The central bank's board today enforced Prompt Corrective Action (PCA) on Capital Merchant Banking and Finance and also decided to call back its management from Madhyamanchal Grameen Bikas Bank.
Capital Merchant Banking and Finance now cannot distribute dividends and increase salaries and incentives of employees, apart from barring of new branch opening.
On June 24 Capital Merchant Bank and Finance Company pulled its shutter down citing acute cash shortage.
Capital Merchant Bank and Finance Company -- that was facing acute shortage of cash had also applied to the central bank for special refinancing facility and central bank team was studying its books. But the team discovered many fake borrowers' accounts and rejected it refinancing.
The central bank's special refinancing indow is for the financial institutions that maintain good corporate governance but lacked liquidity.
The class C financial institution -- that has 12 branches including its head office at Battisputali in Kathmandu -- has posted Rs 40.84 million profits in the third quarter and Rs 52.43 million profits in the second quarter, according to its published unaudited report.
The finance company that has Credit to deposit (CD) ratio at 82.84 per cent by the third quarter has Rs 935 million paid up capital. It has also floated shares that were traded at Rs 132 per unit at the secondary market last time.
Similarly, the finance company has to continue to return deposits to its depositors but cannot collect deposits.
The central bank enforces Prompt Corrective Action after the company’s cash reserve ratio dropped below four percent. According to the central bank directives, finance companies have to maintain cash reserve ratio at a minimum of 11 per cent. But those failing maintain required cash reserve ratio level are declared crisis-ridden.
Capital Merchant has been enforced with Prompt Corrective Action giving a chance to improve its financial health.
Similarly, the central bank has also decided to call back its management from Madhyamanchal Grameen Bikas Bank and let it run itself.
The central bank after the Unity scam -- a ponzi scam -- has sent its management led by Rebati Prasad Nepal to manage the rural development bank.
But after a long discussion, the central bank today decided to call back its staff and let the rural development bank run on its own, according to the central bank.
Showing posts with label Capital Merchant Bank and Finance Company. Show all posts
Showing posts with label Capital Merchant Bank and Finance Company. Show all posts
Friday, July 8, 2011
Saturday, June 25, 2011
Capital Merchant Bank and Finance on fake lending spree
It seems Capital Merchant Bank and Finance Company – that pulled its shutter down yesterday citing acute cash shortage – has faked accounts and lent some Rs 480 million, according to preliminary investigation.
The probe team found that the finance company has lent Rs 300 million to a non-existent sugar mill and Rs 180 million to yet another non-existent furniture factory, though the probe team suspects the amount could be much bigger.
The central bank delayed its special refinancing request since last one week due to suspicious transaction, according to the sources.
The class C financial institute that closed its operations and went to ask for rescue package yesterday had to return empty handed due to its bad governance.
The central bank has asked the management to immediately start operations as it was illegal to close down daily operations and management has responded positively.
Earlier, Samjhana Finance, United Development Bank, Gorkha Development Bank, Nepal Share Market and Financial Institute and People's Finance had faced trouble due to lack of good corporate governance.
The central bank has been monitoring the finance company since last week.
Since it was facing acute shortage of cash from last one week, the finance company has also applied to the central bank for special refinancing facility but the central bank team was studying its books that were found suspicious.
The bank's management and central bank along with Nepal Finance Companies' Association had yesterday held discussions on the possible rescue of the class C financial institution -- that has 12 branches including its head office at Battisputali in Kathmandu -- has posted Rs 40.84 million profits in the third quarter from Rs 52.43 million in the second quarter, according to its published unaudited report.
The finance company has a Rs 935 million paid up capital and has also been listed in the secondary market. Its shares were traded at Rs 132 per unit at the secondary market last time.
Its financial statement revealed that it has a deposit of Rs 3.04 billion and loan and advances stand at Rs 3.36 billion, though the financial statement of the third quarter shows that its CD ratio stands at 82.84 per cent.
The central bank on June 9 had opened a 'special' refinancing window for banks and financial institutions under lender of the last resort to avert systemic risk from tight liquidity situation. But the central bank has set good governance a key criterion to get the special refinancing facility for the four months period against good loan at 10 per cent interest rates.
