The central bank of Nepal, Nepal Rastra Bank (NRB) has decided to take over the management of Putalisadak based finance company Nepal Share Markets & Finance Limited (NSMF), suspending the existing board, which has failed to rescue finance company. Earlier NRB had taken over the management of Nepal Credit and Commerce Bank (NCC Bank). NSMF in troubled due to huge scale fraud done by its formal chairman Yogendra Prasad Shrestha who is currently in jail term. The NSM, ‘C’ class financial institution licensed by the NRB was declared troubled financial institution two years ago.
It was found that chairman Yogendra was arrested on the charge of misused of Rs 2.66 Billion of the finance company. ‘’The NRB board has decided to take over the NSMF management’’ said NRB board member. As of mid- November, the NSMF’s capital fund was negative by Rs 471 million, which have a paid up capital over Rs 2 billion. The finance company still has deposits worth Rs 1.4 billion and has loan of Rs 2.9 billion. NRB’s Deputy Governor Maha Prasad Adhikari confirmed the news and he told that, the three member NRB team which is headed by NRB Deputy Director Santosh Ghimire. It also failed to sell Star Mall owned by the NSMF, proceedings from which were expected to be enough to pay most of liabilities of the company. The finance company had tried to sell the property at Rs 900 million last year but went in vain. Formal chairman Yogendra Shrestha misused Rs 2.66 billion from the finance company by creating fake loans, according to due diligence audit (DDA) report. He created 96 fake borrowers and took the money himself. Similarly he has been charged with the lending of Rs 1.57 billion without collateral and proper documentation out of which Rs 880 million for personal use and Rs 204.9 million for illegal loans to board of director. According to NRB, Shrestha took loans from the finance company in the name of fake applicants and transferred the money to his son and wife account. The amount was then used to purchase the right shares for him and his relatives. NSMF has recovered Rs 150 million from formal chairman by selling his shares in Machhapuchchhre bank but failed to sell his other property. We feel the existing board is influenced by formal chairman and failed to auction his properties. Said NRB official otherwise, the company can be revived by selling his property. In May 2009, NRB had taken over the management of Bank of Kathmandu (BOK) following a prolonged dispute between the bank’s director and management. Similarly in 2006, MRB had also taken the management of Nepal Bangladesh Bank due to its worse financial health. At present Nepal Rastra Bank is handling the management of Gurkha Bikas Bank (B grade bank) since January 2013 due to worse financial health and liquidity crisis. NRB is playing a vital role to make financial institution fair and stable and it also supervises banking and credit institutions to guarantee depositors and other creditors funds at banking and credit institutions in particular and soundness of the financial sector in Nepal.
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