Nepal Rastra Bank Takes Stringent Measures Against Six Financial Institutions for Regulatory Violations

Nepal Rastra Bank (NRB) has taken decisive disciplinary actions against six financial institutions, including Muktinath Bikas Bank, Saptakoshi Development Bank, Narayani Development Bank, Progressive Finance, Goodwill Finance, and Guheshwori Merchant Banking and Finance, for various violations of mandatory regulations.

Muktinath Bikas Bank, in contravention of the Consumer Protection Fund Operation Procedure, 2079, collected fees from customers for personal and group loans with the initial intention of benefiting borrowing customers. Subsequently, the bank diverted these funds for purposes unrelated to the collective interests of customers. Despite the claim of fund return, investigations revealed misuse, acting against the financial interests of depositors and the public. In response, the executive committee, chairman, and CEO of Muktinath Bikas Bank are now subject to caution under Section 100(2)(k) of the Nepal Rastra Bank Act, 2058.

Saptakoshi Development Bank, following a comprehensive on-site inspection, had its independent director's provision for the second term revoked due to lapses in decision-making. The bank's CEO is cautioned for unauthorized base rate changes and inaccurate submission of details on revised rates and loan information. Additionally, an independently appointed director, deemed legally incompetent, has been promptly removed. These actions align with the Banking and Financial Institution Act.

Narayani Development Bank faced penalties for failing to maintain the mandatory minimum cash reserve and exceeding the maximum limit of the Credit-Deposit (CD) ratio, resulting in a cash fine of NPR 12,846.28 and a penalty of NPR 2,41,924.01, respectively. These penalties are in accordance with the Nepal Rastra Bank Act, 2058.

Progressive Finance Limited, after a comprehensive on-site inspection, received a caution from the Nepal Rastra Bank for adopting a risky valuation method in its lending to Maharjan Business Associates Pvt. Ltd. The caution is issued under Section 100, Sub-section (2), Clause (k) of the Banking and Financial Institution Act, 2058, emphasizing concerns about the decision-making process and collateral approval.

Goodwill Finance, following a special examination, faced a caution from the Nepal Rastra Bank for inadequate analysis of project viability and improper utilization of loan amounts when lending to Maharjan Business Associates Pvt. Ltd. The bank's management committee and CEO are cautioned under Section 100, Sub-section (2), Clause (k) of the Banking and Financial Institution Act, 2058.

Guheshwori Merchant Banking and Finance violated the regulatory framework by exceeding the investment threshold during the fiscal year 2079/80, engaging in excessive share selling. Consequently, the Chief Executive Officer of the institution is cautioned under Section 100, Sub-section (2), Clause (k) of the Banking and Financial Institution Act, 2058. Directives have been issued to ensure full compliance with all regulatory provisions in the future.