NRB declares Nepal Finance ‘troubled’

- POST REPORT, Kathmandu
NRB declares Nepal Finance ‘troubled’

Dec 4, 2014-

The Nepal Rastra Bank (NRB) has declared Nepal Finance Limited (NFL) “troubled” after its financial report showed dismal performance. An NRB board meeting on Wednesday decided to take the action against the company as it failed to maintain good governance even after repeated central bank directives.

NRB Spokesperson Manmohan Kumar Shrestha said the finance company has negative capital and has failed to implement good governance practices.

“We took the action to general people’s deposits,” said Shrestha.

The company’s first quarter report showed its nonperforming loans (NPL) at over 54 percent. The first private sector-promoted finance company has a deposit mobilisation of Rs 434.4 million and credit disbursement of Rs 168.8 million. Its loan defaults stand at Rs 91.2 million.

In a statement, the Nepal Rastra Bank said that the finance company has extended loans of more than 25 percent of its core capital to a single client, or firm, or company or relatives of promoters.

One of the main promoters and the company’s former CEO Rabichandra Man Pradhan has been accused of misappropriating public deposits.

Pradhan, his family and relatives and firms own more than 36 percent share in the company.

NRB said the company has also made institutional investment in a cooperative.

The company landed in crisis after its promoters sanctioned big loans to their friends and relatives. Pradhan and his relatives operated the institution in a “cartel-like manner”, according to NRB officials. On July 11, the central bank sought clarification from the company after its second-quarter financial report of 2012-13 and NRB’s subsequent onsite inspection revealed dismal performance.

NRB had sacked Pradhan four years ago after he was found investing in ventures promoted by his kith and kin. Following the NRB action, Pradhan absconded to the US.

However, he is accused of controlling the firm even from abroad and receiving huge remuneration.

NRB has directed the company to maintain its paid-up capital and capital adequacy ratio to the required level. The regulator has also barred it from collecting new deposits, providing loans, and opening new branches.

The central bank has asked the company to receive its prior approval while paying back deposits of more than Rs 200,000.

Published: 05-12-2014 09:35

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