Nepal Rastra Bank has taken control of the management of Karnali Development Bank after bad loans have reached almost 50 percent and it is unable to pay its deposit obligations. The Rashtra Bank Management Committee meeting held on Wednesday morning (a public holiday) decided to declare the institution in trouble and take over the management.

According to Section 86 'B' of the Nepal Rastra Bank Act, 2058, the institution has been declared a 'problem institution'.

The central office of the institution, which received operating permission from Rastra Bank on February 6, 2060, is in Nepalgunj, Banke. Rastra Bank will take over the management of the bank, which has five district jurisdictions namely Banke, Bardia, Dang, Pyuthan and Rolpa from Thursday.

The National Bank has formed a three-member management group under the coordination of Tikaram Khatiwada, Deputy Director of Bank and Financial Institutions Regulation Department, for the leadership of bank management. Rashtra Bank spokesperson Ramu Poudel said that Deputy Director of Financial Institutions Supervision Department Bishnu Kumar Vishwakarma and Deputy Director of Law Division Jugal Kishore Kushwaha have been appointed as members of the group.  It is said that the

group will take over the assigned responsibility of the organization from December 11. No time has been fixed as to how long this team of the National Bank will take over the management. It has been said until further notice.

However, Rashtra Bank sources said that there is a plan to select a new management to bring the institution into a rhythm within a month. Karnali Development Bank has about 5 billion in deposits and 3 billion in loans. Rastra Bank says that this bank has not maintained the minimum capital ratio as specified and the non-performing loan ratio is 40.85 percent. 

The management group of Nepal Rastra Bank has been given the authority 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, said spokesperson Paudel.&nbsp ;

The management group is given the authority to focus on the protection of the interests of the general public and give priority to the payment of savers' savings and the recovery of the organization's debt, to complete the overall asset and liability assessment (DDA) of the organization, to carry out the necessary investigation on the financial misappropriation in the organization, and to carry forward the process of legal action. is given

'The bank has not maintained the minimum capital ratio, institutional governance is weak, there is suspicion of financial embezzlement and the institution is unable to meet its deposit obligations due to weak liquidity,' the National Bank said, 'financial embezzlement received from the institution. Based on the information, the interest of the depositors will not be protected if the institution is allowed to operate as it is, and distrust is created towards the banking system. It has been taken under control.' 

It is said that the institution has problems due to non-maintenance of the minimum capital ratio as specified by the National Bank, non-performing loan ratio of 40.85 percent. According to the instructions of the National Bank, development banks should have a capital ratio of at least 11 percent and bad loans at a maximum of 5 percent. Currently, the capital of this organization is negative by about 20 percent, according to the source.  When the

problem was noticed, the National Bank started quick corrective action effective from 11 November 2081. After the initiation of this action, the institution should improve the indicators specified by the National Bank within the time frame. But as the bank did not improve as promised and the financial indicators started getting worse, the National Bank held a meeting of the board of directors even on public holidays and took control of the management.