The Central Investigation Bureau (CIB) of Nepal Police has arrested Rajendra Bir Raya, the founding chairman of Karnali Development Bank (KDB), who had been on the run following allegations of financial embezzlement.

According to CIB spokesperson Superintendent Yuwaraj Khadka, Raya was apprehended on Saturday, May 31, in Belahiya, Rupandehi district. “He is being transported to Nepalgunj for legal proceedings,” Khadka told New Business Age on Sunday, June 1.

The arrest followed a formal complaint filed by Nepal Rastra Bank (NRB), the country’s central bank, after declaring KDB a problematic institution and taking over its management in January 2025.

KDB's financial irregularities came under scrutiny after discrepancies were found between its reported and actual financial health. In its first-quarter financial disclosure for the current fiscal year, the bank claimed a capital adequacy ratio of 10.05% and non-performing loans (NPLs) at 7.27%. However, an investigation by NRB found the actual NPL figure to be a staggering 40.85%, with the capital adequacy ratio falling below 4% during the same period.

By mid-January, NRB’s review revealed a dramatic deterioration in the bank’s financial position: KDB’s capital adequacy ratio had plummeted to negative 39.98%, while its NPLs soared to 60.75%.