Samjhana Finance betrayed investors, went in red: NRB

KATHMANDU, JUN 10 -
Nepal Rastra Bank on Thursday declared Samjhana Finance, a Banepa-based finance company ‘crisis-ridden.’ NRB said the bases of declaring the company crisis-ridden are its capital fund (negative by 35.04 percent) and its high non-performing loan (as high as 49.02 percent).

The central bank said in a notice that it declared it crisis-ridden as it was not satisfied with the reply by the latter on the latter’s financial status.

Interestingly, the Finance Company has presented the better financial status of the company such as positive capital fund of 8.3 percent, NPL of just 3.1 percent in its third quarterly report published on June 7. The NRB board on Wednesday directed the central bank to submit a report on Samjhana Finance as its financial status was declining. The company turned sick due to lack of good corporate governance on the part of its promoters.

The company was going through acute liquidity crisis and was not able to return the deposits of its depositors. According to NRB, the company failed to implement the directives issued earlier. The central bank had told Samjhana to comply with 10 new directives within six months.

Amongst the directives, the finance company should reduce its NPL to below five percent, sell its all non-banking assests and recover loans taken by its promoters. It has been told to maintain capital fund at the level directed by NRB which should be positive by 11 percent. NRB also directed it to recover all loans that were given without

collateral and remained insecure, take action against officials and employees involved in irregularies and then inform NRB and maintain accounts system as directed by the central bank.

The central bank also directed the finance company to allow withdrawal of matured deposits, carry out external auditing and ensure environment for corporate governmance.

Until these directives are fulfilled within six months, the finance company has been barred from collecting additional deposits and renewing existing ones, borrwing additional fund, provide lending and guarantee and renew them, make additional invesment and open new branches.

Similarly, the central bank has also barred it from obtaining fixed assets through purchase or lease, increase allowance of directors and salary of employees and recruit new employees and promote them.

Source: http://www.ekantipur.com/the-kathmandu-post/2010/06/10/business/samjhana-finance-betrayed-investors-went-in-red-nrb/209267/