Borrowers of NBFIs must withdraw lawsuits to get policy support

Borrowers of non-bank financial institutions (NBFIs) will have to withdraw pending lawsuits against the government, Bangladesh Bank (BB) or their respective finance companies before receiving policy support or incentives, according to a new directive from the central bank.

Bangladesh Bank issued the directive today, saying applications for policy support can be considered only after borrowers withdraw such cases.

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The move comes as the central bank seeks to help distressed borrowers rebuild businesses, restore their financial health, create jobs and support economic growth. It also aims to reduce litigation in the financial sector.

Under the directive, borrowers seeking support while having pending writ petitions or other cases against the government, Bangladesh Bank or the concerned finance company must first withdraw those cases.

They will also have to submit an affidavit confirming that no such case remains pending. The affidavit must include a list of cases that have already been withdrawn.

Following submission of the affidavit, finance companies will process applications based on their in-principle sanction letters.

The terms of policy support or incentives approved in favour of borrowers cannot subsequently be changed, according to the circular.

The latest instruction comes amid growing stress in the NBFI sector, where a large portion of loans has turned bad.

BB has already introduced measures to support distressed borrowers of banks, including a one-time loan settlement facility and special restructuring and rescheduling arrangements.

The central bank said it has observed cases where borrowers were seeking policy support while continuing legal proceedings against the government, BB and the concerned finance companies.

Such litigation, it said, was contributing to complications in the financial sector.

The latest circular seeks to ensure that borrowers receiving regulatory support also bring their related litigation to an end.

The directive was issued under Section 41 of the Finance Company Act, 2023, and took immediate effect.