BRPD Circular No. 07: Providing loan facilities to any borrower of the group if a borrower of the same group is not willful defaulter

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh. Ref No: BRPD Circular No. 07 Banking Regulation and Policy Department Date: ------------------ 20 Chaitra 1430 To: Managing Director / Chief Executive Officer All Scheduled Banks Operating in Bangladesh Dear Sir,

Reference is invited to Section 27kk(3) of the Companies Act, 1991 (as amended up to 2023) in the context of providing loan facilities to any other person, institution, or company within a group if a person, institution, or company within the same group is not a willful defaulter.

2. Section 27kk(3) of the aforementioned Act states that no bank or financial institution shall provide any loan facility to any willful defaulter. However, under the rules of Section 5(gg) of the same Act, if a related person within a group, or in some cases, an institution or company, is not a willful defaulter, and if it is proven to the satisfaction of Bangladesh Bank that there is a reasonable cause for the said person, institution, or company to become a defaulter in loan repayment, then such person, institution, or company shall not be considered a defaulter on the grounds of the default of any other institution or company within the group. In such cases, loan facilities may be provided to such institutions or companies with the prior approval of Bangladesh Bank.

3. Now, in the context of providing loan facilities to any other person, institution, or company within a group if a person, institution, or company within the group is not a willful defaulter, the following instructions shall be followed:

(1) If any borrower is identified as a defaulter, no bank shall provide any loan facility to such willful defaulter;

(2) If a defaulter within a group is not identified/listed as a willful defaulter, loan facilities may be provided to any/all other institutions or companies within the group, subject to obtaining prior approval from Bangladesh Bank;

(3) If a scheduled bank or financial institution finally lists a person, institution, or company within a group as a willful defaulter, and if an appeal is made to Bangladesh Bank by the shortlisted borrower against such listing, no application for the provision of facilities mentioned in sub-section 3(2) shall be made to Bangladesh Bank until the appeal is decided;

(4) After providing such loan facilities to the institutions or companies within the group under the relevant sub-sections, the defaulter loan account of the group must be reconciled/regularized within 01 (one) year following the provision of such loan facilities, in accordance with existing laws/policies. If the defaulter loan account is not reconciled/regularized within the said period, or if it is identified as a defaulter again after regularization, no further loan facilities shall be provided to any other institutions or companies within the group;

(5) To obtain prior approval from Bangladesh Bank, scheduled banks must apply in accordance with Annex-A, subject to the approval of their Board of Directors. A certified copy of the decision taken by the Board of Directors of the concerned bank regarding the provision of such loan facilities must be submitted with the application;

(6) A report stating the reasons why the person, institution, or company within the group became a defaulter must be submitted along with the application submitted to Bangladesh Bank;

(7) An updated CIB report regarding whether the said willful defaulter is a willful defaulter or not must be attached. Until instructions are issued by Bangladesh Bank regarding the CIB report, it must be confirmed that the said defaulter is not a willful defaulter, and a certificate to that effect must be obtained from all concerned lending banks or financial institutions and attached;

(8) For the decision of the application for prior approval submitted by the bank, the bank must supply any necessary documents/papers as required by Bangladesh Bank from time to time;

(9) Before granting prior approval, Bangladesh Bank will conduct a field inspection to examine necessary matters such as the reasonable cause for the person, institution, or company within the group becoming a defaulter, the bank account of the loan applicant, the operations of the institution, and the inspection team;

(10) In the case of granting such prior approval, the decision of Bangladesh Bank shall be final.

4. These instructions are issued under the powers conferred by Sections 27kk(3) and 45 of the Companies Act, 1991.

5. These instructions shall come into force immediately.

Annex: As per format

Yours faithfully, (Mohammad Shahriar Siddique) Director (BRPD) Phone: 9530252

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(6) A report stating the reasons why the person, institution, or company within the group became a defaulter must be submitted along with the application submitted to Bangladesh Bank;

(7) An updated CIB report regarding whether the said willful defaulter is a willful defaulter or not must be attached. Until instructions are issued by Bangladesh Bank regarding the CIB report, it must be confirmed that the said defaulter is not a willful defaulter, and a certificate to that effect must be obtained from all concerned lending banks or financial institutions and attached;

(8) For the decision of the application for prior approval submitted by the bank, the bank must supply any necessary documents/papers as required by Bangladesh Bank from time to time;

(9) Before granting prior approval, Bangladesh Bank will conduct a field inspection to examine necessary matters such as the reasonable cause for the person, institution, or company within the group becoming a defaulter, the bank account of the loan applicant, the operations of the institution, and the inspection team;

(10) In the case of granting such prior approval, the decision of Bangladesh Bank shall be final.

4. These instructions are issued under the powers conferred by Sections 27kk(3) and 45 of the Companies Act, 1991.

5. These instructions shall come into force immediately.

Annex: As per format

Yours faithfully, (Mohammad Shahriar Siddique) Director (BRPD) Phone: 9530252

Annex-A Ref: Date: To: Director (BRPD) Banking Regulation and Policy Department (Division-1) Bangladesh Bank Head Office Dhaka

Dear Sir,

Subject: Request for prior approval to provide loan facilities to the 'I/E' named institution or company of the 'AIE' group if the 'A' named person/institution/company of the 'AIE' group is not a willful defaulter.

Reference is invited to BRPD Circular No. 07, dated 03 April 2024, issued by you regarding the subject cited above.

2. We wish to provide loan facilities to the 'I/E' named institution or company of our customer's 'AIE' group. However, according to the CIB report dated ---/---/20---- (copy attached) of the 'A' named person/institution/company of the 'AIE' group, it has been reported as a defaulter (Category: Sub-standard/Doubtful/Loss or Bad) by ------ Bank or Financial Institution. It is stated that the 'A' named person/institution/company is not a willful defaulter (proof attached), and a report stating the reasons for their default is submitted herewith. Furthermore, the matter of providing loan facilities to the 'I/E' named institution or company of the 'AIE' group, in accordance with all instructions of the cited circular, was approved unanimously by the Board of Directors in its -----th meeting held on ---/---/20---- (certified copy of the decision attached). The details of all existing loans taken by all institutions or companies within the 'AIE' group from banks or financial institutions are listed below:

S.No	Name of Person/Institution/Company	Name of Lending Bank/Financial Institution	Amount of Loan	Amount of Classified Loan	Is Defaulter? (Yes/No)	Is Willful Defaulter? (Yes/No)	Brief Reason for Default (Detailed Report Attached)	Remarks
1
2
3

3. Details of the proposed loan facilities to be provided to the 'I/E' named institution or company of our customer's 'AIE' group:

S.No	Name of Person/Institution/Company	Nature of Loan	Existing Loan Limit/Amount	Proposed Loan Limit/Amount	Tenure	Details of Security Taken/Taken	Remarks
1
2
3

4. Now, in the aforementioned context, we request approval to provide loan facilities to the 'I/E' named institution or company of our customer's 'AIE' group.

Yours faithfully,

Signature: Name: Designation: Phone No:

For contact regarding the application: Name of Responsible Officer: Designation: Office Phone No: Mobile Phone No: E-mail: