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Dhaka Tribune

After banks, now NBFIs told to set up willful defaulter units

The unit will be responsible for identifying whether defaulting borrowers (individuals and institutions) qualify as willful defaulters

Update : 04 Apr 2024, 03:28 PM

Following similar action taken against the banking industry last month, the Bangladesh Bank (BB) has now instructed non-banking financial institutions (NBFIs) to set up willful defaulter identification units by the end of April.

The circular instructed NBFIs to set up the identification units led by officials two levels below the managing director and chief executive officer (CEO) of the finance company.

The management must carry out all related activities throughout the unit.

In a circular on Wednesday, the central bank said a willful defaulter is defined as someone who fails to repay a loan, advance, investment or any other financial benefit taken by themselves, their family members or their institutions, despite having the ability to do so.

The unit will be responsible for identifying whether defaulting borrowers (individuals and institutions) qualify as willful defaulters, according to the central bank notice.

The identification process must begin within 30 days of a borrower defaulting. This timeframe can be extended by a further 30 days with justification.

If a borrower is classified as a willful defaulter according to the Finance Companies Act 2023, they will be granted 14 working days to respond to the accusation, says the circular.

Non-compliance with regulations regarding willful defaulters will result in fines for NBFIs ranging from Tk50 lakh to Tk1 crore.

Continued violations will incur a daily penalty of Tk1 lakh by the central bank, it mentioned.

The circular also outlined the consequences for willful defaulters.

The list of such individuals and institutions will be shared with the Bangladesh Securities and Exchange Commission and the Registrar of Joint Stock Companies and Firms to impose bans on foreign travel and trade licences -- as authorized by the Bank Company Act.

The information will also be forwarded to the relevant authorities responsible for registering vehicles, land, houses and flats.

These authorities will then take appropriate action based on their existing laws and regulations, it also said.

Earlier on March 12 this year, the central bank issued a similar circular for willful defaulters in the banking industry.

Defaulted loans have emerged as a serious concern for struggling NBFIs, where over 25% of total loans are in default.

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