The Nepal Rastra Bank (NRB), the country’s central monetary authority, has taken action against four financial institutions — two commercial banks and two finance companies — for breaching regulatory standards during the last quarter of the previous fiscal year.
The regulatory action includes both monetary penalties and official warnings aimed at ensuring stricter compliance in Nepal’s banking sector.
Citizens Bank under scrutiny
Citizens Bank International has come under serious attention from the NRB. The bank was found to have amended the contract of its Chief Executive Officer (CEO), increasing benefits without the central bank’s approval, which goes against internal directives issued by the Bank and Financial Institution Regulation Department.
Additionally, the bank was found to have:
- Incorrectly calculated the interest rate spread,
- Issued new loans to repay existing debts and interest,
- Failed to make timely payments on claimed bank guarantees,
- Extended short-term loans repeatedly without proper provisioning for potential losses,
- Violated NRB’s Working Capital Guidelines 2079 by not fully adhering to reporting and compliance requirements.
The central bank also noted false reporting in the sector-wise credit disbursement, leading to further cautionary measures against the bank’s CEO and Board of Directors.
NIC Asia Bank warned
NIC Asia Bank was also issued a warning after the NRB discovered that the bank had charged excess interest to borrowers. The bank failed to clearly mention key loan terms — such as fixed or floating interest rates and installment schedules — in its loan agreements. Moreover, there was no evidence that the bank had communicated interest rate changes to its borrowers.
Monetary penalty for Pokhara finance
Pokhara Finance faced a financial penalty of NPR 3.27 million for failing to maintain the minimum mandatory cash reserve between 27th Magh and 23rd Chaitra, 2081 BS. This was classified as a serious breach of financial stability protocols.
Governance lapses at Guheshwori Merchant Banking & Finance
Guheshwori Merchant Banking & Finance also came under the NRB’s radar. The institution was found to have regularized defaulted loans by issuing new credit instead of recovering overdue payments, which resulted in misreporting of non-performing assets. The NRB also observed discrepancies in loan classification and provisioning.
Furthermore, the institution violated the Bank and Financial Institution Act, 2073, by:
- Failing to appoint a board member before the annual general meeting (AGM),
- Appointing directors without a formal election process,
- Amending employee benefit regulations without prior approval.
As a result, both the CEO and the Chairperson of the Board have been officially warned.
Nepal Rastra Bank’s recent actions reflect an increasing push for stronger governance and regulatory discipline within Nepal’s financial sector. The central bank has made it clear that non-compliance with financial regulations will not be tolerated and that institutions must maintain transparency, fairness, and accountability in all operational and financial matters.
