NRB move hits depositors' panic button

Worried depositors and shareholders of Nepal Development Bank (NDB) picketed the central office of the bank at Kamaladi on Wednesday following the central bank decion on Tuesday to initiate NDB's liquidation process.

Angry depositors chanted slogans against the bank promoters and sought legal action against them. The protesters were equally critical of Nepal Rastra Bank (NRB) and Security Board of Nepal(SEBON) that had allowed NDB to issue right shares few months ago. NRB board's decision to start NDB's liquidation has left depositors and investors worried abouttheir money, their primary concern being whether they would be able to retrieve the deposits from the bank.

As per Nepal Rastra Bank Act 2002, the central bank has sent a letter to the board of NDB demanding an explanation on why its liquidation process should not be initiated since the bank's financial condition is already vulnerable.

If the NDB reply fails to satisfy the central bank, it can start the liquidation process by applying to the Appellate Court.

The formal process starts after appellate court gives order to initiate liquidation, according to corporate lawyer Gandhi Pandit. "Then onwards, the process goes according to the insolvency act," Pandit said. For liquidation, the CentralBank has to appoint a liquidator,who in turn will sell off the bank assets after a thorough evaluation.

The money received from selling is used to pay back the depositors and creditors of the bank. Share holders' turn will come at the end.

NDB has Rs. 750 million in deposit of general public and institutional depositors. But there is less possibility that depositors and share holders receiving the money they have invested on it. Advocate Pandit said, "Depositors may not get their full money as money is divided as per insolvency act."NRB on Wednesday closed all accounts of the NDB and also the transaction of Nepal Sahakari. "We've found NDB's investment on Nepal Sahakari and Nepal Sahakari's investmentof NDB," Gopal Kafle,executive director of NRB's Supervision Department said.

"We've closed it as there is possibility of withdrawing money."The NDB episode has taught the lesson to the depositors and the shareholders that they have to be aware while depositing or buying shares of financial institutions. "One has to be careful while depositing or investing", said Kafle. "It also has given message that the bank will collapse if properly not handled."
Source:
Ekantipur.com