Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has asked the top executives of non-banking financial institutions (NBFIs) for taking effective measures to improve financial health through establishing good governance in the sector.
The Bangladesh Bank (BB) has also cautioned the NBFIs not to sanction loans in favour of their directors, defying the existing rules and regulations.
The instructions came at a meeting with the chief executive officers and managing directors of the NBFIs held in the central bank headquarters in Dhaka on Tuesday with BB Governor Atiur Rahman in the chair.
“The governor has issued warning to the NBFIs that the central bank would show zero tolerance to any irregularities,” Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.
Without mentioning the names, Mr. Sur also said the BB has already fined ‘heavily’ three NBFIs for their irregularities in the last two months.
The BB’s moves came after 10 NBFIs entered ‘red-zone,’ according to its latest stress testing report.
“The 10 NBFIs will have to improve their financial health immediately for getting out of the red-zone area,” the deputy governor noted.
Besides, two NBFIs are still facing capital shortfall in line with the Basel-II framework, according to the deputy governor. “We’ve given time to meet their capital shortfall immediately.”
Different issues including cost of fund, CAMELS rating, risk management and documentation fee were discussed at the meeting.
At the meeting, the NBFIs have been asked to collect information annually from their loan recipients to verify the use of the disbursed credits and see if the recipients diverted the loan to another sector.
The BB has asked the NBFIs to prepare a questionnaire for their loan recipients so that they (NBFIs) would be able to ensure that their loans were being invested in the proper sectors.
Currently, 31 NBFIs are running their business across the country.
BBN/SSR/AD-13Aug14-1:34 pm (BST)