Loan defaulters cannot be directors of NBFIs
Defaulted loans at NBFIs edged up around 12% in the April-June quarter, according to a central bank report
If an individual or his/her affiliated company defaults on loans, then they cannot become a director of a non-bank financial institution (NBFI), according to the Bangladesh Bank.
In a circular yesterday, the central bank also said its approval will be needed for the appointment, removal or dismissal of NBFI directors.
The Bangladesh Bank sent the notice to the managing directors of all financial institutions.
Keep updated, follow The Business Standard's Google news channel
Although earlier there were no special terms and conditions for appointing directors at financial institutions.
As per the new rules, a director can serve three terms of three years each. However, he can be a director again three years after the completion of three terms.
The circular, however, mentioned that these rules will not apply to the International Leasing and Financial Services Limited, People's Leasing and Financial Services Limited and Bangladesh Industrial Finance Company Limited as the board of directors of these institutions have been reformed by the High Court.
An official of the concerned department of the central bank said, "Only a few of the financial institutions in the country are in a good shape. Loan fraud committed in collaboration with the directors is very common. The central bank made these policies for the proper management of these financial institutions and to bring more transparency."
According to the new rules, a director of a financial institution must have a minimum of 10 years of business or professional experience. Besides, according to the provisions of the Bangladesh Securities and Exchange Commission, the director must have a minimum of 2% shares of the company.
The circular states that if an individual is convicted of a criminal offence, then he/she will not be qualified as a director.
In addition, if there is an allegation of being involved in forgery, fraud, or financial crime in the investigation report by the central bank or any government agency regarding the nominated person, then he/she will be disqualified.
Defaulted loans at non-bank financial institutions edged up around 12% in the April-June quarter, according to a central bank report.
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, according to the quarterly financial stability assessment report of the Bangladesh Bank.
