The team led by Bishrut Thapa has been given a period of six months to carry out day to day works at the bank and lay prescriptions to improve its financial health, NRB Spokesperson Bhaskar Mani Gyawali told Republica.[break]
“The team of central bank staff members was recruited at the bank as per the provision in the Bank and Financial Institution Act,” he said.
The team, which comprises Mukti Sapkota and Ashok Rai, has been initially asked to conduct a due diligence audit of the financial institution as soon as possible. Once the audit is completed, the central bank will get a complete picture on the value of assets held by the bank and its liabilities.
“We hope this task will take around 45 days to complete,” Gyawali said. “Upon submission of the due diligence audit report, the team will make necessary recommendation on improving the bank´s financial health within the next seven days.”
The central bank is currently mulling over giving a new lease of life to the institution either by selling shares of the bank to institutional investors, bringing in a strategic partner or consolidating it with other financial institutions. “The team can also lay other suggestions that can improve the situation at the bank,” Gyawali said.
NRB has taken this initiative after the financial institution could not overhaul its business on its own ever since it was declared troubled on March 25, 2011. The bank was declared as troubled after its capital adequacy ratio fell to 2.1 percent as against regulatory requirement of 11 percent, while the level of non-performing loans had soared to 17.5 percent of the total credit portfolio.
At the same time the bank was also found to have made a suspicious decision to purchase large plots of land and failed to uphold good governance practices.
These reasons led to depletion in the bank´s capital and it later could not return fixed deposits upon maturity.
Currently, the bank owes little over Rs 2 billion to depositors, mostly institutional, and needs to recoup equivalent amount in bad debts, according to the central bank.
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