Three Options Under Discussion to Revive Troubled Karnali Development Bank

Nepal Rastra Bank (NRB) is exploring three options to resume the operations of Karnali Development Bank, which it had earlier declared troubled and taken under its management. The central bank started discussions after the NRB and police investigations led to legal action against the bank’s former directors, management, and borrowers for alleged irregularities.

According to NRB sources, continuing the bank’s operations under central bank management for too long could send the wrong message and set a bad precedent. The three options being discussed include: bringing in new investors, having existing major investors increase their shareholding, and converting large deposits into equity.

Bank Management Coordinator and NRB Deputy Director Tika Ram Khatiwada said immediate liquidation could result in significant losses for depositors, given the bank’s weak financial position.

“Following our investigations with the police, legal action has started against those involved in irregularities. Our focus now is on managing and reviving the bank,” he said.

NRB has granted the management group authority equivalent to that of the board of directors, the management, and the general assembly. Based on this mandate, the management group has proposed operational options to NRB. “We have suggested various options, but no decision has been made yet. We will now hold discussions with both investors and depositors,” Khatiwada said.

Liabilities Exceed Assets
The bank’s liabilities stand at Rs 5 billion, while its assets amount to only Rs 3 billion—leaving a shortfall of about Rs 2 billion to meet obligations. NRB fears that liquidation would make it impossible to return depositors’ money in full, which is why it is prioritizing operational revival.

The District Government Attorney’s Office in Banke has filed cases against 109 individuals, claiming Rs 3.2 billion from them. However, Khatiwada noted that recovering the funds through the court process will take time, reinforcing the need to keep the bank operational.

Six months after NRB took over the management, depositors have yet to get their money back. While legal proceedings against the bank’s former directors and staff are underway, the timeline for deposit repayment remains uncertain.