Nepal Rastra Bank (NRB) has decided to reduce the shares of 35 shareholders of Karnali Development Bank to 1%. This includes 25 founder shareholders and 10 general public shareholders, according to a notice issued by the bank’s management group.

The notice states that following NRB’s decision on 2081/09/10, the bank was declared a problematic institution, and its management and operations are being overseen by a group appointed by NRB. A due diligence audit revealed a depletion of paid-up capital, liabilities exceeding assets, and irregularities in the capital contributions by certain shareholders. As part of the bank’s restructuring, the shares of the specified shareholders will be reduced to 1% in accordance with the Nepal Rastra Bank Act, 2058.

Currently, the 25 founder shareholders hold 2,160,606.4 shares in total. After the reduction to 1%, their combined shares will drop to 21,360.61 shares, reflecting a massive cut. Similarly, the 10 general public shareholders currently hold 12,684.98 shares, which will reduce to just 126.85 shares after the adjustment.

Karnali Development Bank is listed on the Nepal Stock Exchange (NEPSE). According to NEPSE, the bank has a total of 5,028,300 listed shares, with 2,564,433 shares held by founders and 2,463,867 shares held by the general public. Following the share reduction, the total shares held by these 35 shareholders will decrease by 42%, with founder shareholders experiencing the largest reduction of 82.46%. In the future, the combined total shares of founder and general public shareholders will be 2,901,041 shares.

The reduction comes after NRB’s management group discovered that these 25 founder shareholders and 10 general public shareholders failed to fully pay their due capital, and some had misused public funds while recording their capital contributions. As a result, their shares have been confiscated and reduced.