Himal Press 
KATHMANDU: Nepal Rastra Bank (NRB) has declared Karnali Development Bank Limited of Nepalgunj a ‘problematic’ institution.
A meeting of the central bank’s Board of Directors took the decision as per Section 86 (B) of the Nepal Rastra Bank Act, 2001. “Commercial banks and financial institutions are deemed problematic in case of non-fulfillment of any financial liabilities, lack of probability to do so, or failure to pay due amounts,” Section 86 (B) of the Act states.
The central bank has formed a three-member management team under Deputy Director Tikaram Khatiwada of the Banks and Financial Institutions Regulation Department to oversee the development bank’s operations. Deputy Directors Bishnu Kumar Bishwakarma and Jugal Kishor Kushbaha are the other members of the management team.
“The management team, which will assume responsibilities from December 26, has been authorized to exercise the powers of both the board of directors and the special general meeting, subject to prevailing laws, including the Nepal Rastra Bank Act, 2001, and the Banks and Financial Institutions Act, 2016.”
The management team has been authorized to prioritize public interest by ensuring depositors’ savings repayment and loan recovery, conducting necessary due diligence audits, and investigating financial misconduct for potential legal action.
The central bank took over the management of Karnali Development Bank Ltd after it failed to maintain the minimum capital adequacy ratio prescribed by NRB, showed weak corporate governance, faced allegations of financial misappropriation, and was unable to meet deposit liabilities due to poor liquidity.
The bank was declared problematic and brought under NRB’s control to protect depositors’ interests and prevent erosion of trust in the banking system, the statement added.
The Class ‘B’ bank had been placed under the central bank’s prompt corrective action from November 26, 2024, due to its failure to maintain the minimum capital adequacy ratio and a high non-performing loan ratio of 40.85%.
