Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Prabhu Bank has entered a period of significant uncertainty after the Central Investigation Bureau (CIB) arrested the bank’s Chief Executive Officer Ashok Sherchan, Deputy CEO Mani Ram Sharma, and Chief Credit Officer Riwaj Shrestha in connection with an ongoing investigation into alleged financial misconduct, criminal breach of trust, and violations of the Nepal Rastra Bank Act, 2058.
The arrests have raised concerns among regulators, investors, and depositors, given that Prabhu Bank currently holds around Rs 350 billion in customer deposits and remains one of the country’s large commercial banks.
CIB Confirms Charges Related to Loan Misuse and Regulatory Violations
According to a statement issued by the CIB, the investigation team reviewed documents and evidence related to loan disbursements, misuse of credit through multiple companies, and actions allegedly carried out in violation of Nepal Rastra Bank (NRB) directives and prevailing banking laws. The bureau stated that the actions in question caused financial harm to Prabhu Bank.
The High Court Patan granted permission for the arrests, and the investigation remains ongoing.
NRB Holds Joint Meeting as Bank Enters Regulatory Spotlight
Following the arrests, Nepal Rastra Bank began closely monitoring Prabhu Bank’s situation. A joint meeting of the central bank’s regulation, supervision and corporate planning and risk departments was held to assess potential implications for the banking system.
A senior NRB official said the regulator is reviewing the developments carefully and will move forward based on internal assessments and the outcomes of discussions held with the Governor and the concerned departments. Online transactions and liquidity flows are being monitored more closely as part of precautionary oversight.
Emergency Board Meeting Appoints Acting CEO
Acting on NRB’s instruction, Prabhu Bank held an emergency board meeting on Sunday evening and decided to appoint Niraj Lamsal, the bank’s senior-most recovery officer, as the Acting Chief Executive Officer.
The decision was taken after NRB directed the bank to ensure immediate leadership continuity following the arrest of the top management officials.
Investors Panic, Share Value Falls Sharply
Following the arrests, Prabhu Bank’s share value on NEPSE has been in continuous decline, with investors selling off amid uncertainty over the bank’s future management and regulatory actions.
Market analysts say the arrests have shaken investor confidence, not only toward Prabhu Bank but the entire banking sector, raising questions about governance standards and regulatory oversight.
CIB’s Charges Reveal Shocking Abuse of Depositors’ Money
According to CIB’s public notice, the investigation unearthed alarming evidence:
The arrested executives violated NRB directives and existing banking laws
They caused financial loss to Prabhu Bank through irregular loan approvals
They diverted and misused credit through multiple shell companies
They attempted to hide the wrongdoing by artificially adjusting loan accounts
They are linked to large-scale financial misconduct under the Banking Offense and Punishment Act, 2064
CIB explicitly stated that CEO Sherchan and others were involved in “causing harm and financial damage to Prabhu Bank by knowingly violating banking laws and facilitating loan misuse worth crores through various companies.”
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