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THE CHIEF executive of Nepal Investment Mega Bank stepped down on May 11th. Jyoti Prakash Pandey had led one of Nepal’s larger commercial banks through its post-merger integration and a particularly turbulent period for the sector. The bank’s non-performing loans had climbed to 8.41% by the third quarter, among the worst in the sector. The board was moving towards appointing Mahesh Sharma Dhakal as his temporary successor. The transition was described, in the manner of such things, as marking a “turning point” and a fresh start. It was also, in the language of Nepal’s banking calendar, entirely normal.
Over the past four years or so, eleven of Nepal’s twenty commercial banks have appointed new chief executives. That is more than half the sector in a single parliamentary term. Nabil Bank replaced Gyanendra Dhungana with Manoj Gyawali in June 2025. NMB Bank moved from Sunil KC to Govind Ghimire in April 2025. Standard Chartered Nepal appointed Gorakh Rana—its first-ever Nepali chief executive—also in June 2025. Global IME Bank brought in Surendra Raj Regmi in August 2024. Rastriya Banijya Bank, the state-owned giant, installed Devendra Khanal in May 2024. Before those: Siddhartha Bank, Kumari Bank and Century Commercial Bank all changed hands within a few months of each other.
The raw pace of this turnover would look alarming in any country. In Nepal it is baked into the regulatory architecture. The Bank and Financial Institutions Act—BAFIA, as it is universally called—caps a commercial bank chief executive’s tenure at four years per term, with a maximum of two terms at a single institution. Eight years is the absolute ceiling.
This structure was established in 2017 and is currently operative law; a further amendment bill registered in 2024 proposes additional governance tightening but does not alter the term limit framework. Most banks hire their chief executives in their late forties or early fifties; those who serve both terms retire at sixty or slightly above. The system was meant to prevent the entrenchment that plagued Nepal’s banks when powerful insiders ran the same institution for decades, blurring the line between owner and manager. The intention was sound. The effect, in practice, has been to institutionalise instability.
Consider what four years actually means for a bank chief in Nepal’s current environment. The first year is spent learning the institution: understanding its loan book, its staff, its relationships with the central bank and its largest borrowers. The second year is when big decisions become possible. By the third year, a competent chief executive is producing results that shareholders can evaluate. In the fourth year, if re-appointment looks uncertain or if the board and chairman have different ideas about strategy, the CEO’s authority ebbs even before the letter arrives.
The eight-year maximum is real in theory; in truth many appointments do not reach the second term, as boards change composition; or shareholders fall out with management; or the political winds that shape large institutional appointments in Nepal shift enough to make renewal inconvenient.
The political dimension is the part that nobody in Kathmandu’s banking sector discusses publicly but everyone understands. Nepal’s commercial banks have large promoter shareholders—founding families and business groups who hold big stakes and who, under BAFIA, are prohibited from directly managing the institutions they own. The chief executive is supposed to be a professional manager, independent of those shareholders and accountable to the board.
In practice the boundary between promoter influence and professional management has been porous. Board chairpersons—who also face two-term limits—are themselves often aligned with the interests of dominant shareholders. A chief executive who displeases the right promoter at the wrong moment discovers that his contract is not renewed; or that the regulatory nomination process for his extension takes longer than expected.
The appointment of Biswo Nath Poudel as NRB Governor in May 2025 illustrated how deeply politics runs through financial leadership in Nepal. The weeks before his appointment, as the Kathmandu Post noted, “exposed the lengths to which parties go to divvy up the political appointment pie”. The process produced five resignations including, most revealingly, that of Gyanendra Dhungana as CEO of Nabil Bank. Dhungana did not resign passively. He left 14 months before his term ended, of his own volition, because NRB regulations bar sitting bank CEOs from being appointed governor. He resigned to enter the governor’s race himself: “I resigned as per the central bank’s rule, which requires candidates for the Governor post to leave their current positions,” he told reporters. His candidacy was backed by Nepali Congress leaders and, reportedly, by Binod Chaudhary, whose ownership vehicle holds a stake in Nabil Bank. Dhungana did not get the governorship, leaving Nabil Bank in a period of acting leadership for more than two months.
The episode shows something more troubling than just political interference. The rules that are meant to insulate banking leadership from politics contain a built-in contradiction: because NRB regulations require CEO candidates to vacate private sector positions before their appointment can be considered, the governorship race creates a rational incentive for bank chiefs to abandon their posts mid-term the moment they sense an opportunity. Nepal’s revolving door is not only turned by outside pressure. It is also pushed from inside, by ambitious bankers for whom the central bank job is a prize worth a voluntary early exit.
The consequences of continuous CEO rotation show up in ways that balance sheets rarely highlight. A chief executive who knows he has four years and an uncertain second term has different incentive structures from one with a longer horizon. He is less likely to invest seriously in technology transformation—which takes five to seven years to deliver—and more likely to focus on loan growth and dividend declarations that produce visible results before his tenure ends.
Several analysts have connected Nepal’s over-lent banking sector of 2019-2022, which produced the NPL crisis currently unfolding, to exactly this kind of short-horizon decision-making: credit expanded aggressively during a period when almost every major bank was on its second chief executive or in mid-transition between the first and second. Nobody was thinking about the loan book in 2026.
For the incoming chief executives—Mahesh Sharma Dhakal at Nepal Investment Mega Bank, Manoj Gyawali into his first year at Nabil, Govind Ghimire at NMB—the trouble is to build institutions from inside a system that does not reward institution-building. NMB’s Ghimire has the clearest template: his predecessor Sunil KC used both terms to build the governance infrastructure that attracted nine development finance institutions and $301.5m in international capital.
That is patient, term-spanning work that the four-year structure was never meant to enable. That KC managed it anyway is a function of exceptional individual commitment and the anchor provided by FMO’s board seat; not a product of the regulatory environment.
Nepal’s bank chiefs do not fail to complete their terms because they are incompetent or because the work is too hard. They leave, early or on schedule, because the system around them was designed to move them on, and the system around that system (political, shareholder, regulatory) ensures that the formal clock is rarely the only one running. Sometimes the banker is the one turning the handle. ■
