Kathmandu: The Central Investigation Bureau (CIB) of Nepal Police has completed a detailed investigation report uncovering a massive financial fraud of Rs 3.2 billion at Karnali Development Bank.
The report concludes that a total of 111 individuals were involved in embezzling the amount through collusion and malpractice. CIB SSP Hobindra Bogati confirmed the findings and revealed that recommendations have been made to prosecute all involved.
Among those named are two former chairpersons of the bank and Bhuwan Basnet, a former director-level officer at Nepal Rastra Bank. Of the 111 accused, four are currently in police custody, three have died, and 104 remain at large, according to Bogati.
The investigation found that the misappropriation took place over several years, facilitated by board members, executives, and employees of the bank. The report alleges that the embezzlement was covered up with the support of supervisory officials from Nepal Rastra Bank (NRB), allowing the irregularities to continue unchecked for years.
Suspicion intensified after investigators discovered funds from the bank had been deposited into a personal account belonging to Bhuwan Basnet, who had led oversight missions to the bank during his tenure at the NRB. This discovery further fueled allegations that NRB officials may have aided in concealing the fraud.
NRB had declared Karnali Development Bank “problematic” on 27 November 2024, after the bank failed to maintain the minimum capital adequacy ratio following regulatory adjustments. As a corrective measure, NRB had barred the bank from accepting deposits and disbursing loans from that date.
A special inspection conducted by NRB from 21–26 July 2024, revealed that the bank’s non-performing loans (NPLs) had surged to 40.85 percent. Although provisions should have been increased accordingly, the bank failed to meet the provisioning requirements, leading NRB to take swift regulatory action.
Subsequently, in December 2024, the central bank deployed a three-member management committee to the bank to take over operations. The committee was led by Tikaram Khatiwada (Deputy Director, Regulation Department), with Bishnu Kumar Bishwakarma (Deputy Director, Supervision Department) and Jugal Kishore Kushwaha (Deputy Director, Legal Division) as members.
The situation worsened when it was discovered that the bank had misused funds by submitting fake certificates for fixed deposits allegedly placed in commercial banks. Following this, and upon NRB’s recommendation, CIB initiated a criminal investigation.
CIB’s probe, covering financial activities from 2013 onward, raised suspicions about the integrity of the central bank’s oversight personnel. Allegedly, some of the funds from the misappropriation were traced directly to the personal accounts of NRB inspectors, leading to the arrest of former official Bhuwan Basnet.
Sources within CIB disclosed that NRB refused to provide necessary support during the investigation. When CIB requested that NRB’s inspection personnel be presented as government witnesses, the central bank declined. The bureau also criticized NRB’s inspection reports, claiming they downplayed serious issues and presented them as minor.
Those arrested include former NRB director Bhuwan Basnet, and former bank chairpersons Pashupati Dayal Mishra and Rajendrabir Raya. With only four suspects in custody and over a hundred still at large, the CIB continues its search for the remaining fugitives.
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