Thirty firms suspended for not paying renewal fee

Nepal Stock Exchange suspended some 30 listed companies – including nine finance companies, five development banks, one insurance company, one hydropower company, two trading companies, one hotel, one film development corporation, and nine manufacturing companies, apart from Nepal Electricity Authority's debenture – due o their failure in paying their annual listing renewal fee for the current fiscal year.

Among the suspended companies, shares of Multipurpose Finance, Himalayan Finance, Pashchimanchal Finance, Biratlaxmi Development Bank, and National Hydropower Company were traded last week.

Listed companies are supposed to pay the annual renewal fee within three months of the end of the fiscal year, but these companies failed to pay within the deadline, thus their trading was suspended as per regulation.

This year, Nepse had even issued a notice for listed companies to pay the annual listing fee on time. Companies tend to overlook the matter out of utter carelessness which inconveniences investors.

Among the suspended ones, three – Nepal Development Bank, Jyoti Spinning Mills and Samjhana Finance – are going through liquidation. Share trading of Capital Merchant Banking and Finance, General Finance, Gurkha Development Bank, Crystal Finance and NB Insurance was suspended due to action taken against them by the regulators.

Likewise, nine manufacturing companies, two trading companies, and Hotel Yak and Yeti have not been paying the annual listing fee for the last few years in the hope of getting de-listed.

Last year, Nepse had to suspend the trading of 45 listed companies including Nepal Electricity Authority’s debentures. A year back, trading of 28 listed companies, including four development banks and four finance companies, was suspended due to a delay in paying the listing renewal fee.

Every year, Nepse has to suspend the trading of listed companies for their failure in renewal of listing fee. The renewal fee depends on the capital structure of the company – the maximum that companies have to pay is Rs 50,000 for those with a capital base greater than Rs 100 million.

The suspended companies scramble to pay the renewal fee the day the transaction is suspended. The suspension of trading arising from sheer negligence of the companies is also an instance of bad corporate governance.

CIB nabs former chairman of NDB Amar Gurung

The Central Investigation Bureau of Nepal Police today arrested former chairman of Nepal Development Bank, Amar Gurung, for misappropriating Rs 360.5 million.
He was arrested from Maharajgunj, where he had been hiding. Gurung (62) of Armola, Kaski, had been on the run since 2009.
CIB Chief DIG Upendra Kant Aryal said the central bank had found Gurung guilty of misusing loan and bank resources, sanctioning illegal loan, siphoning off deposit, and defrauding depositors and investors against Nepal Rastra Bank Act, Banking Offences and Punishment Act and ‘Fraud Chapter’ of Civil Code.
“Gurung had abused the authority and cheated depositors and investors of around Rs 360.5 million,” said DIG Aryal.
The investigating bureau said it had also launched a manhunt to nab Uttam Pun (50) of Kusunti, Lalitpur, for embezzling millions of rupees and deteriorating financial health of NDB. Pun, former executive chairman of the bank, is still at large. Gurung has been referred to Metropolitan Police Range, Hanumandhoka, to press banking offence charges against him.
On July 9, 2009, the central bank had moved Patan Appellate Court seeking liquidation of the troubled Nepal Development Bank. Following a court decision, the bank had gone to liquidation on December 18, 2009, becoming the first domestic bank to have been asked to terminate its business. Though it had a paid-up capital of Rs 320 million, losses were pegged at around Rs 670.87 million. It had total assets worth Rs 730.13 million, but the non-performing assets (NPA) stood at 55.09 per cent and capital adequacy ratio a whopping 48.31 per cent — almost five times more than the permissible limit.
The bank had Rs 720 million in deposits, of which more than two-thirds belongs to Employees Provident Fund (EPF) and the Nepali Army Welfare fund.
NDB — Nepal’s first development bank that started its operations in 1998 — had been ailing for many years. The former chairman Uttam Pun who had shares worth Rs 1.6 billion was asked to step down by the central bank and Gurung was appointed as the chairman.
The central bank had declared NDB an ailing institution on October 11, 2007. Over the years, NDB never followed the central bank’s regulatory obligations, instead frittered away depositors’ money and moved to court to stop central bank’s directives.
Uttam Pun — the then executive chairman and promoter of NDB — had repeatedly moved the Appellate Court, and got a reprieve from the judiciary even as the unsuspecting public continued to deposit in his institution. The bank had Rs 720 million in deposits of which more than two-thirds belongs to Employees Provident Fund (EPF) and Nepal Army Welfare fund.
EPF had Rs 331 million and Army Welfare Fund had Rs 180 million in fixed term deposits, which was later changed to call deposit as it had not been able to pay back the deposits even after the maturity of the fixed terms.

Samjhana Finance gets new suitors

Two parties have agreed to inject capital to rescue the troubled Samjhana Finance Company but the central bank needs to endorse the move.
"One party applied at the central bank on Friday and the other has applied today promising to inject capital,” Mod Tripathi, managing director of the troubled finance company said.
The central bank has on February 7 sought explanation with the finance company on why should it not be liquidate due to its bad financial health.
“We are submitting our explanation tomorrow,” he said.
The central bank has decided to send Samjhana Finance into liquidation -- after it get the explanation -- as it has mobilised deposits of Rs 180 million from the public but has a total liability of Rs 640 million.
After declaring it a troubled finance institution, the central bank has last year restricted it to mobilise deposits and float loans on the basis of its weak capital base and high non-performing asset.
The class-C finance company has an outstanding loan worth Rs 210 million and its non-banking assets stands at Rs 300 million. Banepa-headquartered finance company has two branches one each in Kathmandu and Lalitpur.
The central bank had started investigation after its depositors – whose could not get their deposits back– complained the central bank.
However, the deposits of the public are not at risk as the collaterals pledged against loans issued are under central bank’s possession.
The company has around 5,000 depositors, according to the central bank.
After repeated cases deposit risk of the financial institutions, the central bank has started deposit of Class-B development banks and Class-C finance companies up to Rs 200,000 insurance through Deposit and Credit Guarantee Corporation.
Had the law punished Uttam Pun and his team of the liquidated Nepal Development Bank (NDB) by putting them behind bars, others would not have been dared to risk the public deposit.

