BB warns non-banks against wrongdoings

The central bank yesterday warned the chief executives of non-bank financial institutions not to act irresponsibly and indulge in irregularities.

"We have observed that some NBFIs still indulge in irregularities despite our caution. We are investigating those allegations and if any NBFI is found guilty of wrongdoing, we will take tough action against it and its CEO," Bangladesh Bank Governor Atiur Rahman said at a quarterly meeting with the CEOs at the central bank headquarters.

Rahman reminded the CEOs that the central bank has already removed a chairman, some directors and a chief executive of an NBFI for their wrongdoings. Another CEO has also been fined for giving wrong information to the central bank, he added.

The central bank found that the non-banks are lending to directors, violating rules and regulations; paying attendance honorarium to their directors even if they were absent in meetings, and organising executive committee meetings without any important agenda.

SK Sur Chowdhury, deputy governor of BB, said the CEOs have promised the central bank that there will be no irregularities in the future.

On the other hand, the chief executives sought the central bank's protection so that their board of directors cannot remove or suspend them without prior approval from BB. They said the central bank has protected the CEOs of banks through a notice issued in December last year.

"The nature of work of a bank CEO and an NBFI CEO is almost the same; the regulator is also the same. If a bank CEO is protected by Bangladesh Bank, why not us?" Asad Khan, president of Bangladesh Leasing and Finance Companies Association, told reporters after the meeting.

"Otherwise, the CEOs of NBFIs won't be able to stand against the unlawful demands of directors," said Khan, also the chief executive of Prime Finance.

Meanwhile, other issues like the development of the bond market, a road map for strengthening non-banks and removal of regulatory barriers for them were also discussed at the meeting. The deputy governor, who briefed reporters on the outcomes of the meeting, said the central bank wants the NBFIs to become active in the bond market.

"So far, only three NBFIs have appeared in the bond market; we want others to follow."

Chowdhury said the non-banks have demanded a tax rebate, for which, the BB governor will write to the revenue board.

The non-banks submitted a number of proposals at the meeting, including exclusion of the loan exposure with NBFIs' own subsidiaries or associate companies from the list of top 10 borrowers, separating each component from the CAMELS rating, refinancing facility for SMEs based on a client's individual criteria. They also demanded deadline extension to adjust loan exposure with their subsidiary companies. The NBFIs also proposed to calculate nonperforming loans on a net basis, not gross.