Banks and Financial Institutions Act, 2017

102. Taking Over of Licensed Institution: (1) Notwithstanding anything contained elsewhere in this Act, if Nepal Rastra Bank is convinced that a licensed institution has violated this Act or the Nepal Rastra Bank Act or the rules or regulations made thereunder or any order or direction issued thereunder, or that from the inspection and supervision report of Nepal Rastra Bank, the licensed institution has failed or is likely to fail to fulfill its obligations, or that the bank or financial institution is not operating properly, or that it has acted against the interests of shareholders or depositors, Nepal Rastra Bank may suspend the board of directors of such licensed institution for a maximum of three years and take such licensed institution under its control.

(2) After taking a licensed institution under its control under sub-section (1), Nepal Rastra Bank may manage such licensed institution itself or by appointing any suitable person, firm, company, or institution.

(3) Nepal Rastra Bank shall, within one year of managing or causing to be managed such institution itself or through any other person, firm, company, or institution under sub-section (2), conduct or cause to be conducted a financial and management examination of the concerned licensed institution and publish the report publicly.

(4) If, from the report under sub-section (3), Nepal Rastra Bank is convinced that the concerned licensed institution is capable of fulfilling its obligations by itself or has reached a state of proper operation, Nepal Rastra Bank may do as follows:

(a) Revoke the suspension of the board of directors of the licensed institution made under sub-section (1) and again entrust the management of the institution to the same board of directors, or

(b) Dismiss the suspended board of directors of the licensed institution under sub-section (1), form a new board of directors from among the shareholders of the licensed institution, and entrust the management of the institution to it, or

(c) Convene a general meeting of the licensed institution, form a new board of directors from that meeting, and entrust the management of the institution to it, or

(d) Initiate any other action deemed appropriate by Nepal Rastra Bank.

(5) If, from the report under sub-section (3), Nepal Rastra Bank is convinced that the concerned licensed institution is unable to fulfill its obligations by itself or has reached a state where it cannot operate properly, Nepal Rastra Bank may take either of the following two actions concerning such licensed institution:

(a) Commence compulsory liquidation proceedings in accordance with the provisions of Chapter 12 of this Act, or

(b) Proceed with a rehabilitation action under the Nepal Rastra Bank Act.

(6) Before taking a licensed institution under its control under sub-section (1), Nepal Rastra Bank shall give the concerned licensed institution an opportunity to submit its defense, granting a period of up to fifteen days as per the situation.

(7) All expenses incurred by Nepal Rastra Bank for the work done after taking a licensed institution under its control under this section shall be borne by the concerned licensed institution.

(8) Nepal Rastra Bank shall inform the Government of Nepal, Ministry of Finance, about taking a licensed institution under its control under sub-section (1).