Kuber, Himalaya finance companies declared crisis-ridden

KATHMANDU, JAN 08 -

The Nepal Rastra Bank (NRB) has declared two finance companies — Himalaya Finance and Kuber Merchant Finance — as crisis-ridden after their financial status deteriorated due to negative capital adequacy ratio.

Himalaya was declared crisis-ridden as the prompt corrective action failed to yield desired results, while Kuber could not furnish preferred explanation to the central bank on its financial woes. “Allowing the companies to operate would not safeguard depositors’ interest,” said NRB Spokesperson Bhaskarmani Gnawali.

According to NRB officials, both the companies have negative net worth and don’t have adequate liquidity. “Both were under our close monitoring. They were declared crisis-ridden so that new depositors would not face troubles and existing depositors would be able to get back their money,” said an NRB official.

Himalaya has not even kept proper database making it difficult to know its actual state, the officials said. However, when it was taken under prompt corrective action eight months ago, its capital adequacy ratio (CAR) was 2.16 percent less than the required level.

According to Himalaya’s second quarterly financial report of 2011-12, its paid-up capital is at Rs 140 million, deposits at Rs 520 million and credit at Rs 680 million. The company has said it incurred an operating loss of Rs 2.4 million as of the second quarter of last fiscal year. It has invested heavily in the real estate sector.

In Kuber’s case, its paid-up capital is at Rs 150 million, deposits at Rs 801 million and credit at Rs 893 million, according to central bank statistics as of the last fiscal year end. A huge amount of Kuber’s loans has gone to the realty sector which is reflected in its financial report. As per the last quarter financial report of the company, it incurred a operating loss of Rs 100 million.

Real estate trader Sudhir Basnet, a director of Kuber, has taken huge loans from the company, according to NRB sources. Basnet, who is in the police custody on fraud charges, has also taken loans in the name of the employees and relatives, the sources said. “As Basent struggled to pay the loans, Kuber went in red.”

A few weeks ago, the central bank had asked Kuber why it shouldn’t be taken action for its deteriorating financial situation. “As the finance company failed to give a satisfactory answer, it was declared crisis-ridden,” the NRB source said.

After being declared crisis-ridden, the finance companies will not be able to collect deposits and make lending. Their only job will be to recover loans and repay depositors.

Source: The Kathmandu Post