23rd January 2025, Kathmandu
Nepal Rastra Bank (NRB) has taken action against four banking and financial institutions (BFIs) – Pokhara Finance, Garima Bikas Bank, Karnali Development Bank, and Central Finance.
NRB Enforces Banking Discipline
The central bank issued warnings, imposed fines, suspended executives, and took over operations in some cases, citing serious regulatory lapses.
Pokhara Finance: Governance Issues Identified
NRB found that the Board of Directors at Pokhara Finance failed to provide adequate oversight. The lack of monitoring contributed to the institution’s declining performance.
The Board was issued a warning under Section 100 (2)(a) of the Nepal Rastra Bank Act, 2058, urging immediate improvements in governance.
Garima Bikas Bank: Lending to Blacklisted Borrowers
Garima Bikas Bank was found lending personal overdrafts to borrowers blacklisted by NRB. This breach of credit policy prompted a warning under Section 100 (1)(a) of the Nepal Rastra Bank Act, 2058.
NRB stressed the importance of following lending regulations to avoid future penalties.
Karnali Development Bank: Declared Problematic
Karnali Development Bank faced severe liquidity issues, preventing it from honoring depositor withdrawals. NRB took decisive steps to address the situation:
Declared the bank as “problematic” under Section 86(b) of the Nepal Rastra Bank Act, 2058.
Suspended the Board of Directors and the CEO under Section 86(c)(2).
Brought the bank’s operations under NRB’s control, forming a management team under Section 86(c)(1).
These measures aim to stabilize the bank and protect depositors.
Central Finance: Fined for Reserve Shortfall
Central Finance failed to maintain the mandatory liquidity reserve from 8th Mangsir to 13th Poush, 2081, as required by NRB. The central bank imposed a fine of NPR 9,106.09 under Section 47 of the Nepal Rastra Bank Act, 2058, alongside provisions in prudential directives.
This penalty serves as a reminder to meet statutory reserve requirements.
NRB’s Call for Stronger Compliance
NRB’s recent actions highlight its commitment to regulatory oversight and financial stability. By addressing non-compliance, the central bank aims to protect depositors, ensure institutional accountability, and strengthen trust in Nepal’s financial system.
For more: NRB Enforces Banking Discipline