The central bank warned the top executives of non-banking financial institutions (NBFIs) on Tuesday against sanctioning loans in favour of their directors, defying the existing rules and regulations.
Bangladesh Bank (BB) Governor Atiur Rahman issued the warning in a meeting with the chief executive officers (CEOs) and managing directors (MDs) of NBFIs in the central bank headquarters.
The CEOs and MDs of NBFIs have been asked for taking effective measures to prevent such type of irregularities, officials said.
At the meeting, the BB governor also cautioned the top executives that the central bank will take stern actions against them along with their directors to protect depositors' interest, if such irregularities are found in future.
"We've already removed a chairman, a CEO and some directors from their posts, applying section 26 of the Financial Institutions Act 1993," BB Deputy Governor SK Sur Chowdhury told reporters after the meeting.
Besides, the central bank has taken actions against CEO of a NBFI and an external audit farm for providing wrong information.
The CEOs of NBFIs promised at the meeting that such irregularities will not occur in future, he added.
The CEOs planned to appeal to the central bank, seeking their job protection like the commercial banks, for checking such irregularities.
"We'll submit a proposal to BB in this connection," Asad Khan, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA), told reporters while replying to a query.
On December 23, the central bank amended its rules on appointment and removal of CEOs of commercial banks, prohibiting their sacking sans its prior permission.
Under the existing rules, the commercial bank authorities cannot force the CEOs to submit their resignation or cancel their appointment contract without prior approval of BB.
Mr. Khan also said the NBFIs have already shifted their focus to the small and medium enterprises (SMEs) instead of large loans to diversify their investment portfolio.
The central bank has sought cooperation from BLFCA for implementing the NBFIs roadmap for 2015, according to Mr. Sur.
He also said three NBFIs have already issued subordinated bonds to improve their capital base.
"We've advised the NBFIs to issue such bond to meet their growing demand for funds as well as to improve the country's bond market."
Meanwhile, 30 NBFIs out of 31 have already been able to meet the minimum paid-up capital requirement of Tk 1.0 billion from the previous Tk 500 million to consolidate their capital base for minimising risks.
The BB deputy governor also hoped that the rest NBFI will meet its paid-up capital requirement within the next three months.
siddique.islam@gmail.com
BB warns NBFIs against giving loans to directors
FE Report | Published: March 04, 2015 00:00:00 | Updated: March 03, 2015 23:43:28
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