Dhaka, Bangladesh (BBN) - The central bank of Bangladesh on Wednesday asked the non-banking financial institutions (NBFIs) to remain cautious in running their business to avoid financial risk.
The Bangladesh Bank (BB), the country’s central bank, warning came at a review meeting on the day against the backdrop of the global financial crisis that has hit banking sector in different countries across the world, officials said.
The meeting, chaired by BB Governor Salehuddin Ahmed, was attended by the chief executive officers and managing directors of the NBFIs.
"They have to take enough precautionary measures while providing loans to their clients as their business is mortgage-backed," the central bank chief told reporters after the meeting.
On Sunday, the commercial banks were asked to maintain caution in lending by ensuring the quality of assets to avoid any financial risk.
During the meeting, the central bank also asked the NBFIs to ensure the quality of assets along with the credit rating reports before sanctioning any loans, they added.
Expressing concern over the rising trend of non-performing loans (NPL), the central bank chief said: "We'll take all possible regulatory measures unless they (NBFIs) take corrective steps, particularly in reduction of the bad loans."
The BB's warning came after classified loan portfolios of the NBFIs increased in the first half of the current calendar year.
The rate of overall default loans in the non-banking financial sector climbed to 8.0 per cent during April-June period this year from 6.0 per cent in the previous quarter, according to the central bank statistics.
The default loans have increased by 2.0 percentage points mainly due to poor recovery by some NBFIs during the period, officials said.
The central bank earlier instructed at least seven NBFIs out of 29 to take necessary steps to reduce the amount of classified loans and three other NBFIs have been asked to meet provisioning shortfall immediately through improving their financial health.
BBN/SI/SS/AD-23October08-9:07 AM (BST)