Nepal Rastra Bank fines 11 financial institutions for regulatory breaches in Q3 2025

KATHMANDU: The Nepal Rastra Bank (NRB) has cracked down on 11 financial institutions for regulatory violations in the third quarter (January-March) of the 2024/25 fiscal year, signaling heightened oversight to ensure financial stability. The penalized entities—five commercial banks, three development banks, and three finance companies—face fines, warnings, and corrective actions for non-compliance, spotlighting persistent challenges in Nepal’s banking sector.

The commercial banks—National Commercial Bank, Kumari Bank, Laxmi Sunrise Bank, Standard Chartered Bank, and Nepal Bank—were cited for breaching NRB directives. National Commercial Bank failed to classify loans for close monitoring, provision for overdue loan losses, and comply with risk weight calculations, alongside partial adherence to working capital loan guidelines. Its CEO was warned.

Kumari Bank and Laxmi Sunrise Bank faced similar warnings for improper non-performing loan classification and inadequate loan loss provisioning. Laxmi Sunrise also violated rules by indirectly extending credit through negative balances in founders’ accounts, prompting a warning to its CEO.

Nepal Bank was penalized for ineffective strategic plan execution and poor senior management coordination, with its CEO cautioned for delays in loan approvals. Former chairman Chandra Bahadur Adhikari was fined NPR 500,000 for misusing his position, leading to his dismissal. Standard Chartered Bank incurred a hefty NPR 148.525 million fine for failing to meet mandatory lending targets in agriculture, energy, and SMEs by Q2 2024/25, highlighting gaps in productive sector financing.

Development banks faced scrutiny, with Muktinath Development Bank fined for exceeding interest rate spreads, low productive sector lending, and inadequate cash reserves. Chairman Bharat Dhakal was warned. Narayani Development Bank was penalized for failing to meet minimum paid-up capital, exceeding deposit and single-client loan limits, and maintaining inadequate capital ratios. The NRB ordered its board to comply by June 2025. Salpa Development Bank was sanctioned for not meeting Class B capital requirements.

In the finance sector, Pokhara Finance was fined NPR 46,718 for failing to maintain cash reserves in January 2025, while CEO Ravichandra Gurung faced a NPR 500,000 penalty for ignoring inspection findings. With 33.44% non-performing loans and deficient capital ratios, Pokhara Finance was placed under prompt corrective action. Janki Finance faced similar measures for non-compliant capital ratios, and Gorkhas Finance’s chairman, Gaurav Budhathoki, was warned for a three-month CEO vacancy.

Nepal’s banking sector, critical to its 6.5% GDP growth forecast for 2025, faces rising non-performing loans (3.5% in 2024) and compliance issues. The NRB’s actions aim to safeguard financial stability, but experts warn that systemic weaknesses, including lax governance and inadequate risk management, persist. “These penalties signal the NRB’s resolve, but deeper reforms are needed,” said a banking analyst.

The private sector urged the NRB to balance enforcement with support for compliance, citing economic pressures like a 20.85% revenue shortfall in 2022/23. As Nepal aims for digital banking and financial inclusion, the NRB’s stringent measures underscore the urgency of aligning institutions with regulatory standards to bolster investor confidence and economic resilience.