IIDFC fined Tk 31 lakh
Bangladesh Bank has imposed a fine of Tk 31 lakh on the Industrial and Infrastructure Development Finance Company (IIDFC) for violating the central bank's rules for non-bank financial institutions (NBFIs) over renting and decorating branches.
The NBFI had relocated its Uttara branch in January this year without prior approval from Bangladesh Bank, which is why the IIDFC faced the fine on May 26, according to the central bank's documents.
As per the rules, the NBFIs must take approval from the central bank before relocating and decorating branches.
The NBFI rented a new space from January 1 this year but its agreement with the previous building's owner was scheduled to end on February 14.
As a result, the NBFI had to pay double the rent for the period between January 1 and February 14.
Bangladesh Bank had issued regulations in 2015 asking banks and the NBFIs to this effect such that excessive expenditure could be avoided while setting up or relocating new branches.
As per the agreement between the previous building's owner and the IIDFC, there was a scope for both parties to renew the contract, according to the BB documents.
"But, IIDFC did not do so. This is why the unexpected situation emerged," said the BB documents.
The central bank issued a show-cause notice to the IIDFC on March 28, asking it to explain why it should not be penalised.
The IIDFC initially informed the central bank that the infrastructure of the previous branch was not fit for running operations.
There were problems in the water supply and there was no parking facility, which proved troublesome for clients and hindered the smooth delivery of financial services.
Moreover, the NBFI was compelled to hurriedly sign an agreement to take rent of the new space as its owner was in talks with others too.
"The NBFI did not take the prior approval from Bangladesh Bank mistakenly," said the IIDFC.
It also apologised to the central bank, promising that this would not recur in the future.
But the BB did not accept the apology and imposed the fine.
The IIDFC applied for the central bank approval for its new office space on February 1, one month after the entering into the new contract.
As per the central bank rules, the NBFIs that breach the rule face Tk 1 lakh fine for each day that elapses starting from the date the agreement is signed to the time the central bank is informed and permission sought.
Since the NBFI sought the permission from the BB after 31 days, the central bank imposed Tk 31 lakh.
The BB deducted the fine from the NBFI's current account with the central bank on June 9.
Md Golam Sarwar Bhuiyan, managing director of the IIDFC, said there had been a misunderstanding on the issue between the central bank and the NBFI.
He said he had met the BB governor at his office on May 15 requesting that the central bank reconsider the matter.
"We have submitted an appeal to avoid the fine," he said.
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