Kathmandu- A new twist has emerged in the saga surrounding the Chaudhary Group's (CG) controversial takeover of Sri Lanka's Union Bank (UB).

Biznessnews, which has consistently highlighted this issue, has uncovered fresh details indicating that a seemingly innocuous response from the Nepal Rastra Bank (NRB) to the Central Bank of Sri Lanka facilitated Nirvana Chaudhary’s appointment as Deputy Chairman of Union Bank.

Two years ago, CG unexpectedly acquired an indirect 70.84 percent stake in Union Bank, making it the majority shareholder through Culture Financial Holdings Ltd. Following the acquisition, the Sri Lankan Central Bank sought clarification from NRB on the legal provisions governing the appointment of directors.

In response, NRB issued an underdeveloped reply, citing gaps in Nepali regulations and emphasizing the need for legal updates. This response effectively paved the way for Nirvana Chaudhary to become Deputy Chairman of Union Bank in December 2024. Dinesh Weerakkod is the bank’s chairman.

An anonymous NRB official told Biznessnews that the central bank’s inexperience allowed both Nirvana Chaudhary and Malay Mukherjee to secure board positions at Union Bank. 'NRB’s premature reply smoothed the way for their appointments,' the official said.

The official added that NRB only became aware of CG’s share acquisition after the Central Bank of Sri Lanka reached out. The Sri Lankan authorities had highlighted that Nirvana Chaudhary, also a director at Nepal's Nabil Bank, aimed to become Union Bank’s chairman, while Malay Mukherjee sought a directorship. Despite NRB’s acknowledgment of potential conflicts of interest within domestic banks, it clarified that Nepal’s laws were silent on such roles in foreign banks.

'If NRB had taken a firm stance, it could have prevented Nirvana Chaudhary and Malay Mukherjee from joining the board of Union Bank or forced them to resign from Nabil Bank’s board. The lack of decisive action raises questions,' the official stated.

Another NRB official pointed out that speaking openly against Binod Chaudhary could lead to consequences, such as job transfers, highlighting flaws in the Banking and Financial Institutions Act (BAFIA).

'While directors of Nepali banks cannot hold positions in other domestic banks, the law does not cover foreign banks. The government’s silence on this loophole is frustrating,' the official remarked.

Nepal’s Banks and Financial Institutions Act (BAFIA) 2017, bans individuals from serving as directors in more than one Nepali bank. However, it doesn’t address directors taking roles in foreign banks. This gray area allows Chaudhary to appoint directors from Nabil Bank to Union Bank without breaching Nepali law.

Sections 14, 16, and 18 of BAFIA set rules for bank directors. While these sections prevent dual roles within Nepal, they’re silent on foreign positions. This loophole has critics worried about potential conflicts of interest.

The acquisition of Union Bank coincided with a depreciated Sri Lankan rupee, which made the deal favorable for CG. In 2022, CG paid Rs 1.64 billion (approximately LKR 4 billion) for Culture Financial Holdings' shares. These shares were reportedly acquired using dividends distributed by Nabil Bank, with NB International, a principal shareholder of Nabil Bank, playing a key role. Over the last three years, NB International has received approximately Rs 3.3 billion in dividends from Nabil Bank, aligning with CG’s financial requirements for the Union Bank acquisition.

Nabil Bank’s annual reports reveal that NB International, based in Ireland, holds a 39.44 percent stake in the bank. Of the dividends distributed by Nabil Bank, 39 percent is transferred to NB International, with five percent arranged for repatriation to Nepal. However, details about how this 5 percent is returned remain undisclosed.

Rahul Chaudhary, a non-resident Nepali (NRN), holds a 49 percent stake in NB International. While NRB cannot question NRN investments, this raises concerns about Binod Chaudhary’s indirect involvement, as he chairs CG Global Corp, a Dubai-based subsidiary of CG. His sons—Rahul, Nirvana, and Varun—serve as directors of CG Global.

These developments have reignited legal and ethical questions about whether Binod Chaudhary, a Nepali citizen and Member of Parliament, can legally chair or influence foreign companies while maintaining domestic political and business interests.