NRB Lifts Prompt Corrective Action on Pokhara Finance, Paving Way for Unified Growth with Samriddhi Finance

In a significant development for Nepal's financial sector, Nepal Rastra Bank (NRB), the central bank, has officially revoked the Prompt Corrective Action (PCA) previously imposed on Pokhara Finance Limited. This crucial decision, announced via a notice on Friday, marks a pivotal moment for the institution, especially as it moves towards unified operations following its merger with Samriddhi Finance Company Limited.

The Prompt Corrective Action framework is a regulatory measure employed by central banks to intervene in the operations of financial institutions that show signs of deteriorating financial health. Typically, PCA is triggered by breaches in key prudential norms, such as inadequate capital adequacy ratios, high non-performing assets, or consistent losses. For institutions under PCA, the central bank imposes various restrictions, which can include limitations on dividend distribution, branch expansion, new lending activities, and even management changes. The primary objective is to safeguard depositors' interests and ensure the stability of the financial system by compelling the institution to rectify its financial weaknesses.

Pokhara Finance Limited was initially placed under PCA due to its capital adequacy ratio falling significantly below the minimum threshold prescribed by the NRB. This determination was made based on the unaudited financial statement as of Mid-January 2024 (Poush end 2080 BS), coupled with findings from a comprehensive on-site inspection report and off-site supervisory adjustments for the first quarter of the fiscal year 2081/82. Such a low capital base indicates a heightened risk profile, prompting the central bank's intervention under Regulation 3(c) of the Prompt Corrective Action Bylaws for Banks and Financial Institutions, 2074 BS.

The revocation of PCA is a direct consequence of the strategic merger between Pokhara Finance Limited and Samriddhi Finance Company Limited. The merger, which received final approval from the committee on 2083-01-17 BS (April 30, 2026), is expected to significantly bolster the financial standing of the combined entity. According to the NRB's notice, based on the unaudited financial statement of the institution as of Mid-May 2026 (Baisakh end 2083 BS), the projected combined primary capital is set to reach 6.06%, with the capital adequacy ratio improving to a robust 10.80%. This projected improvement comfortably meets and exceeds the regulatory requirements, thereby justifying the lifting of the PCA.

For investors and stakeholders, this development carries substantial positive implications. The lifting of PCA signals renewed confidence from the central bank in the merged entity's financial health and operational viability. It removes the stringent restrictions that previously hampered Pokhara Finance's growth potential, opening avenues for increased lending, potential dividend distributions, and strategic expansion. The unified entity, operating under a stronger capital base and improved governance, is now better positioned to compete effectively in the market, attract new customers, and contribute to the overall economic development.

The decision, effective from the date of unified operations with Samriddhi Finance Company Limited, underscores the NRB's commitment to maintaining a stable and resilient financial sector while also facilitating strategic consolidations that enhance institutional strength. This move is expected to instill greater investor confidence in the newly merged entity and potentially set a precedent for other financial institutions considering similar strategic alliances to improve their financial standing.