Nepal’s central banking authority has come down hard on three major commercial banks for ignoring critical financial regulations.
The Nepal Rastra Bank (NRB) slapped fines and issued severe warnings to NIC Asia, Global IME and Nepal Investment Mega Bank. This latest move signals a zero tolerance policy against regulatory negligence regarding financial reports and loan safety.
Heavy Fines Hit NIC Asia Leadership
The central bank took its most severe step against NIC Asia Bank Limited. The regulator found that the bank repeatedly ignored written instructions regarding the publication of its financial statements.
The following top officials were penalized:
- Tulsi Ram Agrawal: Former Chairperson
- Roshan Kumar Nyaupane: Former Chief Executive Officer
NRB fined both individuals Rs 200,000 each. This action falls under Section 100(2)(c) of the Nepal Rastra Bank Act. The central bank stated that the bank went ahead with publishing data that contradicted specific regulatory directives.
This penalty highlights the personal accountability of board members and CEOs. It serves as a stern reminder that ignoring the regulator results in direct financial hits to leadership figures.
Global IME Bank Faces Loan Scrutiny
Global IME Bank Limited also came under the regulatory radar during this review period. An on-site inspection by the central bank revealed serious gaps in how the bank manages its lending risks.
The inspection team discovered that the bank failed to keep enough money aside for potential bad loans. This is known as loan loss provision. Failing to do this puts depositors at risk if borrowers stop paying back their money.
Key violations found at Global IME included:
- Deficiencies in maintaining adequate loan loss provisions.
- Non compliance with loan rescheduling rules.
- Issues with restructuring loans under the Unified Directives 2081.
A major technical flaw also raised eyebrows at the central bank. The core banking system at Global IME allowed settled loans to be reactivated. This kept the old value date intact. This practice creates a false picture of the bank’s health and strictly violates transparent banking norms.
NIMB Warned Over Security and Interest Rates
Nepal Investment Mega Bank Limited (NIMB) received a formal warning for multiple operational failures. The regulator found that the bank was careless with loan documentation.
Investigators discovered that the bank disbursed loans exceeding the guaranteed amounts. Even worse, they did this without obtaining necessary signatures from customers. This lack of documentation makes it difficult to recover money if a borrower defaults.
The central bank also flagged these financial issues:
- Interest Rate Spreads: The bank maintained a gap of more than two percentage points on similar loan categories.
- Working Capital Breaches: The bank gave out short term loans during the final months of the quarter.
These actions violate the Working Capital Loan Guidelines 2079. By manipulating loan disbursals at the end of a quarter, banks often try to artificially inflate their balance sheets. The NRB has now formally warned the board and CEO of NIMB to fix these issues immediately.
Why This Regulatory Action Matters
These actions by the NRB are part of the supervisory report for the second quarter of the current fiscal year. It shows that the central bank is actively monitoring the health of the financial sector.
When banks hide bad loans or mess up documentation, it weakens the entire economy. The central bank uses these fines and warnings to force banks to be honest. It ensures that the money deposited by the public remains safe.
Experts believe this strict approach is necessary. It forces banks to prioritize compliance over aggressive profit making. The formal warnings to the boards of directors ensure that the message reaches the highest level of management.
All three banks must now correct their course. Failure to do so could lead to even harsher penalties or restrictions on their business operations in the future.
