July 2: Nepal Rastra Bank (NRB) has taken action against six commercial banks for violating its policy throughout the fiscal year 2077/78. The central bank has imposed a fine of Rs 8.78 million on the banks in the current fiscal year. NRB has imposed financial fines on Laxmi Bank, Civil Bank and Standard Chartered Bank while it has issued warnings to Global IME Bank, Rastriya Banijya Bank and Prabhu Bank.

The central bank has slapped a fine of Rs 2 million on Laxmi Bank for violating the Anti Money Laundering Act and instructions. Likewise, Civil Bank has been fined Rs 1 million. Banks need to pay fines if they do not report violation of the Anti Money Laundering Act and instruction to the central bank. The minimum penalty for such violation is Rs 1 million.

The central bank has also taken action against the commercial banks that did not meet the specified limit of priority sector credit flow during this period. Standard Chartered Bank has been fined Rs 5.78 million for failing to invest in priority sector.  

The Bank Supervision Department of NRB has also warned Standard Chartered Bank not to repeat the mistake. The department has also issued warning to Chief Executive Officer (CEO) of Rastriya Banijya Bank Kiran Kumar Shrestha.

According to the Nepal Rastra Bank Act, 2058 BS, there is a provision to warn or give written warning at the beginning if the regulation of the bank is violated. According to the Bank Supervision Department, the NRB has pointed out the weaknesses observed during the supervision and alerted the concerned banks and the CEO in the first phase.

The department says that in the beginning, they are just warning the banks and seeking clarification and not taking any strict action at the moment.

The central bank had imposed fines of Rs. 3.14 million on two commercial banks in the fiscal year 2076/77. Mega Bank had paid a fine of Rs 148,000 for not maintaining the cash reserves ratio. In the same year, Himalayan Bank was also imposed a fine of Rs 3 million for violating the Anti Money Laundering Act. A member and CEO of Nepal Bangladesh Bank were also warned.

The NRB Act also allows the board of directors of the bank to take corrective steps through punishment. NRB has been issuing written warnings to end recurring violations and take corrective steps.

NRB can also restrict the distribution of dividends to shareholders of commercial banks or financial institutions, and even suspend or revoke their license.