The central bank has directed to ensure proper use of loans in the financial sector.

A notification in this regard was issued by the Financial Institutions and Markets Department of Bangladesh Bank on Sunday (February 26) and sent to the chief executives of all financial institutions operating in Bangladesh.

In order to maintain good governance, it is important to ensure that the loans disbursed by financial institutions are disbursed to the intended sector, the circular said. With the new loan, action has to be taken to make sure that the customer is repaying any other loan. In addition, in the case of installment-based project loans, not releasing the next installment without being sure about the proper use of the previous installment is being considered as an essential compliance at present.

The circular further said that the issue of ensuring and supervising the utilization of the loan should be included in the internal loan policy of the organization. If any serious irregularity is observed in the on-the-spot inspection of loan utilization, it should be immediately reported to the Financial Institutions and Markets Department of Bangladesh Bank.

This directive has been issued under the power of Section 16 (g) of the Financial Institutions Act, 1993, which will come into force immediately.

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