NATIONAL 2 (Spotlight Weekly)]

(Mis)Management Is The Rule

The Bank management fires a senior official on charges of corruption. But the mess in the Bank continues unabated

By A CORRESPONDENT

After years-long tussle, the management of the Nepal Bank Limited finally decided to call it a day. Acting general manager at the NBL, Bhavani Devi Sharma, fired its deputy general manager Sher Bahadur Thapa from his post on charge of irregularities. A number of internal investigations as well as from the Nepal Rastra Bank (NRB) had found Thapa's involvement in a number of irregularities amounting to billions of rupees.

Nepal Bank Limited : In a mess

According to a recent inspection report carried out by the NRB, the Kathmandu office of the Bank headed by Thapa had issued a loan of more than Rs 1000 million to 260 firms against the interest of the Bank. "These loans are least likely to be paid back," said the report. The report said Thapa sanctioned loans up to Rs 645 million to unreliable business and industrial enterprises in a single day.

The report said there was crisis of confidence between the members of senior management and that they were even backed by different factions.

The oldest bank in the country, NBL has fallen prey to different scams from time to time. But it had failed to take action against the well-connected culprits so far. "We want the bank to take action against other corrupt officials too," said Premal Khanal, leader of the bank employees union. Thapa was not available for comment.

There are hundreds of cases of irregularities involving big business houses and even the board of directors of the Bank. For example, Laxmi Bahadur Shrestha obtained a loan of Rs 100 million for National Hydropower Company Ltd., a private power developer, headed by his father. As the law prohibits financing the businesses of the directors, Shrestha said he had legal documents to show that he was separated from his father.

Similarly, the larger private sector shareholder in the Bank, the Golchha Organization, has obtained more than Rs 1000 million as loans to their different companies. Interestingly, their lawyer represents them in the board making the organization free of any legal hurdles. Other groups who have millions of rupees in outstanding loans to the Bank include The Fulbari Ltd., Mount Everest Brewery Limited, Sri Mahalaxmi Sugar Ltd., Reliance Spinning Mills Ltd., Bhrikuti Paper and Pulp Nepal, Annapurna Textiles etc. are among those companies who haven't paid their timely dues to the Bank.

Despite the government having diluted its share from majority to minority in 1996, the Bank management was not given any autonomy. In 1999, the Bank's shareholders elected a new board of directors majority of them coming from the private sector. Unfortunately, by then the Bank was already at the stage of negative networth.

According to a final draft report prepared by the KPMG Barents Group, an internationally acclaimed accounting firm, the bank's lending process loan files and the loan portfolio itself are deeply flawed and the bank is technically insolvent. The preliminary estimates of the report said the negative worth of banks could be as high as Rs 6 to 10 billion depending upon probable versus worst case scenario.

With 6,000-plus staff and market share of 30 percent, Nepal Bank offers services all over the country through its more than 150 branches. With a depositor base of nearly one million, the bank's deposit stood at US$ 401.86 million in 1997/98 and US$ 250.43 millions the same year. "The Bank is not producing the results as expected in spite of having huge turn over," said Rajendra K. Khetan, a young industrialist and director of the Bank. "The Bank has to gear up to meet the challenges of the new millennium. In this context, needss weeping changes in its system and management."

Officials say they are trying their best to salvage the bank. "We have initiated a number of reform measures within the Bank," said Bhava Nath Upadhyay, deputy general manager at NBL. But it seems such reforms are not getting adequate support from the employees and board of directors. The Bank employees have gone on strike for the last one-week and the management has failed to convince them to come back to the work. If the situation continues, the Bank may end up as a lost case, as a burning example of (mis)management.