banking offence and punishment act

8/14/2019 Banking Offence and Punishment Act

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Banking Offenc e a nd Punishment Ac t, 2064 (Unofficia l translation)

Date of a uthentic ation (Pramanikaran) 06.2.2008 (2064.10.23)

An Ac t Formulated to Provide Leg al Provisions in rela tion to the Banking Offenc es and

Punishments

Preamble: Whereas it is expedient to provide legal provisions on banking offences and

pun ishme nts with a view to p rom oting t rust towa rds banking and financ ial system thereb y

mitigating the consequences and the risks that the banking and financial system may

suffer on account of the offences may be occurred in course of transactions of Banks &

Financ ial Institutions, the Leg islative Pa rliament ha s formula ted this Ac t.

Chapter-1

Preliminary

1. Short Title, Sc ope and Com menc em ent:(1)The title o f this Ac t sha ll be "Banking Offenc e and Punishment Ac t, 2064.(2)This Ac t sha ll be app lica b le within Nep a l and a lso to the p ersons and

institutions whomsoever, residing abroad after committing banking offence

in Nepa l.

(3)This Ac t sha ll come into effec t imme d ia tely.2. Definitions: Unless the sub jec t o r co ntext otherwise req uires, in this Ac t;

(a )"Bank" means a bank licensed by Nepal Rastra Bank to carry out "A"c a teg ory financ ia l transac tions, pursuant to p reva iling law.

(b )"Bank ing Offenc e" me ans the offenses as stipulated under Cha p ter-2.(c )"Financial Institution" means a financial institution licensed by Nepal

Rastra Bank to carry out "B", "C" and "D" category financial transactions,

pursuant to p reva iling law.

(d )"Institution" means a firm or company eligible to maintain a bankaccount with the banks or financial institutions, pursuant to the

preva iling laws. The te rm a lso denotes other Organized Institutions oragenc ies estab lished under the p reva iling laws.

(e )"Borrower" means a person, firm, company or Organized Institutionincorporated under prevailing law, which borrowed from Bank or

Financ ial Institution. The term a lso d enotes the person who ha s p rov ided

guarantee.


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7. Not to avail or provide loans in an unauthorized manner: While a va iling o r providingloa ns from a bank or financ ia l institution, no one sha ll c om mit the follow ing a c ts:

(a )Ava il or p rovide loans by submitting a false, fake o r unrea l financ ia l sta tem ent orby c rea ting a rtific ial business.

(b )Avail or provide over loans by way of unnatural over valuation of collateralsec urity.

(c )Avail or provide loans by way of unnaturally hiking the project cost based onfalse details.

(d )Ava il or provide c red it, fac ility or disc ounts beyond the a uthority ob ta ined or limitsanctioned.

(e )Re avail or re provide loans from or by other Bank of Financial Institution withouthaving due relea se o f the co llateral sec urity onc e p rovide d to a Bank or Financ ial

Institution o r in excess than the amo unt c ove red by the c olla teral sec urity aga inst

the same c olla teral sec urity.

How eve r, this restric tion sha ll not be app lica b le in case of release of loa ns to be

provided unde r consortium.

(f) Ava il loans through an entity having e stab lished in the name of a person w ho, infact, does not have financial capability to run the business or, who is a personunder undue influenc e o r extend loans knowing the sa id fa c ts.

(g )Extend credit more than the requirement compared to the customer's businesstransaction.

(h)Ac ce pt or provide a ny sort of undue be nefit in return to granting c red it fac ility.8. Not to misuse c redit:

No one shall misuse the credit facilities availed from a bank or financial institution

or let the same be misused by diverting in the purpose other than for which the

c red it fac ilities we re a va iled .

9. Not to misuse banking resourc es, me ans and assets:(1)The Prom ote r, Direc tor, sha reho lder who is deeme d to have a financ ia l interest

under the prevailing laws, Chief Executive Officer, employee, advisor, Managing

Agent o r assoc ia ted person o r organiza tion or fam ily memb er or close relatives of

such persons shall not misuse the resources of a bank or financial institution by

ava iling a c red it or fac ility or in any other ma nner.

