Section 102: Control over the Licensed Institutions

1) Notwithstanding anything contained elsewhere in this Act, if the Rastra Bank believes that a licensed institution has violated this Act or Rastra Bank Act or the Rules or Byelaws framed hereunder or the Orders or Directives issued hereunder or is satisfied, on the basis of the inspection and supervision report of the Rastra Bank, that a licensed institution has failed or is likely to fail to perform the obligations required to be performed by the licensed institution or that a bank or financial institution has not been operated smoothly or has carried out anything contrary to the interests of its shareholders or depositors, the Rastra Bank may suspend the Board of Directors of such licensed institution for a period of maximum three years and take such bank or a financial institution under own control.

2) After taking any licensed institution under its control pursuant to sub-section (1), the Rastra Bank may, either itself or through any appropriate person, firm, company or institution appointed by it, carry out the management of such bank or financial institution.

3) The Rastra Bank shall, within one year after the management of the licensed institution has been carried out by itself or through any other person, firm, company or institution pursuant to sub-section (2), conduct or cause to be conducted financial and management audit of such institution and publicly publish a report thereof.

4) If the Rastra Bank is satisfied, from the report referred to in sub-section (3), that the concerned licensed institution has become capable of performing the liabilities required to be performed by it or that the institution has reached a stage of operating smoothly, the Rastra Bank may take the following actions:-

(a) To remove the suspension of the Board of Directors of the licensed institution made pursuant to sub-section (1) and handover the management of the institution again to that Board of Directors, or

(b) To dismiss the Board of Directors of the licensed institution which has been suspended pursuant to sub-section (1), form a new Board of Directors from amongst the shareholders of the licensed institution and hand over the management of that institution to the new Board of Directors, or

(c) To convene the General Meeting of the licensed institution, get a new Board of Directors formed by the Meeting, and handover the management of the institution to the Board of Directors or

(d) To take any other action as the Rastra Bank deems appropriate.

5) If the Rastra Bank is satisfied, from the report referred to in sub-section (3), that the concerned licensed institution has become incapable of performing the liabilities required to be performed by it or that the institution has reached a stage of not being operated smoothly, the Rastra Bank may take any of the following two actions:-

(a) To initiate the process of mandatory liquidation according to the provisions made in Chapter 12 of the Act, or

(b) To initiate the process of settlement according to the Rastra Bank Act.

6) The Rastra Bank shall, prior to taking a licensed institution under its control pursuant to sub-section (1), give an opportunity to the concerned bank or financial institution to defend itself by providing it with a time limit not exceeding 15 days, having regard to the situation.

7) The concerned licensed institution shall bear all expenses incurred by the Rastra Bank in every act and action taken by it after taking such institution under its control pursuant to this Section.

8) The Rastra Bank shall have to inform the Government of Nepal and the Ministry of Finance about the taking of any licensed institution under its control pursuant to sub-section (1).