‘Detaining CEOs for Debt Recovery Threatens Bank Stability,’ Say Financial Institutions
The Nepal Police have arrested Jyoti Prakash Pandey, CEO of Nepal Investment Mega Bank, in connection with the auction of Smart Telecom’s collateral. Four major organizations representing banks and financial institutions have expressed opposition, stating that the CEO’s arrest could negatively impact the stability of the bank. In a joint statement, they appealed to authorities to consider the bank’s reputation and the dignity of the CEO’s position, urging that Pandey be released from custody to allow the investigation to proceed.
On the issue of collateral auction as a means of debt recovery, the four key financial organizations warned that detaining CEOs could create problems for bank stability. Just on Wednesday, the Nepal Police detained Jyoti Prakash Pandey while executing the auction of Smart Telecom Private Limited’s collateral.
Smart Telecom had defaulted on a loan of NPR 460 crore taken from Nepal Investment Mega Bank. As a result, the telecom company’s equipment was auctioned off by the bank to recover the loan. Nepal Bankers’ Association, Development Bankers’ Association, Nepal Financial Institutions Association, and Nepal Microfinance Bankers’ Association jointly issued a statement expressing their concerns over Pandey’s arrest.
The organizations noted that, under the Banking and Financial Institutions Act, 2016 (2073) and policies issued by Nepal Rastra Bank, banks collect deposits from the general public and provide credit to aid the country’s economic growth, job creation, and entrepreneurial development. According to Section 57 of the Banking and Financial Institutions Act, banks have special rights to recover loans when the borrower defaults. They clarified that auctioning collateral in such circumstances is a primary responsibility of banks and their chief executive officers.
“Banks, which operate on public trust by mobilizing general deposits, may suffer reputational damage and instability if CEOs are arrested in the course of debt recovery,” the joint statement read. The financial institutions called on all parties to be sensitive to the bank’s reputation and the dignity of the CEO’s position. They appealed to the concerned authorities to adhere to the principle of ‘listen and then arrest,’ urging that if further investigation is required, Jyoti Prakash Pandey be promptly released from custody to continue the process smoothly.
