may 25 ,  I spent more than twenty years inside Nepal’s banking system. I have sat on credit committees. I have signed loan recovery notices. I have chaired meetings where we debated, sometimes for hours, whether we had exhausted every legal option before moving to auction a borrower’s collateral. I know what it feels like to carry the weight of those decisions — the sleepless nights, the regulatory scrutiny, the moral burden of putting someone’s pledged assets on the block.

So when I heard that Jyoti Prakash Pandey, the CEO of Nepal Investment Mega Bank, had been arrested by the CIB in Sindhuli at eight in the evening, my first reaction was not outrage. It was a cold, quiet dread. Because I know exactly how these decisions get made inside a bank. And I know that what Bank’s committee did was not crime — it was procedure.

Let me explain what a Loan Recovery Committee actually does, for those outside the industry. It does not act on impulse or personal interest. Every step — the demand notice, the public auction announcement, the bidding process, the final sale — is governed by the Bank and Financial Institutions Act, the Secured Transactions Act, and the Nepal Rastra Bank’s own directives. NIMB Bank has maintained that all actions related to the loan recovery and auction process were carried out in full compliance with prevailing banking laws, the Bank and Financial Institution Act, the Secured Transactions Act, and the bank’s internal loan recovery guidelines. I have no reason to disbelieve that. Because in my experience, no bank moves to auction a major borrower’s assets without layers of internal review and legal sign-off. The reputational and regulatory risk of getting it wrong is simply too high.

The core of the government’s case rests on a contestable claim: that the assets Smart Telecom had pledged as collateral to NIMB somehow ceased to belong to the bank’s security interest once the NTA revoked Smart Telecom’s telecom licence. Smart Telecom’s licence was automatically cancelled after the company failed to pay around Rs 30 billion to the government, following which the Nepal Telecommunications Authority claimed control over the company’s assets. But here is the problem — and I say this as someone who has spent two decades reading loan agreements and security documents — a lender’s charge over collateral does not simply evaporate because a regulator decides it wants those assets. That is not how secured lending works. That is not how it has ever worked in any functioning financial system. If it did, no bank in Nepal could ever safely extend credit to a telecom company, an airline, or any other heavily regulated sector again.

What troubles me even more than the legal theory is the manner in which this arrest was conducted. Pandey is the most senior banking official to be arrested in Nepal in recent memory, and his detention sent a visible tremor through the country’s financial establishment. I felt that tremor personally. I called colleagues I had worked with for years the morning after the news broke. The conversations were hushed. People were frightened — not because they had done anything wrong, but because they suddenly understood that doing everything right was no longer a sufficient defense.

The CIB could have conducted the investigation without detaining CEO Pandey; however, the action appeared intended to intimidate and harass the entire banking sector. Summoning an executive for questioning is standard practice. However arresting executive is meant to send a message. And the message it sent to Nepal’s entire banking community was deeply damaging.

The Supreme Court, to its enormous credit, saw through it. The Court ordered CEO’s release on personal recognizance, ruling that there were no grounds to keep him in custody during the investigation. In thirty years of watching Nepal’s institutions operate, I have learned to pay close attention when the Supreme Court moves this quickly on a habeas corpus petition. It means the justices looked at the government’s justification for detention and found it wanting. That is not a minor procedural footnote — that is the highest court in Nepal telling the CIB that it overreached.

An official at the Nepal Bankers’ Association noted that the arrest raised broader concerns over investment security, project financing risks, and the potential criminalization of executive decisions. I would go further than that. After twenty years in this industry, I can tell you that the pipeline of qualified, experienced professionals willing to sit in a CEO’s chair and make the hard calls — on credit, on recovery, on restructuring — is not unlimited. If we reach a point where a banker who follows the law can still be arrested, we will struggle to find people willing to lead our institutions at all. And the cost of that will not be borne by the government. It will be borne by depositors, by borrowers, by the ordinary Nepali who simply needs a loan to build a house or start a business.

I am not naive. I know banking sector has real problems. I have seen bad loans, weak governance, those people deserve prosecution. But the way you build a culture of accountability in banking is through consistent, evidence-based enforcement — not through theatrical arrests that the Supreme Court then has to undo.

I left banking. But Nepal’s banks are still there, still taking deposits, still lending money, still trying to keep an economy moving. The people running them deserve a government that understands the difference between a criminal and a banker doing his job in a difficult situation.

That distinction used to be obvious. I hope, for Nepal’s sake, it becomes obvious again.