Central bank warns NBFIs of lending anomalies

The Bangladesh Bank Tuesday warned the non-bank financial institutions (NBFIs) of lending anomalies as a central bank inspection found NBFI loans ending up to others rather to the actual borrowers.

Terming such lending a violation of the "Integrated Risk Management Guidelines for Financial Institutions-2016", the central bank in a circular asked the NBFIs for stopping the "malpractices".

The Bangladesh Bank also instructed financial institutions to preserve the bank statement of the borrowers in the loan file prior to loan disbursement to the client bank account.  

Preferring anonymity, sector insiders said they found such lending anomalies by the financial institutions in several previous inspections.

For investments by the Islamic financial institutions, the central bank said the amount could be disbursed to the loan provider's [banks] account.    

In another circular, the central bank Tuesday directed the financial institutions to utilise the Institute of Chartered Accountants of Bangladesh's (ICAB) documents verification system to verify borrowers' financial reports online.

The ICAB documents verification system, that was jointly developed by the institute and national revenue board, is able to scrutinise all necessary information of an audited borrower.

"A proper utilisation of the ICAB system will boost the credit discipline and help reduce defaulted loans," noted the central bank circular.