NRB declares Arun Finance as Crisis-ridden; directed to make recovery within 6 months

ShareSansar, January 27:

 Nepal Rastra Bank has declared Dharan based Arun Finance Limited crisis-ridden, stating that the finance company is in the state of insolvency due to deteriorated financial situation.

The company’s capital fund is negative by 19.10 percent and non-performing loans stand at 80.06 percent till the end of Poush 2070, according to the central bank. Also finance is unable to meet the minimum paid-up capital of Rs 200 million as directed by NRB.

Several anomalies such as company not complying with the central bank’s directive regarding provisioning, surpassing of single obligor limit (limitation of lending in single sector) while lending, failing to take collateral in some loans and long-time chairman taking loans from own company indirectly pushed the company to trouble.

Amid risks to public deposits, investor’s capital and a negative message it could possibly convey about the banking system, the central bank said it declared the company crisis-ridden as per the NRB Act 2002. The company was also failing to meet the cash reserve ratio and statutory liquidity ratio for a long, according to central bank.

NRB has directed the company to bring reforms within the next six months, while barring it to collect deposits and make lending. It has been told not open new branch, seek the central bank approval for withdrawal of deposits more than Rs 200,000, not to distribute dividend and lower non-performing loan below five percent.

Nepal Rastra Bank also directed not to sell any fixed asset without any prior approval of NRB. Not to hire any employees.