The resignation of Roshan Kumar Neupane as CEO of NIC Asia Bank, effective Ashwin 1, 2082 (September 18, 2025), marks a pivotal moment for one of Nepal's largest and most prominent commercial banks.
The Anatomy of a Crisis: Unpacking the Financial Deterioration
The crisis at NIC Asia Bank is a direct consequence of its high-octane, aggressive lending model that prioritized rapid growth over prudent risk management.
The financial fallout of this strategy is now painfully evident in the bank's key performance indicators:
Profit Plunge: The bank's net profit has plummeted, with distributable profit becoming significantly negative.
5 In the third quarter of fiscal year 2024, its net profit collapsed by 88% quarter-on-quarter to a paltry NPR 5 million, the lowest among all commercial banks in Nepal.6 This is a staggering drop for an institution that once posted quarterly profits as high as NPR 1.7 billion.7 Spiraling Non-Performing Loans (NPLs): Perhaps the most alarming sign of the bank's distress is the rapid increase in its NPL ratio.
8 The proportion of loans classified as in or near default has skyrocketed, jumping from 3.45% in FY 2023/24 to 4.61% in the second quarter of the current fiscal year, and has been reported to have reached as high as 6.28%.9 A high NPL ratio indicates that a substantial portion of the bank's loans are unlikely to be repaid, directly impacting its profitability and capital adequacy.10 The Dividend Dilemma: The bank's deteriorating financial health has had a direct and painful consequence for its investors.
11 For two consecutive years, NIC Asia has been unable to distribute dividends, a move that has angered shareholders and eroded investor confidence.12 This is a stark contrast to its previous reputation for robust shareholder returns.13
The Regulatory Hammer: Nepal Rastra Bank's Intervention
The central bank, Nepal Rastra Bank (NRB), has not been a silent spectator.
Misclassification of Loans: The bank was found to have misclassified loans to understate its non-performing assets, a direct violation of regulatory norms.
Preferential Treatment: The NRB discovered that the bank was paying higher interest rates on deposits to its directors, their family members, and affiliated institutions than the publicly advertised rates, a practice that constitutes a serious breach of corporate governance.
16 Non-compliance with Directives: The NRB has repeatedly warned and instructed the bank to address its issues, including the formulation of a corrective action plan.
17 The bank's apparent defiance or slow response to these directives has drawn further scrutiny and led to penalties.18
The NRB's actions are a clear message that it will not tolerate a "growth at all costs" mentality, especially when it jeopardizes the stability of the entire financial system. The central bank's firm stance underscores its critical role as the guardian of financial stability and public trust.
A Systemic Wake-Up Call: The Broader Implications
The crisis at NIC Asia Bank extends beyond its walls; it's a systemic wake-up call for the entire Nepali banking sector. The bank's aggressive strategy was, in many ways, a reflection of the competitive landscape, where institutions vied for market share through aggressive lending and high-interest offerings. The unraveling of this model serves as a cautionary tale:
Prudence over Popularity: The crisis highlights the need for banks to prioritize prudent, long-term stability over short-term, aggressive growth. A healthy banking system is built on sound lending practices, not on a race to the bottom.
Strengthening Corporate Governance: The revelations of preferential treatment for directors underscore the need for stricter corporate governance standards. Boards and management must be held accountable for their actions and ensure fairness and transparency in all dealings.
Public Trust is Fragile: The crisis has created a sense of panic among customers and depositors, who are questioning the safety of their funds. . The incident demonstrates how quickly public trust, which is the very foundation of the banking system, can erode.
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The Road Ahead: Can NIC Asia Bank Rebuild?
The appointment of Santosh Kumar Rathi as the acting CEO marks the beginning of a challenging recovery journey. His immediate priorities must be to:
Stabilize the Financials: He must focus on loan recovery, reducing the NPL ratio, and implementing stricter lending controls to prevent further deterioration.
Restore Regulatory Compliance: The new leadership must work closely with the NRB to fully comply with all directives and demonstrate a genuine commitment to reform.
Regain Public and Investor Confidence: This will be the hardest task. Transparent communication, tangible progress on financial health, and a clear shift to a more conservative and trustworthy business model are essential.
The bank's path to recovery will be a long and arduous one. It will require a complete overhaul of its internal culture, a strategic shift away from its past aggressive model, and a renewed focus on the core principles of sound banking.
The Learning and Message
The NIC Asia Bank crisis is a powerful lesson in leadership, strategy, and accountability. It teaches us that:
Growth at all costs is not sustainable. A business model that sacrifices prudence for speed is inherently flawed and will eventually collapse under its own weight.
Leadership is defined by integrity and long-term vision, not just by market share. A true leader builds a resilient and trustworthy institution, not a house of cards.
The system is only as strong as its weakest link. The crisis at one major bank has the potential to shake the confidence of the entire financial system, underscoring the vital importance of strong regulatory oversight and institutional responsibility.
It's a stark reminder that in the world of finance, where trust is the most valuable currency, a fall from grace can be swift and unforgiving.
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