Six Microfinance Institutions Face Nepal Rastra Bank Action, Five Barred from Declaring Dividends

Kathmandu – Nepal Rastra Bank (NRB) has taken regulatory action against six microfinance institutions for violating prudential requirements, with five of them placed under Prompt Corrective Action (PCA) due to inadequate capital adequacy ratios.

The institutions placed under PCA are Arambha Chautari Laghubitta, Ganapati Laghubitta, Samudayik Laghubitta, Nerude Mirmire Laghubitta, and CYC Nepal Laghubitta. According to the central bank, these institutions failed to maintain the minimum capital adequacy ratio required under regulatory standards and have therefore been subjected to corrective measures under Regulation 3(a) of the Prompt Corrective Action Bylaws, 2017.

As of the reporting dates, Arambha Chautari Laghubitta reported a capital adequacy ratio of 7.77 percent (mid-July 2025), Ganapati Laghubitta 6.06 percent (mid-October 2025), Samudayik Laghubitta 6.12 percent (mid-July 2025), Nerude Mirmire Laghubitta 6.01 percent (mid-July 2025), and CYC Nepal Laghubitta 6.20 percent (mid-July 2025), all below the regulatory threshold.

Under the PCA framework, NRB will hold discussions with the senior management of the affected institutions regarding corrective measures and maintain official records of those consultations. The regulator will also require each institution to submit a capital enhancement plan.

The five institutions placed under PCA will not be allowed to declare cash dividends or bonus shares, open new branches, or increase the salaries, allowances, and other benefits of directors, chief executive officers, or other senior management officials until they meet regulatory requirements.

Separately, NRB has also taken enforcement action against Dhaulagiri Laghubitta, CYC Nepal Laghubitta, and Nerude Mirmire Laghubitta for additional regulatory violations.

The board of Dhaulagiri Laghubitta has been formally cautioned after reinstating a Deputy Chief Executive Officer in a manner deemed inconsistent with the institution’s Employee Service Regulations, 2023. NRB also found that the institution had paid remuneration for a period during which the official was not in service, without adequate legal grounds. The board has been instructed not to repeat such actions.

Similarly, the board of CYC Nepal Laghubitta has been warned for purchasing a vehicle without complying with the expenditure limits and approval procedures specified in the institution’s Financial Administration Regulations.

In the case of Nerude Mirmire Laghubitta, NRB found that the institution had reversed Rs 815.5 million in loan loss provisions and recognized the amount as income without identifying the individual borrowers to whom the provisions related. The central bank has cautioned the institution’s Chief Executive Officer and directed that such accounting practices must not be repeated.