August 29: Nepal Rastra Bank, the regulatory body of banks and financial institutions (BFIs) as well as the overall economy of the country, itself is found to have made loan investment and investment in shares of various organisations against the prescribed limit.

This is clearly evident from the recently published report of the Office of the Auditor General.

As per the Nepal Rastra Bank, the central bank can invest in shares and provide loan up to 10 percent of the paid-up capital of any company. For instance, if the paid-up capital of a company is Rs 1 billion, the central bank can provide a maximum loan of Rs 100 million to the company. However, the Office of the Auditor General claims that NRB has flouted the rule and provided loan to a microfinance company which is more than 10 percent of the paid-up capital of the company. The report prepared by the OAG also points out to faulty investment in shares by the central bank on other companies against its limit.

The microfinance company in question had a paid-up capital of Rs 1 billion as of 2077 BS. Therefore, the company was entitled to receive a maximum loan of Rs 100 million. However, the 58^th annual report of the OAG states that NRB has provided loan of Rs 310.4 million to the company.

The loan was provided to the company on July 16, 2019 in accordance to a decision taken by the Ministry of Finance on December 10, 2018.

The loan was provided to the company in line with a tripartite agreement between the company, finance ministry and the central bank for increasing access to finance in rural areas. However, the microfinance company has mentioned in its financial report that the loan was taken from the Government of Nepal instead of central bank, states the OAG report. NRB has expressed concern regarding this issue. The central bank has maintained that it has not provided loan against the limit set by the Act.

NRB Spokesperson Dev Kumar Dhakal dismissed the AOG report stating that it did not reflect facts.

“We have been providing loan within our limit. That particular loan might have been provided under some special arrangements,” said Dhakal, adding that the Office of the Auditor General might have lacked proper understanding regarding the working modality of the central bank.

Similarly, the central bank is also accused of investing more than the prescribed limit in shares of various companies. NRB can invest in shares up to 10 percent of the total shares of any company. However, NRB is found to has stakes on 62.14 percent shares of Agriculture Technology Service Centre, 55.56 percent stakes on National Insurance Corporation, 14.6 percent  in Nepal Stock Exchange (NEPSE), 13.34 percent in Citizen Investment Trust, 10.3 percent in Loan Information Centre and 15.29 percent in a bank, according to the OAG report.

Spokesperson Dhakal said that the preparations are underway to bring the share investment in those companies under the investment ceiling.