Central bank sends United to liquidation

KATHMANDU: The central bank has sent the troubled United Development Bank to liquidation and upgraded Pokhara-based Annapurna Finance to a class ‘B’ development bank. The Bara-based development bank was under scanner of the central bank. On January 5, Nepal Rastra Bank (NRB) had decided to liquidate it after it failed to improve despite NRB’s repeated prescriptions. The development bank was declared ‘troubled financial institution’ in March, 2011 after a NRB study revealed a sharp deterioration in its financial health, mainly due to heavy embezzlement of funds by its promoters.

Inspection by a central bank team had revealed that the district-level development bank established with a paid up capital of Rs 85 million, had a negative net worth of Rs 120 million. NRB had then asked it to recoup the money that the promoters had embezzled and instructed them to inject additional capital to improve its financials within six months. But the development bank failed to follow NRB’s directives leaving it with no option but to send the development bank to liquidation. It is the third financial institution sent to liquidation in the country’s banking history after Nepal Development Bank and Samjhana Finance.

According to the central bank’s records, the development bank got into trouble after its executive chairman Rabindra Bahadur Singh siphoned off Rs 65 million of the total paid up capital for personal use. The inspection revealed that Singh had created fake loans, and lent to promoters flouting central bank rules. NRB had also asked Nepal Police to take action against Singh and director of the development bank Radha Krishna Amatya under the Banking (Offenses) Act. Currently, Singh and Amatya are behind bars in Birgunj.

Similarly, the central bank decided to upgrade Annapurna Finance to a development bank.There were 73 listed finance companies at the share market but after the upgradation of Annapurna Finance, it will drop to 72 and one more development bank will be increased under the development banks sub group making a total of 64 from the current 63 listed development banks.

Source : THT