Banking Offence and Punishment Act, 2064

Overview

The Banking Offence and Punishment Act, 2064 (authenticated 23 Magh 2064) aims to reduce the risk that criminal acts pose to the banking and financial system and to strengthen public trust in it. It applies throughout Nepal and to any person or institution living abroad after committing a banking offence in Nepal. It has been amended three times; the Second Amendment of 2082 extended the Act to cooperative banks and brought cheque dishonour into it.

Who is covered

• Bank means a class A licensed institution; financial institution means class B, C and D institutions.
• Offences can be committed by anyone: customers, borrowers and guarantors, promoters, directors, shareholders with a financial interest, chief executives, employees, valuers and auditors.
• If an institution commits the offence, the officer or employee responsible is liable; if he cannot be identified, the person acting as office chief at the time is liable.

Acts that are banking offences (Chapter 2)

• Opening an account or demanding payment with fake documents, or opening an account in another's name (s.3).
• Issuing a cheque without sufficient balance (s.3A).
• Unauthorised withdrawal or transfer from another's account (s.5).
• Misuse of credit cards, debit cards, ATM cards or other electronic means (s.6).
• Taking or giving loans on false financial statements, inflated collateral value or inflated project cost, beyond authority, through a fake borrower, or by pledging the same security twice (s.7).
• Misuse of a loan for a purpose other than the one for which it was taken (s.8).
• Forgery or alteration of documents and books (s.12); cheating a bank by deceit (s.12A).
• Wrong valuation, or preparing two sets of financial statements for the same period (s.13).
• Dhukuti transactions (s.14A); a cooperative bank doing banking business without NRB approval (s.14B).

Cheque dishonour procedure (s.3A)

1. The bank returns a cheque that cannot be paid for want of funds.
2. If the holder wants the dishonour certified, the bank gives the account holder notice of up to 45 days to deposit the money.
3. If funds are still short when the cheque is presented after that period, the bank certifies the dishonour within three days.

Punishment: the holder recovers the amount with interest, and the drawer pays a fine of 5 percent of the amount plus imprisonment from up to one month (amount up to Rs 15 lakh) to two to four years (above Rs 10 crore). The parties may settle the case by compromise (s.26A).

Punishment scale (s.15(2))

For offences under s.5, s.6, most of s.7, s.8, s.9, s.10, s.12 and s.14, the amount is recovered, a fine equal to the amount is imposed, and imprisonment is:

• Attempt or indirect involvement: half the punishment.
• A chairperson, director or chief executive gets one additional year.

Investigation and prosecution

• A complaint must be lodged within one year of knowing about the offence and the case filed within six months of the complaint (s.17). An employee or officer who harmed the bank while in office can be prosecuted at any time, even after retirement.
• The Government of Nepal is the plaintiff (s.18).
• A court may allow custody for up to seven days at a time and 60 days in total (s.19).
• The Government may form a special investigation team with banking experts after consulting the Attorney General, the Inspector General of Police and NRB (s.19A).

Exam pointers

• Seven imprisonment slabs, from up to 1 year to 10 to 12 years.
• Cheque dishonour: 45-day notice, 5 percent fine.
• Attempt gets half; top officials get one extra year.
• Complaint within one year; Government is plaintiff.
• Dhukuti is a banking offence.