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| Kathmandu, Friday January 10, 2003 Paush 26, 2059. |
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NRB claims Rs 500m from Delloitte for reneging on RBB
management take-over
By Prem Khanal
KATHMANDU, Jan 9 :
Nepal Rastra Bank (NRB) has claimed around Rs 500 million compensation from Delloitte
Touche Tomatsu (DTT) for the financial loss incurred due to DTT’s unilateral breach
of the management take-over contract of Rastriya Banijya Bank (RBB).
A high-level government
official said that NRB sent the claims letter to DTT two weeks ago, but has yet to receive
a response. "We had made the claim, but the DTT has not yet made any official
comment," said Dr Tilak Rawal, Governor of the NRB.
DTT had signed a
contract with NRB in January last year to take over management control of RBB, but
unilaterally cancelled it six months ago citing the fragile security condition of the
country. NRB claims the action led to huge losses due to DTT’s initial delay and
eventual cancellation of the management take-over contract. The project is part of the
World Bank’s financial sector reform strategy for Nepal.
A senior government
official said that along with the huge financial loss of RBB, the total claim is mainly
based on estimated expenditure that the NRB had agreed to pay for the contract. "The
RBB alone had to bear a loss of around Rs 10 million everyday due the undue lingering of
the process," claimed the source, adding that it had weakened the financial condition
of the bank due to which the non-performing assets climbed to 48 percent. He also said
that the NRB would blacklist the DTT if it declines to clear the compensation, and NRB
will even go to court.
During its last meeting
with International Monetary Fund and World Bank held in Washington DC, the NRB had also
apprised them of breach of trust of DTT and requested them to take the issue seriously.
Despite the latest
development, the Nepal-based DTT representative, BRS Neupane and Company, said that the
office has no knowledge about the claim and added that the NRB might have directly sent
its claim to DTT’s headquarters in the USA. DTT is a multi-national accounting firm.
Earlier on October, as
per the provision on dispute settlement made in the agreement, the DTT had asked the NRB
to send its delegation to Bangkok for the amicable settlement of the problem. But the NRB
rejected the proposal since the final agreement clearly stated that Nepal would be the
venue for negotiations if any dispute arose.
As per the agreement,
both the parties are first required to seek amicable negotiation to settle the dispute. If
that fails, then both parties will go for arbitration. Either party can go to court, if
the arbitration settlement fails to satisfy them.
Apart from the direct
financial losses that estimated to run thousands rupees per day, the lingered management
hand-over process also blocked the entry of Nepal into International Monetary
Fund-sponsored Poverty Reduction and Growth Facility (PRGF). With the entry into the PRGF,
Nepal would get Rs 20 million of annual aid to be used in launching anti-poverty
programmes and other reform processes for next three years.
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