Kathmandu: Karnali Development Bank has decided to drastically reduce its paid-up capital after an investigation revealed that founding shareholders, including former chairman Pashupati Dayal Mishra and Rajendra Bir Rai, illegally used depositors’ funds to subscribe to rights shares.
Because the rights issue was partly funded with customers’ deposits instead of the shareholders’ own money, the bank is now cancelling all unpaid or improperly paid share allotments. As a result, founding shareholders currently holding 2.136 million shares will see their collective holding reduced to just 21,360 shares – a massive 99 percent cut. Another shareholder who held 12,884 shares will be left with only 126 shares.
The move will significantly alter the bank’s ownership structure and bring its officially reported paid-up capital in line with the amount that was actually and legally paid by shareholders.
Nepal Rastra Bank (the central bank) has been pushing class “B” development banks to clean up irregular share subscriptions, especially cases where promoters misused customer deposits or took unauthorized loans to meet capital requirements. The capital reduction at Karnali Development Bank is one of the most severe actions taken so far under this cleanup drive.
The bank has stated that once the illegitimate capital is removed, it will restructure its balance sheet to reflect the true paid-up capital and continue normal operations.
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