The emergency board meeting of NRB on Thursday took a decision in this connection, as per the article 86 (c) of Banking and Financial Act Institution Act (BAFIA).[break]
The bank was identified as problematic mainly due to poor governance after an influential invitee board member colluded with the bank´s executive chairman D B Bamjan to issue loans highly overvaluing the worth of collateral.
“In the given case, Bamjan had issued Rs 900 million loan for the collateral worth hardly over Rs 300 million,” said a source. While the issue drew instant attention of the central bank, the board of directors sacked Bamjan from the board and promised to correct the decision, so as to prevent deduction of loan amount from the paid up capital.
However, Bamjan was reinstated to the same post on Sunday due to pressure from the Maoist lawmaker Dharmashila Chapagain, challenging governance norms and central bank´s authority.
That is not all. The central bank had found the influential invitee board member of playing active role in lending decisions without even signing his presence in minute books, something necessary to ensure board members´ accountability in lending decisions.
“Given the situation, we have decided to seek clarification from other board members,” said the source. The central bank will ask the board members to furnish their clarifications within seven days. Likewise, the central bank board decided to ask the bank to hold general meeting within 15 days and elect a new board of directors.
Meanwhile, the bank has been restricted from carrying out major banking activities as its capital adequacy depleted to 2 percent, much less than the central bank´s directives to maintain it at 10 percent.
The central bank had dug out overarching governance problem and subsequent depletion of financial health of the bank when it deployed a special investigation team to determine the status of the bank. The team had submitted its report on Wednesday.
The emergency board meeting of NRB on Thursday also decided to liquidate Samjhana Finance Company.
“We decided to take liquidate the company after it failed to convince of its revival,” said the source. The central bank had sought clarification from the finance company, asking why the central bank should not liquidate it. Samjhana finance had mobilized a deposit of Rs 180 million, but has a liability of Rs 640 million. Three days earlier, its depositors had met with the top NRB officials and urged them to take the needful decision at the earliest to protect their savings.
Related story
Revised interest rate corridor system introduced
-1200x560-1779450784.webp)
