Bangladesh Bank Tightens Oversight of Large Loans

Bangladesh Bank is preparing to introduce a more rigorous inspection regime for large loans, signalling a decisive shift towards strengthening loan quality, governance and transparency within the banking sector. The initiative, aimed at curbing long-standing irregularities in collateral valuation and mortgage documentation, will primarily target loans exceeding Tk 500 million, a segment historically vulnerable to inflated asset values and forged papers.

Governor Dr Ahsan H Mansur announced the measure on Monday while presenting the Monetary Policy Statement (MPS) for the January–June period. He made it clear that the central bank’s current policy stance prioritises financial discipline and institutional integrity over rapid credit expansion. According to the governor, Bangladesh Bank will soon issue a circular mandating on-site inspections by central bank teams for large loan facilities.

Under the proposed framework, central bank officials will physically verify collateral pledged against loans, scrutinising both the authenticity of documents and the realistic market value of assets. This move is expected to significantly reduce the scope for manipulation of land deeds, title documents and mortgage records, practices that have contributed to mounting non-performing loans in the past.

Dr Mansur noted that Bangladesh Bank is strengthening its internal capacity to detect forged deeds by enhancing technical expertise related to land records, registration systems and supporting documentation. He observed that commercial banks have already begun exercising greater caution when approving high-value loans, particularly facilities of Tk 1.0 billion or Tk 2.0 billion, reflecting a gradual cultural shift from aggressive credit growth to prudent risk management.

Beyond supervisory measures, the governor expressed disappointment that the interim government did not approve the proposed Bangladesh Bank Order, which he described as essential for reinforcing governance, autonomy and accountability in the financial sector. He said the draft amendment to the Bangladesh Bank Order of 1972 would be resubmitted to the next elected government shortly after it assumes office. Amendments to the Bank Company Act, he added, also remain pending.

Nevertheless, Dr Mansur pointed out that two important legal reforms, including the bank resolution framework, have already been approved and are being implemented to enhance systemic stability. He emphasised that permanent legal safeguards for the central bank are standard practice globally and critical for maintaining financial discipline.

Drawing a clear distinction between political and central banking responsibilities, the governor remarked that while political actors often prioritise short-term economic gains, central banks are mandated to ensure long-term stability and sustainable development. He also stated that he had operated with full independence during the interim government’s tenure, facing no external pressure in carrying out his duties.

Key Features of the Proposed Large Loan Inspection Framework

The initiative underscores Bangladesh Bank’s determination to restore confidence in the banking system by addressing structural weaknesses and reinforcing regulatory oversight at the highest levels of lending.