The Nepal Rastra Bank has taken regulatory action against three commercial banks for violating the Nepal Rastra Bank Act and directives issued to banks and financial institutions.
The banks facing action are NIC Asia Bank Limited, Global IME Bank Limited, and Nepal Investment Mega Bank Limited.
According to details of enforcement actions made public today for the second quarter of the current fiscal year, NIC Asia Bank repeatedly published financial statements in violation of directives issued by the central bank. The bank also failed to comply with written instructions issued by Nepal Rastra Bank. As a result, the bank’s former Chairman Tulsi Ram Agrawal and former Chief Executive Officer Roshan Kumar Neupane were each fined Rs 200,000 in accordance with Section 100(2)(c) of the Nepal Rastra Bank Act, 2058 (including the Second Amendment, 2073).
Similarly, based on the on-site inspection report of 2082 BS, the CEO of Global IME Bank has been formally cautioned after irregularities were identified.
Nepal Rastra Bank stated that Global IME Bank failed to maintain adequate loan loss provisions as required under the Unified Directive 2081 issued to banks and financial institutions. The bank also did not fully comply with regulations related to loan rescheduling and restructuring.
During the inspection, the central bank found that the bank’s core banking software system had the capability to recreate loans that had already been repaid by retaining the original value date, raising concerns over internal control mechanisms.
In the case of Nepal Investment Mega Bank, the central bank found that the bank failed to obtain customers’ signatures on loan-related documents in a manner that ensured proper collateral security. Additionally, the bank extended loans exceeding the value of pledged collateral.
The bank was also found to have maintained an interest rate spread of more than two percentage points on loans of a similar nature. Furthermore, it issued new short-term loans in the final month of a quarter in violation of the Working Capital Loan Guidelines, 2079.
As a result of these violations, the board of directors and the CEO of Nepal Investment Mega Bank have been formally warned by the central bank.
