NBFIs asked to conduct pre-audit before disbursals

Bangladesh Bank yesterday asked non-banks in the country to carry out a pre-audit before disbursing any fund amounting to Tk 1 crore and above so that loan irregularities can be tackled.

The management of internal control and compliance (ICC) at non-bank financial institutions (NBFIs) will conduct the audits, which will ensure funds are disbursed following relevant rules and regulations.

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Internal controls are a key element of risk management frameworks that include the processes to assess, mitigate and monitor risks, Bangladesh Bank said in a circular.

If any malpractice is revealed during the pre-audit, the information will have to be sent to the central bank.

Bangladesh Bank also asked NBFIs to set up a dashboard to monitor the loans they disburse.

Chief executive officers and heads of the ICC of NBFIs will follow the dashboard on a regular basis.

The central bank went on to say that some NBFIs are now facing a liquidity crunch due to the high ratio of non-performing loans.

The central bank carried out a review on the issue, which found that many NBFIs did not take collateral securities against the loans.

In some cases, they disbursed the loans violating the single-borrower exposure limit.

A central bank official said the initiative will help NBFIs strengthen their credit discipline and corporate governance as a whole.