Section 86C
Bank Can Take Action Against Problematic Commercial Bank Or Financial Institution
(1) Whatever may be mentioned in the Companies Act or other prevailing law, the bank can take any or all of the following actions against the commercial bank or financial institution which is declared problematic under the provision of Section 86B.
(a) To increase the paid capital by issuing new shares or by receiving due amount of issued capital.
(b) To suspend the right to vote or other rights of shareholder.
(c) To stop payment of dividend or any other amount to the shareholders to increase the capital.
(d) To determine limitation to the amount of bonus, salary, compensation and other expenses for the director and other high level management officials.
(e) To make necessary arrangement for the corporate governance, internal control and risk management of commercial bank or financial institution.
(f) To prohibit or make limitation in collection of deposit, credit supply or investment .
(g) To maintain sufficient capital and high proportion of liquidity or prohibit business transaction or determination of other necessary terms.
(h) To limit transaction of the commercial bank or financial institution or prohibit sale of property or expansion of branch office or close any domestic or international branch.
(i) To maintain necessary arrangement for reduction of risk of the properties which are materially doubtful or securities without proper evaluation or other properties
(J) To prohibit any action carried out illegally by breaching the prevailing law and regulation of the bank that is against the interest of commercial bank or financial institution.
(K) To prohibit from doing some specific business among the businesses allowed to commercial bank or financial institution for specific time
(l) To receive prior approval of the bank for major capital expenditure, substantial commitments having major liabilities or for the expenditure of contingent liabilities.
(m) To issue order to remove from the post to single or more director or manager or employee as per the necessity.
(n) Bank can remove the director or manager or employee in case of not discharge of the order made under Clause (m) by respective commercial bank or financial institution.
(o) To suspend board of director of the commercial bank or financial institution and takeover the management of such commercial bank or financial institution in self control or operate the management and transaction of such commercial bank or financial institution by appointed official. Clarification: “Appointed Officer” means any person, firm, company or organization appointed by the bank for the management and operation of transaction of the commercial bank or financial
institution which is in the control of bank under the provision of this Clause.
(p) To order commercial bank or financial institution, which is listed in Stock Exchange for the application of de-listing.
(q) To prohibit payment of interest and principal for time bond auxiliary loan without having securities of commercial bank or financial institution.
(r) To take any other action as bank feels necessity and proper.
(2) While removing the directors, managers or employee of the commercial bank or financial institution from their post as per the order of Clause
(n) or to suspend the board of director of commercial bank or financial institution by taking the charge of management under Clause (o) of Sub-section (1) reasonable opportunity of hearing shall be provided to the director, manager or employee or board of directors of the commercial bank or financial institution
before. Provided that if such opportunity of hearing can makes negative effect to the interest of the commercial bank or financial institution or its depositors, shareholders, creditors or general public, no provision of prevailing law can debarred to remove immediately to the director, manager or employee from their post or to suspend the board of directors by providing opportunity to hearing after such decision.
(3) During the hearing of the action under the proviso of the Sub- section (2) if such action does not seems reasonable bank can annul, change or make necessary decision to the order under Clause (n) or (o) of Sub-
section (2).
(4) Respective commercial bank or financial institution have to bear all the expenditure while bank take the control of management of any commercial bank or financial institution under the provision of Clause (o) of Sub-section (1) and makes arrangement for the management and operation of transaction.
(5) The order of the bank issued under Sub-section (1) Clause (o) shall generally remain valid for two years from the date of issue unless it is not renewed by the bank.
(6) In case of control of any commercial bank or financial institution by the bank under the provision of Clause (o) of Sub-section (1), the preliminary and annual report prepared by the bank or the officer appointed by the bank shall be submitted to the government of Nepal.
(7) In case of necessity bank can revoke or nullify its order issued under the provision of Clause (m), (n), (o) and (p) of Sub-section (1) by issuing another order. Such order shall contain the basis and reason and other necessary information regarding the need of issuing such order.
(8) The directors, managers, or employees removed by the bank under the provision of the Clause (n) of Sub-section (1) are not allowed to work or involve in transaction in the same commercial bank or financial institution as director, manager or employee or any other post of any commercial bank or financial institution or any other way being involved directly or indirectly.
(9) The directors, managers, or employees removed by the bank under the provision of the Clause (n) of Sub-section (1) or suspended member of board of directors under the provision of Clause (o) are not allowed to receive or claim any remuneration or compensation under the provision of prevailing law or agreement held directly or indirectly from the date of such order.
