Chapter-13 Provisions Regarding Actions, Offences and Punishment

Chapter-13 Provisions Regarding Actions, Offences and Punishment

 

  1. Power to Take Regulatory Actions: (1) In cases where a bank or financial institution is found to have violated this Act, the Rastra Bank Act, or Rules, Bye-laws, Directives or Orders issued thereunder, the Rastra Bank may, depending upon the nature and gravity of the violation, take one or more of the following actions against the bank or financial institution:-

a. To admonish or issue a warning in writing,

b. To cause the Board of Directors to enter into a bond for taking reformative steps,

c. To issue an order in writing not to violate this Act or Rastra Bank Act or Rules, Byelaws, Directives or Order framed thereunder or to take reformative steps,

d. To prohibit to distribute dividends or issuing bonus shares to the shareholders of bank or financial institution or to prohibit to distribute dividends or issues bonus shares,

e. To specify limits on, or prohibit, accepting deposits or disbursing credits or accepting deposits or disbursing credits by the bank or financial institution,

f. To impose complete or partial ban on the transactions of the bank or financial institution.

2. The Rastra Bank may suspend or revoke a license to carry out banking or financial transactions issued to a bank or financial institution in the following circumstances:-

a. In cases where the banking and financial transactions are not initiated within six months from the date of obtaining the license for carrying out banking and financial transactions,

b. In cases where banking and financial transactions have been closed without obtaining approval from the Rastra Bank,

c. In cases where the bank or financial institution has operated banking and financial transactions in such a manner as to be against the interests of the depositors or it does not reimburse of fails to reimburse the deposited amount or amount whose maturity date has expired,

d. In cases where there is violation of or non-compliance with the Rastra Bank Act, this Act, and the Rules, Byelaws, Orders, Directives framed thereunder or the terms and conditions as fixed by the Rastra Bank,

e. If it is found that the bank or financial institution obtained the license submitting false descriptions,

f. If the deposits have not been guaranteed as per the prevailing laws.

3. If a promoter, shareholder, Director, Chief Executive, office bearer, employee or any other relevant person of a bank or financial institution violates this Act or Rastra Bank Act, or Rules, Byelaws, Directives or Orders framed thereunder, the Rastra Bank may, depending on the nature and gravity of the violation, take one or more of the following actions:-

a. To forfeit and freeze the subscribed shares of the concerned bank or financial institution and to give direction to the Board of Directors to sell the said shares to other persons,

b. To give direction the Board of Directors to freeze or suspend some or all of the facilities including meeting allowances, monthly remuneration of the Board of Directors, Director, office bearer, employee or any other relevant person of the bank or financial institution,

c. If the Chairperson, Director, Chief Executive or the person acting in the capacity of the Chief Executive or an employee is, upon an inspection or monitoring of the Rastra Bank, found that such a person has not worked in the interests of the depositors, shareholders, and license holding institution, he/she may be removed from the said position by furnishing a written notification to that effect:

Provided that while taking actions under this clause, a time limit of three to fifteen days shall be given to such a person allowing him or her to submit explanations for defense from the allegation. Such a person shall not be entitled to get any compensation or benefits as set forth in the Personnel Byelaws in lien of termination of his or her service and he/she shall be deemed to be disqualified for service in any bank or financial institution obtaining a license from the Rastra Bank for a period of five years.

d. If the director, office bearer or other employee subjected to the actions referred to in Clause (c) does not receive the letter of taking actions or does not submit an explanation after receiving the letter, the Rastra Bank may inform about the actions taken through a public notice,

e. If any bank or financial institution is found to have taken or given remuneration or other facilities contrary to this Act or in an unnatural manner, to recover all of such service facilities or the amount to be required for such facilities and the interests to be accrued thereon from the person giving such facilities,

f. To issue an order to the bank or financial institution to write to the concerned agency to take action against the Director, office bearer or employee of the bank or financial institution where he/she is professionally affiliated.

