Gurkha Dev Bank to sell promoter shares

KATHMANDU, JAN 25 -

Gurkha Development Bank on Thursday issued a 35-day notice to potential buyers of its promoter shares in a bid to reduce the stake of its original promoters. The move follows a takeover of its management by Nepal Rastra Bank (NRB) for failing to show improvements after it was declared crisis-ridden. Gurkha’s three major promoters — DB Bamjan, Rakesh Adukiya and Nirmal Gurung, all of whom are facing charges of banking fraud — own 45 percent of the bank. They and the other promoters hold a 60 percent stake in the bank. “The notice to sell shares was issued as per the mandate given by the central bank to ensure that the present promoters would not have influence in the bank in the future,” said Mukti Sapkota, a member of NRB’s management team at Gurkha. The central bank had taken over the reins of the troubled development bank on Jan 3. It was declared crisis-ridden in March 2011. Sapkota said that the bank had not fixed any specific ratio by which the shares of the present promoters would be reduced. “This will based on the proposals received from prospective buyers,” he added. According to him, the share price will be determined through negotiations based on the value fixed by the ongoing due diligent audit (DDA) report. The DDA is expected to be completed within the next 40 days.  Gurkha has stated in a notice that persons facing charges under the Banking Offence and Punishment Act would not be eligible to purchase its shares. The central bank has given three instructions to its management at Gurkha. First, reduce the stake of the current promoters by bringing outside parties. Second, if outside parties cannot be brought, go for a merger. If both options fail, the team has been told to recommend appropriate alternatives. “The last option could be to liquidate the company,” said an NRB official. The new management has also made efforts to recover loans from 20 major borrowers. It has given them until Jan 28 to repay their loans with the offer of concessions. “A few of them have shown interest to repay their loans,” said Sapkota. “Stringent action will be taken against defaulters including seizure of their passports as per the Bank and Financial Institution Act.”

These 20 debtors owe Gurkha Rs 1.17 billion including principal and interest. “Promoter related loans amount to Rs 700 million,” said Sapkota. Most of the loans issued to these borrowers have been categorised under bad loans. “There are good loans worth around Rs 400 million too,” added Sapkota. The bank currently holds deposits of around Rs 2.16 billion while its loans stand at Rs 2 billion. Its capital adequacy ratio has remained negative, according to the development bank.

Source: The Kathmandu Post