Kathmandu, August 20: The Confederation of Banks and Financial Institutions Nepal (CBFIN) has expressed serious concern over the investigation into the collateral auction process conducted by Nepal Investment Mega Bank (NIMB) and the filing of cases against some senior officials in connection with the matter.
CBFIN said there is a need for a clear legal interpretation of whether the mortgage and security interests created by a bank in accordance with prevailing laws can subsequently be rendered ineffective by sector-specific regulations or provisions relating to licenses. It has also raised the question of whether the cancellation of a business license automatically transfers the assets associated with that business to state ownership, or whether the bank’s pre-existing security interest remains intact.
Stating that no one is above the law, CBFIN made it clear that proven offences must be dealt with in accordance with the law.
According to CBFIN, Nepal Rastra Bank has the primary responsibility for conducting technical and regulatory reviews of professional decisions made by banks and financial institutions regarding lending, collateral security, loan recovery and auctions. Therefore, it believes that before initiating further investigation or action in such matters, the necessary review should be conducted by Nepal Rastra Bank, and coordination should take place among the concerned authorities based on its findings and opinion.
As the matter under consideration has reached the court, CBFIN expressed its respect for the judicial process and the independence and impartiality of the judiciary. It also said it is confident that the dispute will be appropriately resolved in accordance with the Constitution, prevailing laws, established precedents and judicial practices.
CBFIN emphasized the need to clearly distinguish, in legal terms, between commercial banking decisions, regulatory shortcomings and criminal acts. It said that where there is no objective basis indicating clear criminal intent or a criminal act, the tendency to criminalize disputes of a civil or regulatory nature should be discouraged.
CBFIN said the incident has also raised policy questions concerning the risks associated with lending to nationally prioritized, license-based sectors such as hydropower, telecommunications and infrastructure. It said that if a bank’s pre-existing collateral rights become uncertain, it must be made clear how banks providing loans to such sectors are expected to assess the associated risks.
CBFIN also stated that during investigations, customer information, internal bank decisions, business details and personal information must be protected in accordance with confidentiality laws.
Reiterating that no one is above the law, CBFIN stated that proven offences must be punished in accordance with the law. It said it remains committed to providing the necessary coordination and cooperation for the sustainable development of the overall banking sector, financial stability and the creation of a stronger economy while fully upholding the rule of law.
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