Print Edition - 2014-10-17 | MONEY
Gurkha Dev Bank to partly repay deposits
Oct 16, 2014-Crisis-ridden Gurkha Development Bank has planned to repay a portion of the deposits of big institutional depositors like Nepal Rastra Bank (NRB), Rastriya Beema Sansthan and Citizen Investment Bank before the Tihar festival.
This is the first time that the development bank, which is currently under the management of the central bank, is making partial repayment of the deposits. Earlier, it only paid the interest on them.
NRB has deposits amounting to Rs 510 million stuck at Gurkha, Rastriya Beema Sansthan has Rs 260 million and Citizen Investment Bank Rs 170 million. According to bank sources, the total liability of the bank towards depositors stands at Rs 1.6 billion including interest.
The bank has cash holdings totalling Rs 260 million. “Of the total money presently available, it plans to keep Rs 90 million in reserve for general depositors who are yet to make claims on their savings.
“Likewise, Rs 20-30 million will be kept aside for operational costs and the remaining amount will be paid to big and small institutional depositors,” said a member of the management team at Gurkha. He added that the NRB management was currently negotiating with the bank’s big institutional investors over the interest rate.
“When they deposited their money, the interest rate was as high as 13 percent, but the interest rate in the market has come down massively presently,” said the official. “We cannot make repayments based on past interest rates.”
Meanwhile, Gurkha Development Bank is yet to complete its due diligence audit (DDA) although the central bank has asked it to complete it and submit the recommendations before Dashain.
Technical problems like the departure of staff with knowledge of the bank’s assets have made the valuation process difficult, said the source. The NRB management at Gurkha has been told to reduce the value of its shares based on its losses. Gurkha is in the red to the tune of Rs 1.5 billion as of 2013-14.
Its capital adequacy ratio is negative by 30.58 percent, but it earned a net profit of Rs 180 million. Its paid-up capital is Rs 660 million. Following the completion of the DDA, a reduction of the share value will be possible.
Besides lowering the value of its stock, the central bank has also directed the Gurkha management headed by NRB Deputy Director Bisrut Thapa to consider options such as merger. The management has been told to recommend sending the bank into liquidation if there is no chance of its being revived.
The central bank has kept Gurkha under its management control for the past one and a half years. It had declared Gurkha crisis-ridden in March 2011 after it plunged into a crisis due to insider lending and defaults.
Published: 17-10-2014 09:36