The banking sector regulator in August 2011 had taken prompt corrective action against the category ´C´ financial institution and asked it to immediately bury holes seen in its balance sheet. [break]
At that time non-performing loan of the finance company stood at 73.31 percent of the credit portfolio. It also maintained a negative networth of Rs 1.53 billion and had posted accumulated loss of Rs 2.46 billion.
By mid-October 2012 the situation further worsened and the portion of non-performing loans stood at 98.21 percent of the credit portfolio, while negative networth topped Rs 1.41 billion.
During inspections, NRB also found that most of the deposits of the company was embezzled, while quality of most of the credit was inferior and recovery of these loans seemed almost impossible.
The finance company has now been given six months to improve its capital position and bring down the portion of non-performing loans to below 5 percent.
During this period, the company will not be able to collect new deposits or renew the old ones. It should also return matured deposits to its clients. But it has to take the regulator´s permission prior to releasing deposits or settling liabilities of over Rs 200,000 per day.
The status of ´troubled´ also bars the finance company from opening new branch offices, extending loans and dividends, and working as a guarantor. This status also prevents the company from raising salary and allowances of staff, while it has to take regulator´s permission to hire new employees or promote existing staff members.
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