Asks errant NBFIs to classify the defaulted loan
Bangladesh Bank on Wednesday asked non-bank financial institutions to classify their defaulted loan in line with the earlier directions of the central bank as some NBFIs have recently violated the regulations by showing the defaulted loan as their regular credit.
The BB issued a circular to managing directors and chief executive officers of all NBFIs saying that some NBFIs had recently renewed their revolving loan after the end of the mature date although they failed to recover the loan.
Such type of loan is required to convert to defaulted position on qualitative judgment, but the NBFIs are showing the loan as regular credit.
The central bank’s wing department of off-site supervision has recently discovered that some NBFIs included the condition of renewal facility with their revolving loan for one-year tenure, the circular said.
The NBFIs also attached conditions that the clients would have to pay the interest on monthly basis and repay the capital amount after end of the one-year tenure.
A significant number of clients failed to repay the interest along with the principle amount after the end of the tenure.
The NBFIs are now avoiding the BB regulation and renew the loan for more one-year tenure to avoid keeping provision against the defaulted loan.
For this reason, the credit risk in the NBFIs is now maintaining an increased trend and the good governance and the transparency of the institutions are being hampered, the BB said.
Besides, the NBFIs are now showing their exact amount of defaulted loan at their financial statements and reports.
The BB asked the NBFIs to recover their revolving loan along with the interest at the end of the tenure and to follow the regulation about the classified loan.
-With New Age input
