The Central Investigation Bureau (CIB) of the Nepal Police has arrested 13 persons including a board member of Nepal Credit and Commerce (NCC) Bank for their involvement in a Rs1.5 billion scam.

NCC board members Bishnu Prasad Dhital, Ichha Bahadur Gurung, Subarna Raj Bhandari, Madhuban Lal Shrestha, Rishi Raj Bhatta, Durga Datta Joshi, Ram Chandra Basaula, Bikash Shrestha, Sagar Neupane, Man B Raut, Binit Mani Upadhyay, Mohan Kharel and Sudip Thapa were taken into custody Friday.  

These individuals held key positions in Apex Development Bank before it was merged with NCC Bank. Dhital was chairman and Gurung, Bhandari and Shrestha were board members of the development bank. The rest held important managerial positions. 

They have been charged with misappropriating Rs1.5 billion by issuing credit against substandard collateral, according to the CIB. All the arrested persons are being held at the CIB Office in Maharajgunj.

The CIB arrested these individuals for further questioning at the request of Nepal Rastra Bank (NRB), the country’s central monetary authority and the regulator of the banking industry. 

Finding the loans extended by the development bank before the merger suspicious, NRB’s bank supervision department prepared a file and submitted it to the board of directors. Subsequently, a board meeting of the central bank decided to seek the help of the CIB to continue the probe. 

“We are unable to provide details of the embezzlement as the investigation has just started,” said NRB executive director and spokesperson Narayan Prasad Poudel. “But our preliminary study shows that there has been major embezzlement while extending loans.” 

According to the CIB, the arrested persons were involved in lending funds against substandard collateral to borrowers who had a bad credit history and were willful defaulters. Other charges against them include embezzling funds by extending loans to fake borrowers, accepting fake income statements of borrowers and disbursing loans exceeding the value of the collateral. 

“It seems the former officials of the development bank started lending money wildly following the decision to merge with the commercial bank,” the CIB said in a statement. “The loans were issued after the development bank signed a memorandum of understanding to merge with NCC Bank.”   

Following the merger, NCC Bank discovered the loans extended by the development bank to be substandard, and reported them to the central bank, an NRB source said. “After NRB stepped in, we found out that key officials of the bank had been involved in misappropriation of funds,” said the source.