(10) Determination of the capital and valuation of assets and
liabilities of any problematic commercial bank or financial institution shall be based on the basis, process and standard determined by the bank.
(a) To increase the paid capital by issuing new shares or by receiving due amount of issued capital.
(b) To suspend the right to vote or other rights of shareholder.
(c) To stop payment of dividend or any other amount to the shareholders to increase the capital.
(d) To determine limitation to the amount of bonus, salary, compensation and other expenses for the director and other high level management officials.
(e) To make necessary arrangement for the corporate governance, internal control and risk management of commercial bank or financial institution.
(f) To prohibit or make limitation in collection of deposit, credit supply or investment .
(g) To maintain sufficient capital and high proportion of liquidity or prohibit business transaction or determination of other necessary terms.
(h) To limit transaction of the commercial bank or financial institution or prohibit sale of property or expansion of branch office or close any domestic or international branch.
(i) To maintain necessary arrangement for reduction of risk of the properties which are materially doubtful or securities without proper evaluation or other properties
(J) To prohibit any action carried out illegally by breaching the prevailing law and regulation of the bank that is against the interest of commercial bank or financial institution.
(K) To prohibit from doing some specific business among the businesses allowed to commercial bank or financial institution for specific time
(l) To receive prior approval of the bank for major capital expenditure, substantial commitments having major liabilities or for the expenditure of contingent liabilities.
(m) To issue order to remove from the post to single or more director or manager or employee as per the necessity.
(n) Bank can remove the director or manager or employee in case of not discharge of the order made under Clause (m) by respective commercial bank or financial institution.
(o) To suspend board of director of the commercial bank or financial institution and takeover the management of such commercial bank or financial institution in self control or operate the management and transaction of such commercial bank or financial institution by appointed official. Clarification: “Appointed Officer” means any person, firm, company or organization appointed by the bank for the management and operation of transaction of the commercial bank or financial
institution which is in the control of bank under the provision of this Clause.
(p) To order commercial bank or financial institution, which is listed in Stock Exchange for the application of de-listing.
(q) To prohibit payment of interest and principal for time bond auxiliary loan without having securities of commercial bank or financial institution.
(r) To take any other action as bank feels necessity and proper.
(2) While removing the directors, managers or employee of the commercial bank or financial institution from their post as per the order of Clause
(n) or to suspend the board of director of commercial bank or financial institution by taking the charge of management under Clause (o) of Sub-section (1) reasonable opportunity of hearing shall be provided to the director, manager or employee or board of directors of the commercial bank or financial institution
before. Provided that if such opportunity of hearing can makes negative effect to the interest of the commercial bank or financial institution or its depositors, shareholders, creditors or general public, no provision of prevailing law can debarred to remove immediately to the director, manager or employee from their post or to suspend the board of directors by providing opportunity to hearing after such decision.
(3) During the hearing of the action under the proviso of the Sub- section (2) if such action does not seems reasonable bank can annul, change or make necessary decision to the order under Clause (n) or (o) of Sub-
section (2).
(4) Respective commercial bank or financial institution have to bear all the expenditure while bank take the control of management of any commercial bank or financial institution under the provision of Clause (o) of Sub-section (1) and makes arrangement for the management and operation of transaction.
(5) The order of the bank issued under Sub-section (1) Clause (o) shall generally remain valid for two years from the date of issue unless it is not renewed by the bank.
(6) In case of control of any commercial bank or financial institution by the bank under the provision of Clause (o) of Sub-section (1), the preliminary and annual report prepared by the bank or the officer appointed by the bank shall be submitted to the government of Nepal.
(7) In case of necessity bank can revoke or nullify its order issued under the provision of Clause (m), (n), (o) and (p) of Sub-section (1) by issuing another order. Such order shall contain the basis and reason and other necessary information regarding the need of issuing such order.
(8) The directors, managers, or employees removed by the bank under the provision of the Clause (n) of Sub-section (1) are not allowed to work or involve in transaction in the same commercial bank or financial institution as director, manager or employee or any other post of any commercial bank or financial institution or any other way being involved directly or indirectly.
(9) The directors, managers, or employees removed by the bank under the provision of the Clause (n) of Sub-section (1) or suspended member of board of directors under the provision of Clause (o) are not allowed to receive or claim any remuneration or compensation under the provision of prevailing law or agreement held directly or indirectly from the date of such order.
(10) Determination of the capital and valuation of assets and
liabilities of any problematic commercial bank or financial institution shall be based on the basis, process and standard determined by the bank.