DCGC may have to wait to start deposit gurantee

Deposit and Credit Guarantee Corporation (DCGC) may have to wait before it starts deposit guarantee scheme.

In the Monetary Policy for 2010-11, the central bank has made it mandatory for class-D micro finance institutions to guarantee deposits up to Rs 200,000. But class-D micro finance institutions were not allowed to collect deposit from the public except from their members till July 16.

The central bank allowed them to collect deposit from public from July 17. From the same date, DCGC has also started the deposit guarantee scheme for the deposits of up to Rs 200,000 of these institutions.

According to the central bank, only those class-D institutions can collect deposit from the public which have been posting profits for last three consecutive years.

Some of the institutions, which have fulfilled the central bank's criterion, have applied for the approval from the central bank to collect deposit from the public claiming that they have fulfilled the criterion fixed by the central bank to collect deposit from the public.

"Once they get approval from the central bank, they come to us for the deposit guarantee," said Jagdish Chalise, deputy general manager at DCGC that is planning to guarantee the deposits to safeguard the small depositors. "DCGC is fully prepared to entertain them."

The fiasco of Nepal Development Bank (NDB) that has been sent to liquidation by the Patan Appellet Court has compelled the central bank to guarantee the small deposits to prevent such incidents, where small depositors could lose their hard-earned savings.

Though, almost all the depositors of the bank got their deposit back, NDB is the first bank in the history of Nepal to be sent to liquidation after its financial health deteriorated and was beyond revival.

Nepse allows some companies to start trading

Some firms -- United Insurance Company, Raghupati Jute Mills, Nepal Bitumin and Barrel, Nepal Finance and Nepal Electricity Authority (NEA) Bond -- have paid their annual listing renewal fee today.
Nepse has also allowed today the trading of Paschimanchal Development Bank and Salt trading Corporation, which have already paid their renewal fee within the time but Nepse -- by mistake -- halted their trading yesterday.
Though, the secondary market has never seen the trading of bonds, it has also frozen the trading of NEA Bond and Nabil Bank's Bonds due to their failure in paying the annual renewal fee. Similarly, it has halted the trading of Nepal Development Bank and Hotel Yak & Yeti. The former has been suspended after the Nepal Rastra Bank filed a case asking for permission to liquidate it at the Court and the later has been not paying the renewal fee for last three years as it wanted to be delisted.
According to the Nepse, it has halted the trading of 19 companies -- including Paschimanchal Development Bank and Salt trading Corporation that have already paid their fee. The renewal fee has to be paid -- as according to the Share Listing Regulation -- within the three months of the new fiscal year that ended on October 17. "Due to their failure in paying renewal fee, the Nepse has halted their trading yesterday -- the first day of the trading of this week after the holiday," Nepse said.
A company has to pay Rs 50,000 renewal fee, if its paid-up capital is more than Rs 100 million. Similarly, a company has to pay Rs 35,000 fee, if its paid-up capital is between Rs 50 million and Rs 100 million. One has to pay Rs 25,000, if the paid up capital is between Rs 10 million and Rs 50 million whereas a company has to pay Rs 15,000, if its paid-up capital is less than Rs 10 million.
Meanwhile, Nepse today also lost -- though a marginal 0.05 point -- to close trading at 601.16 points. But the float index gained 0.04 point to close at 57.48 point.
Api Finance has started its trading from Thursday at Rs 540 per unit of shares. Its 10 units of shares were traded for Rs 5,400 on the first day at the secondary market.

Hotel Yak & Yeti to be delisted
KATHMANDU: Hotel Yak & Yeti -- that has been wanting to be delisted -- could be delisted soon. As according to the rule, if a company doesnot pay annual renewal fee for three consecutive years, it could be delisted. The hotel has not been paying its renewal fee for three consecutive years. The Nepse board has also discussed on the hotel's request to be delisted but has not taken any decision. Only four hotels are listed in the hotels sub-group under Nepse. Hotel Yak & Yeti, Soaltee Hotel, Taragoan Regency (Hyatt) Hotel and Oriental Hotel (Radisson) have listed a total of 24,225,898-unit shares in the secondary market. Except for the Soaltee Hotel that has a paid up value of Rs 10 per unit share others have Rs 100 paid up value per unit share. Hotel Yak & Yeti has listed 2,209,208-unit of shares with a face value of rs 100 per unit.

