Central Bank starts taking action against financial institutions

Recently, the central bank is probing financial sectors’ irregularities minutely.
However, the banking sector is yet not convinced. On one hand the central bank has to build confidence of depositors and on the other, it has to take stringent action against all the financial institutions that are involved in mismanagement and financial irregularities.
The central bank has freezed passports of around dozen board members and executives of financial institutions including former executive chairman of Nepal Share Market and Finance Company Yogendra Prasad Shrestha. "They have been found involved in grave financial irregularities," according to a highly placed source at the central bank.
However, some bankers opined that they should be booked and put behind the bars to send the message that no one has right to misuse depositors money.
Nepal Share Market and Finance Company -- the class C financial institution -- had even applied at the central bank to upgrade to class A commercial bank but the central bank’s recent investigation revealed its financial irregularities as Shrestha is suspected of misappropriating over Rs 2 billion.
According to Nepal Rastra Bank Act, Bank and Financial Institutions Act and Banking Offence and Punishment Act, Shrestha could be sent behind the bars for three to five years. However, the investigation is still underway.
The central bank has, however, frozen not only his bank accounts and lockers but also Gita Shrestha and Saurav Shrestha’s accounts, relatives of Shrestha on Thursday.
The initial probe revealed that Shrestha had taken loans from his own finance company in fake names. He had also misappropriated Rs 200 million of Rastriya Beema Sansthan as he did not deposit the RBS money in the corporate deposit accounts.
The bad governance that saw Nepal Development Bank to go to liquidation, still prevails in the banking sector making the depositors feel insecure, though most of the financial institutions have insured the deposits up to Rs 200,000.
“The regulator should come hard on the financial institutions,” one banker said, adding that the central bank has to act efficiently not to make depositors loose their trust on banking system.
In the fiscal year 2010-11, the central bank has taken action against nine financial institutions including Mercantile Finance (Birgunj), Multipurpose Finance (Rajbiraj) and Investa Finance (Birgunj), Samjhana Finance, United Development Bank (Bara), Gurkha Development Bank and Nepal Share Market and Finance.
The central bank had also freezed all fixed and movable assets of former executive chairman DB Bamjan and directors Nirmal Gurung, Dhan Prasad Rai, Dinesh Shakya, Mina Shrestha, Sanjeev Kumar Mishra, Mahesh Prasad Rijal, Ramesh Tamang, general manager Rajendra Das Shrestha, credit department chief Deepak Rana, former director Prabeen Naulakha , Nepal Mentha Product Ltd MD Rakesh Adukiya, loanees Sajeev Kumar Agrawal and Jeevan Ghimire and Ruchi Jajodiya and Punam Khetan under the Banking Offense Act.