NRB mulls measures to curb bank fraud

KATHMANDU, DEC 16 -

After the H&B Development Bank scam exposed, the Nepal Rastra Bank (NRB) has said could come with specific measures to address such banking frauds.

A few days ago, an H&B branch manager was found issuing a huge number of good for payment cheques illegally, causing millions of rupees of loss to the bank.

“We will first study the need for new measures and take an appropriate decision,” said NRB Spokesperson Bhaskarmani Gnawali. He, however, maintained BFIs should improve their internal control system to curb such fraudulent activities.

Niraj Nepal, H&B’s Kuleshwor branch manager, issued fake good-for-payment cheques in collusion with some traders. Those involved in the scam also took loans from other financial institutions and cooperatives by putting up the cheques as collateral.

As the Nepal Rastra Bank (NRB) has prohibited providing loans against good for payment cheques, the central bank has frozen bank accounts and lockers of about a dozen individuals, including officials of financial institutions and cooperatives that sanctioned the loans, and those found directly involved in the scam.

“A big racket behind this scam,” said an H&B board member. “We were threatened not to proceed with police case, but we filed an FIR to the police.”

According to a senior H&B official, the bank has received ‘good for payment’ cheques worth Rs 430 million so far. He, however, said the bank was likely to face a loss of Rs 100-120 million due to the fraud.

Such frauds involving employees have made both bankers and the central bank serious about its possible impact on the banking system. “The Nepal Bankers Association (NBA) has asked its member banks to adopt caution,” said NBA Chairman Rajan Singh Bhandari.

He, however, said such frauds were intentional. “To curb possible frauds, banks are adopting the practice of double signatures in good for payment cheques,” he said.

The H& scam is not the first case involving employees. Earlier, banking frauds with the involvement of employees were reported at General Finance, Everest Bank, Himalayan Bank and Nabil Bank.

In a similar manner, General Finance’s former general manager Raju Kumar Pradhan had misappropriated Rs 78.25 million. Police arrested Pradhan in July and handed over to the court for judicial proceeding.

According to the police’s initial investigation, Pradhan issued good for payment cheques worth Rs 13 million in the name of Prem Dhowj Lama on various occasions although the company had no liabilities to Lama. He is also accused of providing loans to 11 individuals worth Rs 52.93 million against weak or without collateral.

In February, Everest Bank’s Simara branch employee Manoj Chimouriya had also issued good for payment cheques worth Rs 20 million. “After finding the fraud, we recovered the amount from him, fired him from the bank and filed a case in the Hetauda Appellate Court,” said Hum Nath Gurung, deputy general manager of Everest Bank.

At Himalayan Bank, deputy manager at card department Anil Bhakta Suwal was found involved in embezzling Rs 56.7 million while settling Visa and MasterCard accounts receivables.  He deposited the received amount from Visa and MasterCard in his own account, which instead should have been deposited in the bank’s account.

In December 2011, Sabin Rimal, a former employee at the card division of Nabil Bank, and his brother Ritesh Rimal, were arrested for withdrawing hefty amount from other depositors’ account. He managed to withdraw more than Rs 4 million by stealing pin numbers of ATM cards.

Source: The Kathmandu Post