ACE INSTITUTE OF MANAGEMENT

Report on Run on Nepal Bangladesh Bank Limited

Date: 15/05/2020

Submitted by Submitted to
Raju Niraula Resham Raj Regmi
EMBA Fall 2018 Faculty, Corporate Governance
Introduction

Nepal Bangladesh Bank Ltd. is a 'A' class commercial bank licensed by Nepal Rastra Bank. It
was registered with Office of Company Registrar (50-050/051, dated January 14, 1994) as a
public limited company by shares. It started its banking operation from 6th June, 1994. It was
established as a joint venture bank with International Finance Investment and Commerce
(IFIC) Bank Ltd., Bangladesh which has owned 32.75 % shares of government of
Bangladesh.

Vision

The bank for everyone

Mission

To offer financial services and become the “bank for everyone" by dedicating the progress
and growth of the bank to the community, customers, employees and stockholders by:

 Fulfilling financial expectation of all level of society

 Providing excellent customer services by offering personalized quality services and
products
 Giving reasonable returns to all related stakeholders
 Using the latest technology aimed at customer satisfaction & act as an effective
catalyst for socio-economic developments
 Maintaining high standard corporate governance in all levels

Core Values and Code of Conduct/Ethical Principles

The Bank has defined following core values for achieving the vision and mission:

 Deliver quality and complete financial services

 Provide value to the stakeholders
 Be accountable for delivering what we promise
 Demonstrate honesty and integrity in all actions
 Be balanced in customer orientation and risk consciousness
 Be efficient and technology oriented

Overall Strategic Objectives

Stick on core values and code of conduct for betterment of the bank

 Nepal Bangladesh Bank Limited has a wholly owned subsidiary company name
Nepal Bangladesh Bank Capital.

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 ORGANIZATION STRUCTURE OF NEPAL BANGLADESH BANK LTD.

BOARD OF DIRECTORS

Audit Committee Risk Management HR AML

Committee Committee Committee

Internal Audit Department

Company Secretary CEO

CFO COO CRO HRD

CBO CCO

Credit Risk Staffing &

Finance Integrated Resource
Management
Operation Planning
Business Banking HO Credit CAD LRD Department
Provincial Central
(IOD) Operation
Office Accounts HR Operation
Deposit Consortium Documentation Credit Recovery/ and Other &
Management Monitoring Risk
IT Performance
MIS & Management MaManagem
Corporate Credit Information Reporting
NPA/NBA Compliance HR
Treasury & Credit MIS GSPM
Management Development
Department
Branches Budget & &Talent
SME/Retail
(Other than A Planning SWIFT Management
Insurance Documentation
Category) Information
Card Business Security Payroll Unit
Deprived/ Reconciliation Card/ATM
Priority Operation
Transaction & Sector
Retirement Treasury Governance
Digital Banking
Fund Middle Office Unit
Central Trade
Operation
Treasury Back
Corporate
Office
Communication &
Branding Transaction &
Portfolio Digital
Management Banking
'A' Category Operation
Branches

Bancassurance

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Branches and ATM

Nepal Bangladesh Bank has been operating all over Nepal having 95 branches, 7 extension
counters and 63 ATM Counters. There are 21 branches inside Kathmandu Valley and 74
branches outside Kathmandu Valley. Also, there are 24 ATM inside valley and 39 ATM in
outside valley. You can visit https://www.nbbl.com.np/atm_branch for details about
branches, contact information, branch managers, locations and others.

Head office is located on Kamaladi, Kathmandu, Nepal. It's official address is:

Kamaladi, Kathmandu, Nepal

P.O. Box : 9062

4233780/ 81/ 82/ 83/ 84/ 85

Toll free No.: 1-660-017-9771

Fax: 977-1-4233776

SWIFT : NPBBNPKA

nbblho@nbbl.com.np

Correspondent Banks with Nepal Bangladesh Bank Limited are as follows:

STANDARD SETTLEMENT INSTRUCTIONS

Owning Bank: Nepal Bangladesh Bank Ltd
Location of SSIs: Nepal, Kathmandu, Head Office
Last updated on: 12.03.2019

Curr Correspondent Bank SWIFT/BIC Account No

CHF HABIB BANK, AG,ZURICH HBZUCHZZ ACCOUNT NUMBER-

224666

CNY Standard Chartered Bank (China) Limited SCBLCNSXIMN Account Number:

000000501511173037

EUR Standard Chartered Bank, Frankfurt am Main SCBL DE FX Account Number: 424-
018036809

GBP Standard Chartered Bank, London SCBL GB 2L Account Number:

