NRB likely to control NCC till Sept; expect bonus shares as paid-up to rise to Rs 2 arba

ShareSansar, June 22:

Nepal Rastra Bank, which took over the management of Nepal Credit and Commerce Bank following a string of financial crisis, is likely to extend its control over the commercial bank by additional two months.

The central bank had back in February suspended the Board of Directors of NCC Bank and deputed a three-member team led by its director Prapanna Niraula after it could not resolve the disputes between two promoter groups despite repeated attempts.

According to a highly placed official at the bank, the central  bank team, which had initially planned to hand over the management to NCC in six months i.e. by July first week, is planning to extend its control over the bank by additional two months i.e. up to early September.

“Though most of the problems dogging the bank have now been settled, we are yet to realize one of the key objectives behind the takeover: raise the paid-up capital of the bank to Rs 2 arba,” said the source. “Hence we are planning to extend our grip on the bank for two more months.”

NCC’s current paid-up capital stands at Rs 1.47 arba.

The source further informed that the central bank team is currently scrutinizing proposals submitted by six different auditing firms for Due Diligence Audit (DDA) of NCC Bank.

“We are planning to endorse a proposal to shore up the paid-up capital, which we plan to raise by issuing bonus shares, inter alias, and another proposal to push for the bank’s merger during the upcoming Annual General Meeting of the bank,” he added.

Regarding the impending AGM,  NCC Bank’s Chief Executive Officer Amrit Charan Shrestha  said that since the central bank is yet to approve the balance sheet for the last fiscal year, and that the current fiscal year itself is drawing to an end, they might call a combined AGM for the two fiscals.

“The problem is that the central bank is yet to take any decision on the balance sheet we had forwarded a few months back for the last fiscal year,” he said. “Given the situation, we might end up holding AGMs for the last as well as the current fiscal year together.”

NCC is the only commercial bank that is yet to announce dividend and the AGM for the last fiscal year.

The strife between two promoter groups, one associated with NB Group and the other close to Nirmal Pradhan, a big shareholder, had even started to affect the day-to-day operation of the bank before the central bank took over.

Likewise, it is yet to recover much of the defaulted loan from NB Group despite selling off around 4.5 lakh units of ordinary shares of National Hydropower Company Limited (NHPC) on a single day on June 1.

Shrestha further told ShareSansar that the bank has so far sold off around six lakh units of NHPC shares among some 28 lakh units pledged by the NB Group against loan.

He further informed that since NCC Bank’s only interest is to recover the defaulted amount, it has also been cooperating with NB Group to wait for the right moment to sell off the shares and other assets pledged by the group against loan.

But he declined to give the exact figure of loan taken by NB Group by pledging various assets.

NB group had reportedly taken a loan worth Rs 7 crore from the bank by pledging 98 annas of land at Thaiba in Lalitpur as collateral more than two years back. When the bank had tried to auction the land last year, it could not find any bidder who was willing to quote even Rs 3 crore for that land—forcing the bank to call of the auction since the loan amount has now exceeded Rs 10 crore after calculating the interest.

At this point, however, the bank management is quite upbeat about recovering the loan.

“One good news is that we have now recovered the loan against share (marginal lending),” informed Shrestha, who has been day-to-day operation of the bank though the central bank has taken over its management.