Provided,


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(1)It shall not be deemed to be an obstruction in availing loans or advancesby the Chief Exec utive Officer or em p loyees of a bank or financ ia l institution

under emp loyees' fac ility sc hem e, as per the p reva iling laws.

(2)It shall not b e de em ed to b e an ob struction in providing c red it o r fac ility toc lose relative ha ving a pprova l of the Boa rd of Direc tors of Bank or Financ ia l

Institution.

Explanation : (a ) For the p urpose o f this Sub -sec tion, the term "fam ily memb er"

means concerned person's husband or wife, son, daughter, adopted son,

adopted daughter, father, mother, step mother and taken cared elder brother,

younger brother and elder sister young er sister.

(b) "Close relative" means separated elder brother, younger brother, elder sister in

law (wife o f elde r brother), young er sister in law (wife of young er b rothe r), ma rried

elder sister, younger sister, elder brother in law (husband of elder sister), youngerbrothe r in law (husband of young er sister), nep hew (son o f unc le), niec e (d aughter

of uncle), younger brother in law (wife's younger brother), younger sister in law

(wife's younger sister), mother in law (wife's mother), father in law (wife's father),

uncle, aunt, maternal uncle, maternal aunt, nephew (son of sister), Niece

(daughter of sister), grandson, granddaughter, granddaughter in law (wife of

grand son), grandson in law(husband of g rand da ughte r).

(2)No one shall, in violation of the interest of the depositors or a bank or financialinstitution, incur the assets of the bank or financial institution or let the same be

incurred.

(3) No one shall commit any financial irregularity, whiling auctioning selling the non-banking assets or other assets of a bank or financial institution or while doing any

other transactions.

10. Not to ac quire assets or open a c c ount by bo rrower who has over dues:

No bo rrow er who has over dues shall rem it mone y to a ba nk by opening an ac c ount

with a local or foreign bank or financial institution or continue such account or

operate the account or purchase any movable or immovable assets in any manner

or acquire title or possession over such assets in any manner without settling the dues

payable to a bank or financial institution. In case any borrower, before over due, has

obtained any moveable or immovable asset or continued account operation, theborrower must use the amount to be received from such asset or bank account in

rep aying the o ver dues.

11.Not to stop credit facility in the way to loss working project of borrower: Bank orFinancial Institution which has once provided the first installment after approving

credit facility for a project of borrower, without sufficient basis and considerable

reason, shall not stop the remaining installments in-between in the way to loss working

projec t of the b orrow er.


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12.Not to make loss by m aking alteration in the ac c ount or ledger or by c omm ittingforge ry or fraud : No o ne sha ll, with a mo tive of self be nefit or to c ause loss or bene fit

to a ny other person, co mm it a ny forge ry by a c tion like te mp ering any m a tter written

in Bank or Financial Institution's any document or account or ledger whether byremoving or by re writing the same to mean different sense or with a motive to loss

othe r, comm it fraud by mislead ing othe rs rep resenting the untrue o r non-existent fac ts

to b e true or existent or by ge tting a doc ument signed w ith an a lteration in the da te,

number or particular.

13. Not to derive excess, low or false valuation: While carrying out the valuation ofmovable or immovable assets held by a bank or financial institution as a collateral

sec urity of a loa n or non-banking mova ble or imm ova ble a sset o f a ba nk or financ ial

institution, the valuer shall not cause any loss or harm to the bank or financial

institution by deriving excess, low or false valuation of such assets while valuating for

the p urpose o f auc tioning sell or for other purpose relating to Bank.

