NRB mulls sending : BFI executive chairman post to oblivion
KATHMANDU, MAY 29 -
With cases of embezzlement surfacing one after another in banks and financial institutions (BFIs) having executive chairmen, the Nepal Rastra Bank (NRB) is considering prohibiting BFIs’ chairmen from holding executive powers.
Recent cases of Nepal Share Market Finance (NSM) and Gurkha Development Bank (GDB) in which executive chairmen were found manipulating rules have forced the central bank to come to this conclusion.
Sources at the central bank say it is planning to come up with new directives in this connection. “We’ll enforce them within this fiscal year,” said a senior NRB official, adding that BFIs already having executive chairmen will be given a certain time to scrap the post. NRB is planning to enforce the directive before the annual update of regulations at the start of the new fiscal year.
The central bank has been pushing this idea for quite some time. “We’d proposed this directive two years ago. But we were not allowed to introduce then,” said the official. “Not all BFIs having executive chairman are having problems. But most of them facing problems are being run by executive chairmen.” The practice of having an executive chairman is widespread in development banks and finance companies.
A series of corporate governance mishaps has hit the domestic financial market hard, with NSMF being the latest casualty. Financial institutions (FIs) having the same person as chairman and chief executive have suffered the most from bad corporate governance, as seen in Samjhana Finance, United Development Bank, Gurkha and NSM.
In the cases of NSM, Gurkha and Samjhana, executive chairman influenced lending and misused deposits. “The track record of most of the financial institutions having executive chairmen is not so satisfactory,” said a board member of the central bank. “The central bank is of the view that chairman and chief executive should be different persons.”
Especially, B and C class financial institutions are facing severe governance problems. Over the last year, the central bank took action against five finance companies—Samjhana, NSM, Investa, Multipurpose and Mercantile. Of them, Samjhana is in liquidation process and the other are facing central bank actions such as ban on collecting deposits and providing loans.
The central bank was forced to dismiss DB Bamjan, then executive chairman of Gurkha, following a series of scandals. Risky behaviour of promoters of Bara-based United Development Bank (UDB) saw the central bank declaring it crisis-ridden. United’s promoters were found taking loans in violation of banking norms and the BAFIA. United Chairman Rabindra Bahadur Singh and director Radha Krishna Amatya were fined Rs 500,000 each.
Former NSMF chairman Yogendra Prasad Shrestha has been found to have misappropriated around Rs 650 million without maintaining accounts, according to details provided by NSM to the NRB. An NRB investigation found that Shrestha used Rastriya Beema Sansthan (RBS)’s fixed deposit of Rs 200 million for purchasing rights shares and did not maintain accounts of Rs 160 million of Citizens Investment Trust (CIT) and Rs 40 million of the Nepal Army, among others. Shrestha also created fake loans worth Rs 1.57 billion to finance rights shares for him and his kin. His family and kin hold a 40 percent stake in NSM.
A year ago, Kunja Bihari Kayal, then executive chairman of Birgunj-based Public Development Bank (PDB), in collusion with Infrastructure Development Bank (IDB) Chief Indra Humagain was found to have taken loans from IDB by depositing his bank’s cheque that could not be cashed. PDB had given loans to Kayal’s men against fake cheques.
Source: Kantipur
With cases of embezzlement surfacing one after another in banks and financial institutions (BFIs) having executive chairmen, the Nepal Rastra Bank (NRB) is considering prohibiting BFIs’ chairmen from holding executive powers.
Recent cases of Nepal Share Market Finance (NSM) and Gurkha Development Bank (GDB) in which executive chairmen were found manipulating rules have forced the central bank to come to this conclusion.
Sources at the central bank say it is planning to come up with new directives in this connection. “We’ll enforce them within this fiscal year,” said a senior NRB official, adding that BFIs already having executive chairmen will be given a certain time to scrap the post. NRB is planning to enforce the directive before the annual update of regulations at the start of the new fiscal year.
The central bank has been pushing this idea for quite some time. “We’d proposed this directive two years ago. But we were not allowed to introduce then,” said the official. “Not all BFIs having executive chairman are having problems. But most of them facing problems are being run by executive chairmen.” The practice of having an executive chairman is widespread in development banks and finance companies.
A series of corporate governance mishaps has hit the domestic financial market hard, with NSMF being the latest casualty. Financial institutions (FIs) having the same person as chairman and chief executive have suffered the most from bad corporate governance, as seen in Samjhana Finance, United Development Bank, Gurkha and NSM.
In the cases of NSM, Gurkha and Samjhana, executive chairman influenced lending and misused deposits. “The track record of most of the financial institutions having executive chairmen is not so satisfactory,” said a board member of the central bank. “The central bank is of the view that chairman and chief executive should be different persons.”
Especially, B and C class financial institutions are facing severe governance problems. Over the last year, the central bank took action against five finance companies—Samjhana, NSM, Investa, Multipurpose and Mercantile. Of them, Samjhana is in liquidation process and the other are facing central bank actions such as ban on collecting deposits and providing loans.
The central bank was forced to dismiss DB Bamjan, then executive chairman of Gurkha, following a series of scandals. Risky behaviour of promoters of Bara-based United Development Bank (UDB) saw the central bank declaring it crisis-ridden. United’s promoters were found taking loans in violation of banking norms and the BAFIA. United Chairman Rabindra Bahadur Singh and director Radha Krishna Amatya were fined Rs 500,000 each.
Former NSMF chairman Yogendra Prasad Shrestha has been found to have misappropriated around Rs 650 million without maintaining accounts, according to details provided by NSM to the NRB. An NRB investigation found that Shrestha used Rastriya Beema Sansthan (RBS)’s fixed deposit of Rs 200 million for purchasing rights shares and did not maintain accounts of Rs 160 million of Citizens Investment Trust (CIT) and Rs 40 million of the Nepal Army, among others. Shrestha also created fake loans worth Rs 1.57 billion to finance rights shares for him and his kin. His family and kin hold a 40 percent stake in NSM.
A year ago, Kunja Bihari Kayal, then executive chairman of Birgunj-based Public Development Bank (PDB), in collusion with Infrastructure Development Bank (IDB) Chief Indra Humagain was found to have taken loans from IDB by depositing his bank’s cheque that could not be cashed. PDB had given loans to Kayal’s men against fake cheques.
Source: Kantipur
