The central bank has declared Chitwan-based Narayani Development Bank as ‘crisis-ridden’.

The class B financial institution – operational in three districts – that was undergoing Prompt Corrective Action since June 2012 has been finally declared troubled – after two years — by the central bank since it has been unable to fix its financials.

The development bank will not allowed to collect or renew deposits or to provide loans, recruit new staff till it gets its financials straightened up by managing prescribed capital fund, and bring bad loans below five per cent.

Earlier, the central bank has already declared eight financial institutions – one development bank and seven finance companies – problematic.

The central bank had taken a Prompt Corrective Action after the then chairman of the development bank Dibya Kumar Shrestha was found involved in inside borrowing in 2012. The development bank was lending Shrestha’s companies against his shares as collateral.

Shrestha was found to have misused funds worth Rs 36.7 million from the financial institute. The development bank has negative capital fund by more than eight percentage points forcing the central bank to declare it problematic as per regulation. It still has Rs 615 million in outstanding loans but Rs 962.7 million deposits till mid-February 2014, according to central bank.

The eight crisis ridden financial institutions have around Rs 6 billion deposit.

The central bank has declared Gurkha Bikas Bank problematic in March 2011 and since then Capital Merchant Banking and Finance, Nepal Share Markets and Finance, General Finance, Kuber Merchant Banking and Finance, World Merchant Banking and Finance, Himalaya Finance, and Crystal Finance have been officially declared as troubled.

Meanwhile, the central bank had already liquidated Nepal Bikas Bank and Samjhana Finance after they failed to revive itself.

Currently, the central bank has moved to Patan Appellate Court asking for liquidation of United Bikas Bank.

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