Nepse suspends trading of H&B shares

KATHMANDU, DEC 17 -

The Nepal Stock Exchange (Nepse) suspended trading of shares of H&B Development Bank on Sunday following reports of large-scale fraud at the bank with the involvement of its employees. H&B stock was trading at Rs 92 per share on Thursday before news of the fraud broke.

“We have suspended trading of H&B’s shares for the time being to protect investors from possible losses as reports of fraud on a huge scale have been appearing in the media,” said Nepse spokesperson Shambhu Pant. “We have sought an explanation about the company’s status after the fraud, and the suspension will continue until we receive a detailed report.”

As per preliminary reports of the scam, two traders Manoj Chaurasia and Jaya Kumar Yadav had obtained “good for payment” cheques in collusion with bank staff even though their accounts did not contain adequate funds. The duo had deposited the cheques as collateral to take loans from financial institutions and cooperatives. However, officials of H&B and Nepal Rastra Bank (NRB) said that there was no need to worry about the bank’s financial situation as it had adequate earnings and reserves to bear the cash loss.

According to an H&B board member, the bank is likely to suffer a cash loss of Rs 170 million until the amount is recovered from the fraudsters. This is the amount paid to those in the fraud directly and the officials of financial institutions and cooperatives whose bank accounts and lockers have been frozen by the central bank. “They are also our customers who were taking loans from our bank,” he said.

The central bank has suspected the officials of those financial institutions and cooperatives of being involved in the scam as they accepted the “good for payment” cheques as collateral for loans without confirming with H&B first. The central bank has said that providing loans against “good for payment” cheque is illegal.

H&B board members said that a majority of the “good for payment” cheques handed over to the bank were fake. “As the properties and bank accounts of some of those supposed to have been involved in the scam have been frozen, several bearers of the “good for payment” cheques have given up demanding payment for them,” the board member said.

The bank has said that it has received such cheques worth around Rs 500 million so far. He also said that the person who had submitted the “good for payment” cheque for Rs 60 million had sought payment of only Rs 20 million on Sunday.

A central bank official said that as the bank’s loss is less than it’s retained earning and reserve which stand at around Rs 230 million, the depositors should not be worried.

Meanwhile, H&B has suspended eight employees including the chief accused Niraj Nepal on suspicion of being involved in the fraud. The manager of the bank’s Kuleshwor branch had issued “good for payment” cheques against non-existent deposits in their accounts. Nepal was also found to have been using the password of the counter’s computer to debit and credit amounts in the deposits.

“It looks like the employees at the counter could not refuse when Nepal told them to carry out the illegal activities,” said a central bank official. “Juniors being unable to go against a senior is a common disease in Nepali banks and financial institutions, and it has increased their operational risks.”

Source: The Kathmandu Post