Higher denomination notes in short supply

ATMs closed, banks’ ceiling on withdrawal ahead of Dashain

The Nepal Rastra Bank (NRB) is facing a tough time ahead of Dashain. There is an acute crisis of currency notes of higher denomination.
Krishna Bahadur Manandhar, deputy governor, NRB, however, failed to allay revellers’ apprehension. “A shipment, carrying Rs 12 billion, is only expected on October 6. It will help tide over the scarcity,” he said. But that makes little sense for the revellers. Dashain will be over on October 3. A team of Nepal Bankers’ Association (NBA), too, lodged a complaint with the NRB about the looming crisis.
In a departure from the norm, a few desperate bankers were compelled to accept Indian Currency (IC) to meet the growing customers’ demand. But a peeved banker pointed out the legal constraints of paying the customers in IC. In the run up to the festive season, a bank requires around Rs 1 billion in cash daily to pay the customers.However, Manandhar explained the logistical problem that led to the crisis.
“We’ve been expecting the consignment from France earlier. But it got delayed due to unavoidable circumstances. The shortage stands at Rs 4,800 million,” he explained. As the crisis deepened, some banks were forced to shutdown their ATMs from this evening.
A few banks have put a cap on withdrawal as well. A depositor cannot withdraw more than Rs 1 lakh. Agriculture Development Bank Nepal has instructed its branches not to pay more than Rs 25,000, sending the customers into a tizzy.
“Though the central bank gave us Rs 10 million today, the demand is five fold,” said a banker.Uma Kant Thapaliya, president, NRB Employee's Association (Thapathali), said that there had also been an increased demand for lower denominations
.“This year, we’re not giving more than Rs 4,000 in lower denominations to an individual. This is half of the usual amount during the festive season,” he said.
He took a dig at the NRB for mismanagement, alleging it has been able to fulfill only 10 per cent of the demand. Thapaliya said that the crisis could have been averted had a proper planning was in place around six months ago.

NDB depositors withdraw cash
KATHMANDU: Around 60 depositors of the Nepal Development Bank (NDB) on Tuesday withdrew Rs 4.84 million — 50 per cent of their deposit. The withdrawal process took place between 3 and 5pm. “It’ll continue for the next two days," said Kirti Madan Joshi, president, Nepal Bikas Bank Pidith Sangh. On Friday, the Patan Appellate Court had directed the Nepal Rastra Bank (NRB) to release funds for the cash-strapped depositors. Subsequently, the central bank released Rs 27.9 million on Sunday. The court has ordered the NRB to let the depositors withdraw 50 per cent of their sum but not exceeding Rs 2 lakh.

NRB releases Rs 27.9 million for troubled-NDB depositors

Nepal Rastra Bank (NRB) on Sunday decided to release Rs 27.9 million for the depositors of Nepal Development Bank (NDB). On Friday, the Patan Appellate Court directed the NRB to let the depositors withdraw a minimum amount in view of the festive season.
The court ordered the NRB to let the customers withdraw 50 per cent of their deposits, if the deposit is up to Rs 1 lakh. While, the maximum amount that be withdrawn is Rs 2 lakh, which ought to be at least 50 per cent of the deposit. Depositors can withdraw their sum from Tuesday.
The court has directed the NRB as suggested by Investigation Officer T R Upadhyaya, who submitted his report on Wednesday.
Apart from Dashain limited-withdrawal, Upadhayay has also recommended the revival of NDB as the Badri Bhattarai-Nabin Pun group has given bank guarantees equivalent to Rs 340 million -- Rs 240 million and Rs 100 million each. He has also argued that the liquidation of the NDB might hit the economy and encourage capital flight.
The court has also directed the central bank to release the NDB employees' salaries and their Dashain bonus. There are around 30 employees including those in NDB's Pokhara branch office and the head office at Kamaladi of Kathmandu.
Based on the recommendations by Upadhyaya, the court will decide whether to revive the bank or send it into liquidation after Dashain. The recommendation has said that in case of revival, the institutional depositors like Nepal Army and Employment Provident Fund will get their money back in three years.

Relief for strapped NDB depositors

Troubled Nepal Development Bank's (NDB) depositors might be able to celebrate Dashain with an easy mind as Patan Appellate Court yesterday directed Nepal Rastra Bank (NRB) to let them withdraw a minimum amount from their deposits.
The court has asked NRB to let worried depositors withdraw Rs 50,000 -- 50 per cent of their deposit -- if their deposit is Rs 1,00,000. "In case of more than Rs 1,00,000 deposit, they can still withdraw 50 per cent but not above Rs 2,00,000 deposit," said Nepal Bikash Bank Peedit Sangh president Kirti Madan Joshi.
"The letter wil reach NRB on Sunday and it will decide when to let us withdraw our deposits," an elated Joshi said adding that the NRB governor might decide their fate on Sunday. "If NRB permits us to withdraw, depositors with savings accounts and fixed -- whose account has already matured -- can withdraw according to the court directive," he added.
The court has heard the case after Investigation Officer T R Upadhyaya submitted his report on Wednesday. Upadhayay has recommended the revival of NDB as the Badri Bhattarai-Nabin Pun group has given bank guarantees equivalent to Rs 340 million -- Rs 240 million and Rs 100 million each. He has also argued that the liquidation of the NDB might hit the economy and encourage capital flight.
Though he has asked the court to clarify the definition of small depositors the court is silent on it and in turn has asked NRB to make arrangements for the withdrawal of deposits before Dashain.
The court has also asked the central bank to release the NDB employees' salaries and their Dashain bonus. There are around 30 employees including those in NDB's Pokhara branch office and the head office at Kamaladi of Kathmandu.
Based on the recommendations by Upadhyaya, the court will decide whether to revive the bank or send it into liquidation after Dashain. The recommendation has said that in case of revival, the institutional depositors like Nepal Army and Employment Provident Fund will get their money back in three years.
According to Upadhayay's recommendation, the settlement of Non-Performing Assets (NPA) and Non-Banking Assets (NBA) with extra capital injection can revive the bank. "The bank can be revived with internal resources (Rs 274.64 million) and Rs 320 million capital injection from the Bhattarai-Pun Group," he said.
Bhattarai -- the current promoter -- has given a Rs 240 million bank guarantee through Kumari Bank. Pun -- the son of 'controversial' former NDB chairman Uttam Pun -- has given a Rs 100 million bank guarantee through Kist Bank.
However, NDB has also to settle its NPA -- Rs 110 million with Holyland School, Rs 90 million with Nepal Cooperatives Ltd and Rs 80 million with Gurkha Hydropower for its revival.
The first development bank of Nepal has 19,865 shareholders and around 4,000 depositors. Patan Appellate Court appointed Upadhyaya as investigation officer on July 29 as per the Insolvency Act 2007. This is the first of its kind of case in the financial history of Nepal in which NRB sought the court's approval to sent a bank into liquidation.

