This part deals with the various methodologies and approaches that we used during the study and for the preparation for this report. Most of the data of this report is based on secondary data from various sources and also based on both informal and formal interviews with department head of the bank and other various industry experts. This in-depth interview helped us to come out with the basic required information for the study.
Study Approach
The study necessary for the preparation of the report was conducted in these three phases:
Figure 12: Phases of Research
Phase 1: Observation and Adaptation
At this preliminary stage, we observed the working environment of HBL. We tried to make ourselves a part of the organization’s culture, conducts, practices and the rules and regulations that bind all the employees together. Our co-workers and mentors helped us to adopt the work environment and to complete the various tasks assigned to us in the due course of our internship duration.
Phase 2: Exploratory Research
In this phase, identification of the core components of HBL and also of the hydropower industry in Nepal was done. Thus as a part of the research, interviews were conducted with the HBL’s employees and also with people with expertise related to credit and hydropower projects was conducted in order to gain required information regarding project financing and identifying their internal strengths and
weakness in this particular sector. It also helped in designing the assignment along with its methodology and approach.
After conducting the unstructured in depth interviews with the managers of the credit department of HBL, we were able to understand:
• The procedures by which the bank moves forward with project financing
• The pros and cons of financing a hydropower project and why is it a priority lending sector for most of the commercial banks
• What information the bank needs for the better and efficient functioning of the appraisal of hydropower project loans
• The rationales of each step of the appraisal process
Phase 3: Descriptive Research
In this phase of research, the focus was to find the viability of the hydropower industry in Nepal, its pros and cons, the opportunities it provides to the banks financing the projects, the areas that the banks focus upon while appraising the projects and economical viability of financing the projects for the commercial banks.
The descriptive research aimed at recommending new solutions for problems that exist and formulating better strategies to get an upper hand on while financing the projects.
This descriptive research mainly comprised of two parts:
○ Qualitative research
○ Quantitative research Qualitative Research
The qualitative research comprised of these various processes and parts for gathering valuable and meaningful information:
1. Review of literatures and lectures
Different books, literatures, articles were reviewed and studied to have the in depth theoretical understanding of credit appraisal and of the hydropower industry as a whole. This helped in construction of unstructured questionnaire for visiting different banks and interviewing credit officers for the practical understanding of the subject.
2. In- depth interview with the credit managers of the bank
To collect information about the process of project financing in HBL and also about the opportunities and challenged in the hydropower project financing, an in depth interview was conducted with these personnel of HBL:
• Mr. Pawan Agrawal, Credit officer, Credit Control Department (Expertise:
Deep knowledge in hydropower project financing for a long time)
• Mr. Abhaya Bahadur Shah, Relationship Manager, Customer Relation Department (Expertise: Experience of consortium lending in various projects and critical analysts of the loan proposals sent to the department)
Assignment 2, based on the interviews of Mr. Pawan Agrawal and Mr. Abhaya Bahadur Shah has been included in the appendix.
3. In-depth interview with other experienced personnel in this field of other banks
To collect the information for the project and to get deeper insight about the hydropower appraisal in the commercial banks in the country, interviews were conducted with personnel of other banks as well. Some of these personnel are:
• Mr. Rajendra Bahadur Shrestha, Credit Department, DCBL
• Mr. Amit Bajracharya, Relationship Manager, PCBL
• Mr. Sohan Babu Khatri, Director, DCBL
4. Study of Rules and Regulations
Thorough study of NRB directives prescribed for project financing was done to understand the regulatory environment of the same. We also studied the rules and regulations governing the credit appraisal system in the banking environment.
Quantitative Research
The quantitative research comprises of following different type of the research and analysis tools as follows:
1. Financial Analysis of HBL
For qualitative information, analysis of annual report of HBL and study of various other publications were done. Further, the senior manager of the bank was consulted for the same. This analysis helped in depicting the level of financial strength of the bank, which serves as a major base for growth, incorporating new ventures, and starting new operations in the bank
2. Financial Analysis of NEA
Since NEA is the sole purchaser of electricity from the power plants, the analysis of the financial strength of NEA was sought to be necessary for the viability analysis of any project. The necessary details were found in the annual report of NEA and other publications it issues like Generation, Transmission etc.
3. Publications and Statistical Reports
Various publications and statistical reports that provide quantitative data on hydropower plants, its operation and growth, have been analyzed.
SECTION V: Industry Analysis