Cops nab Shrestha over insider lending

KATHMANDU, OCT 07 -

Police have arrest ed Dibya Kumar Shrestha, a resident of Kathmandu, for allegedly taking loans worth Rs 446 million through insider lending from crisis-ridden Crystal Finance Company.

Shrestha’s wife Anju Devi and daughter Alpana are among the promoters of the finance company. Shrestha have been accused of taking the loan against the banking norms.

The Bank and Financial Institution Act bars promoters having more than one percent stake in financial institution (FI) from taking loans for themselves and their family members.

Police said they arrest ed Shrestha near Saraswoti Campus, Kathmandu-29, on Friday. Police have suspected that his wife is hiding in Kathmandu and the daughter has fled to Bangkok. “We are searching for both the mother and the daughter,” said Deputy Superintendent of Police Umesh Raj Joshi at Central Investigation Bureau of Nepal Police.

According to a Nepal Police press statement, the company, after sanctioning the insider loans, did not even try to recover the amount, which led the finance company to crisis. The Nepal Rastra Bank (NRB) had declared the company crisis-ridden last week.

After loan-loss provisioning and deducting the amount equivalent to the insider lending from the company’s core capital as per the NRB’s directive, the company’s cumulative loss reached Rs 23 million and capital adequacy ratio turned negative by 30.4 percent.

Following the revelation of the misdeed, NRB had given the company some time to improve its health under the prompt corrective action. But the company failed to recover.

The central bank has directed Crystal to bring its non-performing loans to 5 percent and capital adequacy ratio to 11 percent, among others.

According to NRB, most of the company’s loans have gone to the real estate sector. An NRB report showed that as of May 2012, its lending to the construction sector stood at Rs 379.33 million, while consumer loans amounted to Rs 32 million.

The company’s total lending stands at Rs 918.12 million, but has a deposit mobilisation of Rs 605 million.

The central bank said the company’s financial situation deteriorated as it had to make provisioning of loans that went to its promoters.

The finance company has been failing to increase its paid-up capital proportionally as directed by the central bank. Its paid-up capital is just Rs 70 million.

Source: The Kathmandu Post