The central bank suspended the NCC board of directors and deputed a three-member management team led by NRB Director Laxmi Prapanna Niraula. The team will function as the board of directors. Other members of the team are NRB Deputy Director Ramesh Acharya and Assistant Director Resham Raj Regmi. The existing management team will, however, continue to work under the NRB team.

The daily operation of the bank has been severely affected by the dispute between the two promoter groups—one associated with NB Group and the other associated with the group led by Nirmal Pradhan, a big shareholder. “As a result of the dispute between the two sides, the bank’s board meeting has not taken place for the last three months,” said a senior NRB official.

This is the second time the central bank has taken over the management of a bank promoted by NB Group. Earlier, it had had taken over the management of NB Group-promoted Nepal Bangladesh Bank (NBB) in 2006. NB Group is in the process of exiting from NBB.

NRB officials said it had to intervene as the two promoter groups could not be brought into a consensus despite “maximum efforts” from its part. They said the two sides were registering complaints against each other at various authorities, including the NRB and Commission for Investigation of Abuse of Authority (CIAA).

“However, both the sides had agreed to settle their differences through a special general

meeting (SGM),” said a senior NRB offiicial. “But the negotiation broke down over whether to elect all board members through the SGM.”

NB Group wanted all the board directors to be elected by the SGM, but the rival faction disagreed as two of the three public directors were associated with it.

Of the three public directors, Ved Man Singh Malla is supportive to NB Group, two others, Ashok Sumsher Rana and Hari Prasad Bhattarai, are associated with the Pradhan camp.

The establishment faction (NB Group) had a clear majority in the suspended board. Besides Chairman Prithvi Raj Ligal, directors Bedman Singh Malla, Badri Narayan Manadhar, Narayankaji Tiwari, Basudev Giri and Gyanhari Shrestha are associated with NB Group, while three directors including Rana, Bhattarai and Tirtha Pradhan are with the Pradhan camp.

NRB officials said although NB Group has 51 percent stake in the bank, overrepresentation of the group on the board was not pleasing for the rival group.

The establishment faction has been accusing Pradhan’s group for trying to capture the bank by purchasing public shares at nominal prices and trouble was being created in the bank so that share prices would fall.

Another issue of the dispute, according to an NRB official, is the establishment faction did not endorse a board representative sent by Nepal Insurance Company. There had been an agreement between NB Group and Nepal Insurance Company on having board representation turn-by-turn, according to NRB official.

The relation between the two sides worsened to such an extent that the management, not the board, furnished clarification to the central bank in response to the latter’s question why not to take over the bank’s management.

The central bank has given a five-point mandate to its management team, which includes conducting a due diligence audit, holding annual general meeting within six months and handing over the management to a new board, and raising the paid-up capital to Rs 2 billion either through a merger or other means within the current fiscal year.

If the bank has to go for merger, the team has been told to present a merger agenda at the annual general meeting (AGM) and the board to be formed through the AGM should complete the merger process within a year.

The team has also been told to recover loans related to the promoters and other loans that went to risky areas. The bank has to recover around Rs 700 million from the promoters, particularly the people associated with NB Bank, according to the NRB.