BoK, HBL under more pressure as stay order on Melamchi row expires
At a time when Nepal Rastra Bank is pressing the Bank of Kathmandu (BoK) and Himalayan Bank (HBL) to repay counter guarantee to Melamchi drinking water project, the two banks have become more vulnerable after the stay order issued by a court to withhold payment to the project expired on Thursday.
The BoK had issued guarantee, risk losing US $6.62 million and Euro 1.4 million to pay as counter guarantee amount to MWSDB after their client — China Railway 15 Bureau Group Corporation — failed to complete the construction of the tunnel of MWSDB.
Likewise, Himalayan Bank stands to lose $6.6 million for guarantee made for the Chinese contractor’s performance bond.
The two banks could not extend the stay order after the hearing on the case was incidentally divided between two benches on Thursday, and the court then went on to adjourn the hearing for Sunday.
After the Chinese party fled three months ago, the Melamchi Water Supply Development Board (MWSDB) has been pressing the BoK and the Himalayan Bank to clear the due.
The problem for these two banks increased after the Commission for the Investigation of Abuse of Authority (CIAA) started to grill the bank officials on the case.
Following this, the central bank, which seemed a little soft toward these two banks in the initial days, started to toughen its stance on them, and have even directed them to pay back counter guarantee amount by November 13.
Then the two commercial banks had moved the appellate court to withhold payments.
As MWSDB continue to press the two banks for immediate payment, they have sought an interim order from the Kathmandu District Court and then from the Appellate Court Patan that allows them to make payment to the Melamchi project only after the Chinese company pays back.
The two commercial banks are in an apparent crisis after the Chinese company declined to make the payment, citing “a local court order”.
This has been a matter of concern for the shareholders of the two banks.
It may be noted here that the banks and the shareholders had heaved a sigh of relief after Nepal Rastra Bank last month approved 14 percent bonus shares proposed by the BoK to its shareholders from the net profit it earned last fiscal year.
Meanwhile, MWSDB has decided to evaluate the construction work carried out by China Railway 15 Bureau Group Corporation at the Melamchi project site.
This is part of the MWSDB’s plan to seek compensation for the losses caused due to the delay of the project due to the Chinese company.
The evaluation process is being carried out with the help of the new contractor CMC Cooperativa Muratori e Cementisti di Ravenna of Italy and the project consultant Poyry Infra Company of Finland.
At a time when Nepal Rastra Bank is pressing the Bank of Kathmandu (BoK) and Himalayan Bank (HBL) to repay counter guarantee to Melamchi drinking water project, the two banks have become more vulnerable after the stay order issued by a court to withhold payment to the project expired on Thursday.
The BoK had issued guarantee, risk losing US $6.62 million and Euro 1.4 million to pay as counter guarantee amount to MWSDB after their client — China Railway 15 Bureau Group Corporation — failed to complete the construction of the tunnel of MWSDB.
Likewise, Himalayan Bank stands to lose $6.6 million for guarantee made for the Chinese contractor’s performance bond.
The two banks could not extend the stay order after the hearing on the case was incidentally divided between two benches on Thursday, and the court then went on to adjourn the hearing for Sunday.
After the Chinese party fled three months ago, the Melamchi Water Supply Development Board (MWSDB) has been pressing the BoK and the Himalayan Bank to clear the due.
The problem for these two banks increased after the Commission for the Investigation of Abuse of Authority (CIAA) started to grill the bank officials on the case.
Following this, the central bank, which seemed a little soft toward these two banks in the initial days, started to toughen its stance on them, and have even directed them to pay back counter guarantee amount by November 13.
Then the two commercial banks had moved the appellate court to withhold payments.
As MWSDB continue to press the two banks for immediate payment, they have sought an interim order from the Kathmandu District Court and then from the Appellate Court Patan that allows them to make payment to the Melamchi project only after the Chinese company pays back.
The two commercial banks are in an apparent crisis after the Chinese company declined to make the payment, citing “a local court order”.
This has been a matter of concern for the shareholders of the two banks.
It may be noted here that the banks and the shareholders had heaved a sigh of relief after Nepal Rastra Bank last month approved 14 percent bonus shares proposed by the BoK to its shareholders from the net profit it earned last fiscal year.
Meanwhile, MWSDB has decided to evaluate the construction work carried out by China Railway 15 Bureau Group Corporation at the Melamchi project site.
This is part of the MWSDB’s plan to seek compensation for the losses caused due to the delay of the project due to the Chinese company.
The evaluation process is being carried out with the help of the new contractor CMC Cooperativa Muratori e Cementisti di Ravenna of Italy and the project consultant Poyry Infra Company of Finland.
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