Looking Beyond Headcount: An Interview with Bank of Kathmandu CEO Ajay Shrestha

Just a couple of weeks ago we pulled back the curtains on a young boy’s life, a student in a small classroom at the base of Nepal’s Himalayan Mountains. The boy is named Pramod and he is the proud owner of a savings account that will one day send him off on the study abroad trip of his dreams. In May 2013, CYBY, the youth savings product rolled out by YouthSave partner Bank of Kathmandu (BoK) for children like Pramod, crossed a significant threshold: 10 million Nepalese Rupees (NPR) in deposits. YouthSave Project Director Rani Deshpande recently had the opportunity to sit down with BoK CEO Ajay Shrestha, who explained why this was such an important milestone for the bank.

What was the significance of CYBY reaching the NPR 10 million mark, for the Bank of Kathmandu?

It’s a psychological threshold. We measure growth in two ways: in terms of products, and in terms of branches. For products, NPR 100 million tends to be the break-even volume. But in the beginning, we had a lot of questions about whether CYBY would even achieve NPR 10 million in deposits, so it’s mentally significant for people to know that we’ve come this far. We were unsure about this product – not even our farmers’ product has reached this level, and we consider that farmers are a lot more economically active segment than kids!

When do you anticipate that CYBY will reach the NPR 100 million threshold?

You can’t be too much of a stickler about volume in this product, because it won’t be high. It’s more interesting to book customers for the future. Our overall goal is to double our client base in 5 years. The majority of young people are not banked, and that segment is a large proportion of the country. So if you don’t reach those people, your numbers won’t go up. And similarly, if some bank does this only for CSR reasons, without any business objective, the young customers will not remain committed in establishing a business relationship with the bank when they do start saving more money. We are well-placed because we have a range of similar savings and loan products around this one; it’s a package approach. So this is not the end of it -- CYBY is a starter product. After this age, people will start earning; if they are in the habit of banking, and banking with us, it will be really easy for us to direct them to other products. That's why the number of accounts is more important than balances. And how they graduate to become more value-added customers later on – that’s even more important.

Does this mean you see CYBY as a permanent part of BoK’s product line?

That will be related with how we position ourselves in in the market. Our current strategy is to pursue the mass market, but if we decide to shift our focus to premium banking, products like CYBY would lose the center stage. But, considering how much we have committed ourselves on mass banking it would be difficult to change the course of the bank – our dependence on small deposits has gone up a lot over the last few years. Because of the liquidity crisis Nepal experienced a few years ago, we have diversified our current accounts, then our fixed deposits. Having so many small fixed accounts was never part of the original vision, but we took the crisis and turned it into an opportunity. In doing so, we’ve also been able to cater to the specific kinds of clients our branches have locally. Now our branches are more occupied and more stable as well – that’s part of the strategic advantage.

Are there other strategic advantages you feel have come from CYBY?

YouthSave has given us a push in going out and talking to the target customers. How do we speak to the mass market? Who is the target mass customer? This is something that banks have always had a problem with – how to communicate with lower-income clients. We used to come out with products but only sell them once people walked into the branch. YouthSave gave us the opportunity to go outside the bank, to get communication going outside the branches. The marketing events gave our guys a lot of confidence to go out and talk to people. We could see the communication skills and confidence of branch staff actually improving, as they understood local social dynamics. So afterward, we’ve done lots of other events for other products. For example, we had a small loan product that was struggling until we gave it to the Retail Banking department. Now all of a sudden it’s near the NPR 100 million mark. The branch staff conducted financial education in many places, teaching about the use of loans. But that was possible only after we had spent so much time dealing with the kinds of customers CYBY catered to. It’s about knowing your customer through the human touch, not just their documents.