Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank (NRB) has taken disciplinary action against three commercial banks: NIC Asia Bank, Himalayan Bank, and Prabhu Bank, citing non-compliance with regulatory provisions.
According to a report released on Monday, the central bank penalized the chairpersons, directors, and chief executive officers (CEOs) of these banks for actions that violated directives during the second quarter of the current fiscal year.
The central bank found that NIC Asia Bank provided interest rates higher than its published rates to its directors, their family members, and affiliated institutions. It also discovered that some fixed deposit accounts for these individuals and entities were opened with backdated entries. The NRB has directed the bank to refund the excess interest amount and issued warnings to the bank’s CEO, Roshan Kumar Neupane, Chairman Tulsi Ram Agrawal, and directors Trilok Chandra Agrawal and Ram Chandra Sangai.
“During an on-site inspection of NIC Asia Bank, it was found that the bank failed to comply with directives related to loan classification, loan loss provisioning, capital adequacy, risk-weighted assets, interest rates, and corporate governance,” the NRB stated. The central bank instructed the bank to refrain from making decisions that contradict its directives, comply fully with the regulations, prepare an action plan for improvements, and avoid violating interest rate guidelines in the future.
The NRB also instructed NIC Asia Bank to ensure compliance with the 2015 Capital Adequacy Framework, maintain appropriate risk-weighted assets and capital reserves, and submit regular reports on its status. Additionally, the bank was directed to align its loan classification and loan loss provisions with NRB’s standards and fully adhere to corporate governance directives.
Prabhu Bank faced action for appointing a board of directors in violation of regulations and approving the appointments through its annual general meeting. The central bank noted that Prabhu Bank manipulated the interpretation of merger and acquisition laws to extend the term of its directors beyond the stipulated period under the Banking and Financial Institutions Act. As a result, NRB directed the bank’s board to remove the non-compliant directors.
The central bank also identified weaknesses in compliance during its on-site inspection of Prabhu Bank, including a failure to address issues highlighted in inspection reports, inadequate loan loss provisioning based on overdue loan periods, and non-adherence to capital adequacy ratio guidelines. The bank’s CEO was cautioned to rectify these issues promptly.
Similarly, Himalayan Bank’s CEO was warned for failing to classify loans based on overdue periods and non-compliance with loan loss provisioning requirements. NRB urged the bank to improve its adherence to regulatory directives and implement corrective measures to address deficiencies.
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