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| Kathmandu Tuesday April 09, 2002 Chaitra 27, 2058. |
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RBB mgmt hand-over hits new
snag
Post Report
KATHMANDU, April 8:The long-running saga of the
management hand-over of the state-owned Rastriya Banijya Bank (RBB) has engulfed into
another complexity after the government refused the plea of Deloitte Touche Tomatsu (DTT)
to relax some binding performance conditions in the final agreement.
According to a highly placed source at the
Ministry of Finance, the government informed the DTT on Friday about its rejection of the
requests made by DTT. The government argues that it is unacceptable and against the
international practice to seek changes after signing final agreement and such a step can
be taken as a breach of agreement.
Earlier, in its letter to the central bank about
a month ago, DTT, the US based consultative firm, had expressed its inability to fulfill
some of the conditions of the agreement that was signed between the central bank and the
company. In the same letter, it had also raised concern over the security situation of the
country. The DTT had even indicated that it could break the agreement, if its demands were
not considered.
The DTT has asked the central bank to relax some
of the binding conditions of the final agreement put by the government in order to prevent
an easy way out for the client after the completion of two years’ agreement period.
The company has argued that its basic job is to find out the actual financial status of
the bank and to suggest viable options to improve its financial health.
The central bank has been struck with the idea
that there should be no negotiation on binding performance condition and has sought
suggestions from the Ministry of Finance and the World Bank, the principal lender of
banking sector reform project.
The Ministry of Finance, in its suggestion had
supported the stance of the central bank and had said that the government is ready to talk
to DTT on security arrangement. However, the World Bank refused to make any specific
comment and urged both the parties to solve their differences through negotiations.
As per the agreement singed on January 31, the
DTT, among others, is compelled to improve the financial health of the bank up to an
acceptable level. Also, the DTT has to improve the accounting system of the bank to
international standards and reduce the existing non-performing assets of the bank by half.
The source also said that it was a mistake of
the DTT to sign the contract by promising to improve the financial health of the bank,
whose actual financial condition is still unknown to DTT.
Despite the latest row between the two parties,
the central bank has indicated that some of the conditions of the DTT, except for the
binding performance indicators, can be considered once it started operating the bank. The
NRB, in its letter, has also urged the DTT to come to Nepal to start its operation.
The source also said that government has made up
its mind to cancel the agreement with the DTT, if it repeatedly disobeys the conditions of
the agreement. "The bid bond of the DTT would be forfeited if it breaches the
contract," said the source.
Earlier, the DTT and the NRB had signed a final
agreement regarding the hand-over of the management of RBB on January 31 after it bagged
the contract bid. The company’s bid, with US $ 5.9 million as a consultant fee, was
the lowest among the bidders. During the singing ceremony, the representative of the DTT
had said that the DTT would take-over the management of the RBB in the first week of
March. However, due to the ongoing controversy, the final takeover of the bank has been
lingering since last two months.
The government had embarked upon the
management-transfer-project after KPMG Barents, an international auditing firm, declared
the two banks technically insolvent in its report last year.
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