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NRB rules on new governance
KATHMANDU, JUN 09 -
Nepal Rastra Bank (NRB) board on Wednesday directed central bank to submit a report about ailing Samjhana Finance Company as its financial status continues to deteriorate.
The company turned sick due to lack of good corporate governance on the part of its promoters, according to NRB officials.
As per the company’s third quarter report for the current fiscal year, its capital fund to risk-weighted asset is positive by 8.30 percent which should have been positive by 11 percent for any finance company. Its lending is higher than deposit with lending remaining at Rs. 340.19 million and deposit at Rs. 313.12 million. It is at a loss of Rs. 116.82 million in the third quarter. Its non-performing loan (NPL) stands at just 3.11 percent which is normal as per international norms.
However, a senior NRB official said the projected financial performance by Samjhana itself does not reflect its reality. “As per our on-site supervision, its financial status is worse than what has been projected in the third quarter report.” Samjhana’s financial situation has been deteriorating for the last four years.
As per NRB’s supervisory report, Samjhana’s capital fund was negative by 10.88 percent as of mid-October and its core capital to risk weighted asset was just 10.02 percent only.
The NRB official said the company turned sick as its promoters took loans worth around Rs. 30-40 million from their own company indirectly, which is an anomaly financially. Although the company has projected low NPL, the NRB official said that the central bank had doubts over the reliability of the debtor.
The central bank confined it by taking deposit and lending up to a certain limit as per prompt corrective action introduced by NRB.
“We may have to adopt a tougher approach to improve its status,” the NRB source said.
As per the NRB supervision till mid-October, its loan was concentrated in a single sector heavily. Its loan that went to the single sector was Rs. 19,090 million against a total lending of Rs. 34,190 million which was 44.16 percent although its limit was just 25 percent of total lending as per the NRB directive.
Meannwhile, NRB board also discussed the involvement of Unity Life International (ULI)’s involvement in Madhyamanchal Gramin Bikas Bank and financial status of rural bank at the hands of ULI.
The NRB has already assigned three-member management team for the rural bank by suspending the existing board.
Posted on: 2010-06-10 08:11
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