Nepal Rastra Bank Declares Karnali Development Bank as Troubled, Takes Over Management

Nepal Rastra Bank (NRB) has declared Karnali Development Bank, a Class ‘B’ financial institution, as troubled and taken over its management. The decision was made during a meeting held on Wednesday under Section 86(b) of the Nepal Rastra Bank Act, 2058. The bank’s central office is located in Nepalgunj, Banke.

Following the declaration, a three-member management committee has been formed under the leadership of NRB’s Deputy Director of the Bank and Financial Institution Regulation Department, Tikaram Khatri. The committee also includes Deputy Director of the Financial Institution Supervision Department, Bishnu Kumar Bishwakarma, and Deputy Director of the Legal Division, Jugal Kishore Kushwaha. This team will assume responsibility for the bank’s operations from December 25, 2024.

The management committee has been authorized to operate under the provisions of the Nepal Rastra Bank Act, 2058, and the Banks and Financial Institutions Act, 2073. The team will focus on protecting depositors' interests, ensuring the repayment of savings, recovering loans, investigating financial irregularities, and initiating legal actions as necessary.

The bank’s financial condition has deteriorated due to its failure to maintain the required minimum capital adequacy ratio, poor corporate governance, liquidity issues, and a high non-performing loan ratio of 40.85%. The central bank had earlier directed Karnali Development Bank to improve its condition through corrective measures, but the situation worsened.

Previously, NRB had declared Gorkha Development Bank and Nepal Share Market Finance as troubled institutions, which resulted in their stock trading being suspended.

This step by NRB is expected to safeguard public interests and restore trust in the banking system.