The Central Investigation Bureau (CIB) of Nepal Police has obtained permission to keep Prabhu Bank’s Chief Executive Officer (CEO) Ashok Sherchan and two other officials in custody for five days.
On Monday, a bench of Judge Geeta Prasad Timilsina of the Patan High Court granted a five-day remand to investigate the three for banking offenses, according to the court’s information officer Parvati Hitan.
On Sunday, Prabhu Bank CEO Sherchan, Deputy CEO Mani Ram Pokhrel, and Chief Risk Officer Riwas Shrestha were arrested by the CIB from the bank’s central office in Anamnagar, Kathmandu.
The arrests took place while the CIB was still prosecuting the bank’s former chairman, Devi Prakash Bhattachan, in a loan misuse case.
Nepal Rastra Bank clarified that the arrests were not based on a complaint filed by the central bank, but during the investigation on a complaint filed with the CIB.
“Normally, in banking offense cases, bank officials are arrested when a complaint from Nepal Rastra Bank leads to an investigation. But these arrests did not occur on the basis of any complaint by NRB,” said NRB spokesperson and Executive Director Guru Prasad Paudel.
However, the central bank had sought technical assistance from the police on the matter.
Earlier, former chairman Bhattachan was arrested based on a complaint filed by Prabhu Management Chairperson Kusum Lama alleging fraud of 1 billion rupees. Other senior bank officials were also arrested during the ongoing investigation into the complaint.
The investigation is believed to be related to loans issued by the bank to Prabhu Management Pvt Ltd.
It appears that Nepal Rastra Bank had already warned and taken action against CEO Sherchan, former chairman Bhattachan, and others during fiscal year 2020-21 after discovering that the bank had invested in another company in which it had its own investment.
The unified directive issued to banks and financial institutions prohibits issuing loans to companies, firms, or institutions in which a director or their immediate family members hold more than 10 percent share ownership.
It has not been disclosed how much loan the bank had issued at that time, when former chairman Bhattachan also had investment in Prabhu Management Pvt Ltd.
The bank also came under the scanner during an investigation into alleged embezzlement of funds from cooperative institutions.
Prabhu Management Pvt Ltd was established with investments from Bhattachan, Kusum Lama, and Daksha Paudel, who is also a former director of Prabhu Bank.
It was created as a “super-agent” company for Prabhu Money Transfer, which was established by Prabhu Group.
As a super agent for Prabhu Money Transfer, Prabhu Management had been providing remittance payment services through around 5,000 cooperatives.
An investigation was launched after these cooperatives were unable to recover around one billion rupees deposited as collateral. Following CIB’s interrogation of Kusum Lama and further inquiry, former chairman Bhattachan and senior bank officials were arrested.
