21st January 2025, Kathmandu
Nepal Rastra Bank (NRB) has imposed penalties on three commercial banks for breaching regulatory guidelines in the second quarter of the 2024/25 fiscal year.
Nepal Rastra Bank Fines 3 Banks
Banks Involved
The three banks under scrutiny are Prabhu Bank, NIC Asia Bank, and Himalayan Bank. NRB’s Banking Supervision Department issued warnings and corrective instructions to these banks.
Prabhu Bank’s Violations
Prabhu Bank failed to properly follow rules regarding the appointment of directors before the annual general meeting (AGM). The bank continued directors in their positions even after their terms expired, interpreting merger and acquisition timelines to their advantage. NRB directed the bank to correct these practices and remove the appointed directors.
Capital Adequacy and Loan Loss Provisions
Prabhu Bank also neglected to follow capital adequacy guidelines. NRB found the bank had not deducted certain amounts as required under the Capital Adequacy Framework of 1959. Furthermore, the bank did not classify loans or set aside provisions for potential loan losses properly. NRB has cautioned the bank’s CEO for failing to comply with these requirements.
NIC Asia’s Irregularities
NIC Asia Bank has been criticized for offering higher-than-published interest rates to directors’ family members and related entities. The bank also opened fixed deposit accounts with incorrect dates, resulting in higher interest payments. NRB instructed NIC Asia to refund the excess interest and warned the bank’s CEO, chairman, and directors to refrain from such actions in the future.
Regulatory Non-Compliance at NIC Asia
During an on-site inspection, NRB discovered several instances where NIC Asia failed to comply with directives related to loan classification, capital adequacy, and interest rates. The bank was directed to ensure full compliance with NRB’s regulations, implement corrective measures, and submit regular reports.
Himalayan Bank’s Shortcomings
Himalayan Bank did not follow NRB’s guidelines for loan loss provisioning, especially regarding the classification of overdue loans. NRB issued a warning to the bank’s CEO, emphasizing the need for immediate corrective action.
NRB’s Final Directive
NRB instructed the three banks to avoid decisions that go against its regulations and to adhere strictly to its guidelines. All three banks are required to submit action plans for improvement and ensure the proper implementation of NRB’s directives.
The central bank’s ongoing supervision aims to strengthen the banking sector’s adherence to regulatory frameworks and protect public trust in financial institutions.
For more: Nepal Rastra Bank Fines 3 Banks
