Against this background, Nepal Rastra Bank -- the central bank of the country -- took over the management of the bank in March, 2002, charging it of being unable to protect depositors´ interest and practicing imprudent corporate governance. The central bank management soon reckoned alarming amount of misallocations of bank´s resources, many of them were even not properly recorded in the book of the bank. [break]
The bank management that was ousted by the NRB had spent more than Rs 30 million to decorate its corporate office in Kathmandu alone. Many promoters of the bank had taken loans from the bank itself, flouting the central bank´s rule that bars promoters from taking loan from bank in which they have equity shares.
The financial woes of the bank did not come to an end even after the management was taken over by the central bank. The financial health further deteriorated during the 15-month management of the NRB, though it did many good things like disassociating bad and notorious shareholders from the bank´s management.
As a result, the central bank was compelled to hand over the management again to a professional management team headed by a well-known banker, Shovan Dev Pant, some four years back.
"The task of managing a bank whose all crucial financial indicators were in the worst state was rally a Herculean task," Shovan Dev Pant, CEO of the bank, recalled at a press meet organized on Monday to brief media about the progresses made by the bank during the last four years.
Over 40 percent of non-performing loan, capital requirement that was negative by almost 14 percent and net worth was negative by over Rs 700 million were some of alarming indicators of the bank, he said.
Four years down the lane, the story has completely changed for the bank that once was the most problematic private bank. “Now Lumbini Bank is one of the healthiest and safest banks in Nepal´s banking industry," declared Pant. The bank has maintained a robust liquidity position of 30 percent even during the current liquidity crunch situation, he said.
The capital adequacy ratio has climbed to 24.23 percent, which is the highest among banks, net worth has been positive to Rs 1.45 billion and the non-performing assets have gone down to 4.66 percent, Pant said, highlighting the achievements that the bank has made so far.
"The reduction in the NPA was not due to loan write-off but due to cash recovery worth Rs 1.2 billion from bad loans and that is something worth mentioning," he said, highlighting the harsh measures that the management had to take to recover troubled loans like confiscating shares owned by promoters and using it to clear their loan liabilities.
Pant also delighted bank´s shareholders, who have never enjoyed dividend from the bank, by dropping hints that the bank might be in a position to declare marginal rewards to equity owners.
Chairman of the bank Prakash Shrestha, who was the board member of the bank when it was in tatters, was frank enough to say that he was not fully confident over the revival of the bank when it was handed over to a professional private management.
"I am extremely happy to note that Lumbini Bank is a financially sound financial institution now,” Shrestha said.
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