Kathmandu. NIC Asia Bank, which has been under the scanner and action of the regulator for a long time, has finally paved the way for a change in leadership. Tulsi Ram Agrawal, chairman of Nepal Rastra Bank (NRB), has resigned from his post on Tuesday.
His resignation, which comes amid years of regulatory violations, poor governance and risky loan management, has sparked debate over whether the bank will return to the right track or repeat the same problems.
Nepal Rastra Bank (NRB) has slapped a fine of Rs 2 lakh each on Agrawal and the then CEO Roshan Kumar Neupane for violating NIC Asia Chairperson’s directive. Agrawal resigned from his post after receiving a letter from the bank on December 19 as per the Nepal Rastra Bank Act. A meeting of the Board of Directors held on Sunday accepted the resignation.
The then CEO Neupane had already left the bank. The bank’s top leadership is in crisis as both the chairman and CEO positions are undergoing change at the same time. Currently, Sujit Shakya is taking over the responsibility of the CEO of the bank and the process of appointing a new chairman is being initiated.
According to the inspection report of the NRB, serious weaknesses have been found in NIC Asia Bank in terms of capital adequacy, loan classification, provision according to risk, implementation of interest rate and corporate governance. According to the NRB, in some quarters, the borrowers have been charged more interest, at some times the directors and related parties have been given facilities against the rules and in some cases the loan and capital fund has been wrongly reported. These problems are not a one-time mistake, but are constantly repeating.
The Nepal Rastra Bank (NRB) had been repeatedly issuing warnings, written instructions and demanding action plans for reforms without taking strict steps all at once. However, due to the lack of expected improvement, financial fines and postal action have been taken. Analysts say that the resignation of the chairman only after the regulator’s letter shows a delay in the sense of accountability at the leadership level of the bank.
Now the main question is, will NIC Asia really improve after the resignation of the chairman? According to financial sector experts, the problem is not solved by changing the person. Long-term improvement in the image and financial health of a bank is not possible unless there is an overall improvement in the board of directors, management structure, risk management system and regulatory discipline.
While the chairman’s resignation has opened the door for reform for NIC Asia, whether that opportunity will be utilized will depend on the new leadership’s style of functioning, transparency and accountability to regulators.
In the past, Agrawal had been accused of exerting undue pressure on the then CEO Neupane. The central bank’s action also said that they had acted illegally through improper collusion.
Shakya is now seen as a pragmatic and responsible CEO. CEO Shakya and the appointment of the new chairman will show how the journey of NIC Asia will move forward.
