Three ex-directors of NSMBL remanded in custody

KATHMANDU, DEC 04 -

Appellate Court Patan has remanded in custody three former directors of now defunct Nepal Sri Lanka Merchant Banking and Finance Limited (NSMBL) who were arrested on charge of banking fraud.

Former chairman of the finance company Rubi Joshi and Sri Ram Prasad Lamichhane and Gaurishankar Chaudhary were sent to jail in judicial custody. It means the other accused in the case also may have to serve jail term following their arrest. Police had last week filed case at the court against 18 people, including those three. Around half a dozen of the accused are family members of Laxmi Bahadur Shrestha, managing director of NB Group.

Police, following a request for action from Nepal Rastra Bank, initiated an investigation and filed a case at the court against them for lending a huge amount of money illegally just before NSMBL’s merger with Nepal Bangladesh Bank (NBB), crippling financial health of the latter.

Based on interrogation with those arrested, Police found Laxmi Bahadur Shrestha as chief culprit in the banking fraud. His brother Purna Bahadur Shrestha, sister in law Gita Shrestha, nephew Jen Shrestha and niece Nabin Shrestha have also been accused in the case.

Likewise, defendants Bijaya Kumar Shrestha, Shailendra Shrestha, Dev Bahadur Shrestha are close relatives of Laxmi Bahadur Shrestha, according to police. Other accused in case are Mukunda Karmacharya, Alija Vaidya, former general manager of the finance company Khim Bahadur DC and former president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Chandi Raj Dhakal.

The finance company had provided a loan worth Rs 350 million right without any collateral before its merger with the NBB. As a result, the finance company was merged with the NBB without any liquidity.

Among the receivers of the loans were the former FNCCI president Dhakal and his nephew Prakash Raj Ghimire. Although the two had demanded only Rs 20 million each, they were extended loans worth Rs 20.08 million each without collateral. Providing loans exceeding loanees’ demand is against banking norms.

The NSLMB was also found to have provided loans worth Rs 90 million to Alka Hospital just before the merger. As the loans were provided without collateral, an NRB source said, their recovery will be very challenging.

 A few weeks ago, the NBB had also issued a 35-day notice to those involved with NB Group to pay off the loans. The group has 14.5 percent stake in the NBB, of which about 8 percent is now being sold to its Bangladeshi promoter—International Finance Investment and Commerce (IFIC) Bank. Laxmi Bahadur and his brother Jit Bahadur, who were recently forced out of the bank’s board, will hold about 7 percent of the bank’s stake for at least one year.

The NB Group has around Rs 800 million in outstanding loans at NB Bank, according to a source at the bank. But an NRB source said that the figure could be as high as Rs 1.4 billion. Laxmi Bahadur has also been blacklisted for not paying loan to Nabil Bank. Shrestha had taken out a loan from Nabil against their company International Recreation Centre, which is now under an auction process.

Source: The Kathmandu Post