(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).