Central bank enforces PCA on two finance companies

Nepal Rastra Bank has enforced Prompt Corrective Action (PCA) on Capital Merchant and Finance and People's Finance, today.
"It is yet another chance for them to reduce their expenses and collect loans," said central bank spokesperson Bhaskar Mani Gyanwali.
Once the PCA is imposed, the banks and finance companies cannot mobilise deposits, open branches, distribute dividends and increase salaries and incentives of employees and add new employees that could add expenses.
On June 24, Capital Merchant Bank and Finance Company had pulled its shutter down citing acute cash shortage. The central bank has decided to enforce Prompt Corrective Action (PCA) on Capital Merchant Banking and Finance to give it a chance to correct itself.
Similarly, People’s Finance ran into trouble after its executive chairperson Chhabilal Bhusal went on missing leading the finance company to closure due to liquidity crunch.
These financial institutions ran into trouble due to over exposure on real estate lending, bad corporate governance and lack of Assets Liability mismatch.