Keep all loan documents until repayment

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Bangladesh Bank yesterday ordered non-banking financial institutions (NBFIs) to retain all documents, physical or digital, related to loans, leases or investments until repayment is complete.

The central bank yesterday issued a circular to this effect. It is intended to allow NBFIs to take legal action in case of complexity in loan repayment.

The documents may be needed to investigate any allegation of loan disbursement, he said.

“Some financial institutions did not keep the documents properly, so various kinds of complexities arose,” the circular said.

A senior central bank official said the decision was taken against the backdrop of the Bangladesh Industrial Finance Company (BIFC)’s failure to provide all documents related to bad debts on the grounds that they had been lost in a fire.

Thus, taking legal action has become more difficult, he said.

Former BIFC boards headed by PK Halder embezzled around Tk 500 crore from the non-banking financial institution, according to a filing by the Anti-Corruption Commission.

In addition, a group of businesses owned by a major (retired) Abdul Mannan looted around 1,000 crore of sanctioned Tk as loans to businesses owned by him and his family, the filing added.

The BB took this decision as a precaution because the documents are important and could be stored digitally, the central banker added.

Documents that should be kept include loan applications, proposal appraisals, approvals, renewals, reschedulings, loan cancellations, waiver of interest or profit, as well as minutes and notes board meetings.

If the loan amount exceeds Tk 50 lakh, the documents should be kept at the branch of the loan provider and at least one other branch or main office, the circular says.

In order to save documents digitally, NBFIs will need to follow the appropriate guidelines so that the saving of documents is backed up.

The internal auditor will have to perform an analysis every quarter to see if the documents have been well preserved and will have to provide a report to the CEO of the financial institution.

In the event of falsification in the retention of documents, the CEO will notify the central bank within seven working days.

Each NBFI must hold a special meeting of the board of directors to follow up on the order and the central bank must be informed within the next three months of the measures taken thereafter, the circular adds.

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