Staff Reporter :
The Bangladesh Bank made it clear that borrowers will not be allowed to use fresh loans to repay or adjust their previous debts, and instructed banks to monitor this properly through their internal audits.
“We have observed that borrowers are using loans to pay or adjust their previous loans, which is not in compliance with loan discipline,” the central bank said in a circular on Wednesday.
The Bangladesh Bank instructed banks to monitor the matter properly to comply with the guidelines on credit risk management.
Earlier in June 2018, the central bank issued a circular, asking banks to take action to prevent fund diversion and ensure the proper utilisation of previous loan instatement before disbursing the next installment of a loan.
A central bank official told The Business Standard, “We have observed that fund diversion could still have occurred despite our previous instructions to banks to prevent it. Now, we have specified our previous instructions so that banks can follow them properly.”
After the reopening of economic activities, businesses have started taking loans under various stimulus packages to recover their losses caused by the novel coronavirus pandemic.
This has contributed to the private sector’s credit growth and, in July, the growth increased to 9.20 percent year-on-year, from 8.61 percent in June.
