KATHMANDU: Nepal Rastra Bank (NRB) on Tuesday suspended deposit collection and credit flow to Karnali Development Bank Limited, citing risks of collapse due to its alarming 40% bad debt rate.
Despite the suspension and warnings, Karnali’s stock hit a record high on the Nepal Stock Exchange (NEPSE) on Wednesday.
The bank’s share price surged by 10%, closing at Rs 845.90, the highest price recorded to date. This represents a Rs 76.90 increase from the previous day’s close at Rs 769, a stark contrast to the concerns raised by the central bank.
Trading on Wednesday saw the bank’s shares fluctuate between Rs 728 and Rs 845.90, with 250,439 units traded across 1,174 transactions.
Karnali Development Bank has 528,300 units listed on NEPSE. Of these, 51% (2,564,433 units) are held by promoters and remain non-tradable. The remaining 49% (2,463,867 units) are held by the general public and are actively traded.
As of Wednesday’s close, the bank’s market capitalization reached Rs 4.25 billion, defying NRB’s warning that the bank faces financial instability.
NRB’s decision to halt deposit collection and credit flow came in response to the bank’s precarious financial condition, as bad loans exceeded the critical 40% threshold, raising concerns for depositors.
Despite these warnings, the unexpected stock rally indicates a divergence between market perception and regulatory oversight.
The situation has raised questions about market dynamics, investor confidence, and the underlying risks associated with Karnali Development Bank.
It remains to be seen how the bank’s financial turmoil and regulatory measures will impact its stock performance in the coming days.
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