Central bank penalizes CEOs of 15 banks and financial institutions

KATHMANDU: Nepal Rastra Bank (NRB) has taken action against the Chief Executive Officers (CEOs) of 15 banks and financial institutions. The regulatory body penalized CEOs from seven development banks and eight finance companies.

The CEOs of Lumbini Development Bank, Mahalaxmi Development Bank, Kamana Sewa Development Bank, Muktinath Development Bank, Salpa Development Bank, Garima Development Bank, and Saptakoshi Development Bank have been cautioned. Similarly, CEOs of finance companies including Samriddhi Finance, Pokhara Finance, Progressive Finance, I.C.F.C. Finance, Janaki Finance, Central Finance, Reliance Finance, and Goodwill Finance have also been warned by the central bank.

The NRB stated that the action was taken due to the improper utilization of refinancing, business continuity loans, and concessional loans.

According to a report submitted by a consultant, some of the loans disbursed by these institutions were either misused or suspected to be misused. The institutions were required to prepare internal audit reports on the loans in question and submit them to NRB. The findings revealed that certain concessional loans were not utilized properly, violating the guidelines on concessional loans and directives issued by NRB. As a result, the CEOs were warned under Section 100, Sub-section 2, Clause (a) of the Nepal Rastra Bank Act, 2058.

Garima Development Bank

Garima Development Bank was also cautioned after an on-site inspection revealed that it had granted personal overdraft loans to blacklisted borrowers. The central bank warned the institution under Section 100, Sub-section (1), Clause (a) of the Nepal Rastra Bank Act, 2058.

Karnali Development Bank

Karnali Development Bank faced stricter action, including financial penalties. Due to its inability to honor deposit payments by depositors as of December 24, 2024 (Poush 9, 2081 BS), the institution had already been declared problematic. NRB suspended its Board of Directors and CEO, taking control of the institution’s operations under Section 86(g), Sub-section (1) of the Nepal Rastra Bank Act.

Pokhara Finance

Pokhara Finance’s Board of Directors was also penalized for failing to conduct adequate oversight through its committees. An on-site inspection found that the institution was heading towards financial distress due to insufficient monitoring, leading to a warning under Section 100, Sub-section 2, Clause (a) of the Nepal Rastra Bank Act, 2058.

Central Finance

Central Finance was fined NPR 9,106 for failing to maintain the mandatory reserve requirement during the period from November 24 to December 28, 2024 (Mangsir 8 to Poush 13, 2081 BS). The penalty was imposed under Section 47 of the Nepal Rastra Bank Act, 2058, and the institution was warned in accordance with various provisions of NRB’s directives.

Broader Financial Sector Challenges

Recently, several financial institutions have faced action from NRB. The banking sector has been experiencing significant challenges, leading to increased regulatory scrutiny and penalties.