasons 92 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Unaudited Financial Results (Quarterly) As at Fourth Quarter (15 Jul 2016) of the Fiscal Year 2015/16 Schedule 4 (A) Amount in Rs ‘000

31.03.2073/ 30.12.2072/ 31.03.2072/ 15.07.2016 12.04.2016 16.07.2015 S.No Particulars This Quarter Previous Quarter Corresponding Ending Ending Previous Year Quarter Ending

1 Total Capital and Liabilities (1.1 to 1.7) 43,041,775 39,933,760 38,198,863 1.1 Paid Up Capital 2,699,167 2,699,167 2,699,167 1.2 Reserve and Surplus 1,388,260 1,003,133 648,150 1.3 Debenture and Bond - - - 1.4 Borrowings - 292,910 328,000 1.5 Deposits (a+b) 37,950,525 34,821,620 33,421,911 a. Domestic Currency 36,569,097 33,343,130 32,542,064 b. Foreign Currency 1,381,428 1,478,490 879,847 1.6 Income Tax Liability - - - 1.7 Other Liabilities 1,003,823 1,116,931 1,101,636 2 Total Assets (2.1 to 2.7) 43,041,775 39,933,760 38,198,863 2.1 Cash & Bank Balance 4,511,196 3,067,534 4,990,975 2.2 Money at Call and Short Notice 1,600,000 948,023 436,881 2.3 Investments 6,142,966 6,512,047 4,862,590 2.4 Loans and Advances (a+b+c+d+e+f) 30,111,445 28,695,897 27,070,390 a.Real Estate Loan 1,720,735 1,835,598 2,010,181 1. Residential Real Estate Loan 621,586 511,378 491,529 2. Business Complex & Residential Apartment Construction Loan 278,533 281,743 373,819 3. Income Generating Commercial Complex Loan - - - 4. Other Real Estate loan 820,616 1,042,477 1,144,833 b. Personal Home Loan of Rs. 1 Crore or Less 3,421,760 3,169,019 2,885,047 c.Margin Type Loan 993,761 865,979 852,523 d.Term Loan 6,468,669 6,141,761 5,542,243 e.Overdraft Loan/TR Loan/WC Loan 15,850,226 15,149,277 14,311,637 f. Others 1,656,296 1,534,262 1,468,760 2.5 Fixed Assets 265,389 262,595 259,463 2.6 Non Banking Assets - - - 2.7 Other Assets 410,780 447,664 578,563 Corresponding Upto This Previous Quarter 3 Profit and Loss Account Previous Year Quarter End Ending Quarter End 3.1 Interest Income 2,692,489 1,897,429 2,433,131 3.2 Interest Expenses 1,517,056 1,146,949 1,507,365 A. Net Interest Income (3.1-3.2) 1,175,433 750,480 925,766

Schedule 4 (A) Continue... KUMARI BANK LIMITED 93

Schedule 4 (A) Continue... Amount in Rs ‘000

31.03.2073/ 30.12.2072/ 31.03.2072/ 15.07.2016 12.04.2016 16.07.2015 S.No Particulars This Quarter Previous Quarter Corresponding Ending Ending Previous Year Quarter Ending

3.3 Fees, Commission and Discount 166,752 109,860 154,635 3.4 Other Operating Income 62,706 49,586 47,668 3.5 Foreign Exchange Gain/ Loss (Net) 108,988 81,092 95,251 B. Total Operating Income (A.+3.3+3.4+3.5) 1,513,879 991,018 1,223,320 3.6 Staff Expenses 316,477 213,576 284,257 3.7 Other Operating Expenses 261,230 180,056 253,823 C. Operating Profit Before Provision (B.- 3.6-3.7) 936,172 597,385 685,240 3.8 Provision for Possible Losses 153,037 159,190 284,492 D. Operating Profit (C-3.8) 783,135 438,195 400,748 3.9 Non Operating Income/Expenses (Net) (31,791) (37,432) (7,021) 3.1 Write Back of Provision for Possible Loss 432,019 157,068 228,688 E. Profit from Regular Activities (D+3.9+3.10) 1,183,362 557,831 622,416 3.11 Extraordinary Income/Expenses (Net) - - - F. Profit before Bonus and Taxes ( E. + 3.11) 1,183,362 557,831 622,416 3.12 Provision for Staff Bonus 107,578 50,712 56,583 3.13 Provision for Tax 335,673 152,136 171,044 G. Net Profit/Loss (F.-3.12-3.13) 740,111 354,984 394,788

At the End of At the End of At the End of 4 Ratios This Quarter Previous Quarter Corresponding Previous Year Quarter

