KATHMANDU: Nepal Rastra Bank today decided to move to Patan Appellate Court for the liquidation order of the troubled Nepal Development Bank.

The NRB board took the decision on Monday after it was not satisfied with the clarification furnished by the NDB on Thursday. "The clarification is abstract," an NRB board member said.

The NRB had sought NDB's clarification again on Friday, enquiring whether the clarification furnished by the bank was the decision of Board of Directors or the chairman's alone. The clarification letter submitted to NRB on Thursday was signed only by NDB chairman Amar Gurung. The NRB had asked NDB's board to clarify its stand.

On June 2, the NRB decided to seek explanation from the ailing development bank on why it should not be liquidated. The NRB had given the bank a 15-day deadline to submit its clarification, as per Clause 86 of the Nepal Rastra Bank Act. The NRB will now file a case at the Patan Appellate Court, seeking permission for NDB's liquidation under Clause 74 of Banks and Financial Institutions Act.

On June 18, NDB submitted a capital plan seeking time till October 17 to improve its financial health. It had claimed that given the opportunity, it could sell shares of several institutions and get back the deposit from National Cooperatives as instructed by the NRB. It still would need an additional Rs 70 million capital injection after it managed to get its money back, according to the NDB.

"The NDB could not be revived as there isn't any guarantee that it would make amends as it has repeatedly been flouting the central bank's directives," said the NRB. The NRB has already frozen all its accounts after it decided to seek explanation from the troubled bank.

According to the findings of central bank, about 3,500 small depositors will get their money back, as the bank has Rs 16.5 million in cash and Rs 160.3 million in bank deposit. Employees' Provident Fund and the Nepali Army might not get their money back, the NRB said.

NDB started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and Capital Adequacy Ratio stands at a whopping 48.31 per cent. A bank must maintain its CAR at 11 per cent.