NRB declares General Finance crisis-ridden

Sharesansar, May 27

Citing weakening financial health, the Nepal Rastra Bank (NRB) has declared General Finance Limited as crisis-ridden. The NRB said in a notice announcing the decision that the company’s worsening financial conditions could put depositor’s money at risk, lead to flight of investors’ capital and further hurt already troubled financial sector.

According to the central bank, the finance company’s troubles stemmed from various factors such as absence of internal control system and good corporate governance, failure to abide by prudential banking norms and poor risk management. The company’s capital fund turned negative by 16.83 percent as of mid-April 2013, from a negative of 8.73 percent a year ago, according to the notice.

The company has non-performing loans of Rs 184.57 million and Rs 41.45 million was lent to its own directors, going against the Bank and Financial Institution Act.

The NRB has issued a 13-point directive to the company instructing it to maintain the capital fund as directed by NRB, stop collecting deposits and lending and reduce the non-performing loans to 5 percent.
The finance company has also been barred from opening new branches. The company would also have to get NRB’s approval for making payments of more than Rs 200,000 and selling fixed assets.