8th August 2023, Kathmandu
Nepal Rastra Bank Action against three commercial banks during the fourth quarter of the last fiscal year (FY).
These actions highlight the central bank’s commitment to upholding regulatory standards within the banking sector.
Nepal Rastra Bank Action
During the last fiscal year (2022/23), NRB initiated punitive actions against three commercial banks for contravening regulatory norms:
Fines for Credit-Deposit Ratio Non-Compliance:
Kumari Bank and Himalayan Bank were fined by NRB for failing to maintain the prescribed credit-to-deposit ratio (CD ratio) of 90 percent. Kumari Bank incurred a penalty of Rs 5.9 million, while Himalayan Bank was fined Rs 13.9 million.
These fines emphasize the importance of adhering to the NRB’s established financial ratios.
Banks’ Violations and Consequences
Kumari Bank and CD Ratio Penalty:
Kumari Bank was penalized for not adhering to the NRB’s CD ratio requirement during the previous fiscal year.
The bank faced a cash penalty of Rs 5.96 million, emphasizing the significance of maintaining balanced credit and deposit levels.
Himalayan Bank and CD Ratio Penalty:
Similarly, Himalayan Bank received a cash penalty of Rs 13.9 million for failing to meet the NRB’s CD ratio requirement within the specified timeframe. This penalty highlights the NRB’s commitment to maintaining stable financial ratios across the banking sector.
Prime Commercial Bank’s Warning and Loan Loss Compliance:
Prime Commercial Bank was warned by NRB for non-compliance with loan loss provisions outlined in the Unified Directives 2079 BS. The bank’s failure to adhere to these provisions necessitated corrective action to ensure financial stability.
Risk-Weighted Asset Calculation (Nepal Rastra Bank Action)
As per the ‘Capital Adequacy Framework 2015,’ NRB identified Prime Commercial Bank for inaccurately calculating risk-weighted assets, underscoring the importance of accurate risk assessment for maintaining financial stability.
Conclusion
Nepal Rastra Bank’s resolute actions against the three commercial banks exemplify its unwavering commitment to maintaining a robust and compliant financial ecosystem.
By penalizing non-compliance with CD ratios and issuing warnings for inadequate loan loss provisions and inaccurate risk-weighted asset calculations, the NRB emphasizes the importance of adhering to established regulatory guidelines.
These actions are pivotal in fostering a secure and stable banking environment, safeguarding the interests of stakeholders, and contributing to the overall financial health of the nation.
