Central bank steps in as Narayani Development Bank faces collapse, CEO resigns

KATHMANDU: The worsening financial condition of Narayani Development Bank has led to the resignation of its Chief Executive Officer (CEO), Bishnu Regmi.

The bank, which has been struggling for years due to weak capital adequacy, high non-performing loans (NPLs), and shareholder disputes, is once again in the spotlight after Regmi stepped down citing health issues. However, insiders say the resignation was triggered by an unfavorable working environment and pressure from the board of directors.

Troubled Rights Share Process

On June 22, 2022 (Asar 8, 2079 BS), the bank’s special general meeting had approved the issuance of rights shares in a 1:1 ratio, amounting to NPR 262.46 million (≈ USD 2 million). The bank sought approval from the Securities Board of Nepal (SEBON) in September 2022. However, SEBON granted permission only after 17 months, on January 3, 2024 (Poush 19, 2080 BS).

As per regulation, the rights shares should have been issued within two months of approval. The process stalled after the bank’s major shareholders failed to deposit their equivalent funds. Even after reapplying on March 25, 2025 (Chaitra 12, 2081 BS), SEBON only provided approval on August 31, 2025 (Bhadra 15, 2082 BS). The bank began offering 2.62 million units of rights shares at a face value of NPR 100 each from September 18, 2025 (Ashoj 2, 2082 BS).

Mounting Losses and Alarming Indicators

As of mid-July 2025 (Asar 2082 BS), the bank’s:

Paid-up capital stood at NPR 262.46 million.

Deposits reached NPR 449.67 million.

Loans stood at NPR 330.86 million.

But the bank’s NPL ratio has surged to 50.97%, and its core capital adequacy ratio is negative at -7.84%. Accumulated losses now stand at NPR 453.92 million.

The bank admits its profitability has been crushed due to weak loan recovery, inability to meet the Nepal Rastra Bank’s (NRB) capital adequacy requirements, excessive operating expenses, and a legacy of non-performing assets.

CEO Regmi’s Exit

Appointed CEO on September 24, 2023 (Bhadra 28, 2080 BS), Regmi submitted his resignation on September 5, 2025 (Bhadra 20, 2082 BS), which the board accepted effective September 15 (Bhadra 30).

Although he formally cited health issues, sources claim Regmi resigned due to the board’s lack of cooperation and mounting risks in loan recovery.

“When Regmi took charge, loans worth NPR 480 million had been disbursed. He managed to recover nearly NPR 300 million. Around NPR 180-200 million in loans remain unrecoverable,” a bank insider said. “Half of the bank’s loans are bad, and previous lending decisions are beyond repair.”

According to insiders, irregularities in collateral valuation and politically influenced lending crippled the bank. Fake companies and inflated property valuations allowed loans without genuine business operations.

“Collateral worth NPR 1 million was valued at NPR 10 million. Relatives used each other’s collateral to borrow, and groups misused loans collectively. When repayment time came, none took responsibility,” another source revealed.

Rising Pressure and Threats

Regmi had blacklisted dozens of borrowers and appraisers involved in fraudulent valuations. This triggered intimidation attempts, with groups of 30-40 people surrounding him at the bank. Local authorities, including the Chief District Office and police, had to intervene to ensure his safety.

Despite his efforts, Regmi found himself isolated. “The board pressured him to restructure bad loans and provide new loans to settle old ones. He feared banking offenses would eventually fall on him,” insiders said.

NRB’s Surprise Inspection

With the bank’s NPL ratio at alarming levels and capital adequacy failing, NRB recently conducted an unannounced inspection, keeping a team for nearly ten days.

Sources say Narayani Development Bank may be heading in the same direction as the troubled Karnali Development Bank if corrective measures fail.