Nepal Development Bank seeks time to improve

Troubled Nepal Development Bank (NDB) has submitted its explanation, signed by its chairman Amar Gurung to the Nepal Rastra Bank (NRB) today - ahead of the deadline that expires on Sunday.
"We've submitted a complete capital plan, seeking time till October 17 to improve our financial health. If we get the opportunity, then we can sell the shares of various institutions and get back the deposit from the National Cooperatives as instructed by the NRB. Once we manage to rack in this sum, we will still be in need of additional Rs 70 million capital injection," said Purna Prasad Sharma, acting CEO of NDB.
Incidentally, the DB chairman has only signed the clarification letter. Hence, it is unclear whether it is his personal explanation or conveys the message of the board of directors as well."We'll ask the bank tomorrow to clarify the board of directors' stand. But, there isn't any guarantee that it'll make amends since it has been repeatedly flouting our directives," said a senior NRB official.
"But the individual depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million as bank deposit," the central bank said adding that its findings show that save the Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million), small depositors need not worry as they will get back their deposits back. The NDB has around 20,000 shareholders and 3,500 depositors.If the NRB finds the clarification unsatisfactory, then it will file a case at the Patan Appellate Court to press for the bank's liquidation.The NRB has already seized all its assets and freezed the accounts in various financial institutions.
NDB - the nation's first development bank - started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per the rule a bank maintain its CAR at 11 per cent.
On October 11, 2007, the NRB had declared the goings in the bank as a problem and directed a slew of corrective measures but the NDB never followed the NRB's directions.