CMBF, borrowers sign pact on loan repayment

KATHMANDU, FEB 27 -

Capital Merchant Banking and Finance (CMBF) and its large borrowers who have received loans without following banking norms have signed an eight-point agreement clearing the way for repayment of credit worth Rs 2.58 billion.

The accord has been sent to Nepal Rastra Bank for its approval. The pact will come into force after the central bank approves it.

CMBF got into trouble after the borrowers, who are relatives of managing director Pawan Karki, defaulted on the loans. The company issued more loans in their names even after Karki flew to the US leaving his father-in-law Shambhu Bahadur KC to head it.

Karki’s relatives have claimed that they never received any of the money they are supposed to have borrowed, and that all of it was used by him. As per the agreement, the relatives have formed a group which will sell off the assets put up as collateral and repay the loans. Their loans amount to Rs 2.58 billion out of the total credit issue of Rs 3 billion made by CMBF.

The company’s current managing director Mahendra Nath Karmacharya said that it was a great achievement for the company that the borrowers have accepted that they are responsible for repaying the loans. “Earlier, they were reluctant to admit that they were the real loanees claiming that they hadn’t used the money,” he added.

As per agreement, the loanees will first deposit Rs 100 million on the day the agreement is implemented after the central bank’s approval. Then the loanees have committed to pay at least Rs 70 million monthly and repay the entire amount within the next one and half years.

As the collateral is not sufficient to cover the amount of the loan, the agreement says that the loanees should ensure additional income from the collateral.

According to the finance company, the estimated value of the entire collateral is short by Rs 1 billion against the loan amount that went to the loanees of the basket. According to the loanees, 1,200 ropanis of land in Kathmandu, Lalitpur, Bhaktapur and Kavre have been put up as collateral.

The cleverness of the immediate leadership of the finance company is revealed by the fact that none of the loanees in the basket has put up their own parental property as collateral for the loan of such a large scale. “The lands that were put up as collateral are not any of our parental properties,” said Baldev KC, chairman of the team of the loanees signing the agreement. “These lands were purchased in our names with loans from the finance company itself.”

As per the agreement, the loanees have also committed that they will give additional collateral for clearing all the loans provided the existing collateral is inadequate.

However, KC said that they have requested the finance ministry and NRB to consider their appeal that they should not be told to pay beyond the coverage of the loans by the collateral as they didn’t use the loans.

The chief fraudster, Karki, is still in the US, and Interpol has issued a diffusion notice in his name. KC said he was in communication with them during the Dashain festival and had expressed readiness to help in generating additional collateral to repay the loans.

The finance company said that it would be in a comfortable position even if the loans covered by the collateral are recovered partially. Karmacharya said that company would have fixed and movable assets worth Rs 3.2 billion with the payment of interest on the total loans and recovery of an estimated Rs 1.5 billion from the collateral put up by the loanees of the basket.

“Given that the company’s liabilities are worth just Rs 2.5 billion, we will be in a comfortable position and merging the company with any strong bank or financial institution will be better after that,” said Karmacharya. He also urged the central bank and other stakeholders to help the finance company to recover the amount.

Source: Kantipur