Upadhyaya recommends NDB's revival

Investigation officer T R Upadhyaya has suggested the revival of troubled Nepal Development Bank (NDB). He has recommended to Patan Appellate Court that the bank has chances of revival as the Badri Bhattarai-Nabin Pun Group has given bank guarantees equivalent to Rs 340 million -- Rs 240 million and Rs 100 million each.
However, he has asked the court to clarify who the small depositors are and how much should they get. The Court had earlier instructed him to pay them first. Tomorrow, the court will define the small depositors and the amount they should get, and it will also order that the salaries of the employees be paid as they have not got their salaries. The employees had urged Investigation Officer Upadhyaya to get them their salaries before Dashain. Upadhyaya has urged the Court for payment of the employees salaries. There are around 30 employees including those in NDB's Pokhara branch office and head office in Kamaladi of Kathmandu.
However, based on the recommendations of Upadhyaya the Court will decide either to revive the bank or send it into liquidation after Dashain.
The recommendation has clearly stated that the bank, even if revived, cannot pay institutional depositors like Nepal Army and Employment Provident Fund. "If the bank is revived and runs according to the plan of the Bhattarai-Pun group, these institutions could get their deposits after three years," the recommendation said. It said that the settlement of Non-Performing Assets (NPA) and Non-Banking Assets (NBA) with capital injection will help improve the financial health of the bank as its Capital Adequacy Ration (CAR) will come to 11 per cent. In his report, Upadhyaya has recommended that the bank can be revived with internal resources (Rs 274.64 million) and Rs 320 million capital injection from the Bhattarai-Pun Group.
Bhattarai -- the current promoter -- has given a Rs 240 million bank guarantee through Kumari Bank. Pun -- son of 'controversial' former NDB chairman Uttam Pun -- has given Rs 100 million bank guarantee through Kist Bank.
If NDB settles its NPA -- Rs 110 million with Holyland School, Rs 90 million with Nepal Cooperatives Ltd and Rs 80 million with Gurkha Hydropower -- it can be revived, Upadhyaya has recommended in his report to Patan Appellate Court this week.Bhattarai-Pun Group's claim of settling the NPA and NBA before injecting Rs 340 million capital has been accepted by the investigation officer.
Bhattarai -- who personally holds 10,000-unit of promoters shares of NDB -- can also add Rs 80 million that is deposited for rights shares by the share holders. But Nepal Rastra Bank has frozen the money.Neither all the promoters nor all the shareholders bought the rights shares. According to the new Securities Board of Nepal (Sebon) rule, the promoters have to buy the rights shares before floating it to ordinary shareholders.The first development bank of Nepal has 19,865 shareholders and around 4,000 depositors. Patan Appellate Court appointed Upadhyaya as investigation officer on July 29 as per the Insolvency Act 2007. This is not only the first of its kind of case in the financial history of Nepal but also the appointed investigation officer has not himself got his fee though his payment comes as the first priority. The Court will decide the fee of the investigation officer.

Development banks want bigger pie

Development banks want a bigger role in the financial market.
"The central bank should ensure our representation in Credit Information Bureau (CIB)," said Development Bankers Association president and CEO of Malika Bikas Bank Jhapat Bohara, adding that Development banks also want to be the part of Central Depository Company, Banking Training Institute and Clearing House.
The Central Depository Company that is being established for the modernisation of the domestic capital market will have 50 per cent share of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 percent of a group of six commercial banks -- Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank -- as promoters. Bohara urged the Nepal Bankers Association (NBA) to give development banks also a chance to be part of it.
NBA -- along with Nepal Rastra Bank (NRB) and other financial institutions -- has established Nepal Clearing House Ltd that will commence Automatic Check Truncation and Clearing Systems to be evolved into a nation-wide payments system. It has 60 per cent share of NBA, 15 per cent of SCT, 10 per cent share of NRB and the remaining share is planned to be distributed between development banks and finance compnaies.
NBA -- with the help of NRB and Rural Microfinace Development Centre (RMDC) and other financial institutions -- has also planned National Banking Training Institute (NBTI). The training institute has a support base of $2 million from Asian Development Bank (ADB). "It will be developed as a self-sustainable institute that will be run by a professional CEO," said Nepal Rastra Bank (NRB) deputy governor Bir Bikram Rayamajhi, inaugurating the one-day seminar on 'Corporate Good Governance in Banks and Financial Institutions' organised by Development Bankers Association here yesterday.
Giving his presentation on Corporate Good Governance in Banks and FIs, Kumari Bank chief executive officer Radhesh Pant said that lack of good corporate governance will result in collapse of banks and financial institutions.
"Good corporate governance will increase depositors' trust leading to rise in premium, Price to Earning (PE) ratio and share price of institutions as a whole," he said adding that corporate good governance will also increase access to finance, spruce up brand image and help mobilise funds.
"Banks are the custodians of public money and thus they need to ensure good corporate government for the better management of public money," Pant added.
"Lack of good corporate governance will lead banks and financial institutions to suffer a fate similar to that of Nepal Development Bank (NDB)," Bohara said.

NDB revival possible, subject to ifs...

