The central bank directive, which will be applicable to CEOs, members of boards of directors, company secretaries and auditors among others, has also blocked financial institutions from extending margin lending to persons involved directly in the management of the institutions, against shares owned by them as collateral.
The directive, circulated to all banks and financial institutions on Wednesday, also bars persons on the management teams of financial institutions from accepting or donating shares of the same institutions.
The central bank has asked banks and financial institutions to recover any margin lending extended to individuals on their management teams by mid-July, 2009. If the borrowers fails to repay the loans within the stipulated time, NRB requires the institutions concerned to sell the shares submitted as collateral through Nepal Stock Exchange to recover the loans.
The directive has also asked the banks and financial institutions to arrange for a 100 percent loan loss provision if they fail to recover loans extended to individuals involved directly in the management of the institutions.
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