Image: Artha Khabar
Editor’s note (Dec 18th 2025): This story has been amended to reflect new updates.
It is a transaction that happens millions of times a year. A Nepali worker in the Gulf logs into an app or visits a money-transfer shop, keying in digits that will send his wages back to his family. This ritual of duty is also the piston of Nepal’s economy. Remittances account for a quarter of its GDP. They pay for imports, prop up the currency and keep households afloat. So what happens if the pipes through which this lifeblood flows are corroded by corruption? A scandal at one of the country’s banks suggests that this isn’t a hypothetical question.
On November 30th the police arrested the chief executive and other senior officers of Prabhu Bank. They followed the bank’s former chairman, Devi Prakash Bhattachan, into custody. The bank, through a related money-transfer firm, is accused of misusing “pre-funding”—advances meant to settle remittances—diverting the cash for other purposes, including loans to companies linked to Mr Bhattachan. It also allegedly failed to collect Rs1.13bn in interest it was owed, meaning some people inside the bank were running a secret operation alongside the bank’s normal activities.
Such a scheme can’t persist without regulators napping. The central bank has rules against lending to a director’s own firms and requires remittance advances to be settled fast. Neither was enforced. Mr Bhattachan is a former lawmaker from a powerful political party led by disgraced K.P. Sharma Oli. That points to the rot of regulatory capture, where watchdogs find it easier to ignore the well-connected. Complaints had circulated since 2021. The scandal broke only when a business partnership soured, prompting a whistleblower complaint, according to news reports. It’s a sorry state when justice is an accidental byproduct of a feud among thieves.
The timing of the arrests isn’t random, either. They follow youth-led protests against corruption which forced a change of government led by Mr Oli in September. The interim administration, keen to show reformist zeal, found a perfect target. Pressure from the International Monetary Fund, which has a lending programme with Nepal, helped stiffen spines. It’s a start but it is not enough.
The real danger is a loss of faith. If migrant workers and their families start to suspect that formal channels are crooked, they may revert to informal hundi networks. These work, but they operate in the shadows, draining foreign exchange from the official economy and making the central bank’s job far harder. The financial sector is already shaky with soaring bad loans. It cannot afford a crisis of confidence.
So what is to be done? Tighter rules for remittance firms are needed, but they must not make legitimate transfers costlier for the workers who depend on them. The deeper fix is institutional. The central bank must be empowered to act independently, and its supervisors must be willing to bite not just bark. Arresting bankers is a dramatic signal, but it treats a symptom. The disease is a culture of impunity that treats banks as personal fiefs. For a country whose economy is built on the sweat of its diaspora, that is an intolerable risk. The money has to make it all the way home. ■
