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Nepal Share Markets and Finance Scam: NRB to conduct independent DDA

Published by Octron on May 11, 2011

UPDATE: The bank has started returning money of the depositers (Saving Accounts, NOT FDs yet). It is returning though, fraction of amount that has been deposited, that too depositers will be able to withdraw only once a week. Click here for details

With cases of financial embezzlement surfacing one after another, the Nepal Rastra Bank (NRB) has decided to conduct an independent Due Digilence Audit (DDA) of Nepal Share Market and Finance (NSMF). An NRB probe has found misappropriation of funds on a huge scale by Yogendra Prasad Shrestha, former chairman of NSMF. “Records of around Rs 165 million deposits of Citizens Investment Trust (CIT) have not been found at NSM,” said a senior NRB official. “CIT had deposited Rs 360 million in NSMF.”

Shrestha was earlier found to have misappropriated Rs 200 million of Rastriya Beema Sansthan (RBS). According to NRB officials, details of the deposit of RBS have not been included in the corporate deposit details that NSMF has to send to the central bank. “Our probe has found that RBS’s Rs 200 million was used to purchase rights shares under Shrestha’s direction,” said the official. The C class financial institution has already raised its paid-up capital to Rs 2 billion to upgrade itself to a commercial bank. It has also filed an application at the central bank for the purpose. The NRB’s probe so far has unearthed that Rs 1.57 billion was withdrawn from the institution by creating fake accounts. Shrestha and his family have 40 percent investment in NSMF.

Also on Tuesday, the central bank decided to freeze fixed and movable assets belonging to Shrestha. It has also been decided that Shrestha and his family will be taken action as per the Banking Offence and Punishment Act. “The central bank will write a letter to finance and home ministries in this regard,” said the NRB official. Under the Banking Offence and Punishment Act, Shrestha may face five years prison sentence and penalty. The central bank on Sunday decided to seize Shrestha’s passport. Following Shrestha’s refusal to produce documents sought by its supervision team, the NRB on Thursday had frozen his bank accounts and lockers. The banking regulator has also frozen bank accounts of Gita Shrestha and Saurav Shrestha, relatives of Shrestha. According to a notice issued by NSMF, the company has deposits worth Rs 3.25 billion of common people and Rs 2.75 billion of loans can be recovered. It has also claimed that Rs 4.55 billion can be raised through the sale of assets belonging to Shrestha and his family and loan recovery.

The central bank on Tuesday also directed NSMF and Gurkha Development Bank (GDB) to open their branches that were closed without any reason. NSMF had closed its branches since Friday after NRB initiated action against Shrestha, while GDB’s branches are closed after the election of the new board of directors. “Banks and financial institutions have to take NRB’s permission to open or close branches,” said the NRB official. GDB had closed its branches a week after the election of new directors. According to NRB, GDB distributed Rs 250 million during that week. After the NRB’s direction, NSMF opened its central office from 3 pm on Tuesday.

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