Nepal Development Bank (NDB) investigation officer T R Upadhyaya thinks that the bank can be revived if it settles its Non-Performing Assets (NPA).
"If NDB settles its NPA -- like Rs 110 million with Holyland School, Rs 90 million with Nepal Cooperatives Ltd and Rs 80 million with Gurkha Hydropower -- it can be revived," he said hinting that he might submit the report to Patan Appellate Court this week. The court will decide NDB's fate after it receives Upadhyaya's report -- whether to revive or liquidate it.
Impatient depositors of the Nepal's first development bank today tried to convince him of the possibilities of the revival of the bank. Around 4,000 depositors of troubled NDB are willing to assist the new investors by not withdrawing their accumulated sum -- around Rs 350 million -- for the next six months. "We want the bank to reopen at the earliest," said Nepal Bikash Bank Peedit Sangh president Kirti Madan Joshi. "Hence, we'd like to withdraw money in instalments. We are ready to withdraw only 50 per cent of our deposit to help the bank, if it reopens," he said adding that new investors should be given a chance.
"But the new investors' capital plans have to be convincing," said Upadhyaya, who is holding one-to-one consultations with prospective investors.
Meanwhile, depositors urged Upadhyaya indirectly to accept the proposal of Badri Bhattarai and Nabin Pun -- son of former chairman Uttam Pun -- and his group who have proposed to settle the NPA and Non-Banking Assets (NBA) before injecting Rs 240 million capital. Bhattarai -- who personally holds 10,000-unit of promoters shares of NDB -- plans to use the Rs 80 million that is deposited for rights shares to make a total of Rs 320 million. Along with Rs 280 NPA -- that they have planned to recover, and Rs 320 million -- the total will come to Rs 600 million, according to the capital plan of Bhattarai and his group.
Nimbus Group and its associates plan to inject Rs 320 million but want to buy out 'promoters' who have been held responsible for sullying NDB's reputation. Nimbus has offered depositors the choice to withdraw their deposit. It also plans to issue rights shares to increase capital to Rs 640 million by end of 2010.
However, not only depositors but also around 20,000 shareholders are clueless since the matter has gone into a legal loop. Patan Appellate Court appointed Upadhyaya as investigation officer on July 29 as per the Insolvency Act 2007.
Of late, depositors are getting lured by high interest rates and do not check the reliability of the banks' management and Board of Directors. They have learnt the hard way that reliability is the key and not just the lure of high interest.
NDB's case has also debunked the myth that banks can never fail. "In fact banks can fail, if the management and directors are not sincere," said a banker. "Depositors must be aware of the back ground of the management and Board of Directors of banks and financial institutions before depositing their hard-earned money," he said, urging banks and financial institutions to follow Nepal Rastra Bank's (NRB) directives. "Had NDB followed NRB's directives it would not have been in trouble today."

NDB depositors learnt the lesson hard way, suffer before Dashain

Around 4,000 depositors of Nepal Development Bank (NDB) are troubled ahead of this festive season.
In a bid to get more interest, they had deposited their hard-earned money in a bank that had all along flouted Nepal Rastra Bank’s directives, plunging it into financial woes.
The depositors are clueless when they could get the money back since the matter has gone into a legal loop. The Patan Appellate Court has appointed T R Upadhyaya as an investigation officer on July 29 as per Insolvency Act 2007. He is likely to submit the report in a couple of days.
The Court will decide on the NDB’s fate only after it receives Upadhyaya’s report. The NDB may either be revived or liquidated as per the court’s order.
Though Upadhyaya is following the due procedures, the depositors are but naturally getting restive.
The investigation officer is poring over two capital plans — put forth by Badri Bhattarai and associates and the Nimbus Group, respectively.
The depositors, meanwhile, have come up with a suggestion. They are willing to assist the new investors by not withdrawing their accumulated sum — around Rs 350 million — for the next six months.
“We want the bank to reopen at the earliest. Hence, we’d like to withdraw money in installments,” said Kirti Madan Joshi, president, Nepal Bikash Bank Peedit Sangh. The victims have learnt their lesson the hard way. Reliability is the key and not just the lure of high interest.
Badri Bhattarai — current promoter of NDB — and his group are looking at settling the Non-Performing Assets (NPA) and Non-Banking Assets (NBA) before injecting Rs 240 million as capital. Bhattarai holds 10,000-unit of promoters shares of NDB.
But Nimbus Group and associates plan to buy out the promoters, who have been held responsible for sullying the NDB’s reputation. It also plans to issue rights shares to increase the capital to Rs 640 million by end of next year. The Group has offered the depositors the choice to withdraw their deposit. It is ready to deposit Rs 32 million — 10 per cent of their proposed Rs 320 million capital injection — as and when NRB deems fit.
NDB has only 30 staff on its rolls, which include employees in the Pokhara branch and the head office in Kathmandu. It has around 20,000 shareholders.

