Nepal Rastra Bank (NRB) has kept 18 out of 20 commercial banks under its watchlist after these banks were suspected of failing to abide by the central bank’s regulations.
According to an NRB official, the central bank has considered these banks under special surveillance after it received a number of complaints against these ‘A’ class financial institutions. The complaints that the central bank received were on personal basis and via Nepal Police, the Commission for the Investigation of Abuse of Authority and the Department of Money Laundering Investigation, among others.
The NRB in the past one year carried out a total of 37 onsite inspections of the commercial banks under the watchlist. The sector’s regulator time and again conducts the offsite and onsite inspection of the banks and financial institutions to ascertain that they implement risk mitigation measures effectively.
Based on the complaints it received, the NRB conducted minute supervision for up to four times of these banks in the review period. According to the NRB source, only Standard Chartered Bank Nepal and Machhapuchchhre Bank Limited fall out of the scrutiny framework of the central bank.
NRB in its ‘Bank Supervision Report 2022/23’ stated the central bank carried out onsite inspections of Laxmi Sunrise Bank and Prabhu Bank for up to four times in the past one year. Likewise, Global IME Bank and Kumari Bank were second in the row to face frequent inspections of the sector’s regulator. Agriculture Development Bank, Nepal SBI Bank, Sanima Bank, Citizens Bank and Siddhartha Bank underwent only one time cross-checking of the NRB.
The report unveiled last week pointed out serious problems in operation of the majority of the commercial banks of Nepal. The NRB has underscored a number of flaws in the credit system, operational risk management and policy implementation of these banks.
The banks were found formulating policies and guidelines such as Recovery Planning Policy, Compliance Policy and Director Education Program Guidelines for internal control system but they failed to timely review and update these policies.
Lacking implementation of an adequate Management Information System (MIS) to support a comprehensive risk management function and failing to conduct information security and system audits were among the identified problems. The banks were found issuing personal loans without holding proper credit appraisal, while they were found to have poor surveillance systems.
According to the NRB, the video surveillance setup of most of the banks is not sophisticated enough to help investigate misconduct, fraud check and report suspicious activities. The CCTVs installed in the banks have issues like maintaining backup for less than 90 days, blur visibility due to which packets and bundles of notes could not be identified properly. They depend on their surveillance system through impaired cameras, while positioning them in anti-light locations, an NRB report stated.
