Nepal Rastra Bank (NRB) is mulling over initiating the process of liquidating Crystal Finance Ltd after the troubled class ‘C’ financial institution failed to shore up its finances despite repeated instructions.
If the banking sector regulator takes a formal decision in this regard, it will be the fourth liquidation case in the banking sector following that of Nepal Bikas Bank, Samjhana Finance and United Development Bank.
“A proposal in this regard has been forwarded to (NRB’s) board of directors. We are waiting for the decision,” a senior NRB official told The Himalayan Times on condition of anonymity.
If the board approves the plan, the matter would be transferred to the court, following which a liquidator would be appointed, who will determine assets and liabilities of the financial institution.
Established in February 2002, Kathmandu-based Crystal Finance had run into trouble after its promoters embezzled funds through insider lending.
NRB had previously said the finance company’s promoters, board directors and people associated to them had illegally obtained loans to the tune of Rs 445.96 million.
After this credit could not be recovered, the finance company’s capital adequacy ratio had dipped to a negative of 30.4 per cent, which was way lower than the minimum regulatory requirement of 11 per cent for class ‘C’ financial institutions.
Then on September 23, 2012, NRB declared the finance company ‘problematic’ and barred it from extending loans and accepting fresh deposits or renewing old ones. At that time, it had also asked the company to immediately recover bad loans. If not, it was told to either inject fresh capital or go for merger.
“But the company has not heeded our call so far,” the NRB official said, justifying the need to liquidate the company. “We cannot wait forever like this.”
As per NRB officials, the finance company has been able to recover ‘only around Rs 20 to 40 million of the bad loans so far’. “At this pace, when will it recover the rest of the bad debt?” the official questioned.
It is said credit to the tune of Rs 250 million is yet to be recovered from Dibya Kumar Shrestha, one of the company’s promoters, and his family members. He is currently in police custody.
“When we asked him (Shrestha) when he intends to return the loan, he simply said, he’s in prison and could do nothing,” the NRB official said.
In spite of this indifferent attitude of one of the largest defaulters at the finance company, NRB has asked public depositors not to worry as ‘it has adequate liquidity to pay them’. The finance company currently holds public deposit to the tune of Rs four million.
“Since the company has recently recovered around Rs 20 million of the bad loans, it can easily pay back public depositors,” the NRB official said.
NRB’s data show the finance company holding total deposit of Rs 392.91 million as of mid-August, 2014.
Quick Facts
Capital fund Rs 413.52 million
Interbank borrowing Rs 60.74 million
Deposit Rs 392.91 million
Loans and advances Rs 595.98 million
Liquid fund Rs 44.23 million
Figures as of mid-August. Source: NRB
source: RUPAK D SHARMA,The himalayan times,30 Nov 2014
LINK
If the banking sector regulator takes a formal decision in this regard, it will be the fourth liquidation case in the banking sector following that of Nepal Bikas Bank, Samjhana Finance and United Development Bank.
“A proposal in this regard has been forwarded to (NRB’s) board of directors. We are waiting for the decision,” a senior NRB official told The Himalayan Times on condition of anonymity.
If the board approves the plan, the matter would be transferred to the court, following which a liquidator would be appointed, who will determine assets and liabilities of the financial institution.
Established in February 2002, Kathmandu-based Crystal Finance had run into trouble after its promoters embezzled funds through insider lending.
NRB had previously said the finance company’s promoters, board directors and people associated to them had illegally obtained loans to the tune of Rs 445.96 million.
After this credit could not be recovered, the finance company’s capital adequacy ratio had dipped to a negative of 30.4 per cent, which was way lower than the minimum regulatory requirement of 11 per cent for class ‘C’ financial institutions.
Then on September 23, 2012, NRB declared the finance company ‘problematic’ and barred it from extending loans and accepting fresh deposits or renewing old ones. At that time, it had also asked the company to immediately recover bad loans. If not, it was told to either inject fresh capital or go for merger.
“But the company has not heeded our call so far,” the NRB official said, justifying the need to liquidate the company. “We cannot wait forever like this.”
As per NRB officials, the finance company has been able to recover ‘only around Rs 20 to 40 million of the bad loans so far’. “At this pace, when will it recover the rest of the bad debt?” the official questioned.
It is said credit to the tune of Rs 250 million is yet to be recovered from Dibya Kumar Shrestha, one of the company’s promoters, and his family members. He is currently in police custody.
“When we asked him (Shrestha) when he intends to return the loan, he simply said, he’s in prison and could do nothing,” the NRB official said.
In spite of this indifferent attitude of one of the largest defaulters at the finance company, NRB has asked public depositors not to worry as ‘it has adequate liquidity to pay them’. The finance company currently holds public deposit to the tune of Rs four million.
“Since the company has recently recovered around Rs 20 million of the bad loans, it can easily pay back public depositors,” the NRB official said.
NRB’s data show the finance company holding total deposit of Rs 392.91 million as of mid-August, 2014.
Quick Facts
Capital fund Rs 413.52 million
Interbank borrowing Rs 60.74 million
Deposit Rs 392.91 million
Loans and advances Rs 595.98 million
Liquid fund Rs 44.23 million
Figures as of mid-August. Source: NRB
source: RUPAK D SHARMA,The himalayan times,30 Nov 2014
LINK
Comments
Post a Comment