Central bank asks H&B to honour ‘genuine’ good-for-payment cheques

The central bank asked H&B Development Bank to make payments for 'genuine' good-for-payment cheques as there are such claims worth Rs 820 million with the bank.

The development bank has to however make payments of good-for-payment based on its own assessment of the cheques. The central bank has asked the development bank to report to Department of Money Laundering Investigation, if cheques are suspicious.

Earlier, the class B financial institution was in trouble after it was found to have paid Rs 426.1 million illegally against good-for-payment cheques without having enough deposit in their accounts.

 The bank's then Kuleswhor branch chief Niraj Nepal, in association with traders Manoj Chaurasiya and Jaya Kumar Yadav, had endorsed the good-for-payment cheques without adequate deposits in the accounts of the traders.

The police had filed a case against the Niraj Nepal, demanding a payment of Rs 1.05 billion, while half of the amount has been demanded from eight other employees. The police have also arrested Chaurasiya and his partners.

The central bank took a prompt corrective action against the bank. Under the prompt corrective action, the development bank has been asked to submit a recapitalisation plan, not to announce cash dividend and bonus shares, not to open new branches and collect deposits in excess of 10 per cent of the deposits maintained on November 25, 2013. Likewise, it has also been barred from expanding credit more than the size maintained on November 23, 2013.

The bank's capital adequacy ratio also came down to 8.10 per cent as it had to provision for the loss, after the fraud was revealed.