The central bank of Bangladesh on Monday issued two key separate circulars on enlistment of non-life private insurance firms with commercial banks by maintaining credit ratings and submission of audited financial reports by enterprises to banks while renewing loans.
The Banking Regulation and Policy Department (BPRD) of the Bangladesh Bank said many banks have been violating orders relating to the enlistment of insurance firms issued sometime in 2011.
The BB in its earlier circular on the enlistment of non-life firms stated that credit ratings of general insurance firms should be considered while enlisting such insurers for business purposes.
The BB in its circular also asked the banks to list those non-life firms having good credit ratings. But many banks are not complying with it now.
The BRPD on Monday asked all banks to comply with it with immediate effect.
Md. Khaled Mamun, CEO at the Reliance Insurance Company, told the FE: "This is a very good initiative taken by the central bank as it will ensure more transparency in the sector."
On the other hand, the BPRD in another circular asked the banks to consider audited financial reports of the enterprises while renewing loans.
The BB said currently many companies submit management reports or review reports to the banks while renewing loans on the grounds that they are yet to complete audits.
In such reports, many enterprises show some fictitious earnings.
Mohammad Mohiuddin Ahmed, an executive director at the Financial Reporting Council, the country's auditing watchdog, told the FE: "The central bank has taken a right step as many firms submit management reports and other internal reports which actually do not reflect the real financial picture of their companies."
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