KATHMANDU — Nepal Police’s Central Investigation Bureau (CIB) on Sunday arrested Prabhu Bank Chief Executive Officer Ashok Sherchan, along with Deputy CEO Mani Ram Pokharel and Chief Credit Officer Rivas Shrestha, on charges of serious banking offences involving alleged financial fraud, loan mismanagement and misappropriation. 

The arrests were made under a warrant issued by Patan High Court, under the provisions of the Banking Offence and Punishment Act, 2007. The decision comes after investigators uncovered evidence pointing toward unauthorized loan issuance, diversion of funds, and other irregularities that reportedly jeopardized the bank’s financial health. 

What Triggered the Arrest?
The probe was initiated following a formal complaint by Prabhu Management Pvt Ltd chairperson, who alleged misappropriation of nearly NPR 980 million — tied to multiple firms and cooperatives connected to the bank. 

 Earlier, on November 8, CIB had raided Prabhu Bank’s head office and confiscated key documents and transaction records. 

Officials say the loans were reportedly disbursed in the names of several companies, often without proper collateral, and some funds were allegedly diverted through suspicious routes. Such practices violated directives from the Nepal Rastra Bank (NRB) and the existing banking regulations. 

Broader Implications for Nepal’s Banking Sector
Analysts and regulatory observers warn that this scandal deepens concerns over corporate governance, risk management, and transparency across Nepal’s banking sector — especially as many commercial banks already struggle with increasing non-performing loans and liquidity stress. 

The timing is particularly sensitive: a foreign audit firm recently began reviewing the loan portfolios of Nepal’s largest commercial banks, urged by the International Monetary Fund (IMF) in its latest macro-economic assessment.

The arrests are likely to intensify scrutiny and trigger tighter regulatory oversight across the sector. Experts say banks may now face stricter compliance demands, internal audits, and risk mitigation protocols to restore depositors’ trust and safeguard financial stability. 

What Happens Next?
The CIB has begun detailed interrogations of the three arrested executives and is gathering additional evidence. Authorities say further arrests or charges against other involved individuals — within Prabhu Bank or related entities — are possible, depending on the outcome of ongoing investigations. A formal charge sheet is expected soon. 

Meanwhile, depositors, investors, and regulatory bodies await clarity on the financial exposure and potential losses linked to the irregular loans. The case underscores the urgent need for robust internal controls — especially in large financial institutions operating in Nepal’s evolving banking environment.