NRB set to move court seeking liquidation of Nepal Development Bank

Nepal Rastra Bank's (NRB) Board meeting, finally, decided today to move to Patan Appellate Court for the liquidation order of the troubled Nepal Development Bank (NDB).
The NRB board took the decision after it was not satisfied with the clarification NDB submitted on Thursday. "The clarification is abstract," a board member said.
Earlier, the NRB on Friday has again sought NDB's clarification either it was of the Board of Directors' decision or the chairman's only as the clarification letter submitted to NRB on Thursday was signed by the NDB chairman Amar Gurung only. The NRB had asked NDB's board to clarify its stand.
On June 2, the NRB has decided to seek explanation with the ailing development bank on why should not it be liquidated. The NRB has given it a 15-day to submit the clarification.
According to the clause 86 of the Nepal Rastra Bank Act, NRB has given a 15-day deadline for the clarification to NDB. The NRB will now file a case at Patan Appellate Court seeking permission for NDB's liquidation under clause 74 of Banks and Financial Institutions Act (BAFIA).
On June 18, NDB submitted a capital plan seeking time till October 17 to improve its financial health. It had claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. "It still would need an additional Rs 70 million capital injection after it managed to get its money back," according to the NDB.
"The NDB could not be revived as there isn't any guarantee that it will make amends as it has repeatedly been flouting the central bank's directives," said the NRB that has frozen its all accounts after it sought explanation.
According to the findings of central bank, small depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors that are around 3,5 00 need not worry, NRB said.
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 rule, a bank must maintain its CAR at 11 per cent.
On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the central bank's regulatory obligations and played dirty with depositors' money.