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KATHMANDU, June 18: Another person has been arrested in connection with the Karnali Development Bank financial scam. Ved Prakash Singh Thakuri, the bank’s former head of finance, has been taken into custody by the Central Investigation Bureau (CIB) of Nepal Police.
According to the CIB, the investigation into the bank's embezzlement case is ongoing. Singh was arrested from Nepalgunj a few days ago and is currently being held in Banke for further inquiry.
Earlier, the bank’s founding chairman Rajendra Bir Raya was also arrested. He had been living in a rented apartment in Lucknow, India, and was brought back to Nepal by a CIB team.
So far, two individuals have been arrested in the case. Police say more people are suspected of involvement, and the search is ongoing. A team led by DSP Dan Thapa has been dispatched to Nepalgunj for investigation.
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The CIB has said the investigation is being conducted under the Banking Offense and Punishment Act 2064, in coordination with Nepal Rastra Bank.
The scam reportedly involves embezzlement of around Rs 2.5 billion. Karnali Development Bank was established in 2060 BS, and Rajendra Bir Raya held about 80 percent of the bank’s founding shares. He worked as the executive chairman and CEO for nearly 15 years and managed the bank directly as the major shareholder.
A special investigation committee, led by Dr Om Prakash Mishra, found evidence of large-scale financial irregularities. The committee reported significant discrepancies between the amounts shown in the bank’s core banking system (CBS) and actual balances in other bank accounts.
It was also found that fake balance certificates were created to hide the embezzlement for years. In addition to Raya, the committee suspects that former CEO Dinesh Kumar Rawat, former finance head Ved Prakash Singh Thakuri (also known as Mahadev), and senior finance officer and CEO Niraj Vikram Shah may also have been involved.
Raya is believed to have been assisted by Man Bahadur Chaudhary and Pawan Singh Tharu. During interrogation, CEO Niraj Vikram Shah reportedly told investigators that Raya was responsible for a major portion of the scam.
The report noted that checks were cleared and funds transferred even when there was no actual balance in the accounts. Cash was also withdrawn directly from vaults and tellers.
The bank’s CRR account at Nepal Rastra Bank was recorded in the CBS system to have a balance of Rs 227.4 million, but investigators later found the actual balance to be nearly zero.
Raya and others also reportedly used fake balance certificates from other banks to cover up the embezzlement. The investigation report stated they had manipulated documents using Photoshop to create false records and submitted photocopies to Nepal Rastra Bank’s inspection team.
