By Our Business Observer
The Central Investigation Bureau (CIB) has increasingly been arresting bank directors and chief executive officers, in the name of conducting investigations and filing cases against them. Cases are still pending against officials of banks including Nepal Investment Mega Bank (NIMB) and Prabhu Bank.
NIMB has expressed serious objection to the CIB’s investigation into allegations of fraud, organized crime and banking offences over the actions it took while recovering a loan from Smart Telecom. The bank maintains that the allegations are baseless, arguing that it proceeded with the loan recovery in accordance with prevailing laws, directives of Nepal Rastra Bank and established banking practices.
According to the bank, after Smart Telecom failed to repay its loan, the process of auctioning and selling its assets, including telecommunications equipment and towers, was initiated under the Secured Transactions Act, 2063 BS and the Banks and Financial Institutions Act, 2073 BS. The bank first published a 35-day auction notice and subsequently a 15-day notice. Of the proceeds from the auction, around Rs 380 million, representing rent and electricity charges payable to the owners of the land and buildings where the equipment and towers were installed, was set aside and kept secure in the bank’s “Earnest Money Auction Account.”
The bank said the amount remained in the account because it could not be distributed until official proof of the amounts payable to the property owners was submitted, and that the CIB had frozen the account. NIMB argues that accusing it of fraud when it was legally unable to distribute the money without official documentation is factually baseless. Rejecting the allegation of organized crime, the bank said its board meeting on July 4, 2025, had decided to auction the collateral.
The bank clarified that, anticipating Nepal Telecom and Ncell could be potential bidders for the assets, its CEO had been authorized to initiate negotiations if Ncell expressed interest in purchasing them.
The bank argues that the process cannot be described as collusion because the sealed bids were opened confidentially in the presence of government representatives, meaning the bank did not know beforehand who had submitted what bid. According to NIMB, mentioning the names of potential buyers of telecommunications equipment that can be used only by a limited number of companies does not constitute criminal collusion.
NIMB has also rejected the allegation of banking offences, stating that the valuation of machinery and equipment and the auction process are different in project-based lending. The bank said the assets were auctioned at a price higher than their most recent insured value and that, since the loan was jointly financed by several banks, the process was initiated only after a decision by all participating banks.
Meanwhile, in the Smart Telecom case, the CIB arrested Sarvesh Joshi on May 4; Narendra Ulak, who provided loans to the bidder, and bidder Palina Shrestha on May 8; and NIMB CEO Jyoti Prakash Pandey on May 12. Pandey was released on May 15. An arrest warrant had also been issued against marketing consultant Bhaskar Nar Singh Joshi, but he was released the same day after the court refused to extend his detention.
All the accused currently linked to the case have been released. On Shrawan 19, 2083 BS, the CIB froze the personal bank accounts of board members as well as accounts belonging to companies associated with them. On Shrawan 21, it wrote to Nepal Rastra Bank requesting that only the personal accounts remain frozen.
After arrest warrants were issued against members of the bank’s board of directors, the bank filed a writ petition at the Supreme Court. NIMB has warned that portraying a legal process undertaken in compliance with regulatory directives and to protect depositors’ money as criminal activity could have a negative impact on the overall economy.
Bank directors and CEOs are now increasingly concerned about the possibility of being arrested by the CIB.
Former Nepal Rastra Bank governor Dipendra Bahadur Chhetry said that the process would have been lawful if the banks had proceeded only after consulting Nepal Rastra Bank and obtaining its opinion. He argues that the banking sector has become insecure because the CIB is conducting investigations directly. Chhetry said that although cases are filed through the CIB because Nepal Rastra Bank, as the regulatory authority, cannot itself prosecute cases, the CIB should investigate financial crimes such as foreign-exchange violations and misuse of loans.
Chhetry said, “Protecting depositors’ money is the bank’s primary responsibility. The government cannot object to the work done by Nepal Rastra Bank in this regard, nor is it saying that the CIB’s investigation is wrong. In fact, Nepal Rastra Bank should be the one to speak on this issue.”
Sections 56 and 57 of the Banks and Financial Institutions Act (BAFIA) authorize banks to recover loans by auctioning collateral if the loan cannot otherwise be recovered. Banks argue that they auctioned the assets under Section 57(1), which allows them to auction collateral and recover principal and interest if the borrower fails to comply with the agreed terms. However, bankers say the CIB is raising questions over the same process.
The action of arrest and torture to the bankers and investors has destroyed investment environment and also made suspicious to the foreign investors in Nepal. Such an act has disseminated negative message to the globe.
In such a crucial issue, the Nepal Rastra Bank, central bank of the country, should take a bold decision to avoid present controversies.
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