4.1 Capital Fund To RWA 12.02% 11.53% 10.84% 4.2 Non Performing Loan (NPL) to Total Loan 1.11% 2.03% 2.49% 4.3 Total Loan Loss Provision to Total NPL 178.78% 133.60% 122.31% 4.4 Cost of Funds (annualized - LCY) 4.41% 4.50% 5.00% 4.5 Credit to Deposit Ratio (as per NRB directives) 74.31% 76.95% 75.71% 4.6 Base Rate (FTM) 7.15% 6.76% 8.66% 4.7 Average Interest Rate Spread (as per NRB directives) 3.70% 4.02% 3.11% 94 ANNUAL REPORT 2015/16

KUMARI BANK LIMITED Disclosure Under Basel II as at 15 July 2016 (For F/Y 2015/16)

Capital Structure and Capital Adequacy

Tier I Capital and a breakdown of its components Amount in Rs

S.N. Particular Current Year

a Paid Up Equity Share Capital 2,699,166,532 b Irredeemable Non- cumulative preferenece share - c Share premium - d Proposed Bonus Equity Share 566,824,972 e Statutory General Reserves 689,584,086 f Retained Earnings 14,649,322 g Un-audited current period profit ( after all provision including tax) - h Bond Redemption Reserve - i Capital Adjustment Reserve 33,769,969 j Dividend Equalization Reserves - k Other free Reserve - Total Tier I Capital 4,003,994,881

Tier 2 Capital and a breakdown of its components Amount in Rs

S.N. Particular Current Year

a Cumulative and/or Reedemable Preference Share - b Subordinated term debt - c Hybrid Capital Instuments - d General Loan Loss provision 314,012,119 e Exchange Equalisation Reserve 29,181,619 f Investment Adjustment Reserve 417,378 g Assets Revaluation Reserve - h Other Reserve (Deferred Tax Reserve) - Total of Tier 2 Capital 343,611,116

Deductions from Capital: Amount in Rs

S.N. Particular Current Year

i. Less: Purchase of land and building in excess of limit and unutilised (88,526,547) Total Deductions from Core Capital (88,526,547) KUMARI BANK LIMITED 95

Total Qualifying Capital Amount in Rs

S.N. Particular Current Year

a Tier I Capital 3,915,468,334 b Tier II Capital 343,611,116 Total Capital Fund 4,259,079,450

Capital Adequacy Ratios

S.N. Particular Current Year (%)

a Tier 1 Capital to total RWA 10.75 b Total Capital Fund (Tier 1 + Tier 2) to Total RWA 11.69

Bank’s Internal Approach to Access Capital Adequacy

Bank’s mangement regularly reviews Bank’s Capital Adequacy. Plans and budgets are prepared on the basis of current and projected capital adequacy. Bank’s plan and investment decision are based on the level of capital adequacy it feels comfortable.

Risk weighted exposures for Credit Risk, Market Risk and Operational Risk Amount in Rs

S.N. Particular Current Year

1 Risk Weighted Exposure for Credit Risk 32,683,533,411 2 Risk Weighted Exposure for Operational Risk 1,816,078,297 3 Risk Weighted Exposure for Market Risk 91,603,305 Total 34,591,215,014

Risk weighted exposures under each of 11 categories of Credit Risk Amount in Rs

S.N. Particular Current Year

1 Claims on government and central bank - 2 Claims on other official entities - 3 Claims on banks 1,038,117,785 4 Claims on corporate and securities firms 17,913,472,919 5 Claims on regulatory retail portfolio 3,860,703,909 6 Claims secured by residential properties 1,841,266,851 7 Claims secured by commercial real estate 844,128,510 8 Past due claims 218,019,250 9 High risk claims 3,835,625,701 10 Other Assets 630,114,687 11 Off balance sheet items 2,502,083,799 Total 32,683,533,411 96 ANNUAL REPORT 2015/16

Total risk weighted exposure calculation table - Amount in Rs

S.N. Particular Current Year

1 Risk Weighted Exposure for Credit Risk 32,683,533,411 2 Risk Weighted Exposure for Operational Risk 1,816,078,297 3 Risk Weighted Exposure for Market Risk 91,603,305 Total Risk Weighted Exposure 34,591,215,014 Add: 3% of the total RWE due to non compliance to Disclosure Requirement Addition to RWE as per supervisiory review (4%) 1,383,648,601 Add RWE equvalent to reciprocal of capital charge of 4 % of gross income. 461,898,982 Add: ...% of Total Deposit due to Insufficient Liquid Assets Total Risk Weighted Exposure (After Bank’s adjustment of Pillar II) 36,436,762,596

Amount of NPAs (Non Performing Assets) both gross and net Current Year’s Amount in Rs.

