Dhaka, Bangladesh (BBN)- The central bank of Bangladesh is going to take a hard-line against the commercial banks that would fail to maintain instructions on loan utilization properly.
“We’ll take actions against the chief executive officer (CEO) personally along with the banks if they do not carry our instructions relating to utilization of loans within the timeframes,” a senior official of the Bangladesh Bank (BB) said.
The central bank has already asked the commercial banks to submit the list of loans worth BDT 10 million or more, which have been diverted from one sector to another by December 15 this year.
The commercial banks have been instructed to adjust such loan portfolios by January 15, 2011, according to a directive, issued by the BB on Thursday.
The central bank will impose restrictions on some major expansionary activities including issuance of license for authorized dealer (AD) branch, generally known as foreign exchange branch, and approval for opening of new branches.
The indirect interventions may take place after the deadlines, the BB officials said.
Besides, the CEO will be held personally responsible and legal action will be taken against him if any irregularity is detected in the central bank’s inspection, they added.
The central bank has taken the move against the backdrop of identifying incidents of diverting loans to the capital market from industries.
The BB executive also said probe teams are now working in both Dhaka and Chittagong to find out such loan diversion as well as quality of asset.
“We’ve to ensure utilization of loans,” another central bank official said, adding that the loans could not be used in purposes other than they are sanctioned for.
BBN/SSR/AD-06Dec10-11:02 am (BST)