Revival of Gurkha not in sight

KATHMANDU, AUG 15 -

Revival of the troubled Gurkha Development Bank is still not in sight, with one after another plans executed by the management failing to yield positive results.

Initially, the Gurkha management tried to make arrangements for a single promoter to take over the bank. One of the key promoters Krishi Premura Holding owned by Rakesh Adukiya proposed purchasing shares of other promoters at a discounted rate, but the Nepal Rastra Bank (NRB) didn’t permit Adukiya to do so as he has been charged with banking fraud. He is currently on bail. A majority of Gurkha promoters had supported Adukiya’s bid to hold a majority stake in the bank.

“It is not possible to allow a person, who has been charged with banking fraud, to run the same financial institution again,” said a senior NRB official.

“There’s no possibility of Adukiya handling Gurkha following the central bank’s direction,” added Amod Domzan, managing director of Gurkha.

Now, the troubled bank has submitted a capital plan, stating that it would raise about Rs 320 million from the rights shares it had issued before it was declared crisis-ridden in March, 2011, and through the recovery of bad loans. It has bad loans worth Rs 1.5 billon out of total Rs 2.18 billion loans, according to Domzan.

While the bank is struggling to recover the amount from promoters under rights shares, Domjan said there are chances of recovery of some bad loans. “There has not been real progress towards the direction of raising funds from rights shares,” said Damzon. “We have fixed the deadline until Friday and I hope that promoters will put in money.”

However, Adukiya has refused to put in money of rights shares after he was not allowed to take a bigger stake in Gurkha, according to Domjan. His firm Krishi Premura holds around 13 percent stake in the bank.

Given the precarious state of the bank, there are also doubts whether other promoters will invest. There are 74 promoters in Gurkha. Domjan, however, claimed that the bank had some positive conversations with borrowers, including Janamukti Housing and Saturn Housing, regarding loan recovery. “Even Pancha Lal Maharjan is seeking to purchase his land acquired by Gurkha for his failure to repay loans,” said Domzan.

However, Maharjan claims that he only borrowed about Rs 50 million against the collateral, but the bank claims the figure to be Rs 132 million. He says other people took loan against his collateral without his knowledge. “We have opened the door for Maharjan to buy back his land at the same value of the total loan, and he is positive,’ said Domzan. Janakukti has loans worth Rs 140 million and Saturn Housing has Rs 100 million.

The bank’s capital adequacy ratio is negative by 136 percent. The bank has said it requires around Rs 1 billion to turn healthy.

Source: The Kathmandu Post