S.N. Non Performing Assets Gross Amount Net Amount

1 Restructured / Rescheduled - - 2 Substandard 31,394,674 23,546,005.27 3 Doubtful 21,764,973 10,882,486.74 4 Loss 292,196,512 - Total 345,356,160 34,428,492.01

NPA Ratios

S.N. Particulars Current Year (%)

1 Gross NPA to gross advances 1.15% 2 Net NPA to net advances 0.12%

Movement of Non Performing Assets Amount in Rs.

S.N. Non Performing Assets Previous Year Change Current Year

1 Restructured / Rescheduled 66,689,228 (66,689,228) - 2 Substandard 49,918,549 (18,523,875) 31,394,674 3 Doubtful 41,819,310 (20,054,336) 21,764,973 4 Loss 515,571,821 (223,375,308) 292,196,512 Total 673,998,907 (328,642,747) 345,356,160 KUMARI BANK LIMITED 97

Write Off of Loan and Interest Suspense Amount in Rs.

S.N. Particular Current Year

1 Loan Write Off 40,134,489 2 Interest Suspense Write Off 33,084,601

Movement of Loan Loss Provision and Interest Suspense Amount in Rs.

S.N. Particular Previous Year Change Current Year

1 Loan Loss Provision 824,351,984 (199,412,198) 624,939,787 2 Interest Suspense 211,462,128 (70,355,099) 141,107,028

Details of additional loan loss provision Current year’s amount in Rs.

S.N. Loan Classification Additional provision

1 Good 46,957,401 2 Restructured / Rescheduled (8,336,153) 3 Substandard (4,630,969) 4 Doubtful (10,027,168) 5 Loss (223,375,308) Total (199,412,198)

Segregation of investment portfolio Amount in Rs.

S.N. Investment category Current Year

1 Held for trading - 2 Held to maturity 6,117,161,391 3 Available for sale 25,804,400 Total 6,142,965,791

KUMARI BANK LIMITED 99

RISK MANAGEMENT FUNCTION

Risk Assessment/Mitigation Practices at Kumari Bank Limited Considering the need to establish effective Risk Management and Risk Mitigation practices at Kumari Bank Ltd, we have developed a system of continuous improvement of processes wherein each member of the Bank works towards balancing profitability with prudence. The system encompasses all banking functions from client interface, to back office operation, to the strategic decision formulated by the management committees and the Board of Directors. Each area has its own check and balance procedure to assess and mitigate risks involved. The practices thus observed are as follows: KBL Organization Structure The bank’s lending approval authority is divided into two distinct units, namely Business and Risk Management. While the Business Unit concentrates more on optimum utility of assets, every lending decision of this Unit is re-assessed and revaluated by the Credit Risk Management Unit for final approval. The Credit Risk Management Unit applies its objective judgment on risk variables deemed appropriate in each instance of lending decision. For this purpose, the Credit Risk Management Unit has two distinct subunits, the Credit Risk Management Department, which facilitates final lending decision after duly adjusting risks as mitigated to an acceptable level, and the Credit Administration and Compliance Department, which evaluates the endorsed paperwork prior to actual sanction, and also after it.

Depending upon the volume of loans and the nature of risk associated, lending decision are subject to validation and approval by various levels of the hierarchy, in which some lending decision are to be approved by CEO, and other by even the Board of Directors as each case may require. Risk Measurement Criteria and Mitigation Process Credit risks are evaluated from the initial customer interface on an array of risk variables by the Credit Policy Guidelines of the Bank, as well as on the individual intuition of experienced officers. As proposals are escalated for approval, judgmental and analytical criteria become broader and more conceptual.

Kumari Bank Ltd. uses the best practices in banking, to make its operation secure through a system of procedural crosschecking mechanism in each operational transaction. An Internal Audit Department, continuously functions to alert bank personnel to the meticulousness required in handling operations in every functional department. A credit monitoring system is well established in the Bank, which periodically checks on credit quality, compliance, and level of risk exposure. This practice has created a continuous learning and improvement environment, and the Bank’s efficiency goal has been to move towards the most prudent practices in the industry. Types of eligible credit risk mitigants used and the benefits availed under CRM -

