Himalayan Bank corrupt practices in bank

Kathmandu, Oct 20. Being the regulator for banks & financial institutions (BFIs) in Nepal, it is neccessary that you/ your organization is aware of ill-practices at banks are involved in. Awareness of practices at banks that are against BAFIA & other laws of Nepal that will have an adverse effect on bank and entire industry should also of primary importance to NRB. Just supervision or risk based inspection with limited time duration and scope is just not adequate to tackle such issues at BFIs.

We may need a policy, whistle blower policy, where identity of informer is hidden and investigations are documented. Till date we have seen that only few smaller banks have faced action from NRB, which means larger banks have been encouraged to continue doing what they were doing and this doesn’t reflect well on you/ your organization. These practices must change and lawfulness can only be enforced by NRB.

I have always been a support of good corporate governance in BFIs and have always argued for higher transparency level in BFI operations and expenditures. In this subject, it is necessary that the present ill practices, its present & future effect on financial health etc of one of the old and important bank, Himalayan Bank, is brought to your notice for necessary investigations and actions is brought to the notice of NRB.

Recent news of UK’s CDC taking over the shares held by Habib Bank of Pakistan and becoming an equity partner in HBL was a very positive news not just for HBL but also for entire banking and also to NRB & nation. But this wasn’t something the existing board of HBL wants because they desperately want to continue with gross violation of corporate governance directives, corrupt procurement practices, promote nepotism & Newarization/ promote caste politics in bank etc. I would like to provide information regarding such corrupt practices in bank, which are as follows:

This year board approved new vehicles for CEO & 2 GMs. The two GMs are close relatives of Chairman so the vehicle provided to these two staffs costs more than the vehicle provided to CEO. The third GM was provided vehicle few years back and budget approved was not even half of the two new vehicles. This may be considered board’s authority but this issue is not only about price of vehicles. The supplier of these two new vehicles, Mitsubishi Outlander SUV, is Leon Motors PL. This supplier company is fully owned by Ashish Lal Shrestha, the eldest son-in-law of Chairman Mr. Manoj B Shrestha. The prices paid by bank is higher than the prices paid by other buyers as they were provided attractive discounts.

No discount to bank was provided but premium price was charged. If you can check the invoices of the company then it will be very clear. These two aren’t the only vehicles supplied by this aupplier. Few years back, two vehicles (Mitsubishi Outlander & Mitsubishi ASX) was purchased for expat staff from Habib Bank, Ejaz Gill. One of the vehicle ASX was old stock, manufactured during previous year, was lying unsold in godown but was sold to bank at the latest showroom price of same year made vehicle. No public procurement procedures were followed and is open corruption by Chairman & Board.

In addition to this, Leon Motors PL has also been availing import loans from HBL Thamel Branch. No security has been provided to bank for loan besides hypothecation of stocks & Personal Guarantee. Another guarantee may have been provided by Chairman but no one knows. So if someone with no business experience or credibility approaches bank and can show cash enough for margin amount only, will bank open such LC and provide loans?

I also request you to look into loan history of this company because numerous violations of directives have been done in this account to avoid loan going bad and to gain credit from Chairman. This loan limits for Leon Motors was processed by Sunil Gorkhali, then branch manager of thamel branch and close relative of Chairman. He has been rewarded by Chairman for such illegal services. He has been directly involved in many big cases in bank but has never been penalized but has always been rewarded.

The story of rampant corruption during the Corporate Office of HBL at Kamaladi may already be known to you but this part may not be known to you. The entire head office shifted from Thamel and the entire furnitures at Thamel were discarded and completely new furnitures and fixtures were bought. Simply wastage. The supplying company was again a company owned by Mr. Subarna Krishna Shrestha, own brother-in-law of Chairman Manoj BS and Director Prachanda BS.

The prices of these furnitures reflect highest level of corruption. The construction materials used by the Chinese contractors were mostly supplied by Manoj BS’s private company at high prices. There still are works that the contractor was required to complete but no such work was completed and no handover takeover has been done till date to facilitate this corruption.

The land purchased by bank in New Road was bought from In-laws of Manoj BS. The prices are much higher than rate paid by Laxmi Bank at about the same time for a better located land in main road of new road with proper four sided shape. The building to be designed and built is already going to be done by ML Kayastha & Co. Director Prachanda BS’s daughter is married to owner of ML Kayastha & Co and proper procedures have not been adopted for awarding contract.

All staffs are estimating the total bills for this building to cross 1 billion because total bills of kamaladi was about 0.5 billion and this is chairman & directors’ in laws building the new branch. Also, Mr. M L Kayastha is a blacklisted engineer and legally cannot work. But his wife is also engineer and company is registered in her name. The proposed building at Durbarmarg has also been awarded to same company without following proper procurement processes.

