Chapter 10 · Part 10 — Related Party Disclosures
Why the disclosure exists, and the board
Connected lending, board committees, and the single most important sentence in the note.
19 terms. Related-party disclosure exists for one reason: a bank can be looted through perfectly legal transactions. A loan to a director's company at a soft rate, a service contract with a promoter's firm, a deposit placed by a subsidiary at above-market rates — each is lawful in form and value-destroying in substance. NAS 24 forces them into the light.
Part 10 checklist
Related Party Disclosures · Board Member Allowances and Facilities · Meeting fees / Monthly allowance · Audit Committee · Risk Management Committee · Human Resource Service Committee · Assets Laundering Prevention Committee · Loans and Advances extended to Promoters · Key Management Personnel · Short Term Employee Benefits · Post-Employment Benefits · Other Long Term Benefits · Termination Benefits (Gratuity and Sick Leave Encashment) · Share Based Payment · Transaction with Subsidiaries · Intra-group related figures · Share Registrar Fee · Debenture RTS Fee · Dividend Distribution
Why related-party disclosure exists
┌──────────────────────────────────────────────────────────────────┐ │ THE STRUCTURAL PROBLEM IN BANKING │ │ │ │ A bank lends OTHER PEOPLE'S MONEY (depositors'). │ │ Its directors and promoters control that lending. │ │ │ │ │ ▼ │ │ A director can direct depositor money to a company he owns, │ │ on terms no independent borrower would get. Every step is │ │ legal. The loan is documented. The board approved it. │ │ │ │ │ ▼ │ │ If it goes bad, DEPOSITORS bear the loss. │ ├──────────────────────────────────────────────────────────────────┤ │ THREE LAYERS OF DEFENCE │ │ │ │ 1. NAS 24 — DISCLOSE all related-party transactions │ │ 2. NRB Unified Directives — RESTRICT or PROHIBIT lending to │ │ promoters, directors and their related concerns [R] │ │ 3. Corporate governance — independent directors, board │ │ committees, and abstention from voting on own interests │ └──────────────────────────────────────────────────────────────────┘
The single most important line in NMB's related-party note:
That one sentence is what the whole disclosure regime exists to elicit. See 10.8.
Related Party Disclosures
Simple definition. Telling readers about dealings with people and companies connected to the bank.
Technical definition. Disclosure under NAS 24 of related-party relationships, transactions, outstanding balances and commitments, so users can assess their potential effect on the financial statements.
Who is a related party.
┌───────────────────────────────────────────────────────────────────┐ │ A PERSON is related to the bank if they: │ │ • Have CONTROL or JOINT CONTROL over it │ │ • Have SIGNIFICANT INFLUENCE over it │ │ • Are a member of its KEY MANAGEMENT PERSONNEL │ │ • Are a CLOSE FAMILY MEMBER of any of the above │ │ (spouse, children, dependants) │ ├───────────────────────────────────────────────────────────────────┤ │ An ENTITY is related to the bank if: │ │ • It is a PARENT, SUBSIDIARY or FELLOW SUBSIDIARY │ │ • It is an ASSOCIATE or JOINT VENTURE │ │ • It is CONTROLLED or SIGNIFICANTLY INFLUENCED by a person │ │ identified above │ │ • It is a POST-EMPLOYMENT BENEFIT PLAN for the bank's │ │ employees │ └───────────────────────────────────────────────────────────────────┘
Applied to NMB — the complete related-party map.
┌─────────────────────────────┐
│ NMB BANK LIMITED │
└──────────────┬──────────────┘
┌───────────────────────────┼───────────────────────────┐
▼ ▼ ▼
SUBSIDIARIES KEY MANAGEMENT SHAREHOLDERS WITH
PERSONNEL INFLUENCE
• NMB Capital 100% • 7 Board members • FMO (has a board
• N.M.B. Securities 100% • Executive Committee representative)
• NMB Laghubitta 51% (7 members) • Employees Provident
• Close family of both Fund (has a board
representative)
• Promoter groupDisclosure required by NAS 24. The nature of the relationship; the amount of transactions; outstanding balances including commitments; provisions for doubtful debts on those balances; and expense recognised for bad or doubtful debts due from related parties.
Related terms. All of Part 10 · Part 8.A.7 Basis of Consolidation · Part 12 Corporate Governance
Board Member Allowances and Facilities
Simple definition. What the directors are paid.
The disclosure, in full.
Board meeting fees paid during the interim period NPR 1,880,000 Number of Board Meetings 20 Per-meeting rates (as per amended AOA): Chairperson NPR 20,000 Other members NPR 18,000 Monthly allowance (as per 23rd AGM, Poush 26, 2075) NPR 12,000 Total monthly allowances paid in the period NPR 1,008,000
Verify the arithmetic — always do this.
Monthly allowance: NPR 12,000 × 7 members × 12 months = NPR 1,008,000 OK
exactly matches the disclosure
Board meeting fees: 20 meetings
If all 7 attended all 20:
(1 chair × 20,000 + 6 members × 18,000) × 20
= (20,000 + 108,000) × 20 = NPR 2,560,000
Actual: NPR 1,880,000 → 73.4% of full attendance value
⇒ Consistent with normal attendance patterns; nothing anomalous.Board activity level.
