BB asks NBFIs to be cautious in running their business

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FE Report
The central bank has asked the non-banking financial institutions (NBFIs) to remain cautious in running their business to avoid financial risk.
The Bangladesh Bank (BB) warning came at a review meeting Wednesday against the backdrop of the global financial crisis that has hit banking sector in different countries across the world.
The meeting, chaired by BB Governor Salehuddin Ahmed, was attended by the chief executive officers and managing directors of the NBFIs.
On Sunday, the commercial banks were asked to maintain caution in lending by ensuring the quality of assets to avoid any financial risk.
"They have to take enough precautionary measures while providing loans to their clients as their business is mortgage-backed," the central bank chief told reporters after the meeting.
During the meeting, the central bank also asked the NBFIs to ensure the quality of assets along with the credit rating reports before sanctioning any loans, officials said.
Expressing concern over the rising trend of non-performing loans (NPL), the BB governor said: "We'll take all possible regulatory measures unless they (NBFIs) take corrective steps, particularly in reduction of the bad loans."
The BB's warning came after classified loan portfolios of the NBFIs increased in the first half of the current calendar year.
The rate of overall default loans in the non-banking financial sector climbed to 8.0 per cent during April-June period this year from 6.0 per cent in the previous quarter, according to the central bank statistics.
The default loans have increased by 2.0 percentage points mainly due to poor recovery by some NBFIs during the period, officials said.
The BB earlier instructed at least seven NBFIs out of 29 to take necessary steps to reduce the amount of classified loans and three other NBFIs have been asked to meet provisioning shortfall immediately through improving their financial health, they added.