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THURSDAY, JULY 24, 2025
Now NBFIs need approval to waive interests, write off loans of subsidiaries

Banking

TBS Report
29 September, 2022, 08:05 pm
Last modified: 29 September, 2022, 10:11 pm

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Now NBFIs need approval to waive interests, write off loans of subsidiaries

TBS Report
29 September, 2022, 08:05 pm
Last modified: 29 September, 2022, 10:11 pm
Photo: Collected
Photo: Collected

From now on, non-bank financial institutions (NBFIs) will require approval from the Bangladesh Bank for the disbursement of loans to their subsidiaries, interest waivers and loan write-offs.

In a circular on Thursday, the central bank said some financial institutions were making excessive investments in their subsidiary companies in violation of the Financial Institutions Act.

There have also been cases of violation of existing rules and regulations in interest waivers and loan write-offs of these institutions, it added.

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However, for banks, the central bank's approval is not required in the case of loan disbursements to their subsidiary institutions and interest waiver and loan write-offs.

A senior official of the relevant department of the central bank said many financial institutions are in very bad condition.

"Between 50% and 90% of their loans are defaulted. The central bank's observation of these institutions shows that they give massive loans to their subsidiary institutions. Most of which are defaulted. Therefore, instructions have been given to bring more transparency in the disbursement of loans in this sector in the future," he added.

Defaulted loans at non-bank financial institutions edged up around 12% in the April-June quarter, according to a central bank report, thanks to lending anomalies and winding down Covid-led repayment facilities.

The NBFI defaulted loan was Tk14,232 crore in the first quarter of 2022, which spiked by Tk1,702 crore at the end of June, the Quarterly Financial Stability Assessment Report of the Bangladesh Bank shows.

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NBFIs / Loan disbursement

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