20 board meetings in one year ≈ every 2.6 weeks. That is an ACTIVE board. Compare with the committee counts below — the governance structure is being used, not just documented.
Total director cost.
Board meeting fees NPR 1,880,000
Committee meeting allowances NPR 474,000 (see 10.3)
Monthly allowances NPR 1,008,000
─────────────
Total board cost NPR 3,362,000
Against profit before tax of NPR 5,748 million:
3,362,000 ÷ 5,748,026,000 = 0.058%Immaterial in amount — but materiality is not the point of this disclosure. It is disclosed because of who is paid, not how much.
Where it sits in the P&L. Other operating expenses (Part 2.15).
Related terms. 10.3–10.7 · Part 2.15 · Part 12 Corporate Governance
Meeting fees / Monthly allowance
The two components of director remuneration: a per-meeting fee (NPR 20,000 chairperson / NPR 18,000 member, set by the amended Articles of Association) and a monthly allowance (NPR 12,000, approved by the 23rd AGM on Poush 26, 2075).
Audit Committee
Simple definition. The board committee that oversees financial reporting, internal control and the auditors.
Technical definition. A board-level committee, chaired by a non-executive director, with responsibility for the integrity of financial statements, the internal audit function, the external audit relationship, and compliance.
The disclosure.
Audit Committee 5 meetings NPR 68,000 in allowances
Why it is the most important committee.
┌──────────────────────────────────────────────────────────────────┐ │ The Audit Committee is the board's counterweight to │ │ management on financial reporting. │ │ │ │ Management prepares the accounts. Management chooses the │ │ ECL assumptions, the actuarial assumptions, the fair values │ │ of Level 3 assets, and the timing of impairment. │ │ │ │ │ ▼ │ │ Every one of those choices moves reported profit. │ │ │ │ │ ▼ │ │ The Audit Committee — with the internal and external │ │ auditors reporting to it — is the mechanism that │ │ challenges them. │ └──────────────────────────────────────────────────────────────────┘
The report's governance statement:
Analyst reading — meeting frequency as a governance signal.
Risk Management 6 meetings ← most frequent
Assets Laundering Prev. 7 meetings ← MOST frequent
Audit 5 meetings
Human Resource 4 meetings
Other 2 meetings
──────────
Total committee mtgs 24 meetings + 20 board meetings = 44Related terms. 10.5–10.7 · Part 12 Corporate Governance, ALCO
Risk Management Committee
Simple definition. The board committee overseeing how the bank identifies and controls risk.
The disclosure.
Risk Management Committee 6 meetings NPR 98,000 in allowances
Scope in a Nepali commercial bank.
• CREDIT RISK — the dominant risk; ECL, NPL, concentration,
sectoral exposure, single-obligor limits [R]
• MARKET RISK — interest rate, FX, equity price
• LIQUIDITY RISK — CD ratio, NLA, maturity gaps, deposit
concentration
• OPERATIONAL RISK — fraud, systems failure, process error,
cyber
• COMPLIANCE RISK — NRB directives, AML/CFT, SEBON
• STRATEGIC RISK — business model, competitionCross-reference to what the risk numbers actually show. The committee met 6 times during a year in which NPL rose from 4.11% to 4.91% and provision coverage fell from 98.38% to 92.57%. The report's own management analysis acknowledges: "NPA level has increased to 4.91% from 4.11% as compared to previous quarter" and lists "Challenges in Recovery and Collection" among external challenges, with "Allocation of specialized staffs to oversee NPA recovery with provinces" as a stated strategy.
Related terms. 10.4 · Part 6.2–6.4 · Part 11 · Part 12 Corporate Governance
Human Resource Service Committee
The disclosure.
Human Resource Service Committee 4 meetings NPR 128,000
Scope. Remuneration policy, senior appointments, succession planning, organisational structure and — relevant this year — the Voluntary Retirement Scheme (Parts 2.14, 8.G.8).
Related terms. Part 2.14 · Part 8.G.8 VRS · 10.9 Key Management Personnel
Assets Laundering Prevention Committee
Simple definition. The board committee overseeing anti-money-laundering compliance.
The disclosure.
Assets Laundering Prevention Committee 7 meetings NPR 116,000
↑ THE MOST FREQUENTWhy AML matters so much in Nepal — the FATF context.
