Kathmandu. KATHMANDU: The Supreme Court (SC) has directed Nepal Rastra Bank (NRB) to clarify the disqualification of chief executive officers (CEOs) and directors of banks and financial institutions.

Judge Dr. A division bench of Justices Nahakul Subedi and Nripa Dhwaj Niraula dismissed the writ petition filed by advocate Madhu Kumar Chaulagain and directed the NRB to make necessary arrangements to remove the legal ambiguities in the future.

In the writ, the apex court had sought an order to relieve directors and chief executive officers of various banks and financial institutions from their posts as per Section 100 (2) (a) of the Nepal Rastra Bank Act, 2058 BS after they were disqualified from holding their posts as per the Bank and Financial Institutions Act (BAFIA), 2073 BS.

The apex court has said that the NRB Act has provisions for different types of actions ranging from warning to directing to remove the concerned bank. The court dismissed the writ petition on that basis.

However, the court held that the action taken by the Rastra Bank would amount to legal disqualification as it would constitute legal disqualification as it would constitute action by the regulatory body under Section 18(1)(d) of the BAFIA.

The Supreme Court has also rejected the argument of the Rastra Bank that the action to warn or admonish is normal and does not amount to disqualification. The court said that since the law puts all types of actions in the same category, it cannot be separated between general and special actions.

Following the verdict, the Supreme Court has directed the Nepal Rastra Bank (NRB) to effectively implement the disqualification law for good governance in the banking sector and to protect the interests of depositors. The apex court has also ordered the banks and financial institutions concerned to inform the banks and financial institutions concerned about the legal disqualification arising out of the action and carry out effective monitoring of the same.