(1) If any licensed institution fails to meet
any of the following conditions, the Rastra Bank may make a decision
to convert it into a Class “B” licensed institution if it is a Class “A”
licensed institution, and into a Class “C” licensed institution if it is a
Class “B” licensed institution:
(a) If it has failed to raise the capital as prescribed within the
period prescribed by the Rastra Bank;
(b) If it has been incurring loss since five consecutive years;
(c) If it has been subjected to action for frequent violations of the directives issued by the Rastra Bank;
(d) If it has failed to maintain a risk-bearing fund as prescribed by the Rastra Bank.
(2) The Rastra Bank shall, prior to taking action against any bank or financial institution pursuant to Sub-section (1), give a reasonable opportunity to the concerned bank or financial institution to furnish its explanations against such action.
(3) If any licensed bank or financial institution of a higher class intends to be converted into a licensed bank or financial institution of a lower class and makes an application to the Rastra Bank for approval, and if the Rastra Bank gives its approval after making necessary inquiries, such bank or financial institution shall be converted into a licensed bank or financial institution of a lower class.