The report's Problems and Challenges section names it explicitly:
┌──────────────────────────────────────────────────────────────────┐
│ WHAT THE FATF GREY LIST MEANS FOR A NEPALI BANK │
│ │
│ "Grey list" = jurisdictions under increased monitoring for │
│ strategic AML/CFT deficiencies. │
│ │ │
│ ▼ │
│ CONSEQUENCES that hit banks directly: │
│ • Correspondent banks abroad apply ENHANCED DUE DILIGENCE │
│ to Nepali banks — slower, costlier, sometimes declined │
│ • Risk of CORRESPONDENT BANKING RELATIONSHIPS BEING │
│ WITHDRAWN ("de-risking") — which would cripple trade │
│ finance and remittance │
│ • Higher compliance cost │
│ • Reputational drag on foreign investment │
│ │ │
│ ▼ │
│ For a bank whose business depends on REMITTANCE INFLOWS and │
│ IMPORT LETTERS OF CREDIT — both requiring correspondent │
│ banking — this is an existential operational risk, not a │
│ compliance formality. │
└──────────────────────────────────────────────────────────────────┘This explains the meeting frequency. Seven meetings — more than the Audit Committee, more than Risk Management. The bank's strategy section responds directly: "Strengthen AML/CFT compliance, enhance risk monitoring, and align with FATF standards."
Related terms. Part 2.4 (remittance and LC fees) · Part 12 AML/CFT, FATF Grey List
Loans and Advances extended to Promoters
Simple definition. Whether the bank has lent money to the people who own and control it.
The disclosure, in full:
Why this is the single most important line in Part 10.
┌──────────────────────────────────────────────────────────────────┐ │ THE CLASSIC BANK-FAILURE MECHANISM, WORLDWIDE │ │ │ │ 1. Promoters/directors control the bank │ │ 2. They cause it to lend to companies they own │ │ 3. Terms are soft: low rate, weak collateral, long tenor │ │ 4. Credit assessment is nominal — who says no to the owner? │ │ 5. The loans go bad │ │ 6. Depositors bear the loss; the promoters keep the money │ │ │ │ │ ▼ │ │ This pattern has caused bank failures in every market that │ │ has permitted it. It is why "connected lending" is the first │ │ thing a bank supervisor restricts. │ └──────────────────────────────────────────────────────────────────┘
How to read the disclosure.
FACT "There are no such loans" → clean. What you want to see.
! A stated amount → check:
• Is it within NRB limits [R]?
• What are the terms?
• Is it secured?
• Is it performing?
• Was it board-approved with
the interested director
abstaining?
! Vague or absent disclosure → the biggest red flag of allCross-reference to the board composition. NMB's board includes representatives of the promoter group (Chairman Mr. Manoj Kumar Goyal represents Promoter Shareholder), public shareholders, FMO, the Employees Provident Fund, and one Independent Director (Ms. Bandana Pathak). The nil-promoter- lending disclosure is meaningful precisely because promoters are represented on the board.
Related terms. 10.1 · Part 11 Concentration of Credit exposures · Part 12 Promoter Shareholder, Corporate Governance
Key Management Personnel
Simple definition. The people who actually run the bank day to day.
Technical definition. Under NAS 24, persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director.
The report's scope: "Key Management Personnel includes members of Executive Committee of the Bank."
The Executive Committee, as disclosed:
| Name | Role |
|---|---|
| Mr. Govind Ghimire | Chief Executive Officer |
| Mr. Sudesh Upadhyaya | Senior Deputy Chief Executive Officer |
| Mr. Pramod Dahal | Chief Officer – Services/Operations/Support and Company Secretary |
| Mr. Navin Manandhar | Chief Risk Officer |
| Mr. Shreejesh Ghimire | Chief Transformation Officer and International Business (Chief Business Officer) |
| Mr. Krishna Dutta Bhattarai | Chief Retail and Other Deposits |
| Mr. Dinesh Dulal | Chief Sustainable Energy Banking |
The compensation disclosure.
S.No Particulars Amount (NPR)
A Short Term Employee Benefits 57,535,663
B Post-Employment Benefits Nil
C Other Long Term Benefits Nil
D Termination Benefits (Gratuity and Sick Leave
Encashment) Nil
E Share Based Payment Nil
───────────────────────────────────────────────── ───────────
Total of Key Management Personnel Compensation 57,535,663Plus non-cash benefits, disclosed separately:
And the CEO's remuneration, disclosed individually:
Govind Ghimire
Basic Salary NPR 7,923,636
Provident Fund NPR 792,364
Allowance NPR 8,207,054
Bonus & Welfare NPR 2,394,044
Other Perquisites NPR 39,618
─────────────
Total Income NPR 19,356,716Analytical checks worth running.
1. Provident fund as % of basic salary
792,364 ÷ 7,923,636 = 10.00% OK
Consistent with a standard 10% PF contribution.
2. Allowance vs basic salary
8,207,054 ÷ 7,923,636 = 103.6%
→ Allowances EXCEED basic salary. Common in Nepali
remuneration structures, but it means "basic salary"
materially understates total pay.
3. CEO pay as a share of total KMP pay
19,356,716 ÷ 57,535,663 = 33.6%
→ The CEO earns about a third of the entire 7-person
Executive Committee's disclosed compensation.
4. CEO pay vs profit
19,356,716 ÷ 5,748,026,000 = 0.34% of pre-tax profit
5. KMP pay vs total personnel expenses
57,535,663 ÷ 3,051,537,000 = 1.89%
→ 7 people account for 1.9% of the entire staff cost.Related terms. 10.10–10.14 · Part 2.14 Personnel expenses · Part 8.G.1 NAS 19
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