BRPD Circular Letter No. 02: Ensuring proper utilization of loan

Subject: BRPD Circular Letter No. 02
Banking Regulation and Policy Department
Bangladesh Bank
Head Office
Dhaka.
13 March, 2017
BRPD Circular Letter No.-02 Date: ---------------------- 29 Falgun, 1423 Managing Director / Chief Executive Officer All Scheduled Banks Operating in Bangladesh Dear Sir, With reference to the subject matter, we draw your attention to BRPD Circular Letter No. 13 issued on November 04, 2010, and Circular No. 04 dated March 08, 2016. Regarding ensuring proper utilization of loans. Through BRPD Circular No. 04/2016, revised International Financial Reporting Standards (IFRS) guidelines were issued for compliance. Paragraph 1.5(iii) of the issued guidelines provides instructions for banks to formulate a Credit Policy (Credit Policy) with the approval of the Management Committee, considering overall credit risk. Among the minimum 19 matters that must be included in the Credit Policy formulated/by the bank, the 15th instruction is: 'Ensure that the purpose of the loan is clearly defined and monitored regularly to ensure that the loan is used for the stated purpose.' Furthermore, Paragraph 3.4: Monitoring of the guidelines states that, 'For each loan, it should be ensured that the borrower uses the loan amount for the approved purpose. If any deviation is found, immediate action should be taken to recover the loan or take necessary steps to secure the loan, and the matter should be reported to the Head Office.' In this context, you are advised to conduct regular monitoring to ensure proper utilization of loans for the purpose for which they have been/will be granted, in accordance with the aforementioned instructions in the conduct of loan operations. In addition, all other instructions mentioned in the guidelines must be complied with properly. Yours faithfully, (Abu Farah Md. Nasir) General Manager Phone: 9530252