One of the major reasons why HBL has not been able to open branches like other banks, launch tech products like ebanking mobilebanking etc is due to its core banking system from Temenos. The software is world class and very expensive but bank has always had problems due to advance software. The supplier is also a company owned by Mr. Atendra Bahadur Shrestha (son of Amrit B Shrestha, brother of Narsingh BShrestha. Narsingh is Manoj & Prachanda’s father.

Atendra is first cousin of these two directors). Every year bank spends crores to Temenos and Atendra’s company receives sales commission without providing any support to HBL’s IT Dept. All NCR brand of ATMs are also supplied by Atendra company. Why does HBL have more NCR ATMs when the other Diebold ATM is more advanced and has better after sales support. In addition to ATMs and CBS, Atendra has also been awarded other contracts but the performance bonds provided by him for such contracta were not claimed after his failure to complete contract works. Another example of corruption at HBL?? Even smaller items like cctv are supplied by his cousin. This issue has always been overlooked by inspection.

There has started massive corrupt practices regarding human resources department also. Despite publication of vacancy notices, exams etc only directors and chairman’s relatives are hired. The exam a few weeks back where massive corruption & negligence took place under supervision of Samir Acharya. Some examination rooms did not have any invigilators and everyone used google to answer the questions. No investigation was done. Acharya along with president of staff union and another staff close to chairman family were provided extra incentives by board of lakhs of rupees to take care of their sick family members.

But what about other staffs who died during treatment during year and staffs who also have sick family members? Is such partiality allowed? Even simple facilities like extended leave or transfer to near branches etc to take care of sick family members was not done by HRD for other staffs. Some allowances being provided to staffs at branches for many many years were discontinued suddenly without any proper reason to do so.

There has also begun massive corruption in the budget to be alloted for training and development of staffs. The most expensive training is of Pakistani SGM in USA who has less than 6 months left for his stay in Nepal, is that justified? Also please investigate the number and amount spent on trainings of EHRO, high ranking staffs and other newar staff relatives of board since past few years. why wasn’t such trainings provided to others?

Corruption in recruitment, transfer and promotion was always there and has been on an increasing trend but now for trainings also started? If you check all the exam answer sheets along with the criteria (scoring) for recruitment then it will be very clear to you. Why is training program details and attending staffs details shown to chairman for approval? why does chairman call high management staff for meeting atleast 2 times every year and scold & insult staffs not related to him? Recently IT Head resigned from bank after such abuse from chairman. Is the chairman allowed to interact with staffs in that manner as per your corporate governance guidelines?

In a similar way, the bad loans on account of some construction materials supplying company was written off without completing due process and blacklisting because the defaulting company was owned by Bandhu Thapa (chairman’s second daughter is married to Bandhu Thapa’s son). He has the money to repay such loans but chairman decided to put pressure on concerned staffs to write off such loans without blacklisting.

There was another loan by the name of Valley Top Services PL, a manpower company, who was provided loan of more than 40 lakhs due to pressure of chairman but collateral was fake and did not have any value. Also this loan was disbursed to party by staffs (relatives of chairman) even when it was not approved at all. No case in court was filed and it was entirely written off again.

They think once written off there will no longer be any complications etc. We request you to take into account list of bad loans written off by bank during past 10 years and properly study all documents, then, everything of abuse of authority will be clear to you. Few weeks ago chairman had gone to London for personal treatment and he also took his secretary Srijana BC along with him but airtickets were fully paid by bank and even allowance was provided by bank.

These are only few instances and examples of gross violations by Chairman and family. If I had written longer complaints,then, it would not have any ending. These are the reasons why CDC is being rejected by chairman and board. CDC had given presentation to board and chairman also visited CDC office in London but is now saying they don’t know anything about equity participation by CDC? This is all lies. CDC had requested for doing Due Diligence of board decisions and that is the only reason why they don’t want to allow CDC to enter bank.

CDC’s entry would mean higher levels of corporate governance in bank which they don’t want at all costs. They are scared that CDC’s study of board documents would clearly reveal their past conduct which may call for further investigations and legal cases against them against various directives and laws. They think they can do anything as long as they have majority in board and that is why Khetan has not been provided directorship despite having more shares. Even the independent director now has been chosen and appointed by chairman and is his “yes-man” only.

Previously he was representing Karmachari Sanchaya Kosh as director in board but as soon as he retired he became independent director in same bank i.e. HBL. Isnt this conflict of interest? There are also rumours that parts of board meetings are conducted in newari language. This doesnt serve the purpose of having independent director in board.

Thus, I hope pray that you consider some of the cases mentioned here, conduct proper investigations and take strict actions against the crimes done by them. If timely investigations are done and guilty are punished, only then good future for bank and banking industry. If ignored by Rastra Bank and if officials look other direction, then, white money of depositors and shareholders will be lost soon. If rule of law and authority of central bank is established, then only then we will be able to establish proper corporate governance and start seeing a better future for Himalayan Bank and entire banking industry in Nepal.