On one hand, the financial institutions that are heavily dependent on institutional depositors have been facing problem due to Assets Liability Mismatch and on the other, bad corporate governance has also plagued some of the financial institutions.
Nepal Army's deposit safe
KATHMANDU: Nepal Army has said that its deposit in Capital Merchant Bank and Finance Company is safe, though the exact amount of deposit is yet to calculate, the Army has withdrawn some last week. Of the total Rs 17.50 billion deposit in various banks and financial institutions, Nepal Army has deposited 93 per cent in commercial banks and only seven per cent is deposited in development banks and finance companies. It has planned to invest some Rs 2 billion on its proposed Army Medical College and has notified the banks and financial institutions some four months ago to arrange fund according to their convenience.
The probe team found that the finance company has lent Rs 300 million to a non-existent sugar mill and Rs 180 million to yet another non-existent furniture factory, though the probe team suspects the amount could be much bigger.
The central bank delayed its special refinancing request since last one week due to suspicious transaction, according to the sources.
The class C financial institute that closed its operations and went to ask for rescue package yesterday had to return empty handed due to its bad governance.
The central bank has asked the management to immediately start operations as it was illegal to close down daily operations and management has responded positively.
Earlier, Samjhana Finance, United Development Bank, Gorkha Development Bank, Nepal Share Market and Financial Institute and People's Finance had faced trouble due to lack of good corporate governance.
The central bank has been monitoring the finance company since last week.
Since it was facing acute shortage of cash from last one week, the finance company has also applied to the central bank for special refinancing facility but the central bank team was studying its books that were found suspicious.
The bank's management and central bank along with Nepal Finance Companies' Association had yesterday held discussions on the possible rescue of the class C financial institution -- that has 12 branches including its head office at Battisputali in Kathmandu -- has posted Rs 40.84 million profits in the third quarter from Rs 52.43 million in the second quarter, according to its published unaudited report.
The finance company has a Rs 935 million paid up capital and has also been listed in the secondary market. Its shares were traded at Rs 132 per unit at the secondary market last time.
Its financial statement revealed that it has a deposit of Rs 3.04 billion and loan and advances stand at Rs 3.36 billion, though the financial statement of the third quarter shows that its CD ratio stands at 82.84 per cent.
The central bank on June 9 had opened a 'special' refinancing window for banks and financial institutions under lender of the last resort to avert systemic risk from tight liquidity situation. But the central bank has set good governance a key criterion to get the special refinancing facility for the four months period against good loan at 10 per cent interest rates.
On one hand, the financial institutions that are heavily dependent on institutional depositors have been facing problem due to Assets Liability Mismatch and on the other, bad corporate governance has also plagued some of the financial institutions.
Nepal Army's deposit safe
KATHMANDU: Nepal Army has said that its deposit in Capital Merchant Bank and Finance Company is safe, though the exact amount of deposit is yet to calculate, the Army has withdrawn some last week. Of the total Rs 17.50 billion deposit in various banks and financial institutions, Nepal Army has deposited 93 per cent in commercial banks and only seven per cent is deposited in development banks and finance companies. It has planned to invest some Rs 2 billion on its proposed Army Medical College and has notified the banks and financial institutions some four months ago to arrange fund according to their convenience.
Friday, June 24, 2011
Capital Merchant Bank and Finance Company pulls shutter down
Yet another finance company -- Capital Merchant Bank and Finance Company -- pulled its shutter down today citing acute cash shortage.
However, spokesperson of the central bank Bhaskar Mani Gyanwali said that management cannot shut down whole operation and stop payments with an excuse of liquidity crunch.
"It is illegal," he said, adding that the central bank had been monitoring the finance company since last week. "We have instructed its management to resume operation and they have also expressed commitment to try their best to recover loan and pay its customers," he added.
Capital Merchant Bank and Finance Company -- that was facing acute shortage of cash from last one week -- has also applied to the central bank for special refinancing facility and central bank team was studying its books.