01251510501

JPY Standard Chartered Bank, Tokyo SCBL JP JT Account Number:

23118601110

INR HDFC Bank Ltd, Mumbai HDFC IN BB Account Number:

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STANDARD SETTLEMENT INSTRUCTIONS
Owning Bank: Nepal Bangladesh Bank Ltd
Location of SSIs: Nepal, Kathmandu, Head Office
Last updated on: 12.03.2019

Curr Correspondent Bank SWIFT/BIC Account No

00600390000802

INR ICICI Bank Limited, Mumbai ICIC IN BB Account Number:

405075198

INR MashreqBank PSC, Mumbai MSHQ IN BB Account Number: 61050272

INR Standard Chartered Bank, Kolkata (Calcutta) SCBL IN BB CAL Account Number: 3310-513-
9507

INR Standard Chartered Bank, Mumbai SCBL IN BB Account Number: 3220-508-

6504

USD Habib American Bank, New York HANY US 33 Account Number: 20729395

USD ICICI Bank Limited, Kowloon ICIC HK HH Account Number:

852005600

USD MashreqBank PSC, Hong Kong MSHQ HK HH Account Number: 10000122

USD MashreqBank PSC, New York MSHQ US 33 Account Number: 70120925

USD Standard Chartered Bank, New York SCBL US 33 Account Number: 3582-
077446-001

USD Kookmin Bank, Seoul, South Korea CZNB-KR-SE Account Number:8808-

USD-017

CAD ICICI Bank, Canada ICICICATT Account Number:

102162465

Services

Services offered by Nepal Bangladesh Bank include:

 Collect scattered deposits providing attractive interest rates on saving, fixed and call
deposits to the individual and institutional customers.
 Accepts retirement benefits for individuals working on different organizations as an
employee.
 Credit lending to different individual as well as institutional borrowers to fulfil their financial
needs.
 Trade financing such as LC, TT, and bank guarantee.

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 Remittance services facilities as well as exchange of various foreign currencies allowed by
Nepal Rastra Bank.
 Mobile banking, E-Banking and various debit/credit card and travel card facilities.
 Locker facilities, shares/DMAT and CASBA.

Major financial highlights

There are 986 permanent as well as non-permanent employees working in Nepal
Bangladesh Bank Limited as on December 19, 2019. Some non-core activities and other
internal functions are being outsourced and fulfilled by different domestic organizations.

As of 25th annual report published on the official websites

Total Deposit 59.76 billion

Total Lending 55.72 billion
Total Assets 76.25 billion
Investment 6.12 billion
Net Interest Income 2.91 billion
Operating Income 4.20 billion
Operating Profit 2.27 billion
Net Income 1.59 billion
Non-Performing Asset 1.74%
Base rate 10.20

Capital Structure

Capital Structure

Public Foreign Promoter

48% 41%

Nepali
Promoter
11%

Public 48.37%
Foreign Promoter 41.91%
Nepali Promoter 10.72

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Board of Directors while taking over by Nepal Rastra Bank

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On November 8, 2006 (2063 Kartik 22) Kantipur National Daily published on its first page
mentioning that Nepal Bangladesh Bank Limited is on the verge of being bankrupt. NB bank
board and management misused bank resources, putting depositors' money, amounting to Rs.
13 billion at risk. On the same day depositors thronged all the branches of Nepal Bangladesh
Bank Ltd. to withdraw their money.

According to The Himalayan Times, Nepalgunj, November 10, 2006

• The bank’s Janakpur branch paid Rs 17.5 million in cash to its depositors today,
branch manager of the bank, Niraj Lamsal said. In Dhangadhi, 300 depositors
withdrew Rs 23 million from the branch office today, while Rs 20 million was
deposited in the bank, branch manager Prem Bahadur Shahi, said.
• Depositors in Biratnagar withdrew over Rs 40 million from the bank’s branch today.
An official of the bank said it paid Rs 30 million yesterday. In Dharan, depositors
withdrew Rs 35 million from the bank today, bank manager Pravin Nepal said. In
Hetauda, the depositors took out Rs 30.05 million from NB Bank today.

• The run on the bank started after reports surfaced that about Rs 2.0 billion was
withdrawn in the last three days.

According to Mr. Abhishek Adhikari currently branch in charge at Bhojpur Branch of Nepal
Bangladesh Bank Limited "around 5 to 6 billion deposit had been withdrew within a week
and there was around 35% non-performing loan, issue was of corporate governance."

There was a queue from Baneshwor Chowk to Hanumansthan near Bhatbhateni Super
Market of depositors to withdraw their deposits.

