Bangladesh Bank has requested all non-banking financial institutions, also known as FIs, to hold special meetings on reported irregularities on a regular basis, 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 regularly reports their irregularities.
In several instances, he found that board directors were unaware of the reported issues and failed to take appropriate action.
To minimize irregularities by raising awareness, the central bank has made such meetings mandatory, issuing a circular in this regard on Sunday.
“The issues reported were discussed at different meetings of the relevant FIs. However, the central bank has now made special meetings mandatory with the circular,” said a senior central bank official, who did not wish to be named. .
He hopes the initiative will drastically reduce the irregularities, as the directors of the institutions will discuss these issues in the meetings, in the presence of the representatives of the Bangladesh Bank.
According to the circular, the respective financial companies should organize these special meetings within two months after the publication of the report and inform the Bangladesh Bank 10 days before the meetings.
A team from the Bangladesh Bank, comprising officials from its Financial Institutions and Markets Department and the Financial Institutions Inspection Department, would be present at the meetings.
FIs must send the minutes of the meeting to the central bank within 15 days of the meeting.
The country now has 34 non-banking financial institutions. At the end of June last year, defaulted corporate loans stood at Tk 10,328 crore, or 15.39% of their total disbursement, according to Bangladesh Bank.
Among them, six companies – Bangladesh Industrial Finance, Fareast Finance and Investment, FAS Finance and Investment, First Finance, International Leasing and Finance Services and Premier Leasing and Finance – were highly vulnerable in terms of defaults, loss provisioning shortfalls on loans and capital shortfalls. They hold about 67% of the total loans in default in the sector.