Finance Committee Directs Amendment to Prevent Disqualification of Bank Directors and CEOs for Minor Offenses

The Parliamentary Finance Committee has instructed the Ministry of Finance to amend the Bank and Financial Institutions Act (BAFIA) to ensure that bank directors and CEOs are not disqualified on the basis of minor disciplinary actions or warnings. On Friday, the committee completed clause-by-clause discussions on the Nepal Rastra Bank Act Bill and decided to establish provisions that would allow the Government of Nepal to issue directives to the Nepal Rastra Bank.

Following the Supreme Court’s ruling, banks had expressed disagreement with provisions declaring directors, employees, and CEOs ineligible due to minor disciplinary offenses. On September 11 in Kathmandu, the committee’s Friday meeting directed the Ministry of Finance to initiate amendments to the Bank and Financial Institutions Act, 2073. The committee also decided to instruct the Finance Minister to promptly proceed with amending Section 18 of BAFIA to modify the provision under Subsection (2)(a) of Section 100 of the Nepal Rastra Bank Act, which currently causes directors, employees, and CEOs to become disqualified due to penalties involving warnings or minor reprimands.

During their detailed deliberations on the bill, the committee resolved to reinstate the Government of Nepal’s authority to issue directives to the Nepal Rastra Bank, a provision that had been removed from the bill. “The provision allowing the Government of Nepal to direct the Nepal Rastra Bank has been reinstated, as it was previously omitted from the bill,” said committee secretary Laxman Aryal. The Supreme Court had ruled that CEOs and directors are disqualified even for minor reprimands.

The court based its ruling on the Nepal Rastra Bank Act and BAFIA. After several directors and CEOs in the financial sector were declared ineligible due to this ruling, banks voiced their opposition. To address this concern, the finance committee has now issued directives to the Finance Minister. Section 100 of the Nepal Rastra Bank Act, 2058, outlines disciplinary actions applicable to banks, financial institutions, their officers, and employees. The finance committee has instructed amendments to eliminate the regulation that imposes a five-year disqualification following disciplinary actions imposed contrary to BAFIA rules.