The Nepal Bankers Association believes that the Supreme Court's decision has left directors and CEOs of banks and the financial sector in a state of confusion.
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The Supreme Court has ruled that directors and chief executive officers (CEOs) of banks and financial institutions who have been subject to action by the National Bank will be ineligible for reappointment. With this, directors and CEOs who have been warned and admonished by the National Bank are under tension.
The Supreme Court has already issued a directive order to Nepal Rastra Bank to implement the decision. MP and advocate Madhu Kumar Chaulagain had filed a writ petition with two demands: that the CEOs and directors of various banks should be removed from their posts on the basis of the action taken by the National Bank from time to time, stating that they are ineligible, and that the directors and CEOs who have been subject to such action should be ineligible for reappointment.
The Supreme Court's ruling explains that the legal action taken by the National Bank at various times against the CEOs and directors of banks can be considered as the basis for disqualification. The Supreme Court has already issued a directive order to the National Bank to implement this decision.
A summary document of the Supreme Court's order dated 19 Mangsir 2081 was made public only last week. The joint bench of Supreme Court Justices Nahakul Subedi and Nripadhwaj Niraula ruled that the action taken by Nepal Rastra Bank cannot be distinguished as general or special. In other words, since action such as 'awareness' or 'advice' was also taken by the regulatory body, the court concluded that the matter is considered as action.
The court, interpreting Section 18, Section 29(5) of the Banking and Financial Institutions Act (BAFIA), has said that a person who has been subject to action by a regulatory body and has not completed five years is ineligible to be a director or CEO.
The Supreme Court had dismissed the writ petition filed by the writ petitioner on 19 Mangsir 2081 in the case of incitement, including the provision regarding the disqualification of directors and officers of banks and financial institutions licensed by Nepal Rastra Bank, said Rastra Bank spokesperson Guru Prasad Poudal.
‘The order has been directed to send a letter to the concerned banks and financial institutions to ensure mandatory compliance with the legal provisions and to conduct effective monitoring of compliance,’ Poudel said. ‘This means that the office bearers will not be disqualified in the context of the writ petition being dismissed.’
The latest Supreme Court ruling has left the directors and CEOs of the bank and financial sector confused, said Nepal Bankers Association President Santosh Koirala. ‘The ruling states that if a person receives a warning and admonition from the National Bank, he will be disqualified from being appointed for five years,’ he said. ‘If this ruling is implemented, many directors and CEOs of banks and financial institutions will be affected.’ The Bankers Association has already held discussions among its members regarding the Supreme Court ruling last week.
The National Bank takes action from time to time against officials of banks and financial institutions in cases of violation of rules. During such action, sometimes admonishment, warning and sometimes even fines are imposed. However, the court has issued a directive order in the name of the Nepal Rastra Bank to send a letter to the concerned banks and financial institutions to ensure mandatory compliance with the legal provisions regarding the disqualification of directors and officers of banks and financial institutions and to monitor it effectively.
