Four financial institutions -- Gurkha Development Bank, Capital Merchant Banking and Finance, Nepal Share Markets and Finance and People´s Finance -- are facing financial problems mainly because of bad governance or piles of bad loans. [break]
These critically ill institutions are not allowed to collect deposit or extend loan, but are obliged to release certain amount of money to individual depositors on regular basis. So, depending on capacity, different institutions have created different withdrawal ceilings, based on the size of deposits.
But recently, keeping Dashain festival in view, the central bank asked these sick financial institutions to raise this ceiling, which has put some of the cash-strapped companies in a difficult position.
People´s Finance, which had earlier told Republica about its intent to raise the ceiling, said it may not be able to do so as it has “not been able to raise funds”.
“We were supposed to raise the money by selling some plots of land in Kathmandu. But we were unlucky,” an official of the finance company, which faced cash crunch following deposit outflow of Rs 70 million, told Republica on condition of anonymity. “Since most of the offices will remain close from Monday, I don´t think we´ll be able to raise the fund by that time.”
Currently, the finance company, which owes around Rs 750 million to individual depositors, is allowing each depositor to withdraw Rs 7,000 to Rs 100,000 per week depending on the size of deposit.
Gurkha Development Bank is another financial institution which won´t be raising the withdrawal ceiling. But unlike People´s Finance, it had previously mentioned about its intention to not distribute extra cash during Dashain. It had then told Republica that the company was facing one-way drain out of funds -- since it is neither allowed to collect new deposit nor disburse new loans -- and won´t be able to raise the ceiling.
The bank, which owes around Rs 3 billion to its depositors, is currently allowing depositors to withdraw Rs 5,000 to Rs 100,000 per week.
Another financial institution facing liquidity crunch, Capital Merchant Banking and Finance, however, said it has already raised the deposit withdrawal ceiling. Till Dashain, the finance company, which is suffering from deteriorating asset quality due to exposure to real estate sector, has allowed clients with deposits ranging from Rs 100,000 to Rs 500,000 to withdraw Rs 25,000 per week. Those with deposits ranging from Rs 500,000 to Rs 1 million can withdraw Rs 30,000 and those who have deposited more than a million can withdraw Rs 50,000. Earlier, it was allowing all customers to withdraw Rs 10,000 per week.
“But it be applicable only till Dashain,” an official of the finance company told Republica. “We will come with a new notice after the Dashain festival to let our customers know about the new arrangement.”
Another cash-strapped institution, Nepal Share Markets and Finance, has also mobilized fund to raise the deposit withdrawal ceiling by selling 8,208 sq ft (2.5 ropanis) of land in Kamaladi. The finance company, which started suffering from cash shortage after its chief embezzled more than Rs 2 billion, has decided to allow clients having deposits up to Rs 20,000 to take home all the money, while those who have deposited more than Rs 20,000 can withdraw 15 percent of the amount.
Earlier, the finance company was allowing individual depositors to withdraw up to Rs 5,000 per week.
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