H&B Dev Bank commits irregularity

KATHMANDU, DEC 19: 

Financial institutions that have issued loans against good for payment cheques do not have right to claim for compensation according to Nepal Rastra Bank (NRB). 

H&B Development Bank’s Kuleshwor branch was found to have been involved in large-scale issuance of unauthorised good for payment cheques, which were pledged as collateral to obtain loans from other financial institutions and cooperatives. The scam is supposedly worth Rs 750 million. 

“Any licensed financial institution claiming that it had lent based on good for payment cheques issued by H&B Development Bank will be proven to have been involved in illegal lending,” said spokesperson for NRB Bhaskar Mani Gyanwali. 

The central bank does not allow any financial institution to provide loans against collateral of any type of cheque. A good for payment cheque is issued by banks on behalf of account holders to ensure the cheque receiver that the account holder has money in the said account, guaranteeing that the cheque will not bounce. The bank after issuing a good for payment cheque freezes the amount mentioned in the cheque to provide the money if and when the cheque is encashed. 

“A good for payment cheque can guarantee the account holder has money in bank but it is not an acceptable collateral for formal lending, so if they do so it is against regulation,” he said. 

Two traders were issued such cheques by the bank’s Kuleshwor branch manager Niraj Nepal without verifying their accounts or freezing the issued amounts in their accounts.

Source: THT