Depositors losing confidence at Nepal's finance companies

The deposits of Nepal's finance companies shrunk by over four percent in the first eight months of the current financial year.

This was due to financial imprudence and bad governance that led to lost depositor confidence to ategory ´C´ financial institutions .

“The deposit collection has been falling this fiscal year as people lost trust in finance companies after couple of them were declared troubled by the central bank,” Rajendra Man Shakya, president of Nepal Finance Companies Association, said, referring to Capital Merchant Banking and Finance, Nepal Share Markets and Finance, and People´s Finance that faced action of Nepal Rastra Bank.

The central bank had taken action against them after they generated holes in their balance sheets due to bad governance and overexposure to bad loans.

In the eight months through mid-March, deposits of finance companies stood at Rs 81.53 billion - down from Rs 85.47 billion reported during the same period last fiscal year. This dismal performance is reported at a time when the banking system is flush with liquidity.

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