Nepal Rastra Bank Takes Strict Measures Against Financial Institutions for Violations

KATHMANDU: Nepal Rastra Bank (NRB) has recently taken decisive action against various financial institutions, issuing alerts, fines, and warnings in response to alleged violations. The regulatory body has underscored its commitment to maintaining the integrity of the financial sector and ensuring adherence to established guidelines.

One of the banks facing scrutiny is Muktinath Bikas Bank, where the NRB has raised concerns about the misappropriation of funds from the customer protection fund.

The bank allegedly diverted funds collected from fees on poor-class loans, intended for the customer protection fund, for purposes other than their designated use. Subsequently, the bank returned the misused funds. The chairman and CEO of Muktinath Bikas Bank have been alerted regarding this matter.

Saptakoshi Development Bank is another institution in the spotlight, with the NRB warning its Board of Directors and CEO. The central bank expressed concern over the continuous presence of an independent director, whose term had reportedly ended, in board meetings and decision-making processes.

Additionally, the CEO of Saptakoshi allegedly changed the base rate through unauthorized access to the core banking system.

Narayani Development Bank has been fined Rs 12,846 for failure to maintain the mandatory balance as per regulatory provisions. Furthermore, the bank incurred an additional fine of Rs 242,000 for increasing the Credit-Deposit (CD) ratio by 90 percent during the Nepali months of Shrawan and Bhadra.

Progressive Finance received instructions from the NRB, cautioning both the CEO and the board of directors. The bank was found to have issued risky loans by adopting a non-current mortgage evaluation process.

Goodwill Finance also faced regulatory intervention, as it provided loans to Maharjan Business Associates Pvt Ltd without conducting adequate project analysis and ensuring the proper utilization of the loan amount. The NRB issued appropriate instructions to the board of directors and the executive head of Goodwill Finance in response to these findings.

Guhyeshwari Merchant Banking and Finance was cited for violating NRB regulatory provisions by selling investment shares exceeding the prescribed limit during the last fiscal year 2022/23.

These actions by the NRB underline the importance of compliance with financial regulations and responsible governance within the banking and finance sector. As the regulatory body continues to monitor and enforce guidelines, it aims to strengthen the stability and credibility of the financial institutions operating in Nepal.