14.Not to ca rry out and cause to carry out irregular ec onom ic or financ ial transac tions:No one shall, with a motive to cause any harm loss to a bank or financial institution,

ge t som ething done or undo ne or ba rga in or forbid ba rga ining or take or give any

amount or take or give any goods or services free of costs; take or give any charity,

grant, gift o r dona tion; execute or ge t exec uted or translate or ge t translate d a false

de ed or do wo rk or ge t the w ork be done with an ill intention to c ause illeg al benefits

or losses.


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Chapter-3

Punishment

15. Punishment:

(1) If person c om mits any offense spe c ified unde r Sec tion 3 (a), (b), (c ) Sec tion

4 or Sec tion 11, suc h p erson sha ll be p unished with a fine up to Rup ee s Ten

thousand , dep ending upon the d egree of the o ffense c omm itted.

(2) If anyone c om mits any offense spec ified unde r Sec tion 5, 6 Sec tion 7 (d),

(e), (f), (g ) o r (h) or Sec tion 8,9,10,12 or Sec tion 14, he/ she sha ll be punished

with fine and imprisonment as stipulated under on the basis of the claimed

am ount, after rec overing the claimed am ount, if any and de pend ing up on

the de gree of the offense c omm itted.

(a) If the suit amo unt is up to one million

rupees

Imp risonm ent up to o ne yea r

(b) If the suit amount is above o ne million

rupees and up to five million rupees

Imprisonment from one year

to two years

(c ) If the suit amo unt is above Five million

rupees and up to Ten m illion rupees

Imprisonment from two years

to three yea rs

(d ) If the suit amo unt is above Ten million

rupe es with whate ver amo unt

Imprisonment from three

yea rs to five yea rs

(3)If anyone c om mits any offense spe c ified under Sec tion 7(a), (b), (c ) or Sec tion 13,he/she shall be punished with a fine equivalent to the value of such collateralsecurity and an imprisonment up to a period of five years, depending upon the

de gree of the o ffense c omm itted and the Ad judicating Office r may, de pe nding

upon the deg ree of the offense, issue a n orde r restric ting suc h va luer not to c arry

out the va luation wo rks up t o a pe riod of three yea rs from the d ate of c om p letion

of the p unishme nt.

(4)In case the suit amount c annot b e estab lished in ac c orda nc e w ith this Sec tion,he/ she sha ll be punished with a fine up to Rupees one million a nd an imprisonm ent

up to two years.

(5)In case any organization commits any offense specified under this Act and if theconcerned office bearer or the employee committing such offense be identified,

he/she shall be held liable, if the office bearer or the employee could not be

identified , the pe rson w orking in the c ap ac ity of the organization hea d a t the time

of the oc c urrenc e o f the o ffense shall be he ld liab le.

(6)The p erson o r orga niza tion attem pt ing to c om mit a b anking o ffense o r the p ersonor organization indirectly involved in committing such offense or the person

assisting in committing such offense or the employees or the Chief Executive

Officer or Office bearer of such assisting organization shall be punished with a half

of the punishment tha t the offende r ma y be subjec ted to.


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16. Punishment to the Persons Creating Hindrance: If any one creates hindranceprote st in the investiga tion and inquiry proc eed ings undertaken und er this Ac t, the

adjudicating officer may punish him/her with an imprisonment up to six months ora fine up to five thousand rupees or both based on the report of the Officer

involving in Investigation and inquiry.

Chapter-4

Proc eeding s and Disposal of the suits

17. Time and limita tion for the lodgment of First Informa tion Rep ort:

(1)In rega rd to a n offense und er this Ac t, an FIR ma y be lodg ed within one year fromthe date the offense comes to the knowledge and the suit shall have to belodged within six months from the date the FIR is so lodged with the Court as fixed

by the Gove rnment o f Nepa l with pub lishing a notice in Nepa l Ga zette.

(2)Notw ithstand ing anything c onta ined hereinab ove in Subsec tion (1), a law suitmay, at any time, be initiated against an employee or office-bearer of a bank or

financial institution, who caused misappropriation or loss of asset of Bank or

Financ ial Institution d uring his/ her assump tion o f servic e in any post the reof a nd

there sha ll be no o bstruction in initia ting a lawsuit even a fter suc h office -bearer or

em ployee ret ires from his/ her service .

