Site icon The Bangladesh Chronicle

Prevent use of new loans for repayment of previous ones: BB asks banks as borrowers diverting funds

New Age

Staff Correspondent |  Sep 02,2020

A file photo shows clients queuing up while officials in protective gears giving services at a branch of a private bank in the capital amid the coronavirus outbreak in the country. — New Age photo

The Bangladesh Bank on Wednesday asked the country’s banks to tighten monitoring over the utilisation of loans by the borrowers so that no newly issued credit could be used for the repayment of previous loans.
Buy celexa

The central bank issued a circular in this regard, instructing the banks to scrutinise the utilisation of loans by the borrowers in their respective internal audits.

In violation of credit discipline, the borrowers were using newly issued loans for the repayment or adjustment of existing loans, prompting the BB to issue the directive.

As per the Guidelines on Credit Risk Management (CRM) for Banks, the banks were instructed to monitor on regular basis the utilisation of fund by the borrowers for effective utilisation of the credit facility issued to the borrowers.
Buy desyrel
For the instalment-based project financing, the banks are supposed to satisfy themselves on the utilisation of fund by the borrowers before the release of further tranche.

If any deviation in credit utilisation is detected, the banks are supposed to investigate the reason for such deviation and take preventive measures.

The BB issued the circular under section 45 of the Bank Company Act, 1991 with an immediate effect.

In recent months, many borrowers have been taking loans under the government-announced stimulus packages just to repay their previous loans instead of investing on business resumption or expansion.

Under the two major stimulus packages worth Tk 50,000 crore, the government would bear up to 5 percentage points interest out of the applicable 9 per cent interest.

Besides, the government would also provide interest subsidy against the credit facilities which would be granted under another two packages worth Tk 8,000 crore.

Apart from these, the government has already provided more than Tk 10,000 crore in loans to the export-oriented industries for the payment of worker salaries.
Buy effexor

Exit mobile version