4. If it is found that any amount to be paid by a bank or financial institution resulted from recklessness or negligence of any Director, office bearer or employee, the Rastra Bank may issue an order to recover the amount from such a director, office bearer or employee.

5. The Director, office bearer or employee shall pay personally within thirty-five days from the date of receipt of the information of the order issued pursuant to Sub-Section (4).

6. If the amount payable within the time limit as referred to in Sub-Section (5) is not paid, the said amount shall be recovered as government due from any account of such a Director, office bearer or employee or from the account of any of his/her family members that has been kept at any bank or financial institution or from any movable or immovable property belonging to him or her or his or her family member.

7. If the Rastra Bank carries out regulation, inspection, supervision or any other actions of any bank or financial institution pursuant to this Section and publishes or broadcasts public notices thereof, the concerned bank or financial institution shall pay the expenses incurred in connection with publishing or broadcasting such notices.

  1. Power to Impose Fines: (1) The Rastra Bank may impose the following fines against a bank or financial institution which does not give information or documents to be given according to the this Act or Rastra Bank Act, or Rules, Byelaws, Directives or Orders issued thereunder; or which does not make available within the prescribed time the documents, statement, statistics, or record as demanded in the course of carrying out, monitoring, inspection or suspension by the Rastra Bank or any official deputed by the Rastra Bank for that purpose:-

a. Daily one hundred thousand rupees up to two weeks from the date of expiration of the time limit,

b. Daily one hundred twenty-five thousand rupees up to one month from the date of expiration of the time limit,

c. Daily one hundred fifty thousand rupees from the date of expiration of the time limit referred to in Clause (b) up to indefinite period of time.

2. If a Promoter, Director, Shareholder, Chief Executive, office bearer, employee of a bank or financial institution or any other related person violates this Act or the Rastra Bank Act or the Rules, Byelaws framed thereunder or the Directive or Order issued thereunder, or fails to implement the directive issued by the Rastra Bank pursuant to Clause (b) of Sub-Section(3) of section 99, the Rastra Bank may, depending on the nature and gravity of the violation, impose a fine not exceeding on million rupees.

3. If the bank or financial institution fails to pay the fines imposed pursuant to Sub-Section (1) within three days from the date of receipt of information of the decision, the said amount shall be recovered by deducting from the amount deposited in an account of the said bank or financial institution opened at the Rastra Bank.

4. The amount of a fine received in the form of cash by the Rastra Bank pursuant to Sub-Sections (1) and (2) shall be deposited to the Government fund.

  1. Procedures of Actions: Except otherwise provided for in this Act, the Rastra Bank shall follow the procedures as mentioned hereunder while taking actions pursuant to Section 99 and imposing fines pursuant to Section 100:-

a. Before taking the proposed action or imposing fines, the accused bank or financial institution or person shall be given a written notice of seven days to defend its/his/her position, stating the nature of the act he/she/it has committed, short description of the act, the amount that may be imposed as fines and the proposed actions.

b. The concerned bank or financial institution or person shall be required to submit his/her/its clarification in writing within seven days from the date of receipt of the written notice pursuant to Clause (a).

c. If the written clarification submitted pursuant to Clause (b) is found to be reasonable, the Rastra Bank may amend, delimit or dismiss the charge.

d. If the written clarification submitted pursuant to Clause (b) is not found to be satisfactory, the Rastra Bank may take action as referred to in Section 99 or impose a fine pursuant to as set forth in Section 100.

2. The other procedures to be complied with while taking actions or imposing fines by the Rastra Bank shall be as specified by the Rastra Bank.