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Government to be the plaintiff: In the lawsuits, where punishment shall be given asper this Act, the government shall be the plaintiff and such lawsuits shall be

c onside red to be inc lude d in Sc hed ule-1 of Ac t relating to Gove rnment Ca ses,

2049.

19. Proc eed ings may b e initiated by de taining into the c ustody:(1)Notwithstanding anything contained in the prevailing laws, the Officer involving in

Investiga tion a nd inquiry ma y de tain an offende r unde r the Ac t, in the c ustod y by

giving him/ her a warrant as per the p reva iling laws, if there is an ad eq uate g round

to b elieve tha t the p erson, ag ainst whom p roc eedings have be en initiate d a s pe r

this Ac t, may extinct o r destroy any evide nc e o r c rea te hindranc es or obstac les or

imp ac t adversely in the p roc eed ing o f investiga tion and inquiry of it or on the b asisof the evidenc es existent presently, if there is a rea sona b le ground to be lieve tha t

a person, not having residence in Nepal, is the offender of banking offence who

c an be subjec t to a n imp risonm ent up to 6 months or above.

(2)In case the investigation and inquiry initiated in regard to the person detained inthe c ustod y as stipulated unde r Subsec tion (1) above c ould no t b e c om pleted

within 24 hours and it is deemed necessary to continue the investigation and

inquiry process by detaining him/her further in the custody, the investigation and

inquiry officer shall detain further only after obtaining approval from the


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adjudicating officer getting the person in presence before the adjudicating

officer.

(3)While requesting to adjudicating officer for approval as stipulated underSubsec tion (2) ab ove , the c ha rges aga inst the person d eta ined in the c ustod y,

basis thereon, justific a tion for c ontinuing the investiga tion and inquiry proc eed ings

by d eta ining him/ her in the c ustod y and desc ription of the affida vit of statement

ob tained , if any ta ken from him/ her, shall have to b e c lea rly mentioned .

(4)If app rova l for de tention a s stipulated under Subsec tion (2) ab ove is soug ht fordetention, the adjudicating officer may, considering, after reviewing the

concerned documents, whether the investigation and inquiry progress has been

satisfactorily or not, grant approval for detention up to a period of maximum forty-

five days a t a time or in multip le instanc es but not exceed ing te n da ys a t a time, if

p rog ress in the investiga tion and inquiry proc ee d ings dee me d to b e sa tisfac tory.

Chapter-5

Miscellaneous

20. Cooperation to be extended : It sha ll be the d uty of t he b ank or financ ia l institution

or the c onc erned individual to extend nec essary co op eration to the investiga tion

and inquiry officer while carrying out investigation and inquiries on the offenses

under this Ac t.

21. Ac tion not be initiated on the ground of breac h of sec rec y: Notwithstanding

anything contained in the prevailing laws, if the person, who provided informationon happening of offence or possible happening of the same to initiate legal

proc eedings or to stop oc c urrenc e o f offence unde r this Ac t, is an em ployee o f a

ba nk or financ ial institution, no a c tion shall be taken on the ground of b rea c h of

secrecy in terms of his/her service rules, for the reason of his/her providing/doing

such cooperation.

22. Provisions relating to Delivery of Notice:

(1) Notwithstand ing anything conta ined in the prevailing law s, a notic e to be

delivered in the name of a foreign individual, in connection with the

offenses under this Act, shall be delivered in the name of an office or

representative of such individual in Nepal, if any, and the notice sode livered shall be de em ed to b e d uly delivered .

(2) In c ase the office or rep resenta tive as stipu late d under Subsec tion (1) is no t

existent, the notice shall be delivered at the main business place of such

individua l or his/ her pe rma nent resident ial ad dress or a t the ma iling address

if provided by him/her during the course of business, through telex, telefax

or other means of recordable telecommunication or through post by

registration and the notice so delivered shall be deemed to be duly

delivered.


