Nepal Rastra Bank Imposes Prompt Corrective Action on Pokhara and Janaki Finance, Warns Three Development Banks

Nepal Rastra Bank (NRB) has taken action against three development banks and two finance companies for non-compliance with regulatory directives. Pokhara Finance and Janaki Finance have been placed under prompt corrective action, while Muktinath Development Bank, Narayani Development Bank, and Salpa Development Bank have been issued warnings. Additionally, Pokhara Finance’s former CEO Ravichandra Gurung has been fined NPR 500,000, and the board chairpersons and CEOs of other institutions have been cautioned.

The actions follow inspections by NRB’s Financial Institutions Supervision Department during the third quarter of FY 2081/82 (2024/25), which revealed violations of central bank directives.

Muktinath Development Bank
NRB found that Muktinath Development Bank’s Board Chairperson Bharat Raj Dhakal violated unified directives by participating as the convener of the building construction committee. The directive prohibits board chairpersons from joining internal committees beyond the board. Dhakal has been warned for this breach.

Narayani Development Bank
Narayani Development Bank has been issued a written order for repeatedly violating NRB directives. When removed from the problematic institutions list on August 5, 2020, the bank was instructed to meet minimum paid-up capital within two years, limit public deposits to 100% of paid-up capital, and cap single-client loans at 10% of core capital. The bank failed to meet the minimum capital requirement, exceeded deposit collection limits, breached single-client loan caps, and mobilized financial resources beyond permitted limits. NRB has directed the bank’s board to ensure compliance with minimum paid-up capital and capital adequacy ratio by mid-July 2025.

Salpa Development Bank
Salpa Development Bank has been reprimanded for failing to meet the minimum paid-up capital requirement and for not implementing NRB’s prior directives. The bank’s board has been advised to comply with regulatory provisions.

Pokhara Finance
Pokhara Finance has been fined NPR 46,718.23 for failing to maintain the mandatory cash reserve from January 27 to February 8, 2025. Former CEO Ravichandra Gurung was asked for clarification regarding lapses in overall management. His response was deemed unsatisfactory, leading to a NPR 500,000 fine and his removal as CEO. Pokhara Finance has appointed Prakash Gurung as the new CEO. As of mid-January 2025, the institution’s non-performing loans stood at 33.44%, with capital adequacy below regulatory standards. NRB has imposed prompt corrective action, requiring compliance with financial indicators within six months.

Janaki Finance
Janaki Finance has been subjected to prompt corrective action due to its capital adequacy ratio falling below regulatory standards as of mid-December 2024.

NRB stated that these actions were taken under the Prompt Corrective Action Regulation for Banks and Financial Institutions, 2074 (2017).