NRB Initiates Enforcement Measures Against Four Commercial Banks and Two Development Banks for Regulatory Violations
In the third quarter of the current financial year, Nepal Rastra Bank has taken action against four commercial banks and two development banks for violating its regulations.
Among the commercial banks facing action are Kumari Bank, Prime Commercial Bank, Nepal Investment Mega Bank, and Laxmi Sunrise Bank. Development banks under scrutiny include Lumbini Bikas Bank and Excel Development Bank.
Prime Commercial Bank has been reprimanded for several violations, including failure to classify loans according to the unified directive issued by the Nepal Rastra Bank Act 2079, inadequate maintenance of systems for loan losses, incorrect calculation of risk-weighted assets according to the Capital Education Framework 2015, and preparation of financial statements based on incomplete data for the month of Chaitra 2078. The bank's CEO has been warned for not following instructions from on-site inspection reports regarding maintaining additional loan loss provisions. Additionally, the Board of Directors has been alerted for insufficient monitoring of compliance with existing laws and regulations.
Similarly, Kumari Bank has been found guilty of similar infractions, including failure to classify loans according to regulations, inadequate maintenance of systems for loan losses, incorrect calculation of risk-weighted assets, and non-compliance with procedures for subsidizing interest on subsidized loans. The board of directors and CEO have been alerted, and the board has been instructed to recover a sum of NPR 2.30 crores within 35 days for non-performance of contract agreements regarding salary allowances and facilities to the former CEO.
Laxmi Sunrise Bank has provided a loan to its major shareholder, Rajendra Kumar Khetan, exceeding 1% of shares. However, improper monitoring of the loan's utilization and payment of interest from the shareholder's account has resulted in a fine of NPR 10 lakhs for Rajendra Kumar Khetan, and a caution has been issued to the bank's CEO.
Moreover, Nepal Investment Mega Bank Limited's Kalimati branch has been found purchasing bills worth NPR 41.36 crores on credit and renewing them continuously, contrary to directives from the Central Bank. Consequently, the bank has been advised to calculate institutional social responsibility expenses and ensure proper reflection of assets in capital adequacy calculations.
Lumbini Bikas Bank and Excel Development Bank have also received cautions for inadequate customer identification and incomplete implementation of systems for identifying suspicious transactions and activities. Additionally, Excel Development Bank has been reminded of compliance with unified directives issued to banks and financial institutions.
