A few days ago, the central bank had taken over the management of Nepal Credit and Commerce Bank.

NSMF landed in trouble due to large-scale fraud committed by its former chairman Yogendra Shrestha who is currently serving jail term.

“The NRB board has decided to take over the NSMF management,” said a central bank board member. “An NRB team will be assigned to take over the management of the company next week.”

The three-member NRB team is likely to be headed by NRB Deputy Director Santosh Ghimire, according to an NRB official. Even after recovering some good loans and bringing down credit and deposits, the existing board could do nothing when it comes to selling assets held by former chairman Shrestha, the official said.

“It also failed to sell Star Mall owned by the company, proceedings from which were expected to be enough to pay most of liabilities of the company,” said the NRB official. The finance company had tried to sell the property at Rs 900 million last year, but to no avail.

Shrestha embezzled Rs 2.66 billion from the finance company by creating fake loanees, according to a due diligence audit (DDA) report. He created 96 bogus borrowers and took the money himself.

He has been charged with lending Rs 1.57 billion without collateral and proper documentation, using Rs 880 million for personal purposes and lending Rs 204.9 million to the board of directors illegally.

An NRB probe had revealed that Shrestha took loans from his own company in the name of fake loanees and transferred the money to the accounts of his son and wife. The amount was then used to purchase rights shares for him and his relatives.

NSMF has recovered Rs 150 million from Shrestha by selling his shares in Machhapuchchhre Bank, but failed to sell his other property.

“We feel the existing board is influenced by Shrestha and failed to auction his properties,” said the NRB official. “Otherwise, the company can be revived is Shrestha’s property is sold.”

The crisis-ridden finance company has reached Rs 3.7 billion in cumulative losses as of April 2011. Its net worth is negative by Rs 1.59 billion, while bad loans stand at 56.98 percent.

Moreover, Rs 780 million in public deposits was found unaccounted as Shrestha embezzled the public deposits for personal purpose.