Kathmandu. The Central Investigation Bureau (CIB) of Nepal Police on Wednesday arrested Jyoti Prakash Pandey, the chief executive officer (CEO) of Nepal Investment Mega Bank. The CIB has arrested the CEO of the bank in connection with the incident process related to Smart Telecom Pvt. Ltd.

Pandey has been linked to the recovery of loans worth Rs 4.60 billion related to Smart Telecom. The bank had started auctioning the mortgaged towers and technical equipments for the loan recovery.

The bank had accepted the loan as per the legal process to manage the bad loans. The CIB has arrested CEO Pandey for investigation. The Central Bureau of Investigation (CBI) has arrested Pandey on charges of cheating and criminal breach of trust. The CIB has claimed that the ownership of the auctioned properties is “government property”. However, the bank has claimed that it has recovered the loan as per the agreement and rules made while investing the loan.

Section 57 of the Bank and Financial Institutions Act (57) has given special powers to the banks and financial institutions to recover loans in case of non-recovery of loans. It is within the primary process of the bank and is the main responsibility of the Chief Executive Officer,” says a banker, “According to the same process, the bank seems to have auctioned the assets of Smart Telecom.” ”

Similarly, former banker Parshuram Kunwar said that as per Clause 57 of the Bank and Financial Institutions Act, 2073, the bank can recover the pledged property by auctioning the borrower if the borrower fails to pay the principal, interest and damages as per the loan agreement. He said that if the value of the collateral decreases, additional collateral can be demanded and if necessary, the loan can be recovered from other movable and immovable assets of the borrower.

According to a banker, even if the license of Smart Telecom is suspended or revoked, the right to recover the loan of the concerned banks and financial institutions will still remain. According to the existing laws related to banks and financial institutions, loans can be recovered from movable and immovable assets such as buildings, towers, equipment, land.

The banking sector is in a state of panic over the CIB’s move. The umbrella organizations of banks and financial institutions have said that criminalizing the loan recovery process done by exercising the powers given by the law can affect the stability of the financial system.

Nepal Bankers’ Association, Development Bankers Association Nepal, Nepal Financial Institutions Association and Nepal Microfinance Bankers’ Association issued a joint statement.

According to the press release, if bad loans are not controlled, the entire financial system can be at risk. However, bankers believe that the recent developments have put such decisions at legal risk.

They claim that it is a matter of concern for the financial sector to take action against the CEO at a time when he is trying to recover bad loans through mortgage sale within the legal limit. They believe that the steps taken by the banks as part of their risk management and responsibility to protect depositors’ money have become controversial, which has sent a negative message to the entire banking system.

“This trend not only curtails the performance of the banks but also increases the risk of unnecessary interference in the decision-making process,” said the CEO of a bank. ’

According to him, serious questions will be raised in the banking system as the CEO of the bank, who is responsible for recovering the loan through the sale of the collateral kept for the security of the money, will be handcuffed. The committee has demanded that the investigation process be forwarded by adopting the principle of ‘gold and barn’ published by four umbrella organizations of banks and financial institutions. The umbrella organizations of banks and financial institutions have also demanded that Pandey be kept out of jail and the investigation should be forwarded.

Why is the Rastra Bank silent?

The central bank is now silent when the incident became public. Not only this, the NRB has been silent on such incidents in the financial sector for some time now. Lately, the police administration has been doing the work that the regulatory body should do.

After the amendment of some Nepal Acts in mid-April 2080, the powers of the regulatory bodies have been curtailed. The police administration does what the regulator does.

Bankers argue that the NRB should investigate such incidents and send them to other agencies for further investigation if serious lapses are found. This has a direct impact on banks and financial institutions as well, says a banker. Some of the investigations and investigations that Nepal Rastra Bank used to do on its own in the past are now being carried out through the CIB.

An official of the Nepal Rastra Bank says, “The bank has been facilitating the investigation by being limited to the role of providing necessary technical support, providing details and tacit support in the investigation process.” ’