CHINA BANK- MELAMCHI PROJECT ROW
KATHMANDU, DEC 21 -
The government will take diplomatic initiatives to secure the release of the bank guarantee amount from Chinese Bank for the Melamchi Drinking Water Project . The Chinese bank has been refusing to release the amount, citing a local court’s order.
After the Melamchi project terminated the contract with Chinese contractor China Railway 15 Bureau Group for the construction of a tunnel, the project has been seeking release of the bank guarantee amount from the China Construction Bank that had given the guarantee to the contractor.
Nepali banks, including Himalayan Bank Limited and Bank of Kathmandu, that had given counter guarantee amounts are having problems in releasing the amount for Melamchi. In this context, the High Level Financial Sector Coordination Committee led by the Finance Minister on Thursday decided to ask the Foreign Ministry to take diplomatic initiatives to secure the release of the amount.
Deputy Governor of Nepal Rastra Bank, Maha Prasad Adhikari, who attended the meeting, said the Finance Ministry would write to the Foreign Ministry in this regard.
According to him, the central bank is also taking initiatives to secure the release of the amount at the central banks of the two countries. A two-member NRB team led by its executive director Lila Prakash Sitaula is currently in Beijing to discuss the matter and other issues to enhance relations between the central banks of the two countries. “What happened in this case is unusual in the international banking practice,” Adhikari added.
The two Nepali banks have given to the Chinese bank a performance security of $6.62 million and guarantee for advance payment of $6.62 million and 1.4 million euro (Rs 1.3 billion).
As per the existing mechanisms, the Chinese bank should have released that amount to the Nepali banks, which would have been paid to the Melamchi Project. Following the incident, Nepal Bankers’ Association has decided to adopt maximum caution while giving counter guarantee to the Chinese bank.
After banking fraud committed at some banks and financial institutions while issuing good-for-payment cheques came into light, the high-level committee decided to ask the Ministry of Cooperatives and Poverty Alleviation to make arrangements to ensure that the cooperatives will not give out loans against the collateral of good-for-payment cheques.
In the case of fraud at the H&B Development Bank, it was found that the fraudsters took loans from a few financial institutions and cooperatives by keeping the good-for-payment cheques issued by the H&B as collateral.
As a result, H&B apparently suffered a cash loss of around Rs 170 million, while the amount is likely to go higher with the bank receiving claims as high as Rs 500 million.
Following irregularities in cooperatives, the high-level committee also decided to make arrangements for the regulation of saving and credit cooperatives after it receives a report from a taskforce formed by the committee on the matter.
Finance Secretary Shanta Raj Subedi said the taskforce will submit a working procedure for the regulation of cooperatives. The high-level committee will then take a decision on the regulation on the basis of the recommendations.
Recently, a few big cooperatives, including Guna and Oriental, and some small cooperatives, including Exim and Ugrachandi, have been found to have failed to pay back deposits.
A monitoring of 133 cooperatives carried out by the Department of Cooperatives with support from the central bank found a number of anomalies in the cooperatives.
The high-level committee also decided to form a committee to recommend formation of an Asset Management Company to settle old loans in banks and financial institutions which have not been paid for long.
Deputy Governor Adhikari, however, made it clear that the proposed high-level committee will only help settle the old loans and not form the Asset Management Company that would take possession of non-banking assets and sell them to recover the unpaid loans.
Source: The Kathmandu Post
