Banking Offense in Nepal

Banks and financial institutions are key players in any country’s economy and financial system. A well-regulated banking system is an essential requirement to flourish international trade, which allows connection with different countries. A few years back, the government came up with a policy of “one citizen: one bank account” to bring rural people within the ambit of the banking system and promote banking institutions’ expansion in rural areas.

But, with such expansion, the chance of occurrence of banking offences also goes up along with the number of banking service recipients multiplied. Here, it is high time you understood the basics of banking offence rules in Nepal.

Banking offences in Nepal defined 

Basically, banking offence includes those acts in which the banking laws of the state impose criminal liability (punishment for any crime-intended act) in order to maintain financial stability and discipline. The state imposes criminal liability on acts such as dishonour of cheques, and abuse of loans or other facilities provided by the banks. These two are the most common banking offences in Nepal.

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The government of Nepal introduced Banking Offence and Punishment Act, 2008 in order to minimise the effect and risks associated with banks and financial institutions that may be caused by the possible offences in banks and financial institutions. Likewise, the act was also implemented to promote public trust in the banking system.

Types of banking offence

The Banking Offence and Punishment Act has enlisted the following 14 types of banking offences:

  1. Opening an account or demanding cash payment in an unauthorised manner
  2. Making unauthorised withdrawals or payments
  3. Obtaining or making payment by way of abuse or unauthorised use of electronic means
  4. Making available or providing loans in an unauthorised manner,
  5. Misusing credit facility
  6. Misusing banking resources, means and assets
  7. Acquiring assets or opening an account by the borrower having dues
  8. Stopping credit facility in the way to lose working project of the borrower
  9. Making a loss by altering an account or ledger or by committing forgery or fraud
  10. Doing transactions by misrepresenting bank or financial institutions or cooperative institutions
  11. Deriving excess, low or false valuation
  12. Carrying out or causing to carry out irregular economic or financial transactions
  13. Dhukuti transactions, and
  14. Illegal banking transactions.

Offences and punishments

Carrying out banking and financial transactions without obtaining a licenceUp to a threefold fine of the amount in question and up to five years of imprisonment with confiscation of the amount in question
Obtaining a licence for carrying out banking and financial transactions by submitting wrong or false statementsUp to a twofold fine of the amount in question and up to two years of imprisonment with confiscation of the amount in question if any
Carrying out banking and financial transactions against the terms and limits of the license

Carrying out foreign currency exchange-related businesses without a licence

Disbursing credits or other financings against this Act

Committing irregularities while carrying out valuation in artificial price while disbursing credits, recovering credits, evaluating securities, recovering loan or carrying out any action relating thereto, creating artificial price while auctioning the assets pledged as collateral, or while accepting the property as non-banking assets or while selling by accepting non-banking assets or while taking collateral

Committing irregularities by any director, official, employee and another person while carrying out merger and acquisition, liquidating, or auditing
Fine equal to the amount in question and up to one-year imprisonment with confiscation of the amount in question if any
Attempting to commit the aforementioned offences or abetting the commission of such offence by any mannerFine equal to the amount in question and imprisonment for a period that is half of the principal offender’s sentence with confiscation of the amount in question if any
In case an official or employee of a branch of a foreign bank transfers assets of such branch to another country, grants approval thereof, delegates authority to that effect, or abets the commission of such an actFine equal to the amount in question and up to five-year imprisonment