Nepal Rastra Bank (NRB) has taken regulatory action against two development banks for violating banking rules. Lumbini Development Bank received a warning, while Saptakoshi Development Bank faced stricter measures.
Lumbini Development Bank warned
NRB found that Lumbini Development Bank’s board increased the chief executive officer’s benefits shortly after reappointing him for a second term. This violated Section 29(7) of the Bank and Financial Institution Act, 2073. As a result, the board was officially warned under Section 100(1)(ka) of the NRB Act, 2058.
Saptakoshi Development Bank faces multiple actions
NRB identified several issues at Saptakoshi Development Bank:
- Its capital adequacy ratio was only 7.51% as of mid-July 2082, far below the 10% minimum required.
- Past loans were extended in the core banking system without proper documentation.
- Loan loss provisions were not accurately recorded, and reports submitted to NRB were unreliable.
- The bank failed to follow NRB instructions.
Because of these violations, NRB took prompt corrective action under the Bank and Financial Institutions (Prompt Corrective Action) Regulations, 2074.
The bank’s board is responsible for fixing the errors highlighted in the inspection report. NRB has also directed the CEO, Dinesh Kumar Pokharel, to correct the issues. The board must ensure that such violations do not happen again.
