Kathmandu – The positions of directors and chief executive officers (CEOs) from nearly a dozen banks and financial institutions are at risk due to a pending case in the Supreme Court. The case, filed by advocate Madhu Kumar Chaulagai, challenges the proper implementation of the “Bank and Financial Institution Act, 2016.” This act’s provisions have not been fully enforced, according to the lawsuit.

The provisions in question—sections 18, 19, and 29 of the 2016 act—state that directors and CEOs of banks and financial institutions penalized under the “Nepal Rastra Bank Act, 2002” should not remain in their positions. Advocate Chaulagai had filed a petition on May 27, 2024, asking the Nepal Rastra Bank (NRB) to investigate whether these provisions were being followed. When no action was taken, Chaulagai took the matter to the Supreme Court.

The case was scheduled for a full hearing this week, but the Supreme Court has now ordered the NRB to provide documentation by September 20, 2024, regarding any directors and CEOs penalized under the 2002 act. NRB must submit a list of such individuals and institutions, following the court’s directive.

So far, several directors and CEOs have been penalized under the 2002 act, but penalties have mostly been warnings or fines. If the Supreme Court rules that those penalized must also be removed from their positions, many directors and CEOs will face dismissal. This could affect over half a dozen commercial banks, one development bank, and one finance company.

Section 18 of the 2016 act explicitly states that directors penalized under the 2002 act are disqualified from holding their positions, leaving many banking executives’ roles in jeopardy.