A crucial board meeting of Nepal Rastra Bank (NRB) on Tuesday suspended the board of Bank of Kathmandu (BoK) and took control of its management, amid deepening disputes among promoters of the bank.
A source told myrepublica.com that the action against the BoK management was taken on the charge of its failure to safeguard interests of bank´s promoters and depositors due to ongoing disputes among promoters.
The same board meeting has decided to send a four-member NRB board led by Director Laxmi Prapanna Niraula to manage the bank. The board will work with the existing acting Chief Executive Officer of BoK, Sabin Lal Shrestha.
BoK will remain under the control of central for up to three months during which an in-depth investigation will be carried out to find whether suspended management is competent to run the bank, said the source.
The decision was taken as per the clause 54 of Banks and Financial Institutions Act 2006, which authorizes the central bank to take control of management of a bank, if it is found taking decisions that are not in the favor of the bank.
Earlier, the central bank had sought clarification from the board of the BoK over its decision to remove Radhesh Pant from the post of Managing Director (MD).
NRB warned of taking stringent action, including dissolving the board, if the clarification failed to justify the action taken by the BOK board against MD Pant.
The NRB had argued that the clarification was sought after the central bank was convinced that due processes were not followed in the removal of Pant from the post of MD of the BOK.
However, in its reply to the NRB, the BoK board questioned central bank´s jurisdiction over its enquiry into the decision taken by the board of a bank. BoK board had argued that the executive board of a bank has full authority to appoint or dismiss any staff of the bank and no law allows the central bank to intervene in such cases.
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