Two groups bid to revive sick Nepal Development Bank

Two groups have submitted proposals to investigation officer Tirtha Raj Upadhayay to revive troubled Nepal Development Bank (NDB).
Nimbus Group of Jagdish Agrawal alongwith World Link, ICTC Group, Golchha Group, Kailash Chandra Goyal, Ravi Singh Group, Guna Chandra Bista and others have submitted one proposal while Badri Bhattarai, current promoter of NDB, and his group have submitted another proposal.
"After investigation, we found that NDB has Rs 90 million cash but the deposits of the public -- except organisations -- come to around Rs 350 million," said Upadhyaya whom Patan Appellate Court on July 29 appointed the investigation officer to report and start the insolvency process.
The Court has ordered that small depositors be paid first. "If Rs 90 million is distributed among the public depositors, they will one get just one-fourth of their real deposit," he said adding that the definition of small depositors was also unclear.
"Revival of the troubled bank might be the best option," he said adding that he has called both the groups to discuss their detailed capital plan. "After meeting both the groups and discussing their proposals in detail, if I am convinced I will advise the court to revive the bank," the senior Chartered Accountant by profession Upadhayay added.
Nimbus Group and its associates are ready to deposit Rs 32 million as and when Nepal Rastra Bank (NRB) asks and also to prepare a capital plan within three months. "We are planning to inject Rs 320 million after detailed study," said Sudarshan Raj Pandey, a representative of the Nimbus Group that also plans to buy out the promoters who are responsible for damaging the bank. "We will buy the shares of the promoters responsible for damage to the bank at one rupee per share and buy them out," he said adding that after that they plan to issue rights shares to increase the capital to Rs 640 million by the end of 2010.
If the rights shares are not sold completely, we will buy them," Pandey said assuring the depositors that if they want to take their deposit back after Nimbus starts running the bank, they will be allowed to do so.
The other group led by Badri Bhattarai has claimed that it is ready to inject Rs 640 million but has not elaborated its plan.
Meanwhile, the Supreme Court has declined to issue a stay order as demanded by the Employees' Provident Fund (EPF) to protect its deposit in the process of liquidating NDB.Directing to return the deposit of the small depositors first, Patan Appellate Court had okayed the liquidation of NDB. The court has directed to start the process of liquidation as per the Insolvency Act 2007.

NRB urges police, RID, IRD to investigate NDB honchos

Nepal Rastra Bank (NRB) today formally requested the Nepal Police, Revenue Investigation Department (RID) and Inland Revenue Department (IRD) to thoroughly investigate into financial crimes involving the board of directors -- serving at different time till date -- of Nepal Development Bank (NDB), including the patron Uttam Pun and chairman Amar Gurung.
All of them have been accused of fraud, financial embezzlement and misuse amounting to a massive Rs 1.08 billion. The NRB has also sought for the Finance Ministry’s coordination in the investigation process.
“The troubled NDB board of directors, chief executive officers, advisors and managing directors — serving at different times — have not been abiding at all by directives of the central bank, risking the depositors and shareholders’ money, but benefitting themselves,” the central bank’s Supervision Department said in the letter to Police Headquarters written on Thursday. Similarly, the department also wrote to the RID and IRD to probe the source of income and banking transactions of Pun, Gurung and all other directors. The NRB Board had decided to take the help of police, RID and IRD on July 6.
The central bank also sought the Appellate Court’s approval to appoint liquidator to begin the liquidation process as the bank could not be revived and deserved to be sent to liquidation under Section 77 of the Bank and Financial Institution Act 2007. Before moving the Appellate Court, the central bank had also sought NDB’s clarification on why it should not be sent for liquidation. In response, the first development bank in the country could not furnish satisfactory clarification.
According to the NRB’s findings, the NDB has a huge loss of Rs 670.87 million, though it possesses a paid-up capital of Rs 320 million. It has total assets of Rs 730.13 million but its non-performing assets stand at 55.09 per cent and capital adequacy ratio is a whopping 48.31 per cent: that is almost five times more than the permissible limit of 11 per cent.
The NDB had Rs 720 million deposit of 32,000 depositors till mid-March. Of the total deposit, the bank has not been able to return Rs 330 million worth of institutional deposits of Employment Provident Fund and Nepal Army´s Welfare Fund even after expiry of maturity date. The EPF and Army’s deposit constitute around 45 per cent and 27 per cent of the total deposit, respectively.

