Thumb impressions – verified by the National Identification Card Database – of both the borrower and guarantor will now be required for finalising banks loan approval documents.
Additionally, signatures of borrowers and guarantors must be taken on relevant documents, and these documents must be read out to a third party. The central bank’s Banking Regulation and Policy Department (BRPD) issued a circular in this regard on Wednesday.
Several writ petitions have been filed recently due to borrowers and guarantors not signing their relevant documents while seeking bank loans, observes the High Court.
The Bangladesh Bank has introduced these moves in response to the observation, adding that such irregularities are severely disrupting the legal process of loan recovery.
Bankers however have expressed dissatisfaction with this new directive, pointing out that the document for a loan proposal or agreement is already several pages long. So, the added process of taking thumb impressions will further slow down the loan process.
The circular adds that the thumb impression issue has been included under the guidelines on Credit Risk Management (CRM) for banks.
The guidelines mention that the credit administration should ensure that the credit application has proper approval before entering facility limits into computer systems. Disbursement should be effected only after the execution of charge documents and completion of covenants and upon creating a charge on primary securities and collaterals.
In case of exceptions, necessary approval should be obtained from competent authorities. In no case should any of the loan proceeds be disbursed before all necessary approvals have been granted, it adds.
In disbursing loans, it is imperative that the borrower understand and acknowledge the purpose of the loan.
It is also imperative for the bank to design and implement checks, such as the submission of invoices, to ensure that the proceeds are spent on the designated purpose and for no other purposes, and for the borrower to understand and comply with these checks.
