Nepal Rastra Bank (NRB) has taken regulatory action against six development banks and financial institutions, including their board members and executives, during the third quarter of Fiscal Year 2024/25. The measures include prompt corrective actions, cash fines, and official warnings, based on both on-site and off-site monitoring.

NRB initiated prompt corrective action against Janaki Finance and Pokhara Finance under Clause (c) of Regulation 3 of the Prompt Corrective Action Regulations, 2017.

According to the regulation, if a financial institution’s capital adequacy ratio (CAR) falls 75% below the required level or goes  50% above the prescribed threshold it faces restrictions such as a ban on opening new deposit accounts, issuing loans, hiring staff, and increasing service benefits. If the CAR is not brought within the regulatory limit within six months, further action can be taken against the board and the chief executive officer.

As of mid-January 2024, Pokhara Finance’s non-performing loans (NPLs) stood at a concerning 33.44 percent, and its capital ratio was negative 3.08 percent. In response, NRB fined then-CEO Ravichandran Gurung Rs 500,000.

Janaki Finance was similarly found to have an inadequate capital ratio—just 0.16 percent as of mid-December 2024—and faced prompt corrective action.

Other financial institutions also came under NRB’s scrutiny during the period. The board of directors of Narayani Development Bank was instructed not to violate regulatory directives. At Salpa Bikas Bank, the board was admonished for failing to meet the capital requirement. Gurkhas Finance also received warnings, with Chairman Gaurav Budhathoki and directors Yubaraj Rai, Narendra Kumar Agrawal, Neelam Bohara, and Kalpana Khapung held accountable for failing to fill vacant positions within the required three-month period. The CEO position at Gurkhas Finance remains vacant, following the revocation of the appointments of Prakash Chandra Adhikari in January and Gyanendra Iwahang in March.

Meanwhile, the chairman of Muktinath Bikas Bank was issued a formal warning.