"After a week-long wait bowing to the pressure of withdrawal, we decided to close down," said a senior official of the finance company without wanting to be named.
After closing the transaction, they went to the central bank to ask for rescue package.
The bank's management and central bank along with Nepal Finance Companies' Association today held discussions on the possible rescue of the class C financial institution -- that has 12 branches including its head office at Battisputali in Kathmandu -- has posted Rs 40.84 million profits in the third quarter. It has posted Rs 52.43 million profits in the second quarter, according to its published unaudited report.
The finance company that has CD ration at 82.84 per cent by the third quarter has Rs 935 million paid up capital. It has also floated shares that were traded at Rs 132 per unit at the secondary market last time.
President of Nepal Finance Companies' Association Rajendra Man Shakya, who was in the talks, however, said that the central bank has to release special financing facility quicker to rescue the financial institutions.
The central bank on June 9 had opened a 'special' refinancing window for banks and financial institutions under lender of the last resort to avert systemic risk from tight liquidity situation.But the central bank has set good governance as the condition to get the special refinancing facility for the four months period against good loan at 10 per cent interest rates.
"The central bank seemed little reluctant pushing the financial institutions to closure," another finance company that has applied for the special refinancing facility said.
"Though, refinancing facility is a short-term measure, there is no alternative for the moment," Shakya said, adding that the central bank should bring a long term strategy to solve the crisis.
Due to low depositors' confidence deposit mobilisation could not grow at the rate it used to grow in the past years flaring a series of failures of financial institutions.
On one hand, the financial institutions that are heavily dependent on institutional depositors have been facing problem due to Assets Liability mismatch and on the other bad corporate governance has also plagued some of the financial instutitons.
Last week, the Parliamentary committee has also directed the central bank to prepare a work plan to avert the systemic crisis in case the current liquidity crunch prolongs.
However, spokesperson of the central bank Bhaskar Mani Gyanwali said that management cannot shut down whole operation and stop payments with an excuse of liquidity crunch.
"It is illegal," he said, adding that the central bank had been monitoring the finance company since last week. "We have instructed its management to resume operation and they have also expressed commitment to try their best to recover loan and pay its customers," he added.
Capital Merchant Bank and Finance Company -- that was facing acute shortage of cash from last one week -- has also applied to the central bank for special refinancing facility and central bank team was studying its books.
"After a week-long wait bowing to the pressure of withdrawal, we decided to close down," said a senior official of the finance company without wanting to be named.
After closing the transaction, they went to the central bank to ask for rescue package.
The bank's management and central bank along with Nepal Finance Companies' Association today held discussions on the possible rescue of the class C financial institution -- that has 12 branches including its head office at Battisputali in Kathmandu -- has posted Rs 40.84 million profits in the third quarter. It has posted Rs 52.43 million profits in the second quarter, according to its published unaudited report.
The finance company that has CD ration at 82.84 per cent by the third quarter has Rs 935 million paid up capital. It has also floated shares that were traded at Rs 132 per unit at the secondary market last time.
President of Nepal Finance Companies' Association Rajendra Man Shakya, who was in the talks, however, said that the central bank has to release special financing facility quicker to rescue the financial institutions.
The central bank on June 9 had opened a 'special' refinancing window for banks and financial institutions under lender of the last resort to avert systemic risk from tight liquidity situation.But the central bank has set good governance as the condition to get the special refinancing facility for the four months period against good loan at 10 per cent interest rates.
"The central bank seemed little reluctant pushing the financial institutions to closure," another finance company that has applied for the special refinancing facility said.
"Though, refinancing facility is a short-term measure, there is no alternative for the moment," Shakya said, adding that the central bank should bring a long term strategy to solve the crisis.
Due to low depositors' confidence deposit mobilisation could not grow at the rate it used to grow in the past years flaring a series of failures of financial institutions.
On one hand, the financial institutions that are heavily dependent on institutional depositors have been facing problem due to Assets Liability mismatch and on the other bad corporate governance has also plagued some of the financial instutitons.
Last week, the Parliamentary committee has also directed the central bank to prepare a work plan to avert the systemic crisis in case the current liquidity crunch prolongs.
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