Three ex-directors of NSLMB nabbed for banking fraud

KATHMANDU, OCT 08 -

Police on Saturday arrested three former directors of now-defunct Nepal Sri Lanka Merchant Bank and Finance Limited (NSLMB) for causing huge loss to the company by flouting banking norms while disbursing loans at a time when the finance company was about to merge with Nepal Bangladesh Bank.

Those arrested include company’s former Executive Chairman Rubi Joshi and former Directors Sri Ram Prasad Lamichhane and Gaurishankar Chaudhary. Police said that they had caused a loss of Rs 353.1 million to the company while disbursing loans against the banking norms and central bank’s directives. Deputy Superintendent of Police Umesh Raj Joshi of Central Investigation Bureau (CIB) said that Patan Appellate Court on Sunday allowed the Metropolitan Police Range, Hanuman Dhoka to keep them in police custody for additional 10 days for further investigation into their alleged financial crime.

The Nepal Rastra Bank (NRB), which had long been questioning the corporate governance at the NSLMB, had requested the police to arrest the three on October 1. Promoted by NB Group, the finance company was merged with NB Bank in 2011. In a statment released on Sunday, police said the company and its top management provided loans to various persons who had defaulted huge loans in other banks and financial institutions without any collateral except personal guarantee. Promoter NB Group, in a gross breach of the Bank and Financial Institution Act (BAFIA), had put up their shares as collateral to take out loans. “That inflicted a huge loss to the financial institution while benefiting the loanees,” the statement reads.

A source at the Nepal Rastra Bank said that loans worth Rs 20.08 million were provided to former Federation of Nepalese Chambers of Commerce and Industry President Chandi Raj Dhakal and Prakash Raj Ghimire without any collateral on the part of loanees in the final week of the merger. Dhakal had a huge outstanding loan at the Nepal Bangladesh Bank (NBB) at that time.

“The duo had received loans from the finance company during a week from the date the NRB gave the final nod to its merger with NB Bank,” said the NRB source, adding that the company violated the banking norms had extended more amount although the loanees had demanded just Rs 20 million.

Likewise, the company was also found to have provided loans worth Rs 90 million to Alka Hospital just before the merger with NB Bank. That left the finance company with no cash and other resources, even affecting the financial health of NB Bank that was slowly emerging from a crisis. Right after the merger, NB Bank’s capital adequacy ratio fell below the required 10 percent as the bank absorbed the liabilities of the finance company worth Rs 800 million. Earlier, a proposal was floated to the board of the central bank for sending the NSLMB into liquidation. “But two NRB directors, whose tenure has recently been completed, refused the proposal that saw the proposal on hold for a month,” said the NRB source.

Source: The Kathmandu Post