Grand Bank in soup

KATHMANDU:

Grand Bank is likely to face central bank’s action soon as its financial health has deteriorated massively, with capital adequacy ratio (CAR) falling way below the minimum regulatory requirement and networth diminishing rapidly.

The bank had reported CAR, which gauges a banking institution’s strength to absorb shocks and ability to extend loans, of 12.43 per cent at the end of the third quarter of last fiscal year.

But by the end of the fourth quarter of last fiscal, the ratio had fallen to 4.07 per cent, shows the latest unaudited financial report of the bank. As per Nepal Rastra Bank (NRB), the banking sector regulator, commercial banks must maintain CAR of at least 10 per cent.

If the CAR is less than four to six percentage points, the regulator can halt banks and financial institutions from collecting fresh deposits and issuing loans.

In another sign of deteriorating financial health, the bank’s networth has dipped to Rs 576.34 million, as its reserve and surplus stood at negative of Rs 1.42 billion at the end of the fourth quarter of last fiscal.

The health of the bank — which was highly exposed to the real estate sector during the market’s boom period a few years back — had weakened as most of the loans it extended to borrowers turned sour. The level of bad debt at the bank currently stands at 19.09 per cent of the total credit portfolio.

Because of growing pile of non-performing loans, the bank had to keep aside Rs 1.93 billion as provision for possible losses in the fourth quarter of last fiscal. This provisioning resulted in the bank incurring net loss of Rs 1.61 billion in the fourth quarter, shows the unaudited financial report.

The management of the bank was led by Sudhir Khatri for a long time before he stepped down in February. He was replaced by Parshuram Kunwar Chhetri.

The Himalayan Times did try to contact the CEO of the bank and NRB officials but could not reach them.

Source: THT