Good For Payment Cheque Fraud: COO among eight H&B employees suspended

KATHMANDU, DEC 18 -

H&B Development Bank, which is investigating a large-scale fraud at its Kuleshwor branch, on Sunday suspended its eight employees including its chief operating officer (COO), head of finance and suspended the entire employees of Kuleshwor branch.

The development bank incurred millions of rupees in loss due to the fraud allegedly committed by chief of Kuleshwor branch Niraj Nepal in collusion with some traders, while issuing good for payment cheques.

Besides Nepal, the bank has suspended its COO Mahesh Bhusal and head of finance Nirmal Nepal and six employees of the Kuleshwor branch. Finance head Nirmal is the brother of alleged fraudster Niraj.

“Senior officers have been suspended until the investigation is over as operational lapses were noticed on their part allowing the fraud to take place,” said bank’s CEO Jasoda Sainju. “Suspension of the Kuleshwor branch employees was a natural response to what happened there.”

The Nepal Rastra Bank investigation so far has found branch manager Nepal to have issued good for payment cheques in the name of two traders Manoj Chaurasia and Jaya Kumar Yadav without verifying they had adequate deposits at the development bank.

According to a central bank official, the traders appeared to have collected amount from other individuals and cooperatives to deposit at the H&B. To collect the amount, the duo offered

them good for payment cheque issued by H&B as collateral at high interest. On the other hand, they got the bank’s good for payment cheque issued against their deposits.

However, the bank’s branch failed to stop the withdrawal of the deposits which resulted in the deposits account with no balance and the loss to the H&B, according to the NRB official.

Good for payment cheque is a tool used by a bank as guarantee to pay the money to beneficiary of the cheque endorsed by the bank. Such cheques are issued to the depositors having adequate funds to pay for their liabilities.

The scam is expected to cause the development bank Rs 170 million in loss for the time being, according to  Sainju. A bank official said there were claims worth around Rs 500 million against the good for payment cheques issued from the branch. However, he said not all of the cheques were genuine.

Despite the incident, CEO Sainju assured the depositors that the bank has adequate liquidity to address the withdrawals and to adjust ‘momentary’ losses.

“As bank’s paid up capital is Rs 900 million and retained earning plus reserve is Rs 180 million, the estimated loss will not lead the bank into crisis,” said Sainju. “In the worst case scenario, shareholders may not get dividend for 2-4 years but depositors should not worry.”

The bank has deposits worth Rs 7.5 billion and credit Rs 6 billion. Despite ‘hue and cry’ over fraud, Sainju claimed the bank has been receiving deposits normally. “We collected deposits of Rs 160 million on Monday alone,” she said. Fearing possible loss to the investors as a result of the fraud, Nepal Stock Exchange had on Sunday suspended the trading of H&B shares.

Source: The Kathmandu Post