The board meeting of the central bank held Thursday decided to use all possible means including auctioning of assets owned by the promoters of the group for recovering the reaming loans by mid-January 2010.
The total dues comprise Rs 350 million in principal and remaining Rs 190 million in interest, according to a high ranking NRB official. The NB group that used to own 48 percent equity in the bank had borrowed over Rs 2 billion from the bank.
According to an inspection report of NRB, the group was able to borrow the amount under the names of various companies by bypassing standard banking rules that bar shareholders and their close family members to take loans from the bank where they have equity of more than one percent.
The board meeting also decided to organize Annual General Meeting (AGM) of the NB Bank on 13 January 2010 and hand over its management to an elected board of directors, if the NB bank management is successful in recovering the loans.
"However, an important condition attached to the decision is that either the NB Group should repay all the remaining loans or the NB Bank should at least publish auction notice to liquidate assets pledged as collaterals while obtaining the loans within the deadline," said a source.
NB group, which has heavily invested in hydropower sector in recent years, lowered its equity at NB bank to 9 percent from the 48 percent it used to hold before the bank was declared problematic.
The management of the NB Bank was taken over by the central bank in November 2006 after the bank witnessed a first-ever run on bank in Nepal following media reports of huge financial irregularities, resulting in withdrawal of over Rs 2.25 billion within a week.
As per the report presented by the Regulation Department of the NRB at the board meeting, all the vital financial conditions, except one, have been achieved at NB bank. The department recommended to the board to hand over the management of the bank back to an elected board of directors if only remaining condition -- payback of loans taken by NB group -- is fulfilled, said the source.
According to the report, the bank was able to raise its capital above the required level and non-performing loans of the bank have also been lowered to a comfortable level. However, failure of the bank management to recover loans from the group is the only remaining big problem, underlined the report.
The NB Bank came into operation in 1993 and has 17 branches across the country now. It so far has mobilized deposits of over Rs 10 billion.
prem@myrepublica.com
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