Not only who steal money from state dhukiti by preparing false vat bills, raise voice against who take loans from banking institution thinking as if its their own property. This has been a growing trend nowdays in todays banking sector in nepal, which can be fatal for banking industry in Nepal


NRB to seize former NSM chairman’s passport

Nepal Rastra Bank (NRB) has decided to seize the passport of Yogendra Prasad Shrestha, former executive chairman of Nepal Share Market and Finance (NSM), and take action against him. A board meeting of the central bank on Sunday took the decision saying that Shrestha misappropriated more than Rs 2 billion.

As per the law, Shrestha may face a three to five years prison sentence. “It has been decided that action will be taken against Shrestha as per the law, and Nepal Rastra Bank Act, Bank and Financial Institutions Act and Banking Offence and Punishment Act are focussing on it,” said an NRB board member. “Initial probe shows huge irregularities in the company,” said a senior NRB official.

According to the central bank, investigation is still underway and the Nepal Rastra Bank Act, Bank and Financial Institutions Act and Banking Offence will be invoked in this case. These acts have provisions ranging from stopping dividend distribution to sending the institution into liquidation.

The central bank on Thursday had frozen Shrestha’s bank accounts and lockers for his refusal to produce documents sought by the NRB’s supervision team. The banking regulator has also frozen bank accounts of Gita Shrestha and Saurav Shrestha, relatives of Shrestha.

The NRB’s initial investigation found that Shrestha took loans from his own company in the name of fake loanees. Shrestha also misappropriated Rs 200 million of Rastriya Beema Sansthan (RBS). According to NRB officials, the deposit of RBS has not been included in the corporate deposit details that NSM has to send to the central bank.

The Nepal Share Market and Finance (NSM) episode has established what was feared in the domestic financial market. Bad corporate governance is spread in the banking fraternity and it is high time that the regulator took a hard decision.

A series of corporate governance mishaps have hit the domestic financial market hard, with NSM the latest casualty. The NSM episode shows how vulnerable corporate governance is in development banks and financial institutions. “The situation is much worse that what we had thought,” said a senior NRB official.

This fiscal year alone, the central bank has taken action against nine financial institutions (FIs) including five finance companies. In similar cases, the central bank penalised promoters, stopped FIs from collecting deposits, lending and distributing dividends.

In all cases, promoters were found to have manipulated banking norms related to insider lending. They also did not allow the management to work professionally. Those FIs having the same person as chairman and chief executive have suffered bad corporate governance the most, as seen in Samjhana Finance, United Development Bank, Gurkha Development Bank and Nepal Share Market.

The central bank was forced to dismiss DB Bamjan, then executive chairman of Gurkha, after a series of scandals plagued the bank. Several Gurkha promoters borrowed around Rs 500 million through third parties.

NRB investigation further showed that Gurkha, violating the Bank and Financial Institution Act (BAFIA), was in the  process of buying land worth millions of rupees owned by its own promoter, Krishi Premura Holding. The bank had already paid Rs 300 million of Rs 900 million, the valued price of the land located at Kamaladi, Kathmandu.

Such was the level of irregularities that the central bank on April 29 had decided to write to the authorities concerned asking them to freeze all fixed and movable assets belonging to former directors, employees and loanees of the bank responsible for financial crisis in the institution, and take action against them under the Banking Offense Act. Officials facing the central bank’s action are former executive chairman Bamjan and directors Nirmal Gurung, Dhan Prasad Rai, Dinesh Shakya, Mina Shrestha, Sanjeev Kumar Mishra, Mahesh Prasad Rijal and Ramesh Tamang.

NRB investigation found that former executive chairman Bamjan took around Rs 250 million, while former general manager Shrestha and director Dhan Prasad Rai received Rs140 million and Rs 30 million, respectively, through third parties.

On Feb. 8, NRB decided to liquidate Banepa-based Samjhana Finance after the institution failed to recover from the financial crisis within stipulated time. Major promoters’ involvement in taking loans for themselves and their kin against banking norms led the finance company towards disaster. In Samjhana’s case, directors were not only involved in insider lending, they were also hiding details of certain transactions.

The risky behaviour of the promoters of Bara-based United Development Bank (UDB) led the central bank to declare  it crisis-ridden. The promoters were found taking loans against banking norms and the BAFIA. UDB Chairman Rabindra Bahadur Singh and director Radha Krishna Amatya were each fined Rs 500,000.

The central bank in February banned three FIs—Mercantile Finance (Birgunj), Multipurpose Finance (Rajbiraj) and Investa Finance (Birgunj) from collecting deposits, lending and distributing dividends to shareholders for their failure to increase their paid-up capital on a proportional basis every year