Two major financial institutions of the country - Investment Corporation of Bangladesh (ICB) and Bangladesh House Building Finance Corporation (BHBFC) - have been doing their banking and financial activities without any licence of the central bank, said a report of Bangladesh Bank (BB).

The BB has urged the government to bring the activities of the two state-owned financial organisations under the purview of the central bank to establish financial discipline.

"These two financial institutions (ICB and BHBFC) have virtually no regulator," said BB in a confidential report to the Ministry of Finance (MoF).

The financial institutions operating in the country are very much under the close monitoring of BB, which is not applicable to these two state-owned financial institutions, the report added.

The BB said both the institutions, though involved in the financing business for long in the country, are not licensed institutions.

Sources in the financial institutions said the ICB has been involved both in banking and leasing business without having licences from BB for even a single purpose.

The ICB was established in 1976 under the ICB Ordinance, 1976. As per clause 3(3) of ICB Ordinance, the organisation is a banking company. However, ICB has been doing banking business without any banking licence, the sources alleged.

"The Corporation shall be deemed to be a banking company within the meaning of the Bank Companies Act, 1991 (Act XIV of 1991)," reads clause 3(3) of ICB Ordinance, 1976.

"Although the ICB Ordinance stipulates that the Corporation is a banking company, in reality ICB is not a banking company or a scheduled bank," BB said in its report.

Currently, the ICB takes term deposit from clients. Besides doing banking business, the Corporation is involved in lease financing, consumer credit, lien, equity support and share related business.

The BHBFC, established under BHBFC Order, 1973 has long been involved in financing activities permitted under Financial Institution Act, 1973.

"The BHBFC did not take any licence from BB under Financial Institution Act, 1973," BB said in its report.

"Steps are urgent to bring both ICB and BHBFC under the Financial Institution Act, 1973," it added.

Presently, BHBFC provides house building loan at administered rates of interest to meet the demand of housing problem in the country.

Neither BHBFC nor ICB sends any financial reports to BB for monitoring and supervision.

Asked, top bosses of ICB and BHBFC, who declined to be named, said they send financial reports and audit reports to the MoF.

However, the MoF never sends its teams to evaluate or supervise the activities of the two state-owned financial institutions paving way for irregularities, the sources alleged.

The Credit Information Bureau (CIB) of BB seldom scrutinises the loan proposals of BHBFC as the Corporation is not a licensed financial institution, a top BB official said.

"Sometimes, BHBFC sends its loan proposals to us, which we care little as the institution is not a legal entity to operate financing business," the official added.

A general manager of ICB, when asked, said they have no problem if they are brought under the jurisdiction of BB.

Financial Express/Bangladesh/ 12th March 2012