BB for tight monitoring to check loan diversion

Bangladesh Bank (BB) has instructed all banks to be more vigilant about borrowers who repay their debt by taking a new loan.

A circular in this regard was issued by the Banking Regulation and Policy Division (BRPD) of Bangladesh Bank on Wednesday (September 2).

It is alleged that many businessmen repay previous loans by taking new loans. As result, the new entrepreneurs are being deprived from opportunities to take loans.

Besides, this method increases corruption and creates chaos in loan distribution, which in the end brings loss to the banks.

Therefore, the central bank strictly instructed to stop irregularities including ensuring distribution of bank loans and proper use.

At the same time, the control body instructed that the debt of one loan cannot be repaid or adjusted in any way.

The circular sent to the chief executives of all scheduled banks operating in Bangladesh said, “Banks are required to conduct regular monitoring to ensure proper use of loan for the purpose for which the loan has been or will be given to the clients as per the guidelines of BB Guidelines on Credit Risk Management (CRM).”

“In order to ensure proper compliance with the Guidelines on Credit Risk Management (CRM) for Banks, instructions are being issued to the effect that debt can be repaid or adjusted in any way. Banks are also instructed to monitor the matter seriously in the internal audit of the bank,” the circular said.

Regarding instalment loans, he circular said, banks must ensure that previous loan instalment has been properly utilised and not used for other purposes before releasing new instalment.

In such case, banks have also been instructed to act immediately to stop releasing loans.

Recently it has been noticed that some loans given are being used to pay or adjust the liability of another existing loan, which is contrary to the loan discipline.

ask/zn