Nepal Rastra Bank Fines Former Prabhu Bank CEO Rs 500000 Takes Action Against Three Commercial Banks
2nd August 2026, Kathmandu
Nepal Rastra Bank has enforced significant regulatory measures against three major commercial banking institutions operating in Nepal during the fourth quarter of fiscal year 2025/26.
Former Prabhu Bank CEO Fined for Rs 500000
The regulatory intervention by the Bank Supervision Department of the central bank involved imposing a cash penalty on the former chief executive officer of Prabhu Bank Limited, Ashok Sherchan.
It also issued formal warnings and administrative directives to two major government backed financial institutions, Rastriya Banijya Bank Limited and Agricultural Development Bank Limited.
This regulatory enforcement underscores the commitment of the central bank to improving corporate governance, maintaining financial transparency, and safeguarding overall stability across Nepal financial sector.
Former Prabhu Bank CEO Fined Rs 500000
The monetary penalty imposed on former Prabhu Bank CEO Ashok Sherchan represents one of the most prominent individual supervisory actions taken by the regulator in recent years.
Exercising its legal powers under Section 100 subsection 2 clause g of the Nepal Rastra Bank Act 2002, the central bank penalized the executive with a personal fine amounting to five hundred thousand rupees.
The disciplinary action was triggered by multiple recurring supervisory failures and non compliance with statutory directives.
Inspections conducted by central bank auditors revealed that Prabhu Bank repeatedly failed to implement crucial credit related recommendations that had been formally issued following previous on site evaluations.
In addition to the monetary penalty levied against the former executive, the central bank has instructed the Board of Directors of Prabhu Bank to take immediate responsibility for operational oversight.
The board of directors has been officially required to submit a formal written commitment to correct all identified operational deficiencies and guarantee that similar compliance failures do not recur in future banking operations.
Loan Classification And Regulatory Compliance Violations
A primary area of concern highlighted by the regulator involved improper loan classification and inadequate credit risk management.
Under the Unified Directives 2081 issued by Nepal Rastra Bank, commercial banks are legally mandated to categorize their loan portfolios based on specific risk metrics and maintain corresponding financial provisions to cushion against potential loan losses.
According to official regulatory findings, Prabhu Bank failed to comply with several key regulatory directives related to loan management and supervision.
First, the bank failed to implement most of the loan related recommendations issued during previous on site supervisory inspections.
Second, it did not classify its credit portfolio in accordance with Unified Directives 2081, resulting in inadequate loan loss provisioning that failed to reflect the true risk exposure of its balance sheet.
Third, the bank failed to rectify major operational and credit risk deficiencies identified during earlier supervisory reviews.
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Fourth, supervisory officials identified major reporting discrepancies when comparing the financial details submitted directly to Nepal Rastra Bank against data generated from the core banking software of the bank.
Nepal Rastra Bank described these shortcomings as serious violations of statutory and regulatory requirements, which directly prompted the personal monetary penalty against the former chief executive officer.
Board Directed To Implement Corrective Measures
The central bank noted that Prabhu Bank had previously been instructed to prepare and execute a comprehensive corrective action plan following a consolidated on site inspection conducted in fiscal year 2081.
However, a subsequent risk based inspection conducted in fiscal year 2082 using the unaudited financial statements of the bank as of Chaitra 2081 revealed that expected operational improvements were not achieved.
Consequently, Nepal Rastra Bank directed the Board of Directors of Prabhu Bank Limited to formally commit to implementing corrective measures under Section 100 subsection 1 clause b of the Nepal Rastra Bank Act.
This legal framework obligates the governing board to address internal control weaknesses, ensure reliable financial reporting, and enforce institutional accountability across all branches.
Rastriya Banijya Bank And Agricultural Development Bank Warned
The supervisory enforcement actions undertaken by the central bank were not limited to private commercial banks.
State owned banking institutions were also subjected to formal supervisory warnings under Section 100 subsection 1 clause a of the Nepal Rastra Bank Act for non compliance with statutory procedures.
Rastriya Banijya Bank Limited received a formal administrative warning after supervisory reviews established that the bank failed to comply with regulatory directives issued by Nepal Rastra Bank as well as its own internal regulations regarding the freezing and unfreezing of customer bank accounts.
Similarly, Agricultural Development Bank Limited was issued a formal administrative warning following a special on site inspection conducted by central bank officials.
The investigation revealed that Agricultural Development Bank Limited failed to freeze specific customer accounts on time despite official requests and instructions received from relevant law enforcement and investigative authorities.
Timely execution of account freezes is critical for preventing financial fraud and assisting law enforcement investigations, making non compliance a serious regulatory breach.
NRB Reinforces Regulatory Oversight
The supervisory interventions against Prabhu Bank Limited, Rastriya Banijya Bank Limited, and Agricultural Development Bank Limited highlight the continuous efforts of Nepal Rastra Bank to strengthen compliance, improve corporate governance, and enforce prudential banking standards across the commercial banking sector in Nepal.
The central bank has reiterated that all financial institutions and their senior leadership are expected to adhere strictly to supervisory directives, maintain accurate data reporting, and strengthen internal control mechanisms.
By enforcing strict regulatory compliance, Nepal Rastra Bank aims to preserve public trust in the financial system, safeguard depositor funds, and maintain overall economic stability across the country.