Nepal Development Bank stares at liquidation

Nepal Rastra Bank (NRB) — the central bank — has moved Patan Appellate Court to press for liquidation of the troubled Nepal Development Bank (NDB).
If the Court decides in favour of NRB, then NDB will hold the unenviable record of becoming the first banking institution in the nation’s financial history to be liquidated.
Liquidation refers to the process by which a company — or part of a company — is disbanded, liabilities settled and subsequently the assets and property of the company is redistributed among shareholders.
A liquidator — in other words an officer who is specially appointed to wind up the company’s affairs — oversees the due process. The liquidator is legally empowered to act on behalf of the company in various capacities. S/he is primarily responsible to bring and defend lawsuits.
Other duties and responsibilities include collecting outstanding receivables, paying off debts, finishing corporate termination procedures and settling all claims ahead of the dissolution.
Stating that the bank could not be revived and deserves the liquidation as per Section 77 of the Bank and Financial Institution Act, 2007, the central bank sought Patan Appellate Court’s approval to appoint liquidator to begin the liquidation.
However, the court has the prerogative to take a decision that could seek an alternative if any party evinces interest to run the beleaguered institution.
NDB — Nepal’s first development bank that started its operations in 1998 — is ailing for many years. According to NRB’s findings, NDB has run up huge losses. Though it has a paid-up capital of Rs 320 million, the losses are pegged at Rs 670.87 million. While, it has total assets worth Rs 730.13 million. But, its non-performing assets stand at 55.09 per cent and capital adequacy ratio (CAR) is a whopping 48.31 per cent, which is almost five times more than the permissible limit.
In this light, the ill-fated financial institution has little chance of a revival, especially after Dreams Capital Ltd’s failed attempt to pump Rs 280 million to put it back in business. One of the negotiators, who were involved in the revival bid, said that the capital injection could restore CAR to the required level of 11 per cent.
But he has reservations about Uttam Pun — NDB’s patron — who has shares worth Rs 1.6 billion. Pun claimed to have resigned from his post and showed willingness to sell his shares after the Dreams Capital Ltd declined to invest because of his presence. Pun’s actions smack of escapism to evade legal action as he cannot sell his shares that have been frozen for transaction.
Association of Nepali Development Banks and the Association of Nepali Finance Companies had also lobbied hard with NRB not to liquidate NDB. However, the central bank had no option but to opt for liquidation.
Earlier, Sunanda Shrestha and his group had injected Rs 86.2 million. Shrestha also bowed out, thanks to Pun and his associates, who did not want to let go the management.
NRB had declared NDB an ailing institution on October 11, 2007. Over the years, NDB never followed the central bank’s regulatory obligations, instead frittered away depositors’ money. Had the NRB taken bold step at the outset, then less depositors would have been in trouble today.
Uttam Pun — the then executive chairman and promoter of NDB — repeatedly moved the Appellate Court, got a reprieve from the judiciary even as the unsuspecting public continued to deposit in his institution.
NDB got many opportunities from NRB but each time it tried to get away by furnishing abstract clarifications. On June 2, NRB had sought a clarification within 15 days, citing Clause 86 of Nepal Rastra Bank Act. NDB, in turn, submitted a capital plan on June 18, seeking time till
October 17 to improve its financial health. It claimed that given the opportunity, it could sell Rs 10 million worth shares and recover Rs 90 million deposit from Nepal Cooperatives as
instructed by NRB.
Under the circumstances, liquidation is the only corrective measure that a regulator can
restore to prevent further losses, putting paid to the bank’s hopes to operate with doctored balance sheets and misusing public
money.
Legal action also has to be taken against NDB’s management and promoters to send out a strong message that depositors’ sums are safe and central bank is capable of living up to its regulator’s role. However, the central bank has to ensure speedy handover of around 3,200 small depositors’ money.
Time is ripe for NRB to act tough to rein in tainted banks in an otherwise healthy banking
industry. It’s high time as well to ponder over setting up a national deposit insurer, which can insure deposits up to a certain limit.
Banking is one of the few sectors that has not only created jobs but also given a chance to the investors to operate in a transparent manner. However, the bad apples need to be weeded out to restore depositors’ faith that banks and financial institutions are the custodians of public money.

NDB small depositors ask their money back as soon as possible

Nepal Development Bank (NDB) Victims' Group has asked the Nepal Rastra Bank (NRB) to return deposits of small depositors and amount of the rights shares of some shareholders as soon as possible as the court procedure will take a long time.
"If the liquidation is the last resort, we urge NRB to immediately get permission from the court and return small depositors money and the amount of rights shares," said Kirti Madan Joshi, president of ad-hoc committee of NDB-Victims Group during a press meet here today.
They also urged to give a last chance to revive the ill-fated bank. "It should be given a last chance to revive," he said suggesting three options - indirect intervention, and strict supervision, taking control of its management or appointment of new management team to revive the first development bank of the country. "NRB could form a new board of directors including promoters like Nepal Army, Employees' Provident Fund and investors," he added.
The victims demanded to punish the existing management team, directors and senior officers of the bank for mismanaging the people's deposit. "A bank cannot misuse public deposit," the victims said warning that if their demands are not met they will go on strike."
The liquidation of NDB is not the solution," said Joshi adding that it would affect the entire financial sector.
The victims slammed NRB for delay in taking action against the troubled-NDB. "NRB officials and NDB both should take responsibility for the present state of NDB," the depositors accused.
The NRB has decided the NDB to sent to liquidation after its repeated attempt to revive it as a healthy financial institution failed due to non-cooperation of the bank's chairman Uttam Pun and his team.

NRB set to move court seeking liquidation of Nepal Development Bank

Nepal Rastra Bank's (NRB) Board meeting, finally, decided today to move to Patan Appellate Court for the liquidation order of the troubled Nepal Development Bank (NDB).
The NRB board took the decision after it was not satisfied with the clarification NDB submitted on Thursday. "The clarification is abstract," a board member said.
Earlier, the NRB on Friday has again sought NDB's clarification either it was of the Board of Directors' decision or the chairman's only as the clarification letter submitted to NRB on Thursday was signed by the NDB chairman Amar Gurung only. The NRB had asked NDB's board to clarify its stand.
On June 2, the NRB has decided to seek explanation with the ailing development bank on why should not it be liquidated. The NRB has given it a 15-day to submit the clarification.
According to the clause 86 of the Nepal Rastra Bank Act, NRB has given a 15-day deadline for the clarification to NDB. The NRB will now file a case at Patan Appellate Court seeking permission for NDB's liquidation under clause 74 of Banks and Financial Institutions Act (BAFIA).
On June 18, NDB submitted a capital plan seeking time till October 17 to improve its financial health. It had claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. "It still would need an additional Rs 70 million capital injection after it managed to get its money back," according to the NDB.
"The NDB could not be revived as there isn't any guarantee that it will make amends as it has repeatedly been flouting the central bank's directives," said the NRB that has frozen its all accounts after it sought explanation.
According to the findings of central bank, small depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors that are around 3,5 00 need not worry, NRB said.
NDB -- the nation's first development bank -- started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per rule, a bank must maintain its CAR at 11 per cent.
On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the central bank's regulatory obligations and played dirty with depositors' money.

