Banking News – In a controversial turn of events, Prabhu Bank’s Chief Executive Officer (CEO) Ashok Sherchan has continued to hold office in violation of the Bank and Financial Institutions Act, 2073 (BAFIA)—backed by a recent ruling of the Supreme Court. Sherchan, who has been serving as CEO for the past 10 years, has effectively overruled the legal provisions of BAFIA with the support of legal power, political influence, and financial strength.

Section 29 of BAFIA clearly states that the tenure of a CEO of a commercial bank is limited to four years, with a possibility of only one extension—making the maximum term eight years. However, Sherchan has remained in the CEO role since 2071 BS, now entering his third term.

Sherchan was first appointed CEO of Prabhu Bank in 2071 BS, reappointed in 2075 BS for a second term, and then again in 2079 BS for a third term effective from Magh 15, 2079. The bank’s board cited provisions in Nepal Rastra Bank’s regulations while justifying his third appointment.

Nepal Rastra Bank’s Merger and Acquisition Bylaws, 2073 and integrated directives mention that the tenure restriction does not apply in cases of mergers or acquisitions. Using this clause, Prabhu Bank argued that Sherchan’s third term was valid as the bank had merged with Century Bank in Poush 2079. However, critics claim this interpretation is a deliberate manipulation of the law to maintain Sherchan’s position.

Following Sherchan’s third appointment, a legal petition was filed against him on Magh 18, 2079, at the Patan High Court by advocate Anita Thapa, arguing that the appointment was against BAFIA provisions. The court ruled that Sherchan could only serve until Baisakh 9, 2082. Yet, appealing to the Supreme Court at the end of 2081, Sherchan secured the right to serve his full third term.

Sherchan has been serving as CEO since 2064 BS, beginning with Prabhu Finance, which was registered in 2062 BS and later converted into a commercial bank after a series of mergers. Despite the transformation of the institution, his continued tenure has become increasingly controversial.

The Supreme Court has issued a show-cause notice to both the Patan High Court and Nepal Rastra Bank. This ruling, however, effectively allows a bylaw to override the parent act—raising serious concerns about the integrity of the legal framework.

Legal experts, including senior advocate Madhu Kumar Chaulagain, have criticized this move. Speaking to Banking News, he stated, “It is a matter of national shame that a bylaw is being used to override an act. In any legal system, when an act and a regulation contradict, the act prevails. This situation is a blatant violation of that principle and a mockery of good governance.”

Attempts to reach CEO Sherchan for comment were unsuccessful.