The police have arrested Kamal Gyawali, fugitive former managing director of then Kist Bank who has been absconding since 2016 after being convicted of financial crime. Kist Bank was part of a mega merger between multiple banks to form Prabhu Bank.

In 2016, the Patan High Court handed a four-year jail term and a Rs125 million fine to Gyawali for his involvement in financial fraud. He had taken a Rs120 million loan from Siddhartha Development Bank by putting up substandard collateral.

A team from the Metropolitan Crime Division of the Nepal Police on Friday morning arrested Gyawali from Kanchanpur and brought him to Kathmandu in the afternoon. Division Chief SSP Dhiraj Pratap Singh told the Post that they had presented him before the Patan High Court. “We arrested him to enforce the court’s decision,” said Singh. “We will now wait for the court’s decision before imprisoning him.”

In 2010, Gyawali and his wife Gauri Khanal took a Rs120 million loan in the name of Jamko Publication from the development bank against a collateral worth Rs60 million by influencing its top management. A year later, an on-field inspection by Nepal Rastra Bank (NRB) uncovered the fraud, and the central bank handed over the case to the Crime Investigation Bureau (CIB) of the Nepal Police for further investigation.

The CIB took the case to the Patan Appellate Court which awarded the Gyawali couple a four-year jail term and a Rs65 million fine each. Gyawali fled after finding out that the CIB was investigating his case.

Gyawali’s rise in the real estate and banking business is a rags-to-riches story. In 2003, he established Kist Merchant Banking and Finance with a few friends. It was then a ‘C’ class financial institution, and had a paid-up capital of Rs30 million. The finance company rode the real estate boom, and witnessed phenomenal growth as land prices in the Kathmandu Valley and major cities soared.

Gyawali, the master manipulator, was able to influence NRB’s top officials and upgraded the finance company to a commercial bank in 2009. According to banking industry insiders, Gyawali became successful in the banking business by exploiting the weak governance of the central bank and investing massively in real estate. He was also successful in influencing the top management of various banks and financial institutions to secure loans to invest in various properties.

Everything was rosy for Gyawali until 2010 when the current Finance Minster Yubraj Khatiwada was appointed NRB governor. After Khatiwada took charge of the central bank, Gyawali’s bad days started.

Under Khatiwada’s leadership, NRB’s regulatory and supervisory competence was strengthened, and lending

to the real estate sector by banks and financial institutions was curbed. This led to a fall in real estate prices, and Gyawali struggled to repay loans and advances he took to invest in the sector. He borrowed more money to clear previous loans, and he sank deeper into debt.