Central Bank declares Gorkha Development Bank 'troubled', to send Samjhana Finance to liquidation

The central bank declared Gorkha Development Bank a 'troubled financial institution' and decided to send Samjhana Finance to liquidation.
The central bank’s board of directors meeting today evening has taken the decision under the Nepal Rastra Bank Act that gives the central bank the right to declare any banks and financial institutions troubled in case of financial discrepancies.
The bank will now be restricted to mobilise deposits and float loans after being declared a troubled financial institution.
Gurkha Development Bank (Nepal) Ltd -- promoted by British Gurkhas had been in trouble after a scandal over ‘embezzlement’ of Rs 130 million by its former executive director D B Bomjan and other staffers.
The bank replaced its ‘tainted’ executive director Bomjan and his team with chairman Nirmal Gurung in the second week of March. But last week, Bomjan again took over ‘forcefully’ replacing Gurung.
The central bank could not remain silence in such cases as the banks and financial institutions are losing their focus from good governance and regulatory compliance and involved in petty interest exposing the depositors’ money to risk.
Earlier, the central bank had directed Gurkha Development Bank to prepare a Due Diligence Report after former executive director DB Bamjan was found to have been involved in embezzlement while issuing credit to a customer Panchalal Maharjan.
Recently most of the banks and financial institutions have come into trouble after they failed in maintain good governance.
Similarly, the central bank decided to send Samjhana Finance after its explanation could not satisfy the central bank. The finance company submitted its explanation with proposal of new management that would take the management over and run it but central bank rejected the proposal and today decided to send it to the liquidation.
After declaring Samjhana Finance a troubled financial institution, the central bank has last year restricted it to mobilise deposits and float loans on the basis of its weak capital base and high non-performing asset.
The Banepa-headquartered finance company has an outstanding loan worth Rs 210 million and its non-banking assets stands at Rs 300 million.