As per a staff Mr. Madhav Prasad Sapkota " we were moved after closing office a day before
but when we came at office in Bijulibazar, Main Branch tomorrow we got surprised seeing a
queue of people, situation was horrifying."

What was the actual reason behind it?

Nepal Bangladesh Bank was established with joint venture with foreign bank in Bangladesh.
One of the Nepali promoters was NB group founded by Mr. Narsingh Bahadur Shrestha in
the 1950s. NB group was a leading group at that time. They are the promotors of Nepal
Bangladesh Bank Limited, Nepal Credit and Commerce Bank Limited, National Hydro
Power Company limited, NB Insurance, Harisiddhi Brick and Tiles Factories, NB Finances
and many more.

Corporate governance issues were emerging in Nepal Bangladesh Bank Limited from years at
that time. Nepal Rastra Bank had issued various circulars and directives to take under control
the then situation of bank various times. Non-performing loans were hiking up due to the loan
given to different individuals and companies without proper care and ignoring NRB
guidelines and directives. The board of directors of bank itself had their own companies
registered and board was controlled by them and loan was floated to that companies. Later,
bank was slowly unable to recover that loan and started showing the problem. Non-

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performing loan was started rising and estimated at an alarming position 25 per cent and its
total net worth was reported to be almost negative.

The bank was facing problems despite of NRB instructions and NRB was preparing to take
over the bank management but the takeover plan was leaked in advance, and a flurry of
meetings between NBB officials and the Patan Appellate Court judge resulted in him
ordering the central bank to stop any proposed action. Ordinary depositors heard about the
court's decision and, now really fearing for their investments, started queuing up from 5AM
the next day to withdraw their savings. In less than an hour, over a billion rupees was
withdrawn.

On November 11, 2006 after 3 days of continuous withdrawn threatened by the possibility of
going bankrupt due to panic withdrawals by its clients, the NB Bank management had
approached the central bank for taking over its management.

NRB formally intervened NB Bank and took over the management on November 12, 2006
and assigned four members management team lead by Maha Prasad Adhikari, director of
NRB. NRB took over the management as per NRB act 2058 section 86 subsection D(1),
where there are the terms and conditions the NRB can punish the problematic banks and
financial institutions.

As per NRB report 2006/07,

Control Over Nepal Bangladesh Bank

2.115 This Bank took over the management of Nepal Bangladesh Bank Limited on
November 12, 2006. This was essential since the directions given to improve the anomalies
found in course of supervision were overlooked time and again. The Bank management had
failed to ensure corporate governance. Large amount of loan disbursed to the principal
promotor of NB Group and its associate firms, companies and individuals was misused and
the Bank management could not recover such loans. Also it failed to implement capital
planning due to inadequate capital fund, did not maintain adequate loan loss provisions by
defying NRB directives regarding loan classification and did not try to bring lending limits
and facilities to single borrower as per the provision for single-borrower limits. The four-
member management team under the convenorship of the Director of NRB was formed to
take control of the management of the Bank. The management team worked there since
November 12, 2006 to March 9, 2007.

Nepal Bangladesh Bank Limited

39. To report the necessary improvement and the status of correction of the discrepancies in
line with the conditions mentioned in the TOR of the management team. The bank was
unable to maintain the required minimum capital fund, failed to do regular audit on L/C
related transactions, non-compliance of investment related directives, loans disbursed
exceeding single borrower limit. In addition, the bank had outstanding amount of Rs. 1416.3
million (principal) and Rs. 302.3 million (interest) under fund based loans and Rs. 79.0

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million under non-fund based facility as at mid – July 2006 extended to individuals, firms and
companies affiliated to NB Group as against the principle of corporate governance.

Conclusion and Lesson Learned

Corporate governance has more important roles in the sectors like banks and financial
institutions where credibility of Board of Directors and bank management has direct impact
on perceptions of depositors. If any BFIs failed to ensure proper corporate governance and
depositors feel unsafety of their money the problem would be huge. The concept of to-big-to-
fail directly implies here and cost of the mismanagement is huge. For that reason NRB issues
unified directives yearly to guide the banks and financial institutions. You can see unified
directives 2076 directive no. 6 for provision for corporate governance.

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References

www.nbbl.com.np

https://thehimalayantimes.com/business/nrb-formally-takes-over-nb-bank/

https://thehimalayantimes.com/opinion/tht-10-years-ago-run-nepal-bangladesh-bank/

http://archive.nepalitimes.com/news.php?id=12777#.Xr1ratbivIV

https://nbgroup.com.np/

www.nrb.com.np

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