Saturday, June 11, 2011

Vibor Development Bank gets rescued

The Nepal Rastra Bank, Nepal’s central bank, acting as a lender of last resort, extended short-term loan of Rs 500 million to the troubled Vibor Development Bank. The bank itself asked for either a liquidity injection or management takeover by the central bank just two days ago.

NRB has instructed Vibor to take a number of corrective actions such as appointment of separate individuals as chairman and chief executive; to send VBB into forced merger and asked it to sign a merger MOU with some other financial institution within the next three months; to downsize staff; to not offer salary to executive chairman until the bank is reformed; and to reform within one-and-a-half month and pay loan within six months. Along with agreeing to these set of tough conditions, the troubled VBB has pledged a number of collaterals for the loan, including good loans worth Rs 700 million and a plot of land worth Rs 350 million at Kamalpokhari, according to media reports. Vobor’s deposits presently stand at around Rs 3.06 billion, whereas its loans and advances total Rs 2.26 billion; real estate loan amounts to Rs 1.40 billion. It has investments in about half a dozen assets-related projects.

This is the latest saga of troubled banks in Nepal. Earlier, six BFIs landed in red: Gorkha Development Bank, Samjhana Finance, United Development Bank, Nepal Share Markets, Nepal Bangladesh Bank, and Nepal Development Bank were in trouble. The central bank liquidated Nepal Development Bank, restructured Nepal Bangladesh Bank, and is taking corrective management measures in others.

I will post detail discussion about state of Nepali banking sector in later posts.

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