Nepal Rastra Bank has initiated prompt corrective action against five microfinance institutions and issued warnings to the board of directors of two institutions and the CEO of one, following inspections during the third quarter of the current fiscal year.
Nepal Rastra Bank (NRB) has recently taken stringent measures against microfinance financial institutions that were found violating regulations and failing to uphold financial discipline. The NRB’s Microfinance Institution Supervision Department conducted inspections during the third quarter of the current fiscal year, leading to prompt corrective actions against five microfinance companies. Additionally, a board of directors of two microfinance institutions and the Chief Executive Officer (CEO) of one were issued formal warnings.
Prompt Corrective Action for Capital Adequacy
According to the central bank, five microfinance financial institutions were subjected to prompt corrective action primarily because they could not maintain the minimum capital adequacy ratio as stipulated. These institutions include Aarambha Chautari Laghubitta Bittiya Sanstha Limited, Ganapati Laghubitta Bittiya Sanstha Limited, Samudayik Laghubitta Bittiya Sanstha Limited, Nerude Mirmire Laghubitta Bittiya Sanstha Limited, and CYC Nepal Laghubitta Bittiya Sanstha Limited.
The capital adequacy ratios for these companies were as follows: Aarambha Chautari stood at 7.77 percent, Ganapati Laghubitta at 6.06 percent, Samudayik Laghubitta at 6.12 percent, Nerude Mirmire at 6.01 percent, and CYC Nepal at 6.20 percent. These figures fall below the required minimum threshold.
Warnings Issued for Corporate Governance Issues
Beyond capital adequacy, warnings were also issued to a board of directors of two microfinance institutions due to identified weaknesses in their institutional governance practices.
Dhaulagiri Laghubitta’s Board
Nepal Rastra Bank reported that the board of directors of Dhaulagiri Laghubitta Bittiya Sanstha Limited was found to have reinstated a Deputy Executive Officer. This decision was made against the company’s employee service regulations. Furthermore, the bank noted that the officer was paid for a period when he was not actively serving. Regarding this matter, Chairman Sirjana Thapa and other directors has been warned not to repeat such actions from now on.
CYC Nepal Laghubitta’s Board
Similarly, the board of directors of CYC Nepal Laghubitta Bittiya Sanstha Limited was found to have purchased vehicles without properly following financial administration rules and adhering to expenditure limits, as stated by the central bank. Chairman Padmanath Sharma, along with the board of directors, received a warning concerning this particular issue.
Nerude Mirmire Laghubitta’s CEO
In addition, the Chief Executive Officer of Nerude Mirmire Laghubitta Bittiya Sanstha Limited, Bhojraj Bashyal, also received a warning from Nepal Rastra Bank. The central bank stated that the institution had shown Rs. 81.55 crore as income derived from a loan loss provision recovery. However, the company failed to provide clear details about which specific borrowers’ loans this recovery pertained to. Citing that this accounting practice was against NRB directives, CEO Bashyal was warned to not repeat such an action in the future.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
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