Dhangadhi, February 25:
Far-western Rural Development Bank (FRDB) is on the verge of closure mainly due to increasing overhead costs, inadequate resources and pro-blems in loan recovery.
Established in 1992 with a prime objective of alleviating poverty through loan investment for the poor and disadvantaged groups, the bank has an authorised capital of Rs 120 million, while the paid up capital stands at Rs 58.5 million.
However, the bank is in difficulty as it lacks capital. The bankâ€™s non-performing loans (NPL) have already crossed Rs 40 million out of a total of Rs 133.7 million worth of investment made so far.
Annually, Rs 40 million have been spent on administrative expenses, staff salaries and in
payment of interest of loans from other banks. The annual income has been limited at Rs 27.5 million.
The problems have risen because major shareholders like the Nepal government, Nepal Rastra Bank, Nepal Bank Ltd, Rastriya Banijya Bank, Standard Chartered Bank Nepal, Nepal Investment Bank, and Nabil Bank did not agree to increase its capital, said Mohan Singh Bista, executive director of FRDB.
The present state of the bank is attributed to negligence of the bank management, and the decade long conflict that confined the bankâ€™s activities within urban areas.
Although the concept for establishment of the bank was good, there was lack of plans and no efforts were made from any quarters in restructuring it, Bista added.
If Maoists continue to assure of exemption of loans to debtors, the bank will be closed, said insiders. They underlined the need for restructuring the bank as well as to increase the cap for loan investment to Rs 300,000 immediately in order to save the bank.
The government has given Rs 50 million for restructuring. However, the result of reforms is yet to be known. The bank has 17 branches in various districts and 112 employees with central office in Dhangadhi in the Kailali.