KATHMANDU: Nepal Rastra Bank (NRB) has declared Karnali Development Bank as troubled. The decision was made during a meeting of the NRB board of directors on Wednesday.
Until further arrangements are made, NRB will take control of Karnali Development Bank under Clause 86 (c) of the Nepal Rastra Bank Act. To manage the bank’s operations, NRB has formed a three-member management team led by Tika Ram Khatri, Deputy Director of the Bank and Financial Institution Regulation Department.
Bishnu Kumar Bishwakarma from the Financial Institution Supervision Department and Kishor Kushwaha, Deputy Director of the Legal Department, have been appointed as members of the team. This group will assume responsibility for the bank from December 25, 2024 (Poush 11, 2081 BS).
The management team has been tasked with prioritizing public interest by ensuring the protection of depositors’ rights, facilitating the disbursement of savings, and recovering the bank’s loans. Additionally, the team will conduct due diligence, investigate financial irregularities, and initiate legal proceedings as necessary.
Karnali Development Bank was unable to maintain the minimum capital adequacy ratio set by NRB. The bank’s non-performing loans (NPLs) had surged to 40.85%, prompting NRB to initiate corrective action on November 26, 2024 (Mangsir 11, 2081 BS). Despite these efforts, the bank failed to show improvement, leading to its troubled declaration.
Following the announcement, share transactions of Karnali Development Bank will be halted starting Thursday. Nepal Stock Exchange (NEPSE) has been notified to suspend trading, as confirmed by Daya Ram Sharma, Executive Director of the Financial Institution Supervision Department at NRB.
“NRB has already sent a letter to NEPSE to halt share trading following the troubled declaration of the bank. Trading will cease from tomorrow,” Sharma said.
Shares of the bank were trading at NPR 833 per unit on NEPSE even amidst the crisis, with a sharp increase of NPR 33 just the day before the declaration. However, the decision to declare the bank troubled and suspend trading will impact investors and could potentially harm consumer interests.
NRB’s supervisory team will now work to protect depositors and restore the bank’s operations while addressing financial anomalies through rigorous investigations.