Particular Eligible CRM

Deposit with Bank & Cash Margin 145,657,441 100 ANNUAL REPORT 2015/16

ATM LOCATIONS

INSIDE KATHMANDU VALLEY

PUTALISADAK ATM I THAMEL ATM NAXAL ATM Kumari Bank Limited, Right to Main Entrance Fire Club Building, Thamel, Kathmandu Opposite Police Head Quarter, Naxal, Gate, Putalisadak, Kathmandu Kathmandu KANTIPUR MALL ATM PUTALISADAK ATM II Kumari Bank Limited, Kantipur Mall, Gongabu LAZIMPAT ATM Kumari Bank Limited, Right to Main Entrance Big Mart Building (Way to Hotel Radisson), Gate, Putalisadak, Kathmandu KOTESHWOR ATM Lazimpat, Kathmandu Koteshwor, Kathmandu PUTALISADAK ATM III JHAMSIKHEL ATM Kumari Bank Limited, Ground Floor (Lobby), DURBARMARG ATM 8 Degrees Fine Dine & Venues (opposite Putalisadak, Kathmandu Kumari Bank Limited, Durbarmarg, Kathmandu St. Mary’s Bus Stop), Jhamsikhel, Lalitpur

PUTALISADAK ATM IV CHUCHHEPATI ATM MANGAL BAZAR ATM Kumari Bank Limited, Ground Floor (Lobby), Kumari Bank Limited, Chuchhepati, Chabahil Yala Guest House premise, Patan Durbar Putalisadak, Kathmandu Square (Near Honacha) BUDDHANILKANTHA ATM NEW ROAD ATM Kumari Bank Limited, Buddhanilkantha, BALKHU ATM Kumari Bank Limited, New Road,Kathmandu Kathmandu Balkhu Chowk

NEW BANESHWOR ATM OLD BANESHWOR ATM KALANKI ATM Royal Thai Restaurant premise, Near Everest Kumari Bank Limited, Old Baneshwor, Kumari Bank Limited, Kalanki, Kathmandu Hotel, New Baneshwor Chowk, Kathmandu Kathmandu

RATNA PARK ATM KUMARIPATI ATM Nepal Electricity Authority Building, Ratna Park, Kumari Bank Limited, Kumaripati, Lalitpur Kathmandu KUMARI BANK LIMITED 101

OUTSIDE KATHMANDU VALLEY

BHAIRAHAWA ATM ITAHARI ATM TULSIPUR ATM Kumari Bank Limited, Bhairahawa Branch, Kumari Bank Limited, Pathivara Market, B.P. Chowk, Tulsipur, Dang Narayan Path Bhairahawa Dharan Road, Itahari , Sunsari KAWASOTI ATM POKHARA ATM I URLABARI ATM Kumari Bank Limited, Sabhapati Chowk, Chiple Dhunga, Pokhara, Kaski Kumari Bank Limited, Urlabari, Morang Kawasoti

POKHARA ATM II BUTWAL ATM OKHALDHUNGA ATM Lakeside, Opposite to Lalupate Marga Infront of Kumari Bank Limited, Ram Kumari Bank Limited, Rambazar, Mandir Line, Butwal Okhaldhunga JHAPA ATM Kumari Bank Limited, Birtamode Jhapa NEPALGUNJ ATM MAHENDRANAGAR ATM Surkhet Road, Dhambhoji, Nepalgunj Kumari Bank Limited, Mahendranagar BAGLUNG ATM Kumari Bank Limited Mahendra Path Baglung DHANGADI ATM NIJHGADH ATM Ratopul, Dhangadi, Kailali Kumari Bank Limited, Nijhgadh NARAYANGADH ATM Kumari Bank Limited Narayangadh Branch, SURKHET ATM KOHALPUR ATM Pulchowk, Narayangadh Birendra Nagar, Surkhet Kumari Bank Limited, Kohalpur

BIRATNAGAR ATM DAMAULI ATM MUSIKOT ATM Kumari Bank Limited, Goshwara Road, Morang Kumari Bank Limited,Damauli-2 Kumari Bank Limited, Musikot Byapaar Sangh Building, Biratnagar, Morang SAURAHA ATM BIRGUNJ ATM I Bacchauli-2, Sauraha, Chitwan Kumari Bank Limited, Adarsha Nagar, Birgunj, Parsa SALYAN ATM Kumari Bank Limited, Khalanga, Salyan BIRGUNJ ATM II National Medical College

MEMBER GROUP NETWORK

Nepal Investment Bank ATM Network Global IME Bank ATM Network Sanima Bank ATM Network

Rastriya Banijya Bank ATM Network NCC Bank ATM Network National Payment ATM Network 102 ANNUAL REPORT 2015/16 BRANCHESBRANCHES KUMARI BANK LIMITED 103 CORPORATE OFFICE Durbarmarg, Kathmandu P.O. BOX 21128 TEL 01-4221311, 01-4221314 FAX 01-4226644 EMAIL [email protected] www.kumaribank.com