NB Bank well set on road to recovery

Nepal Bangladesh Bank (NBB) is on the way to making a turnaround as it has intensified the recovery of bad loans.

According to the financial report of the last quarter made public by the bank, its capital fund has become positive by 8.08 percent from its negative status of 8.16 percent in the third quarter of the last fiscal year 2008/09.

The capital fund against risk weighted asset must be positive by 10 percent as per Nepal Rastra Bank (NRB) directives. The bank's capital fund was negative by 14.22 percent in the beginning of the last fiscal year.

The bank which is still under the central bank's control has also reduced its non-performing loans (NPL) from 29.90 percent in the third quarter to 19.30 percent in the final quarter of last year. An NRB official said that the bank was in the process of improvement. "But it is yet to meet the objective of NRB," he said.

Acting general manager of NB Bank Govinda Babu Tiwari said that the recovery of loans from the NB Group, which remained the highest, contributed mainly to the revival of the bank.

Despite being a promoter of the bank, the NB Group had taken loans from the bank against banking norms.

According to Tiwari, the bank recovered Rs. 1.3 billion from the NB Group over the last fiscal year. The bank has recovered Rs. 2.09 billion from the group after NRB took over the bank in November 2006. The bank needs to recover just Rs. 140 million more from the group which is not a big amount for the bank, Tiwari said. "We didn't give any concession to the group as it was connected with governance questions," he said. "The group was not given an interest waiver and the interest rate was also kept relatively higher than that for other borrowers."

The group's share in the bank has also declined to around 10 percent as the group was forced to renounce its shares and other shareholders of the bank increased their share through holding right shares, according to NRB.

On the other hand, other big borrowers also have started to pay back loans to the bank. Momento Apparel owned by former president of the Federation of Nepalese Chambers of Commerce and Industry Chandi Dhakal also paid Rs. 30 million in July, according to the bank.

Likewise, Space Time Network also paid Rs. 20 million to the consortium of NBB and Rastriya Banijya Bank in July. They are yet to pay hefty amounts back to the bank.
While repaying the loans, Momento has also proposed a revival plan for Momento to the bank demanding concessions in the repayment schedule. "We are studying the proposal and will decide on it soon," Tiwari said.

Momento, which was the biggest readymade garment exporter of the country once, collapsed as result of the scrapping of the quota system on apparels among other reasons.Tiwari said that the bank was focusing on three areas -- maintaining capital adequacy, good governance and reducing NPL. He promised that the bank would reduce its NPL to below 5 percent by mid-January 2010. "We will manage the required capital fund of 10 percent positive capital fund within a month," he said.
Source: eKantipur