Financial institutions asked to hold special meetings on irregularities

The Bangladesh Bank has asked all non-bank financial institutions, also known as FIs, to hold special meetings on a regular basis over reported irregularities, so that all board members of the respective institutions remain well-informed about the issues.  

The Financial Institutions Inspection Department of the central bank monitors the activities of these institutions and reports their irregularities regularly.

In different cases, it found that board directors were not aware of the reported issues, and they did not take necessary steps accordingly.

To minimise the irregularities by raising awareness, the central bank made such meetings mandatory, issuing a circular in this regard on Sunday. 

"The reported issues were discussed in different meetings of concerned FIs. However, the central bank has now made special meetings mandatory with the circular," said a senior official of the central bank, not willing to be named.  

He hoped the initiative would cut irregularities significantly, as the directors of institutions would discuss such matters in the meetings, in the presence of Bangladesh Bank representatives.

According to the circular, respective financial firms must arrange these special meetings within two months after the report release and inform the Bangladesh Bank 10 days prior to the meetings.

A Bangladesh Bank team, comprised of officials from its Department of Financial Institutions and Markets and the Financial Institution Inspection Department would be present at the meetings.

The FIs must forward the meeting minutes to the central bank within 15 days after the meeting.

The country now has 34 non-banking financial institutions. At the end of June last year, loans of the firms that were in default stood at Tk10,328 crore, which is 15.39% of their total disbursement, according to the Bangladesh Bank.

Among them, six firms – Bangladesh Industrial Finance, Fareast Finance and Investment, FAS Finance and Investment, First Finance, International Leasing and Finance Services, and Premier Leasing and Finance – were very vulnerable in terms of loan defaults, loan loss provisioning shortfalls, and capital shortfalls.  They hold around 67% of the total loans in default in the sector.