Kathmandu, August 19
Nepal Investment Mega Bank (NIMB) Chairman, most board members and Chief Executive Officer (CEO) are set to continue in their respective positions despite the government filing a criminal case against them, as existing banking laws do not require their suspension merely because a case has been filed.
The government has filed a case at the Kathmandu District Court against NIMB directors and senior officials over the recovery of Rs 4.6 billion through the sale of collateral belonging to Smart Telecom.
The case has raised questions over whether the bank’s chairman, directors and CEO can continue in their positions.
However, provisions of the Bank and Financial Institutions Act (BAFIA) and directives issued by Nepal Rastra Bank indicate that the filing of a criminal case alone does not automatically suspend or remove a bank director or CEO.
Sections 16, 17, 18 and 19 of BAFIA set out the qualifications, disqualifications and circumstances under which a director of a bank or financial institution cannot remain in office.
Section 102 of the Act also provides for the suspension of a bank’s board of directors. However, none of these provisions state that a board or individual director must be suspended or removed simply because a criminal case has been filed against them.
Instead, Section 18(1)(tha) states that a person is disqualified from serving as a director if they have been convicted by a court in Nepal or another country and have not completed 10 years since serving the sentence for offences including theft, fraud, forgery, cheating, corruption, an offence involving moral turpitude or a banking offence.
This means the directors facing the current case would become ineligible for the position only if they are convicted, according to officials familiar with the legal provisions.
The Act also contains separate provisions governing the appointment and terms of service of a CEO.
Section 29 states that, among other qualifications, a CEO must not be disqualified from becoming a director under Section 18(1).
According to a Nepal Rastra Bank official, this provision also does not allow a CEO to be removed or suspended merely because a case has been filed before the allegations are proven.
Section 102 of BAFIA outlines the circumstances under which a bank’s board of directors can be suspended. Under the provision, only Nepal Rastra Bank can suspend the board.
The provision allows the central bank to suspend a board for up to three years and take the institution under its control if it is convinced that a licensed institution has violated the BAFIA, Nepal Rastra Bank Act, related rules or directives, failed or is likely to fail to fulfil its obligations, is not operating properly, or has acted against the interests of shareholders or depositors.
A Nepal Rastra Bank source said the provision does not provide for the suspension of directors simply because they have been accused in a criminal case.
A senior central bank official said NIMB’s chairman, directors and CEO therefore continue to perform their regular responsibilities unless a court establishes their criminal liability.
“Bank CEOs and directors can no longer remain in office only after a criminal offence is established,” the official said. “At present, NIMB’s chairman, board and CEO continue their regular work. The matter will be dealt with according to the court’s verdict.”
An NIMB official also said the bank had sought necessary legal advice and concluded that its directors and CEO do not need to step down.
“The board continues its regular work as before, and the CEO is also carrying out his responsibilities. There is no ambiguity on this matter,” the official said.
