Nepal Rastra Bank (NRB) has declared Nepal Finance Ltd (NFS) a ´troubled´ institution after it found serious shortcomings in the ´C´ class finance company.
The board meeting of the NRB held last week took the decision after the finance company failed to comply with the regulator´s directives issued earlier.
Earlier on July 11, NRB had sought clarifications from the NFS after the company´s financial report for the second quarter of 2012/13 and report of the NRB´s subsequent onsite inspection showed that some of the financial indicators were on red.
NRB Spokesperson Manmohan Shrestha told Republica that the central regulatory bank declared the finance company a troubled institution after it failed to make desire improvement in its financial health.
At the end of second quarter of 2012/13, the company had paid-up capital of Rs 135.8 million paid-up capital. Similarly, its capital adequacy ratio (CAR) was below the required limit and non-performing loans stood at 54.18 percent of its total loans. According to the regulatory requirement, NES should maintain the paid-up capital of Rs 220 million and CAR of 11 percent.
“Not only are the financial indicators on the weak side, the finance company was also found operating without following the basic corporate governance norms,” Shrestha said, adding that the action of the central regulatory bank was aimed at protecting the interest of public depositors. “The incumbent CEO mostly remains outside the country by handing over the reins to his own brother. That is why our instructions were rarely implemented."
According to NRB´s statement, NFS CEO Ravichandra Man Pradhan, his family and relatives and firms own more than 36 percent of the company´s shares. NRB has also said that the finance company has extended loans more than 25 percent of the core capital to a single client, his/her relatives and his/her firms, flouting the directives of the central regulatory bank. NFS has also made institutional investment in a cooperative.
NRB has also instructed the finance company to maintain minimum paid-up capital and capital adequacy ratio and bring down the non-performing loans to five percent within six months.
The NRB action means NFS will not be able to collect deposits and renew the deposits whose maturity period will end. The central bank has also restricted the finance company from issuing new loans and opening new branch offices, among others.
According to the unaudited report for the first quarter of 2014/15, the company´s CAR and NPL stand at 3.1 percent and 47.34 percent, respectively. It reported a net loss of Rs 17.7 million, while it reported negative reserve and surplus of Rs 154.5 million.
source: republica, 4 dec 2014
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The board meeting of the NRB held last week took the decision after the finance company failed to comply with the regulator´s directives issued earlier.
Earlier on July 11, NRB had sought clarifications from the NFS after the company´s financial report for the second quarter of 2012/13 and report of the NRB´s subsequent onsite inspection showed that some of the financial indicators were on red.
NRB Spokesperson Manmohan Shrestha told Republica that the central regulatory bank declared the finance company a troubled institution after it failed to make desire improvement in its financial health.
At the end of second quarter of 2012/13, the company had paid-up capital of Rs 135.8 million paid-up capital. Similarly, its capital adequacy ratio (CAR) was below the required limit and non-performing loans stood at 54.18 percent of its total loans. According to the regulatory requirement, NES should maintain the paid-up capital of Rs 220 million and CAR of 11 percent.
“Not only are the financial indicators on the weak side, the finance company was also found operating without following the basic corporate governance norms,” Shrestha said, adding that the action of the central regulatory bank was aimed at protecting the interest of public depositors. “The incumbent CEO mostly remains outside the country by handing over the reins to his own brother. That is why our instructions were rarely implemented."
According to NRB´s statement, NFS CEO Ravichandra Man Pradhan, his family and relatives and firms own more than 36 percent of the company´s shares. NRB has also said that the finance company has extended loans more than 25 percent of the core capital to a single client, his/her relatives and his/her firms, flouting the directives of the central regulatory bank. NFS has also made institutional investment in a cooperative.
NRB has also instructed the finance company to maintain minimum paid-up capital and capital adequacy ratio and bring down the non-performing loans to five percent within six months.
The NRB action means NFS will not be able to collect deposits and renew the deposits whose maturity period will end. The central bank has also restricted the finance company from issuing new loans and opening new branch offices, among others.
According to the unaudited report for the first quarter of 2014/15, the company´s CAR and NPL stand at 3.1 percent and 47.34 percent, respectively. It reported a net loss of Rs 17.7 million, while it reported negative reserve and surplus of Rs 154.5 million.
source: republica, 4 dec 2014
LINK
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