Nepal Rastra Bank (NRB) took over the management of crisis-ridden H&B Development Bank on Wednesday for failing to comply with its directives reviving memories of the good-for-payment cheque scam that rocked it one and a half years ago.
H&B has been under financial stress since the swindle when good-for-payment cheques worth Rs 870 million were issued illegally with bank staff and two traders working in collusion.
The central bank said that it had to intervene as H&B had long been refusing to take initiatives to control embezzlement of its depositors’ money. “We were forced to take this move as the bank has been reluctant to honour the central bank’s directives,” said Maha Prasad Adhikari, deputy governor of NRB.
NRB has also dissolved H&B’s board of directors and suspended the chief executive officer. It has sent a three-member team led by its Deputy Director Gyanu Krishna Adhikari to look after the bank’s management. Deputy Director Bishnu Mani Gautam and Assistance Director Hem Raj Adhikari are the other members of the team.
The central bank had been repeatedly asking H&B to make payment to “genuine” good-for-payment cheque holders. The development bank had also been told to inform the central bank if fraudulent cheques were discovered. “However, the bank showed no interest in complying with the instructions,” said Bhaskar Mani Gnawali, NRB spokesperson.
The immediate past chief of the Kuleshwor branch Niraj Nepal, in collusion with traders Manoj Chaurasiya and Jaya Kumar Yadav, had endorsed their cheques despite the insufficient balance in their accounts.
According to a central bank probe, the traders appeared to have collected money from other individuals and cooperatives to deposit in H&B. The duo had offered them good-for-payment cheques issued by H&B as collateral at a high interest rate.
A good-for-payment cheque is an assurance by the bank that the account holder has money in the bank, but it cannot be offered as collateral for loans. Doing so is a violation of the law, said NRB.
On Nov 13, 2013, the central bank had sent its detailed study report and directives to H&B asking it to implement them. The central bank took the step after H&B was found to be issuing good-for-payment cheques without fulfilling the minimum conditions.
As per the NRB directive, the signatures of two officials and the stamp of the bank or financial institution (BFI) are required when issuing good-for-payment cheques. The signers must also put down their code number, name, post and date.
Under prompt corrective action, the central bank had asked the H&B management to submit a recapitalisation plan, not announce cash dividends or bonus shares, not open new branches and not collect deposits in excess of 10 percent of the deposits maintained on Nov 25, 2013. However, the bank has not submitted its recapitalisation plan till now.
The central bank said that the scam had affected the bank’s financial position too. H&B’s Q3 profits in the last fiscal year amounted to Rs 15 million while it posted losses of Rs 163 million during the same period this year.
source: the kathmandu post,29 may 2014
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H&B has been under financial stress since the swindle when good-for-payment cheques worth Rs 870 million were issued illegally with bank staff and two traders working in collusion.
The central bank said that it had to intervene as H&B had long been refusing to take initiatives to control embezzlement of its depositors’ money. “We were forced to take this move as the bank has been reluctant to honour the central bank’s directives,” said Maha Prasad Adhikari, deputy governor of NRB.
NRB has also dissolved H&B’s board of directors and suspended the chief executive officer. It has sent a three-member team led by its Deputy Director Gyanu Krishna Adhikari to look after the bank’s management. Deputy Director Bishnu Mani Gautam and Assistance Director Hem Raj Adhikari are the other members of the team.
The central bank had been repeatedly asking H&B to make payment to “genuine” good-for-payment cheque holders. The development bank had also been told to inform the central bank if fraudulent cheques were discovered. “However, the bank showed no interest in complying with the instructions,” said Bhaskar Mani Gnawali, NRB spokesperson.
The immediate past chief of the Kuleshwor branch Niraj Nepal, in collusion with traders Manoj Chaurasiya and Jaya Kumar Yadav, had endorsed their cheques despite the insufficient balance in their accounts.
According to a central bank probe, the traders appeared to have collected money from other individuals and cooperatives to deposit in H&B. The duo had offered them good-for-payment cheques issued by H&B as collateral at a high interest rate.
A good-for-payment cheque is an assurance by the bank that the account holder has money in the bank, but it cannot be offered as collateral for loans. Doing so is a violation of the law, said NRB.
On Nov 13, 2013, the central bank had sent its detailed study report and directives to H&B asking it to implement them. The central bank took the step after H&B was found to be issuing good-for-payment cheques without fulfilling the minimum conditions.
As per the NRB directive, the signatures of two officials and the stamp of the bank or financial institution (BFI) are required when issuing good-for-payment cheques. The signers must also put down their code number, name, post and date.
Under prompt corrective action, the central bank had asked the H&B management to submit a recapitalisation plan, not announce cash dividends or bonus shares, not open new branches and not collect deposits in excess of 10 percent of the deposits maintained on Nov 25, 2013. However, the bank has not submitted its recapitalisation plan till now.
The central bank said that the scam had affected the bank’s financial position too. H&B’s Q3 profits in the last fiscal year amounted to Rs 15 million while it posted losses of Rs 163 million during the same period this year.
source: the kathmandu post,29 may 2014
LINK
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