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(3) Notw ithstand ing anything conta ined und er Subsec tion (1) or (2), if there is a

separate provision in any treaty where Government of Nepal or Nepal is a

party, there sha ll be no o bstruc tion in delivering the no tice in the na me of a

person residing in foreign c oun try in the m anner as spec ified in the same .

23. Notice to be pub lished : In case a report is received, in connection with the

dispatch or delivery of a notice to any individual under this Act or other prevailing

law s, deta iling tha t the notice c ould not b e d ispa tc hed or delivered for the rea son

tha t the a ddress of suc h ind ividua l could no t be identified or for any othe r rea sons,

notwithstand ing anything c onta ined in the prevailing law s, a pub lic notice to this

effect shall be published in a national level newspaper (in an English daily in

regard to a foreigner) at least two times extending him/her a time period of 3o

days and furnishing thereon the abridged particulars of the case, whether the

c ase is investiga ted or is a lrea dy lod ge d with the a d judica ting office r. If the no tice

is so published, it shall be deemed to be duly delivered or delivered to suchindividual, notwithstanding anything contained under this Act or other prevailing

laws.

24. Issuanc e of order for c rea ting enc umb rances ove r the assets of a foreign

individual:

(1)If any foreign individual does not appear in front of the investigation andinquiry officer as per the notice even after providing notice by the

investiga tion a nd inquiry o fficer or de livering it pursua nt to Sec tion 22, the

investigation and inquiry officer may issue an order not to take outside

Nepa l or to c rea te encum branc e over the prope rty, entitlem ent, interest orc onc ern held by him/ her within Nepal, if a ny, till the person do esn't ap pe al

in front o f the investiga tion or inquiry offic er and it sha ll be the duty of the

all c onc erned to c om ply with suc h orde r.

(2)Person no t c omp lying with the o rder issued pursua nt to Sub -sec tion (1) sha llbe punished with a fine up to Rupees one hundred thousand by the

investiga tion a nd inquiry offic er. The losses or ha rm c aused to the

Government of Nepal or public institution, if any, due to such non-

c om plianc e o f the o rder, shall also b e rec overed from him/ her.

25. Adjudication proceedings and disposal of the case not be affected:Notwithstanding anything contained under the prevailing laws, the adjudicationproceedings and disposal of the case initiated or to be initiated pursuant to this

Ac t shall no longe r be a ffected even if the offend er is died .

26. Waiver in the Claim of Punishment may be Happen: The investiga tion a nd inquiryofficer may provide waiver in the claim of punishment, in full or part, to a person

extending cooperation in regard to the investigation and inquiry proceedings

initiate d und er the Ac t p resenting suc h person a s his/ her witness.

Provided, notwithstanding anything contained in this Act or in prevailing laws a

lawsuit may be reregistered against such person if his/her cooperation could not


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be established from other proof/e vide nc e o r if he/ she m ad e state ment b efore the

adjudicating officer against the cooperation extended by him/her to the

investiga tion and inquiry office r

27. To b e c onsidered ineligible: A person convicted with an imprisonment under thisAct shall be considered ineligible to work as an employee of a bank or financial

institution.

28. To be g overned as pe r the p revailing laws: Notwithstand ing anything c onta inedelsew here under this Ac t, in the o ffense c om mitted in the involvement of a pe rson

holding pub lic p osition und er the p reva iling laws or of a c ivil servant, if the o ffenc e

is prosecutable or punishable pursuant to Commission for the Investigation of

Abuse of Authority Act, 2048 and the Corruption Prevention Act, 2059, the action

shall be initiate d and the p unishment shall be given in ac c ordanc e w ith the sam e

Acts.

29. Regulation may b e fram ed: The Gove rnme nt of Nep a l ma y formulate nec essaryreg ulations for imp lementa tion of the o b jec tives of this Ac t.

THE END

banking offence and punishment act

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