NRB goes soft with suspended Bank of Kathmandu board

Nepal Rastra Bank (NRB) has revoked the action against the suspended board members of Bank of Kathmandu (BoK) and allowed them to contest in the special annual general meeting (AGM).
According to the NRB's decision on May 19 -- when it took over the bank's management -- the suspended board members would not be able to hold any position in any financial institution for a period of five years from the date of suspension.
"But today's decision allows them contest the AGM," an NRB board member said.
The NRB will publish a Due Deligence Audit report and decide to call the AGM. According to the regulation, a 21-day notice has to be published for the AGM. The NRB team will hand over the management after the AGM slated any time in future.
NRB had suspended the BoK board and sent a four-member team, led by its director Laxmi Prapanna Niraula, to work with acting CEO Sabin Lal Shrestha. It was mandated to hand over the management to the new board members after the AGM.
NRB today revoked the decision late this evening after the suspended board realised its mistake and agreed to work together for the betterment of the bank, investors and promoters. After NRB received a joint application from the two warring factions of the suspended board promising to work jointly, the central bank decided to call back Laxmi Prapanna Niraula, the executive director it had sent to run BoK.
The suspended board members also withdrew the case they had filed at the Supreme Court against Nepal Rastra Bank's (NRB) intervention on Monday. They had filed the writ petition claiming that NRB's move to take over the bank under the NRB Act 2063 (Section 54) could not be justified as the bank's financial health was sound and that the interests of BoK's promoters and depositors were not at stake.
The crisis precipitated after the 313th board meeting of BoK on March 22, which decided to call back Pant from the post of managing director. Though the decision was taken by a majority of the board members, Pant was not given a chance to furnish his explanation.
Four directors took the decision against Pant, while the remaining two -- Sitaram Thapaliya and Sudarshan Poudel -- supported Pant.
NRB took over the bank's management to safeguard the investors and promoters interest due to dispute among the board members after it was not satisfied with the explanation that BoK's board submitted to it.
The central bank is empowered to take over the management of any financial institution under NRB Act 2063 (Section 54), if it is dissatisfied with the explanation it has sought.
A majority of shares of BoK -- established on March 3, 1995 as the 10th commercial bank -- is with the public. The promoters are only 42 per cent stakeholders.