NRB agains seeks clarification with NDB

Nepal Rastra Bank (NRB) has asked the troubled Nepal Development Bank (NDB) to clarify its Board of Directors' stand on the clarification letter that it submitted to NRB on Thursday.
The NDB submitted its explanation -- signed by its chairman Amar Gurung -- to NRB but NRB said it had sought clarification on why the ailing development bank should not be liquidated from its board, said a high ranking NRB official.
The NRB letter asked NDB's board to clarify its stand. "If the clarification is from the board also, the minutes of the board meeting also have to be submitted along with the clarification," the official said adding that the minutes of the board meeting are a must if it is the board's decision. "It is unclear whether it is the NDB chairman's personal explanation or the reply of the board of directors."
"Yes, we have received a query letter," NDB acting chief executive officer Purna Prasad Sharma said adding that the board is meeting to darft a clarification to NRB after it received the letter.
On June 18, NDB submitted a complete capital plan but also sought time till October 17 to improve its financial health. It claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. However, it still needs an additional Rs 70 million capital injection even after it manages to get its money back.
However, there isn't any guarantee that NDB will make amends as it has repeatedly been flouting the central bank's directives.Individual depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. The NRB's findings show the Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors need not worry. NDB has around 20,000 shareholders and 3,500 depositors.
If NRB finds the clarification unsatisfactory, it will file a case at Patan Appellate Court to press for NDB's liquidation. NRB has already seized all its assets and frozen the accounts in various financial institutions.
NDB -- the nation's first development bank -- started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets (NPA) is at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per rule, a bank must maintain its CAR at 11 per cent.On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the NRB line.

Nepal Development Bank seeks time to improve

Troubled Nepal Development Bank (NDB) has submitted its explanation, signed by its chairman Amar Gurung to the Nepal Rastra Bank (NRB) today - ahead of the deadline that expires on Sunday.
"We've submitted a complete capital plan, seeking time till October 17 to improve our financial health. If we get the opportunity, then we can sell the shares of various institutions and get back the deposit from the National Cooperatives as instructed by the NRB. Once we manage to rack in this sum, we will still be in need of additional Rs 70 million capital injection," said Purna Prasad Sharma, acting CEO of NDB.
Incidentally, the DB chairman has only signed the clarification letter. Hence, it is unclear whether it is his personal explanation or conveys the message of the board of directors as well."We'll ask the bank tomorrow to clarify the board of directors' stand. But, there isn't any guarantee that it'll make amends since it has been repeatedly flouting our directives," said a senior NRB official.
"But the individual depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million as bank deposit," the central bank said adding that its findings show that save the Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million), small depositors need not worry as they will get back their deposits back. The NDB has around 20,000 shareholders and 3,500 depositors.If the NRB finds the clarification unsatisfactory, then it will file a case at the Patan Appellate Court to press for the bank's liquidation.The NRB has already seized all its assets and freezed the accounts in various financial institutions.
NDB - the nation's first development bank - started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per the rule a bank maintain its CAR at 11 per cent.
On October 11, 2007, the NRB had declared the goings in the bank as a problem and directed a slew of corrective measures but the NDB never followed the NRB's directions.

NDB individual depositors to get money back

Atleast its a little relief for the depositors of Nepal Development Bank (NDB) after a stressful week of uncertainity. Individual depositors of the troubled Nepal Development Bank (NDB) need not worry as according to Nepal Rastra Bank (NRB), NDB has Rs 16.5 million cash and Rs 160.3 million bank deposit -- including Rs 95 million deposit in Nepal Cooperative -- Rs 95.7 million savings deposit, Rs 84.9 million fixed deposit and Rs 193.5 million other deposits.
"The findings of NRB show that except institutional depositors -- Employee Provident Fund (Rs 331.4 million) and Nepal Army (Rs 180 million) -- individual depositors need not worry as they will get their deposits back," the central bank said. The NDB has not been able to return the Nepal Army's and Employees Provident Fund's (EPF) term deposits -- even after maturity -- and they might lose their deposits. Nepal Army and EPF have been asking for their money back repeatedly but the bank is unable to return it.
On June 2, NRB decided to ask NDB why should it be not sent into liquidation. It sent a letter on June 3 to NDB asking why it should not be liquidated.
According to clause 86 of the Nepal Rastra Bank Act, NRB has given a 15-day deadline for the clarification to NDB. If the clarification is not satisfactory, NRB will file a case at Patan Appellate Court under clause 74 of Banks and Financial Institutions Act (BAFIA) to begin the process of NDB's liquidation.
After seeking clarification, NRB seized all the cash, cheques and securities of the bank and froze its accounts in various financial institutions.
NDB -- Nepal's first development bank -- started operations in 1998 and has a paid-up capital of Rs 320 million but its accumulated loss is more than double the paid-up capital, Rs 690.2 million by the end of mid-March. Its non-performing assets (NPA) is at 55.09 per cent and capital adequacy ratio (CAR) at a whopping 48.31 per cent. A bank must maintain its CAR at 11 per cent.
The NDB top brass has blamed NRB for taking biased action. "NRB has treated other financial institutions and NDB unequally," blamed NDB chairman Amar Gurung.
However, NRB governor Dipendra Bahadur Kshetry said that other financial institutions obeyed the NRB directives and have been improving. "Over the last four years, the NDB board never followed NRB's directives," Kshetry said adding that had NDB paid heed to the directives the condition of the bank would have improved.
The central bank has declared it a 'problematic bank' on October 11, 2007 after NDB and its board repeatedly flounted the central bank's directives. "NDB board members constantly failed to abide by NRB directives, were involved in personal gain and put depositors' money at risk," said NRB. "Financial institutions are custodians of public money and they have no right to put public money at risk."
Nepal Bankers' Association (NBA) has suggested NDB come up with a concrete plan within 15 days to revive itself. "NDB still has time to furnish its explanation with a convincing business plan to save itself," said Sashin Joshi, president of NBA and CEO of NIC Bank. NBA has also recommended a bottom-up approach in distributing deposits to depositors.