  1. Control Over Licensee Institutions: (1) Notwithstanding anything contained elsewhere in this Act, if the Rastra Bank believes that a licensee institution has violated this Act or the Rastra Bank Act or the Rules or Byelaws, Orders or Directives framed thereunder or is satisfied, on the basis of the inspection and supervision report of the Rastra Bank, that a licensed institution has failed or is likely to fail to perform the obligations required to be performed by the licensed institution or that a bank or financial institution has not been operated smoothly or has carried out anything contrary to the interests of its shareholders or depositors, the Rastra Bank may suspend the Board of Directors of such a licensed institution for a maximum period of three years and take such a bank or financial institution under own control.

2. After taking any licensee institution under its control pursuant to Sub-Section (1), the Rastra Bank may, either itself or through any appropriate person, firm, company or institution appointed by it, carry out the management of such bank or financial institution.

3. The Rastra Bank shall, within one year after the management of a licensee institution by itself or through any other person, firm, company or institution pursuant to Sub-Section (2), conduct or cause to be conducted financial and management audit of such institution and publicly publish a report thereof.

4. If the Rastra Bank is satisfied, from the report referred to in Sub-Section (3), that the concerned licensed institution has become capable of fulfilling the responsibilities required to be fulfilled by it or has reached a stage under which it has become able to operate smoothly, the Rastra Bank may take the following actions:-

a. To lift the suspension of the Board of Directors of the licensed institution made as referred to in Sub-Section (1) and handover the management of the institution again to that Board of Directors, or

b. To disolve the Board of Directors of the licensed institution which has been suspended pursuant to Sub-Section (1), and then form a new Board of Directors from among the shareholders of the licenseed institution and handover the management of that institution to a new Board of Directors, or

c. To convene the General Meeting of the licensed institution, and get a new Board of Directors formed by the Meeting, and handover the management of the institution to the Board of Directors, or

d. To take any other action as the Rastra Bank may deem appropriate.

5. If the Rastra Bank is satisfied, from the report referred to in Sub-Section (3), that the concerned licensed institution has become incapable of fulfilling the responsibilities required to be fulfilled by it or that the institution has reached a stage in which it is not able to operate smoothly, the Rastra Bank may take any of the following two actions:-

a. To initiate the process of mandatory liquidation according to the provisions made in Chapter 12 of the Act, or

b. To initiate the process of settlement according to the Rastra Bank Act.

6. The Rastra Bank shall, prior to taking a licensed institution under its control pursuant to Sub-Section (1), give an opportunity to the concerned bank or financial institution to defend itself, by providing it with a time-limit not exceeding fifteen days, depending on the situation.

7. The concerned licensed institution shall bear all expenses incurred by the Rastra Bank in connected with taking actions taken by it after taking such an institution under its control pursuant to this Section.

8. The Rastra Bank shall inform the Government of Nepal, Ministry of Finance about the action of taking of any licensed institution under its control pursuant to Sub-Section (1).

  1. Offences: (1) If anyone commits any of the following acts in contravention of this Act or the Rules, Byelaws, Directives, Orders, issued were under conditions or limitations shall be deemed to have committed an offence under this Act:-

a. Carrying out banking and financial transactions without obtaining a

license,

(b)      Obtaining a license for carrying out banking and financial transactions submitting wrong or false statements,

c. Carrying out banking and financial transactions against the terms and limitations of the license for carrying out banking and financial transactions,

d. Carrying out foreign currency exchange related business without a license,

e. Disbursing credits or making other investment in contravention of this Act,

f. Engaging in irregularities in the course of distributing credits, valuating mortgage, recovering credits or performing any act related thereto or creating an artificial price in the course of auctioning off of a mortgage, accepting an assets as a non-banking asset, selling a non-banking asset after it is accepted or while taking collateral.

g. Committing irregularities by any Director, office bearer, employee and other person while carrying out merger, amalgation and acquisition, liquidation, or auditing,

h. Attempting to commit an offence as referred to in Clauses (a) to (g) or abetting to the commission of such offence by any manner.

