Bangladesh Bank asks banks to be diligent in loan disbursement

Warns of stringent actions in case of failure

FE Report | Published: June 06, 2018 09:26:21 | Updated: June 06, 2018 17:33:56

Picture used for illustrative purpose only

The central bank has again directed the commercial banks to ensure that the loans they disburse are not diverted to uses other than the ones proposed originally, officials said on Tuesday.

If any sort of anomaly is detected by the banks concerned, they (the banks) have to take remedial action immediately, the central bank said in its directive.

The banks have been reminded of their responsibility in ensuring the proper utilisation of the loans they disburse through regular monitoring, the officials also said.

The Bangladesh Bank (BB) has advised the banks to release an instalment of loans, particularly in case of the term loans, after being certain about the proper use of the same made available to borrower/s earlier.

The banks have been advised to follow the amended credit risk management guidelines in this regard, they added.

The BB issued a directive in this connection Tuesday, asking the chief executives and managing directors of all scheduled banks to comply with the instructions therein properly.

If any type of anomaly or connivance in disbursement of loans is detected during the BB's supervision, stringent actions will be taken against the person(s) involved in line with the relevant provisions of the Banking Companies Act, 1991, it added.

"All (types of) loans will have to be scrutinised by the banks concerned in line with the latest instructions," a BB senior official told the FE.

He also said trade financing, particularly the import-related ones, will also come under such monitoring.

On March 13, 2017, the central bank had issued a similar circular, asking the banks to comply with the instructions as mentioned in the previously issued BB guidelines.

"In the case of disbursing a loan, it is imperative that the borrower concerned understands and acknowledges the purpose of the loan," according to the guideline.

"It is also imperative for the bank to design and implement checks, such as the submission of invoices, to ensure that the loan proceeds are spent on the designated purposes only," it added.

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