Kathmandu. Nepal Rastra Bank has taken action against 3 commercial banks. In the second quarter of the fiscal year 2081/82, the Nepal Rastra Bank Financial Institution Supervision Department has taken action against licensed “A” class banks, their chairmen, directors and chief executive officers (CEOs). The banks subject to action are Prabhu Bank, Himalaya Bank and NIC Asia Bank.

The meeting of the Board of Directors of Prabhu Bank has appointed directors for the post of directors until the annual general meeting in violation of the provisions of the Bank and Financial Institutions Act, 2073, and has continued the appointment only after obtaining approval from the same annual general meeting.

Although the term of office of the general director of the bank has expired, the board of directors has also been instructed to remove the director after it was found that the term of office of the director was calculated from the date of acquisition by interpreting the merger and acquisition provisions in its favor.

During the on-site inspection of Prabhu Bank, it was found that weaknesses were observed in the implementation of the instructions issued by the Rastra Bank and that the bank was not taking the initiative to correct the shortcomings highlighted in the inspection report in a timely manner.

It has been found that the banks under action have not established a provision for loan losses based on the loan arrears period and have not deducted the amount to be deducted from the primary capital in accordance with the provisions of the Capital Education Framework issued by this bank regarding the calculation of the capital adequacy ratio and while assigning risk weight to some loans, they have assigned a lower weight than mentioned in the said framework, thereby showing lower risk-weighted assets than the actual ones. The Chief Executive Officer of the bank has been warned to prevent such incidents from recurring in the future.

Himalayan Bank has been warned by the Chief Executive Officer for not classifying loans based on the period of overdue and not complying with the provisions related to loan losses.

The directors of NIC Asia Bank have been informed that the directors of their family members and affiliated institutions have paid interest higher than the published interest rate, and the directors of the bank, their family members and affiliated institutions have opened some accounts with old dates, and the excess interest has been refunded as per the instructions of the Rastra Bank. The bank has stated that it has issued a warning to Garib Bank's Chief Executive Officer Roshan Kumar Neupane, Chairman Tulsiram Agrawal, Director Trilok Chandra Agrawal and Director Ram Chandra Sanghai under Sub-section 2(a) of Section 100 of the Nepal Rastra Bank Act, 2058 (with the Second Amendment).

During the on-site inspection of NIC Asia, it was found that the bank had not implemented the instructions related to loan classification and loan losses, the instructions related to capital fund and risk weight, the instructions related to interest rates and some instructions related to institutional good governance.

The Rastra Bank has directed this bank not to take any action/decision that is contrary to the integrated instructions issued to banks and financial institutions and to fully comply with the Rastra Bank's instructions and to prepare and implement a reform action plan.

The Rastra Bank has also directed that the arrangements related to loan classification and loan losses be made in accordance with the instructions of this bank and to fully comply with the instructions related to institutional good governance issued by the Nepal Rastra Bank and to prepare and implement a reform action plan.