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Banking Offence and Punishment Act was enacted in Magh 2064 B.S. to incorporate legal provisions related to Banks and Financial Systems in Nepal. The Preamble of the Act has mentioned that the Objective of the Act is to formulate legal provisions on Offences relating to Banks. It desires to promote trust in the Banking and Financial System and mitigate the risks and consequences faced by such Institutions during their regular transactions. Section 2 of the Act has defined Banks as those banks licensed by Nepal Rastra Bank as “A” Category. Similarly, Financial Institutions are those that are licensed by Nepal Rastra Bank for the “B”, “C”, and “D” category Financial Transactions in Nepal.
Crimes under the Banking Offence and Punishment Act 2064
The Criminal Acts as stated by the Banking Offence and Punishment Act 2064 are as follows:
3. Opening Unauthorized Accounts or Demanding Unauthorized Cash Payment
As stipulated in this offense, there are certain prohibitions while opening an account with a bank or requesting Cash Payments. They are:
(a) It's not allowed to open an account using false documents.
(b) You cannot open an account under a fictitious or unauthorized name, except as permitted by the law.
(c) It's prohibited to issue a check or make a payment from an account if you're aware that the account lacks sufficient funds to cover the amount of the check.
4. Obtaining or Issuing Unauthorized Checks, Checkbooks or Bank Statements
No one can request or obtain someone else’s check checkbook or account statement in an authorized or deceptive manner. Moreover, one cannot give someone else’s checks, a checkbook, or an account statement without their written request or in an unauthorized manner as per banking offence and punishment act 2064
5. Unauthorized Withdrawals or Payments
While withdrawing money from Banks or making Payments from a Bank or Financial Institution, the following have been prohibited:
(a) One cannot take money from someone else’s account without Permission.
(b) One can't steal someone's check or get it sneakily.
(c) One can't move money from a customer's account or make unauthorized payments.
(d) One can't use fake or someone else's bills, checks, drafts, or similar things to get or make cash payments.
6. Misusing Electronic Payment Methods
Section 7 of the Act prohibits misusing or wrongly using Electronic Methods. It has provisioned that one’s not allowed to misuse or wrongly use electronic methods like credit cards, debit cards, ATM Cards, or other electronic devices to make or receive payments.
7. Unauthorized Lending or Borrowing
The banking Offence and Punishment Act 2064has prohibited the following actions while seeking or granting loans from a Bank or a Financial Institution in Nepal:
(a) Do not obtain or provide loans using false or misleading financial statements or by creating fictitious businesses.
(b) Avoid granting loans based on an artificially inflated value of collateral security.
(c) Do not increase project costs unrealistically by providing loans based on false information.
(d) Do not offer credit, facilities, or discounts beyond your authorized limit.
(e) Do not take additional loans or grant them from another bank or financial institution without releasing the collateral security previously provided or over the collateral security’s coverage. However, this doesn’t apply to consortium loans.
(f) Refrain from obtaining loans through an entity established in the name of a person who lacks the financial capacity to operate the business or is under undue influence.
(g) Do not provide more credit than required for the customer’s business transactions.
(h) Avoid giving or receiving undue benefits in return for granting credit facilities.
8. Misusing Credit
It has been provisioned that no one should misuse the credit facilities obtained from a bank or financial institution or allow others to misuse them by diverting the funds for purposes other than those for which the credit facilities were obtained as per banking offence and punishment act 2064.
9. Misusing Banking Resources, Means and Assets
Promoters, Directors, shareholders with a financial interest, Chief Executive Officers, employees, advisors, Managing Agents, or associated individuals or organizations, as well as their family members and close relatives, must not misuse a bank or financial institution’s resources by obtaining credit or facilities or in any other improper manner. Nobody should, to the detriment of depositors or the bank or financial institution, misuse the assets of the bank or financial institution or allow others to do so. No one should engage in financial irregularities while auctioning or selling non-banking or other assets of a bank or financial institution, or during any other transactions that could harm the institution.
Frequently Asked Questions
What is the Banking Punishment Act 2064?
The Act has proposed the Crimes and Punishments related with Banks and Financial Institutions in Nepal such as Cheque Bounce, Unauthorized Withdrawals, Providing unauthorized Loans and misusing Banking Resources, means and assets.
What is the Banking Law of Nepal?
Banking Offences and Punishment Act, Banks and Financial Institutions Act, Insurance Act are the major Banking Laws of Nepal.
What is a Banking Offence?
The Offences proposed in Chapter 2 Section 3 to 14 of the Banking Offences and Punishment Act are the Banking Offences of Nepal.
What are the Crimes and Punishment of Banking Offence and Punishment Act 2064?
The Banking Crimes of Nepal include False Valuation, Wrong Loans, False Accounts, Assets, Irregular Transactions, Misusing Credits etc. Thereafter, the Punishment lies from Fines for some Crimes and Imprisonment for up to five years.
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