GDB was declared a ´troubled´ bank on March 25, 2011 after the central bank´s inspection unearthed scores of serious corporate governance problems and sharp depletion in its capital, among others. [break]
It had asked the bank to replenish its capital and implement other corrective measures within six months.
However, NRB says the management so far has failed to implement the corrective measures. It even did not submit any business plan to steer the bank back on track even though the central bank silently pledged it five months time even after the end of initial deadline.
“We have now decided to break our silence and work out possible options to bring the case to a logical conclusion. In this connection, we have asked the GDB management to submit a clear capital plan, operation plan and risk assessment plan, among others in 15 days,” said a senior NRB official.
The central bank geared up for fresh action mainly after its recent investigation showed further decline in financial outlook of the troubled bank. NRB´s latest report shows GDB´s capital adequacy has presently turned 18 percent negative, from 2 percent positive of 11 months ago. Its non-performing loans too have soared to over 50 percent from 17.5 percent of March last year.
Given the situation, officials said the central bank is presently discussing two options to salvage the bank -- asking the promoters to recapitalize the bank or forcefully merge it with other institutions that can absorb its shortfall.
“The bank will face liquidation if both these options failed. But our first priority is to save it,” the source said.
According to the NRB, the GDB management has so far recovered only Rs 150 million of the Rs 600 million bad loans identified a year ago, whereas the volume of its non-performing loans (NPL) soared dramatically during the period. It has recovered another Rs 1.10 billion worth of good loans, and paid about Rs 1.90 billion to the depositors.
“At present, the bank has only a handful of good loans. Bad loans have increased rapidly,” said the source. The source, however, said the bank has enough non-banking assets of good quality and can repay its depositors easily.
The bank presently has Rs 2.70 billion worth of deposits from general public as well as institutional depositors.
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