KATHMANDU, Dec 27: After taking over the management of Karnali Development Bank Limited (KDBL), Nepal Rastra Bank (NRB) has stepped up efforts to return depositors’ money with the development bank.
Ramu Paudel, executive director at the Bank Supervision Department of the NRB, said the KDBL is facing a liquidity problem at present. “We will be focusing on recovery of credits issued by the development bank, following which we will return money of the individual depositors and then the institutional depositors,” said Paudel.
On Wednesday, the NRB decided to take over the management of the KDBL by declaring the B class financial institution as crisis-ridden. A three-member management team led by the deputy-director of the Banks and Financial Institutions Regulation Department, Tikaram Khatiwada, took over the management of the Nepalgunj-based development bank with effect from Thursday.
Revised interest rate corridor system introduced
According to an NRB official, the central bank went into action against the KDBL on a public holiday citing the critical financial situation of the development bank. The board members and management of the KDBL are found to have embezzled over Rs 1 billion of depositors.
The KDBL fails to maintain minimum capital adequacy while its non-performing loan has also gone up as high as 40.85 percent. The bank recorded a net loss of Rs 19.8 million during the three-month period. Despite the NRB’s direction to the KDBL on November 26 to improve its financial health, the bank showed no signs of improvement even in the one-month opportunity period provided by the central bank.
The KDBL has collected deposits of Rs 5.18 billion and it has provided loans of Rs 3.70 billion. The paid-up capital of the development bank is Rs 502.8 million while its retained earning stands at a negative of Rs 1.19 billion.
Meanwhile, the Nepal Stock Exchange (NEPSE) suspended transactions of both the ordinary shares and promoter shares of the KDBL in the secondary market from Thursday. The NEPSE took action against the KDBL following instructions from the Securities Board of Nepal.
The KDBL’s share price stood at Rs 810 per unit when NEPSE closed on Tuesday. On the following day of the NRB’s action on November 26, the share price of the development bank had surged abnormally while the sector’s regulator was compelled to impose positive circuit breaker on KDBL’s share trading on the day.
