This happened when Nepal Rastra Bank decided last year to liquidate Nepal Development Bank (NDB). It has happened again in the case of Samjhana Finance Company that the central bank decided to liquidate last week.[break]
"NA could again lose Rs 17 million in Samjhana Finance," said an NRB source.
NA Welfare Fund had deposits of Rs 180 million in NDB when it was subjected to liquidation. Even though the Fund recovered Rs 10 million, the fate of the remaining Rs 170 million remains unclear.
That is not all. United Development Bank, which was also declared as troubled bank on the same day NRB decided to liquidate Samjhana Finance, too has deposits of Rs 70 million of the NA Welfare Fund.
NA has deposits of 140 million in Nepal Sri Lanka Merchant Bank, which is currently not in a position to repay its depositors. Even though the merger of bank with Nepal Bangladesh Bank has raised hopes of recovery, NA has not recovered Rs 80 million deposited in Amarawati Cooperatives.
"Name any troubled or sick institution and one will find NA deposits there. This had happened in the past and is still happening despite repeated assurances by the NA that it has taken all possible steps to safeguard the fund´s money," said an official at the central bank.
There are other institutional depositors as well, but why does this happen all the time only to the NA? Clearly, it could happen if the Welfare Fund managers are not competent enough to identify which financial institution is safe. Ramindra Chhetri, NA spokesperson, however rejects incompetence of fund managers.
"The deposits were kept in those financial institutions when the development banks and finance companies were in good health. But the condition of some of the institutions deteriorated sharply later. We could not do anything in such a situation," said Chhetri said.
Such situation can happen also if officials managing Welfare Fund show laxity in selecting financial institutions. "In NA´s case, the present condition has largely to do with unfair practices and corruption by the fund managers," said an official at Ministry of Finance.
Bankers told Republica that, some of the banks and financial institutions in a bid to lure institutional depositors into depositing money offer ´incentives´ to the fund managers. While such ´incentives´ paid to the deposit providers remain unaccounted for, the bank and financial institutions pay only regular interest on the deposits.
Purna Chandra Thapa, director of NA Welfare Fund admitted that some Rs 490 million worth of deposits maintained by NA at different financial institutions are at risk. He, however, ruled out any foul deals and practices behind the situation.
"NA has always taken sincere steps for recovery of its deposits from all troubled and liquidated banks. We never keep our money in troubled financial institutions," he stated.
NRB officials, however, said NA had renewed its deposits in NDB even when the bank was known to be in poor financial health.
Thapa said that NA presently has deposited its Welfare Fund´s money in commercial banks and is enjoying annual interest return of 12 percent. "Together, we earn annual interest worth Rs 930 million from those fixed savings," he stated.
NA has a total of Rs 16.50 billion in its Welfare Fund. It also has additional Rs 3.80 billion to be received from the UN. The fund established more than three decades ago was developed from 22 percent worth of salary contribution made by Nepali soldiers serving in UN peacekeeping missions. Army personnel deployed in other missions abroad too contribute 5 percent of their allowances to the fund.
The fund has some 700,000 beneficiaries and the money is spent for the welfare of the army personnel and their dependents.
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