Now NBFIs need approval to waive interest and cancel branch loans
Now, Non-Banking Financial Institutions (NBFIs) will need to obtain approval from the Bangladesh Bank for disbursement of loans to their subsidiaries, interest relief and loan cancellations.
In a circular on Thursday, the central bank said some financial institutions were making excessive investments in their subsidiaries in violation of the Financial Institutions Act.
There have also been cases of breaches of existing rules and regulations regarding interest relief and loan cancellations from these institutions, he added.
However, for banks, central bank approval is not required in the case of loan disbursements to their subsidiaries and interest relief and cancellation of loans.
A senior official from the central bank’s relevant department said many financial institutions are in very poor condition.
“Between 50% and 90% of their loans are in default. Central bank observation of these institutions shows that they are making massive loans to their subsidiary institutions. Most are in default. Therefore, instructions have been data to bring more transparency in the disbursement of loans in this sector in the future,” he added.
Loans in default by non-bank financial institutions edged up about 12% in the April-June quarter, a central bank report said, helped by loan anomalies and the removal of directed repayment facilities by Covid.
NBFI’s loan default was Tk 14,232 crore in the first quarter of 2022, which increased to Tk 1,702 crore at the end of June, according to the Bangladesh Bank’s Quarterly Financial Stability Assessment Report.