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28 March 2024


Business Insider Bangladesh

NBFIs asked to curb misuse of loan money

BI Report || BusinessInsider

Published: 02:54, 1 March 2021   Update: 03:25, 1 March 2021
NBFIs asked to curb misuse of loan money

Bangladesh Bank logo

Bangladesh Bank has asked all non-bank financial institutions to curb misuse of their loan money to ensure governance and prevent adverse impact on the economy.

In a directive on Thursday, the central bank said that in the current situation it seemed that it needed to be mandatory to ensure proper utilisation of loan money.

The central bank has asked the NBFIs not to disburse fresh loan until making sure that the previous loan was used as per the condition when it was approved.

If it is found that the loan money was used in any sector other than the approved one then the NBFIs will have to conduct an investigation into it and take necessary actions, said the directive.

The central bank also barred paying off one loan from sourcing money through another loan, according to the directive.

NBFIs have been instructed to incorporate loan money utilisation in their internal monitoring system and inform the central bank immediately if any irregularities are detected.

“We actually support the initiative as the DCCI never endorses misuse of public funds. However unintended misuse needs to be verified stringently before penalising businesses,” Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry told the Business Insider Bangladesh.

“Using loans to pay off other loans is pretty much the same as a pyramid scheme so NBFIs need to have strong monitoring and compliance to prevent that from happening. But if further investment enhances a company’s growth then loans can be disbursed subject to approval.”

Nagad
Walton