Karnali Development Bank, recently declared problematic by Nepal Rastra Bank (NRB), has been found to have misappropriated over Rs 3 billion, according to a detailed investigation by the Central Investigation Bureau (CIB) of Nepal Police.
The five-month-long probe revealed serious financial misconduct orchestrated through collusion among the bank’s board members, senior officials, and regulatory officers from NRB assigned to supervise the bank. The CIB submitted its investigation report to the Office of the Attorney General on Thursday.
According to the report, as of the first quarter of fiscal year 2024/25, the bank had total assets of Rs 5.74 billion, out of which approximately 56 percent—around Rs 3.2 billion—was embezzled. CIB has recommended legal action against 111 individuals, including board members, employees, borrowers, and NRB officials.
“The external financial statements appeared sound, but the internal structure of the bank had completely collapsed,” said CIB spokesperson Yubaraj Khadka. “Recovery must now proceed through legal channels.”
Directors, NRB Officials Among Those Accused
Those recommended for prosecution include current and former directors, bank employees, borrowers, and regulatory officials from the central bank. According to sources, the charges apply to all directors who served since 2070 BS, along with employees involved in deposit and lending irregularities.
Recently, CIB arrested Bhuwan Basnet, a former supervisory officer from NRB, accusing him of submitting favorable reports despite being aware of the bank’s failing condition, allegedly for personal gain.
Other individuals already in custody include former CEO and ex-chairman Rajendra Bahadur Raya, former CFO Dev Prakash Thakuri, and former chairman Pashupati Dayal. Former CEOs Dinesh Kumar Rawat and Niraj Bikram Shah remain at large.
Fake Deposits, Loan Files Used to Manipulate Financials
In its October-November 2024 financial report, the bank claimed a capital adequacy ratio of 10.05% and a non-performing loan (NPL) ratio of 7.24%. However, just two months later, NRB announced the bank’s NPL ratio had actually reached 40.85%, with the capital adequacy ratio dropping below 4%, prompting it to declare the bank problematic on January 25.
The bank is now under the management of a three-member team led by NRB Deputy Director Tikaram Khatiwada, with Bishnu Kumar Bishwakarma and Jugal Kishor Kushwaha as members. An internal audit revealed that the bank falsified records using fake deposit and loan files. Directors had reportedly issued loans to relatives and affiliated companies, misusing bank funds.
According to internal sources, Rs 1.33 billion of total deposits were misused, and more than half of the loan portfolio was funneled to companies connected to the bank’s board members and their families.
Depositors Still Await Refunds
Despite NRB taking control of the bank over six months ago, more than 25,000 account holders have yet to recover their savings—amounting to over Rs 4.5 billion. Only a few account holders facing medical emergencies or exceptional circumstances have received limited disbursements.
Management committee coordinator Khatiwada acknowledged that the legal recovery process will take time and confirmed that NRB is considering alternative measures to address depositors’ concerns.
