KATHMANDU — Prabhu Bank Limited’s CEO Ashok Sherchan faces mounting scrutiny as his tenure nears its end, with a mere six months remaining. In a recent ruling, the Patan High Court determined that Sherchan is eligible to hold the CEO position only until Baisakh 9, 2082 (April 21, 2025). The decision followed a legal challenge citing violations of tenure regulations.
The ruling also affects CEOs of other banks involved in mergers and acquisitions. Leaders such as Ashok Rana of Himalayan Bank Limited and Jyoti Prakash Pandey of Nepal Investment Mega Bank Limited will also see their terms capped at a maximum of eight years, as clarified by the court.
According to sources, Nepal Investment Mega Bank is preparing to appoint Deputy CEO Mahesh Dhakal as its new CEO, with Himalayan Bank reportedly planning similar succession steps.
Allegations of Financial Misconduct
Sherchan’s time at Prabhu Bank is also under fire amid allegations of financial misconduct. Reports suggest he may be attempting to cover up these alleged irregularities by appointing a close female associate as Deputy CEO, with the goal of having her succeed him as CEO. Recently, Sherchan dismissed nearly two dozen senior staff members from the formerly merged Century Commercial Bank. The associate, who joined the bank nine years ago, has reportedly been promoted ten times, allegedly due to her close relationship with Sherchan.
Legal Grounds and Court Ruling
The Patan High Court’s ruling is based on the 2073 Bank and Financial Institution Act (BAFIA), which limits a CEO’s tenure to two terms or eight years. Sherchan was controversially appointed for a third term following Prabhu Bank’s acquisition of Century Commercial Bank, which, despite not creating a new entity, used the merger to justify extending his term.
In 2079 (2023), Advocate Anita Thapa KC challenged Sherchan’s reappointment, arguing it violated tenure limits set by BAFIA. The case named 16 entities, including the Nepal Rastra Bank (NRB), Company Registrar’s Office, Nepal Securities Board, and Prabhu Bank’s Board of Directors, demanding an annulment of Sherchan’s third-term appointment.
Following the court’s decision, the Patan High Court interpreted Clause 29(2) of BAFIA, which defines a CEO’s maximum term as four years with one possible renewal, effective from Baisakh 10, 2074 (April 23, 2017). This interpretation caps Sherchan’s term at Baisakh 9, 2082 (April 21, 2025).
Court and Regulatory Authority on CEO Appointments
The court further clarified that NRB holds the authority to replace CEOs if they are deemed unfit. The petitioner’s direct approach to the court, without first seeking action from NRB, was deemed procedurally inappropriate.
With the court’s decision now applying to other bank CEOs, terms for Ashok Rana of Himalayan Bank and Jyoti Prakash Pandey of Nepal Investment Mega Bank will also be capped at eight years, as per BAFIA’s regulations.
Concerns of Conflict of Interest
The two-term limit is designed to prevent conflicts of interest from prolonged appointments. Despite these safeguards, Sherchan has faced allegations of embezzling billions in loan funds under the names of relatives. While complaints have reportedly reached NRB and the Central Investigation Bureau (CIB), authorities have yet to take action, allegedly due to Sherchan’s political connections and influence.
