Bangladesh Bank yesterday issued a detailed guideline, including default loan recovery targets, alongside criteria over the appointment, reappointment and responsibilities of managing directors and chief executive officers of non-bank financial institutions (NBFIs).

A month ago, the banking regulator had issued similar criteria for MDs and CEOs of banks, all to ensure good governance and reduce bad debts.

A total of 12 NBFIs in Bangladesh are running without an MD or CEO and a majority of them have had their top post vacant for more than three months in a clear breach of laws. Apart from the absence of top executives, the sector is reeling from scams, irregularities, a liquidity crunch and the presence of a huge amount of non-performing loans.

Soured loans at the 35 NBFIs of the country stood at Tk 21,658 crore at the end of September last year, rising by 9 percent from June in the same year and 25 percent from that a year ago.

The latest amount of bad loans accounted for 29.75 percent of the total outstanding loans of NBFIs at the end of September 2023.

This is one reason why the guideline states that for appointment or reappointment of CEOs, NBFIs need to set specific targets for the recovery of defaulted and written-off loans and monitor the progress from time to time. 

The inclusion of the targets will help bring down the bad loans in the sector, a senior official of the central bank told The Daily Star.

Moreover, potential candidates must not have any business interest in the bank and cannot be involved with any association or institution of any director of the NBFI.

If the candidate has citizenship of any country other than that of Bangladesh or is in the process of applying for permanent or long-term residency in another country, their detailed information has to be submitted with the central bank.

The candidate has to inform the BB of any need for travelling frequently for personal and family related reasons.

When travelling abroad, they need to avail approval from the BB at least ten working days in advance and have to avoid staying abroad for too long, it said.

Though there is no minimum age limit, the maximum age is 65 years. Moreover, at least 20 years' experience in banking profession is needed.

The central bank will approve the appointment or re-appointment of the CEOs nominated by the NBFIs based on the recommendations of a committee led by a deputy governor of the banking regulator.