H&B Development Bank plans to boost capital anticipating huge payouts

KATHMANDU, MAR 18 -

H&B Development Bank has planned to increase its paid-up capital in anticipation of huge payouts due to large-scale fraud committed by former employee Niraj Nepal. He engaged in a scam, in cahoots with traders Manoj Chaurasiya and Jaya Kumar Yadav, causing capital losses to the bank amounting to Rs 220 million. H&B faces possible losses of Rs 1 billion which could push it into the red.

The police have filed charges against 14 persons involved in the Rs 1.09 billion bank ing fraud

at H&B, including the chief accused Niraj Nepal. He had issued good for payment cheques without an adequate cash balance in the account.

The bank ’s chief executive officer Jasoda Sainju said that they had been discussing how to inject more capital even though the bank ’s paid-up capital was higher than the level required by central bank regulations. H&B has a paid-up capital of Rs 897.93 million while the required paid-up capital for a national-level development bank is Rs 640 million.

“The move is aimed at addressing possible losses and strengthening the bank which will also help build trust among our customers,” said Sainju. She added that even if the court orders it to honour the good for payment cheques, they would have adequate cash to do so. “And if we do not have to honour the cheques, we will be a stronger financial institution.” However, Sainju said that they had not decided how much extra capital should be injected and what the modality would be.

Meanwhile, a board member said that they were holding discussions with experts on the modality of increasing the capital. “Issuing rights shares, further mergers, issuance of debentures and other means could be options,” said the board member. He added that they expected to reach a conclusion on the issue within this week.

H&B has been holding discussions with the holders of the good for payment cheques under the coordination of Nepal Rastra Bank (NRB). Although it has said officially that it will act only after getting the court’s verdict, Sainju said that they were ready to settle the issue out of court which will be better for both parties.

According to her, they have been weighing settling the issue by offering promoter shares, debentures and cash to the cheque holders. The cheque holders said that they deposited the money in the accounts of the two traders after Nepal assured them of a profit. Many others deposited money lured by the promise of 24 percent interest. They deposited money in the accounts of the traders in return for good for payment cheques. The tricked depositors have been picketing H&B, the central bank and police offices in protest

A central bank official said that NRB had told H&B to deal with each cheque separately as there might be genuine cheques too. “We have told the bank to recheck the cheques whether they are genuine and not been issued illegally,” said the NRB official.

Source: The Kathmandu Post