Tuesday, February 4, 2014

Central bank takes over NCC Bank management for five months



Suspending the current board of director, the Central bank took over the management of the Nepal Credit and Commerce (NCC) Bank due to power tussle among the board members.
The board meeting of the central bank today decided to take over the management of the NCC Bank – despite its good financial health – for five months due to prolonged dispute within the bank's board that could pose serious threat to not only public depositors and investors' interest but also the financial system.
The central bank appointed three-member team led by Nepal Rastra Bank director Laxmi Prapanna Niroula will hold special annual general meeting and hand over the management in five months, according to the central bank that has sent deputy director Ramesh Acharya and assistant director Resham Raj Regmi to assist Niraula. "The team will also audit the accounts and find possible ways to increase paid up capital as the bank still has not complied with the mandatory paid up capital provision of at least Rs 2 billion," the central bank press note stated. "Likewise, the team will also look into possibility to merger with another bank or financial institutions. The team will also recover financial loss incurred from risky investment."
Chairman of the bank Prithvi Raj Ligal, along with directors Ved Man Singh Malla, Badri Narayan Manandhar, Narayan Raj Tiwari, Basudev Giri and Gyan Hari Shrestha favoured the notorious NB Group, while Tirtha Pradhan, Ashok SJB Rana and Hari Prasad Bhattarai backed the stock investor Nirmal Pradhan group making a vertical split in the board. The board has been divided into two groups –  one favouring NB group and the other Pradhan group – in a bid to capture the bank.
The problems started after Pradhan group accused the NB group of insider lending to NB Group-related business without following proper procedures.
Since the directors' long drawn feud spilled out of the board room, The central bank had, also, tried to mediate between the directors by summoning them for talks more than 15 times but they were adamant and their friction was beyond mending. At last, the central bank had on December 31, 2013, given a 15-day ultimatum to the bank seeking explanation on why it should not suspend the board to safeguard the interest of investors and depositors.
But one of the faction led by Pradhan went to Patan Appellate Court asking for permission to hold annual general meeting. The Court last week rejected the plea and opened the door for the central bank to intervene.
The bank has not been able to hold even board meeting since November 2, 2013, due increasing tug of war among the two factions.
The bank has deposits worth Rs 22.02 billion and floated loans worth Rs 17.6 billion as of mid-January. It has more than 14.7 million primary shares and 14 million units of promoter shares listed at Nepal Stock Exchange (Nepse). Its stocks have been traded at around Rs 400 per unit at the Nepse. It has posted Rs 32.5 million profits in the first quarter of the current fiscal year.
As the regulatory authority, the central bank is empowered to take over the management of any banks and financial institutions under NRB Act 2063 (Section 54), if it is dissatisfied with the given explanation. The regulator has earlier too taken over the managements of NB Group promoted Nepal Bangladesh Bank (in 2006), Bank of Kathmandu (in May 2009), and handed over the management back. NCC Bank is the third commercial bank that has been taken over the central bank, though Nepal Bank Ltd is also under the central bank due to Financial Sector Reform Programme and Gurkha Development Bank due to also feud between the board of directors.

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