NDB liquidation: NRB moves to court NDB promoters fined

Nepal Rastra Bank (NRB) registered an application at the Patan Appellate Court on Friday seeking liquidation of crisis-ridden Nepal Development Bank (NDB).
It is the first ever instance of any financial institution being taken to court for liquidation.
"We filed the application at 2.45 p.m. asking the court to appoint a liquidator," said Dharma Raj Subedi, director of NRB who oversees the legal department.
"We also requested the court to order the liquidator to pay off the money belonging to ordinary depositors as soon as possible."
In the application running to more than 20 pages, the central bank has responded to the allegations made by the promoters of NDB in their clarification submitted to the central bank before it decided on liquidation, said Subedi.
The depositors have been asking the central bank to facilitate an early withdrawal of their deposits worth around Rs. 190 million.
The Appellate Court has fixed the hearing on July 5, said Subedi. The court may ask the defendant to submit its clarification before deciding whether to appoint a liquidator or not as per the Insolvency Act.
In addition to the ordinary depositors' money, the Employees Provident Fund and the Nepal Army also have deposits of Rs. 331 million and Rs. 180 million respectively in NDB. They have been urging the central bank that they should be treated equally if the bank is liquidated.
The Bank and Financial Institution Act (BAFIA) has given first priority to ordinary depositors after the liquidator's expenses followed by fixed depositors and then only other types of depositors.
"Institutional depositors have been classified as other types of depositors," Subedi said.
Meanwhile, the central bank has fined the chairman and directors of NDB for falsifying their report about their involvement in other financial institutions.
According to NRB, it has slapped a penalty of Rs. 200,000 on NDB chairman Amar Gurung and Rs. 100,000 each on the directors for sitting on the board of both NDB and Nepal Cooperative. The law prohibits directors of one financial institution for sitting on the board of other financial institutions.
After NRB initiated the liquidation process in the first week of June, the central bank found that NDB chairman Amar Gurung was also chairman of Nepal Cooperative where NDB had deposits of Rs. 90 million. Likewise, NDB's directors Kiran Joshi and Lab Raj Joshi are also directors of both institutions.
NRB had sought clarification from three NDB promoters in the first week of June why they should not be penalised for being involved in the board of both institutions.
Source: Ekantipur