KATHMANDU, July 19: Nepal Rastra Bank (NRB) has come under fire for its weak role in supervision and monitoring of the banks and financial institutions (BFIs) following the case of crisis-ridden Karnali Development Bank Limited (KDBL).
The central bank’s role as the regulator of the BFIs has been put into question after the Central Investigation Bureau (CIB) of Nepal Police on Wednesday arrested Bhuwan Basnet, a former senior official of the NRB, on charges of manipulating the financial status of the KDBL. The CIB, during its investigation, found that Basnet, who had been delegated the authority to study over the poor financial health of the KDBL, submitted a fake report by hiding the actual condition of the development bank.
The CIB investigation shows that Basnet received Rs 1 million transferred in his bank account from the KDBL. CIB Spokesperson Senior Superintendent of Police, Hobindra Bogati, said the issue has raised a serious concern over the monitoring system of the NRB itself.
CIB reports embezzlement worth Rs 3.2 billion in KDBL scam
Last December, the NRB took over the management of KDBL by declaring the ‘B’ class financial institution as crisis-ridden. On November 26, 2024, the NRB imposed severe restrictions on the KDBL, barring it from accepting deposits and issuing new loans citing the critical financial issues that the development bank revealed during an onsite inspection carried out by the central bank.
The KDBL failed to maintain the minimum capital adequacy ratio as prescribed by the regulatory body. The central bank also accused the KDBL of weak institutional good governance, being involved in suspected financial misappropriation and facing poor liquidity conditions. Likewise, the KDBL’s non-performing loan was found to have escalated to as high as 40.85 percent.
The financial report for the first quarter of the last fiscal year unveiled by the KDBL paints a dismal picture. The bank recorded a net loss of Rs 19.8 million during the three-month period, as the development bank struggled to generate sustainable revenue for its operation.
According to the CIB, the KDBL’s management embezzled billions of rupees for many years by showing a fake balance sheet of the development bank. The CIB has already arrested the KDBL’s founding chairperson Rajendra Bir Raya and a former chairperson Pashupati Dayal Mishra, while Former CEO Dinesh Kumar Rawat and Head of Finance Department Ved Prakash Thakuri and an official Niraj Bikram Shah are also under scrutiny of the CIB.
As of now, the NRB is being considered as one of the influential regulators due to its tight monitoring system. However, the CIB, on suspicion of the alleged involvement of a number of officials of the central bank, has started an investigation against them.
The KDBL had collected deposits of Rs 4.90 billion from the general people. After falling into financial crisis, the development bank has now been unable to return its depositors’ money.