2. Except in cases where a sitting Director, office bearer, employee or any other person abetting in the commission of an offence as referred to in Sub-Section (1) proves that he/she had tried his/her best to avoid committing such an offence or that it was committed without his/her consent, the offence is deemed to have been committed by himself/herself.

3. Except in connection with regular transaction, in cases where an office bearer or employee of a branch of a foreign bank transfers the assets of such branch to another country, grants approval therefor, delegates authority to that effect, or abets the commission of such an act, it shall be deemed to be an offence committed under this Act.

  1. Punishment: (1) Any person who commits any of the following offenses shall be

liable to the following punishment:-

a. In the case of commission of the offence as referred to in Clause (a) of Sub-Section (1) of Section 103, the amount involved shall be confiscated and the offender shall be punished with a fine up to three times of the amount involved and with imprisonment for a term not exceeding five years,

b. In the case of commission of the offence referred to in Clause (b) of Sub-Section (1) of Section 103, the amount involved shall be confiscated and the offender shall be punished with a fine up to two times of the amount involved and with an imprisonment for a term not exceeding two years,

c. In the case of commission of the offence referred to in Clause (c), (d), (e), (f) or (g) of Sub-Section (1) of Section 103, the amount involved, if any, shall be confiscated and the offender shall be punished with a fine equal to the amount involved and with imprisonment for a term not exceeding one year,

d. In the case of commission of the offence referred to in Clause (h) of Sub-Section (1) of Section 103, the amount involved, if any, shall be confiscated and the offender shall be punished with a half of the punishment to be imposed on the principal offender.

2. While ascertaining the amount involved for the purpose of Sub-Section (1), the amount shall be calculated taking into account the entire amount of transaction involved.

3. While imposing fines for the offences as referred to in Clause (a) to (e) of Sub-Section (1), if the amount involved is identified, fines shall be imposed accordingly and if no such amount is identified, a fine ranging from one million to five million rupees will be imposed.

4. In case of a person committing an offence as referred to in Sub-Section (3) of Section 103, the offender shall be punished with a fine equivalent to the involved amount and with imprisonment for a term not exceeding five years.

5. In cases where an offence as referred to in Section 103 has been committed by any firm, company or institution, punishment according to this Section shall be imposed on the concerned Director, office bearer, employee or concerned person of the concerned firm, company, or institution and if such a concerned person could not be ascertained, punishment shall be imposed on the chief of the firm, company, or institution, as the case may be.

6. If anyone is found to have committed any offence as referred to in Section 103 and the proceeds of the offence is found to have been kept or concealed in the name of himself/herself, any family member or relative or in the name of anyone else, such property and the property accrued therefrom shall also be confiscated.

  1. Appeal: (1) A bank or financial institution or a Director, office bearer, shareholder or employee thereof which of who is not satisfied with the actions taken by the Rastra Bank pursuant to Section 99 or punishment imposed pursuant to Section 100, may file an appeal at the court within thirty-five days from the date of getting an order of such actions:

Provided that while filing an appeal against an action taken pursuant to Section 99 or punishment imposed pursuant to Section 100 on a bank or financial institution by any shareholder, it has to be filed by a representative of the shareholders representing at least twenty-five percent of the paid up capital of the bank or financial institution.

2. If any Director, office bearer, employee or any other person wishes to file an appeal pursuant to Sub-Section (1) against an actions taken or a fine imposed on him or her on a personal basis, fifty percent of the amount of such fines or any amount as mentioned in the order as payable should be deposited.

3. A director, office bearer or employee of any bank or financial institution who is removed or dismissed from his position shall not be eligible to become a director, office bearer or employee of any other bank or financial institution until a period of five years is expired from the date of such actions taken or until, if he or she has filed an appeal at the court, until the exoneration by the court.

  1. No Difficulty in Imposing Punishment: If any person is found to have been committed in any offence as referred to in Section 103 while holding any position of a bank or financial institution, there shall be no obstruction to take actions against him/her for the reason of his/her retirement or non-holding of the position.