The central bank has sent the troubled United Development Bank to liquidation and upgraded Pokhara-based Annapurna Finance to a class 'B' development bank.
The Bara-based development bank was already under the scanner of the central bank. On January 5, the central bank had decided to liquidate it after it failed to improve despite the central bank’s repeated prescriptions. The development bank was declared ‘troubled financial institution’ in March, 2011 after a central bank study revealed a sharp deterioration in its financial health, mainly due to heavy embezzlement of funds by its promoters.
Inspection by a central bank team had revealed that the district-level development bank established with a paid up capital of Rs 85 million, had a negative net worth of Rs 120 million. The central bank had then asked it to recoup the money that the promoters had embezzled and instructed them to inject additional capital to improve its financials within six months. But the development bank failed to follow the central bank’s directives leaving it with no option but to send the development bank to liquidation.
It is the third financial institution sent to liquidation in the country's banking history after Nepal Development Bank and Samjhana Finance.
According to the central bank's records, the development bank got into trouble after its executive chairman Rabindra Bahadur Singh siphoned off Rs 65 million of the total paid up capital for personal use. The inspection revealed that Singh had created fake loans, and lent to promoters flouting central bank rules.
The central bank had also asked Nepal Police to take action against Singh and director of the development bank Radha Krishna Amatya under the Banking (Offenses) Act. Currently, Singh and Amatya are behind bars in Birgunj.
Similarly, the central bank decided to upgrade Annapurna Finance to a development bank. The development bank will be named Kailash Bikas Bank, according to the management.
There were 73 listed finance companies at the share market but after the upgradation of Annapurna Finance, it will drop to 72 and one more development bank will be increased under the development banks sub group making a total of 64 from the current 63 listed development banks.
Annapurna Finance that has listed 2,620,800 units shares at a face value of Rs 100 per unit, according to Nepse, last saw its shares traded at Rs 217 per unit on April, 22, 2010.
Declare Dhukuti illegal
KATHMANDU: The central bank has asked the Finance Ministry to officially declare Dhukuti illegal as lots of people have become victims of the informal deposit scheme. Recently, a woman committed suicide inside a police station due to Dhukuti, making the central bank think over the informal deposit scheme that has spread in the valley hitting the formal banking channel. "Either the government has to regulate it or declare it illegal as it has become a chronic problem in society forcing people to even commit suicides," the central bank said.