NRB has Rs 1 billion stuck in troubled BFIs

- PRITHVI MAN SHRESTHA, Kathmandu

Mar 21, 2015-

Nepal Rastra Bank (NRB) has around Rs 1 billion stuck in crisis-ridden banks financial institutions (BFIs), which suggests the regulator itself was unaware about the status of the BFIs before they landed in trouble.

The amount accounts for 12 percent of the central bank’s deposits (around Rs 8 billion) in BFIs. It has more than Rs 300 million in the crisis-ridden Gurkha Development Bank alone.

“It is a shame that NRB, as a regular, could not see what was happening at those institutions,” said an NRB official. “At the time, NRB put the money in institutions that offered higher interest rates.”

After the institutions started landing in trouble, the central bank two years ago introduced its investment policy, making a provision that it will invest more than 50 percent of the deposits in commercial banks and the rest in development banks and finance companies.

To get NRB’s deposits, the institutions should have adequate capital adequacy and posted profits for the past three years, according to the policy. Besides the NRB, other institutions having huge deposits in crisis-ridden FIs are Citizen Investment Trust, Rastriya Beema Sansthan and Army Welfare Fund, according to the NRB.

As of mid-January this fiscal year, crisis-ridden FIs have total deposit liability of Rs 5.36 billion, while they have loans of Rs 7.8 billion to be recovered. Of the total deposit,

Rs 850 million belongs to the

general public. There are 14 FIs

that have been declared crisis-ridden. Of them, Nepal Development Bank, United Development Bank, Sanjhana Finance, Himalaya and Crystal Finance are under the liquidation process.

Among the crisis-ridden FIs, Nepal Share Market and Finance, and Gurkha have the largest liability to the depositors and the largest credit to be recovered.

According to NRB, Nepal Share Market and Finance has deposit liability of Rs 1.11 billion, while it has to recover Rs 1.71 billion of credit. Most of the loans of the FI are fake ones created by its former executive chairman Yogendra Shrestha to embezzle funds.

Gurkha has deposit liability of Rs1.21 billion, and Rs 1.19 billion credit to be recovered.

Capital Merchant and Finance Company has around Rs 1 billion credit to be recovered. Most of bad loans are fake ones created by its former chief executive Pawan Karki, who is currently in the US. Public deposits in the finance company is relatively lower at Rs 40 million, according to the NRB.

General Finance has the lowest deposit liability of Rs 90 million and outstanding credit of Rs 220 million.

 

Published: 22-03-2015 08:19

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