Nepal Rastra Bank has declared Karnali Development Bank as problematic. It is a 'B' category licensed financial institution from the National Bank.

The meeting of the Nepal Rastra Bank Board of Directors held on Wednesday decided to declare the institution problematic and until further arrangements are made, the Rastra Bank has decided to take control of the management of the institution.

According to Section 86B of the Nepal Rastra Bank Act, 2058, the said institution has been declared a 'problem institution' according to the Rastra Bank. Rastra Bank has formed a three-member management group under the coordination of Tikaram Khatiwada, Deputy Director of Banks and Financial Institutions Regulation Department, for the operation of Karnali Development Bank. Bishnu Kumar Vishwakarma, Deputy Director of the Financial Institutions Supervision Department and Jugalkishore Kushwaha, Deputy Director of the Law Division, have been designated as members of the

group. It is said that the group will take over the assigned responsibilities of the said organization from 081 December 11 .

The management group of Nepal Rastra Bank is authorized to exercise the functions, duties and powers of the board of directors and the special general meeting of the institution under the prevailing laws including the Nepal Rastra Bank Act, 2058, the Bank and Financial Institutions Act, 2073, and the mandate assigned to it. Ramu Paudel said.

management group focusing on the protection of the interests of the general public, giving priority to saving savings payments and debt recovery of the organization, doing the necessary work to complete the overall asset and liability assessment (DDA) of the organization, carrying out the necessary investigation on the financial misappropriation in the organization and proceeding with the process of legal action, etc. Poudel informed that the authorization has been granted.

This bank has not maintained the minimum capital ratio, the state of institutional governance is weak, there is a threat of financial embezzlement, and the institution is unable to meet its deposit obligations due to its weak liquidity position, the National Bank has stated.

Similarly, based on the information of financial misappropriation received from the institution, the interest of the depositors will not be protected if the institution is allowed to operate as it is and distrust towards the banking system will be created.

The financial condition of the institution is problematic due to the fact that the minimum capital ratio as specified by this bank is not maintained, the non-performing loan ratio is 40.85 percent.