Kathmandu, Dec 25: Nepal Rastra Bank (NRB), the central bank of Nepal, has declared Karnali Development Bank as a problematic financial institution. The decision was made during a meeting of NRB’s Board of Directors. Following this declaration, NRB has assumed the management responsibilities of the bank, which has its head office in Nepalgunj, Banke.
According to a press release issued by NRB, the decision was taken under Section 86(b) of the Nepal Rastra Bank Act, 2002. The management of the bank will now be overseen by NRB under Section 86(c) of the same Act until further notice.
To manage the bank, NRB has formed a three-member management team led by Tika Ram Khatri, Deputy Director of the Banks and Financial Institutions Regulation Department. The team includes Bishnu Kumar Bishwakarma, Deputy Director of the Financial Institution Supervision Department, and Jugal Kishor Kushwaha, Deputy Director of the Legal Department. This group will assume its responsibilities starting Poush 11, 2081 BS.
The management team has been granted authority to act under the Nepal Rastra Bank Act, 2058BS, the Banks and Financial Institutions Act, 2073BS, and other prevailing laws. Their responsibilities include ensuring depositor protection, prioritizing deposit payments and loan recoveries, conducting a due diligence audit of the institution, and investigating financial irregularities for legal action.
NRB cited several reasons for declaring Karnali Development Bank problematic, including failure to maintain the minimum capital adequacy ratio, weak corporate governance, suspected financial misconduct, liquidity issues, and inability to meet deposit obligations. Allowing the bank to operate in its current state posed risks to depositors’ funds and public confidence in the banking system, prompting NRB to take control for safeguarding public interest.
The bank’s financial troubles had been apparent for some time. On Mangsir 11, 2081 BS, NRB had imposed restrictions on further deposit collection and loan disbursement. Despite granting the institution six months for corrective action, the situation worsened, leading to takeover decision. #nrb #nepal #devBank #Karnali
NRB Notice
