Prabhu Bank CEO Sherchan released, Investigation to continue outside custody

KATHMANDU: Prabhu Bank’s Chief Executive Officer Ashok Sherchan has been released from custody following an order from the Office of the Special Government Attorney. The decision was confirmed by Central Investigation Bureau (CIB) Chief and Additional Inspector General of Police Dr. Manoj Kumar Shrestha. Sherchan, along with other bank employees, was also released today.

Sherchan was arrested on Mangsir 14 from Prabhu Bank’s central office in Babarmahal as part of an ongoing investigation into alleged banking irregularities. He was taken into custody by the CIB and later presented for remand extension. However, the Special Government Attorney’s Office ordered his release, allowing investigators to proceed with the case without keeping him in detention.

According to the CIB, the investigation will continue with Sherchan remaining out of custody, and further legal steps will be taken based on the findings of the probe.

Background of the Case

The arrest of Sherchan marked one of the most serious law-enforcement actions against a sitting CEO of a commercial bank in Nepal in recent years, sending shockwaves through the banking sector. The CIB launched the investigation following complaints and intelligence inputs related to alleged irregular lending practices, weaknesses in internal controls, and potential violations of Nepal Rastra Bank (NRB) regulations.

Sources close to the investigation indicate that the case is linked to questionable credit decisions and governance lapses, particularly in high-value loan approvals and related-party exposures. The probe also expanded to examine risk assessment failures, compliance with prudential norms, and the role of senior management in overseeing large loan portfolios.

During the course of the investigation, the CIB also detained other senior officials associated with Prabhu Bank, signaling that the case was not limited to an individual but was focused on systemic governance and operational failures within the institution. The arrests prompted NRB to closely monitor the bank’s stability indicators, asset quality, and compliance status.

Sector-Wide Implications

The case emerged at a time when Nepal’s banking sector is already under pressure due to rising non-performing loans (NPLs), increased provisioning requirements, weak credit growth, and declining profitability. Several banks have reported shrinking distributable profits, while some have been unable to declare dividends despite having marginal capacity.

The arrest of a bank CEO intensified concerns among investors and depositors about corporate governance, regulatory enforcement, and accountability of top management in commercial banks. Following the development, Prabhu Bank’s governance practices came under heightened scrutiny, with market participants closely watching regulatory actions and investigative outcomes.

What Lies Ahead

With Sherchan now released, investigators are expected to continue collecting documents, recording statements, and analyzing financial transactions related to the case. Legal experts note that release from custody does not imply clearance of charges, as the investigation remains active and could lead to formal prosecution depending on the evidence.

The CIB has reiterated that the probe will proceed independently and professionally, while the banking regulator is expected to assess whether regulatory breaches warrant supervisory or corrective action under existing banking laws.

The outcome of the Prabhu Bank case is widely seen as a test of Nepal’s financial governance framework, particularly in holding senior banking executives accountable while ensuring institutional stability in a fragile economic environment.