BB asks banks to set up cells on large loans

The central bank has asked commercial banks to set up special cells for ensuring monitoring and supervision of restructured loans, officials said.
"Bank shall set up a special cell headed by head of recovery for continuous monitoring of the restructured loan and the cell shall submit a quarterly report to the board of directors through risk management committee of the board," the BB said in a circular, issued Thursday.
This report must contain, among others, progress in compliance with the restructuring terms and conditions, according to the circular.
It also said the board of directors of the bank would review such quarterly reports and forward the same along with its specific observations to the Department of Offsite Supervision (DOS) of the BB through the chief executive officer and managing director of the bank.
"The DOS will submit their report on large loan restructuring to the BB governor on a quarterly basis," a BB senior official told the FE.
Besides, such a report would be submitted to the board of directors of the central bank on a half-yearly basis, the BB official added.
"The bank will have to make full disclosure of the restructured loans in its published audited accounts in a separate note to ensure their accountability and transparency," the central banker noted. Bank borrowers in general have experienced difficulties in running business smoothly resulting in their default on debt servicing, in particular, due to the prevalent economic scenario emanating from various external and domestic factors beyond their control, the BB said in its five-page circular.
"This phenomenon has augmented a situation whereby the present policy needs to be liberalised especially with respect to large borrowers having multiple bank exposures," it noted.
Earlier on January 27 last, the BB's board of directors approved the policy allowing loan rescheduling only if the business entities are hit by global or domestic shocks.
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