NRB governor raps court for NDB debacle

Nepal Rastra Bank (NRB) governor Dipendra Bahadur Kshetry today blamed the judiciary for the present state of Nepal Development Bank (NDB).
"The central bank wanted to save Nepal Development Bank (NDB) and its depositors two years ago," he said while speaking during a prize distribution ceremony organised by the Rural Microfinance Development Centre (RMDC) here today. He added that each time NRB issued directives to improve NDB's financial health, the board of directors moved the court and "the court issued stay orders."
A division bench of judges Rana Bahadur Bam and Bhoopdhoj Adhikari at the Patan Appallate Court had issued ex-parte stay order overturning the NRB's decision, when it tried to safeguard the interest of depositors and shareholders.
"Twice the court did not help the central bank. As a result, the country's first development bank -- NDB -- lost financial health and deteriorated so much that NRB was forced to send it into liquidation," the governor said.
If the court had helped the central bank, NDB's losses could have been curbed. NDB that started operations in 1998 has an accumulated loss at Rs 678.6 million by the end of mid-March. Its non-performing loan is also at almost 30 per cent. It has a paid up capital of Rs 160 million but its loss -- in three big loans that are under risk -- is Rs 380 millio.
Even now, NRB has to move the Appellate Court to get orders for liquidation after 15 days, according to the law. According to clause 74 of the Banks and Financial Institutions Act (BAFIA), NRB must file a case at Patan Appellate Court to begin the process of liquidation of a financial institution whose financial damages are beyond repair. "If the Appellate Court does not give permission, the central bank can do nothing," he added.The NRB has assured the depositors that they get priority in getting their money back after liquidation of the NDB.
"Some blame the lack of supervision by the central bank, but NRB's supervision is not weak and neither is the regulatory authority weak," Kshetry said adding that the central bank is committed to safeguarding the interests of the depositors. He suggested, however, that depositors also should be careful while depositing their hard-earned money with any financial institution. During the programme Kshetry also released the report on Nepal's Microfinance Industry prepared by RMDC along with the Singapore-based Banking With The Poor network.
The governor hailed the contribution of microfinance companies. "Microfinance can be an effective tool to bridge the rich-poor gap in Nepal," said RMDC chief executive officer Shankar Man Shrestha. "In the last decade, microfinance institutions have shown remarkable progress as they provide loan to the poorest of the poor," he added.
The governor also distributed awards to three successful microfinance companies -- Chhimek Bikas Bank, Sahara Nepal Savings and Credit and Swabalamban Bikas Kendra -- for their outstanding services in this field. RMDC has been awarding successful microfinance companies since last three years.