Bangladesh Bank, as the apex institution of banking sector in Bangladesh, is shouldering the responsibility of supervising the activities of commercial banks/Non-Bank Financial Institutions (NBFIs) under article 7(A)f of the Bangladesh Bank Order-1972 (Amendments upto 10th March, 2003), section 44 of the Bank Companies Act-1991 (Amendments upto 2013), Section-20 of Financial Institutions Act-1993 and Section-23(1)e of Money Laundering Prevention Act-2012 and section-19(A) of Foreign Exchange Regulation Act-1947. Article 7(A)f of the Bangladesh Bank Order-1972 (Amendments upto 10th March, 2003) read as "to regulate and supervise banking companies and financial institutions". The above mentioned sections of the concerned laws have empowered Bangladesh Bank to examine the books of accounts and related documents/records of the banks/NBFIs with a view to ascerting their financial soundness and quality of portfolios so that the operation of banks and NBFIs cannot be detrimental to depositors� interest in general and to the economy as a whole.
The institutions under the jurisdiction of Department of Banking Inspection-2 (DBI-2) fall are 03 Scheduled Specialized Banks, namely - Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), Probashi Kallyan Bank, 03 Non-scheduled Specialized Banks, namely - Ansar-VDP Unnayan Bank, Karmasangsthan Bank, Palli Sanchay Bank, 01 private Non-scheduled Bank, namely � Jubilee Bank and 01 State-owned Financial Institution, namely � Investment Corporation of Bangladesh (ICB). Besides, this department is especially entrusted with the responsibility of inspecting SME loans activities of all Banks and Non-Bank Financial Institutions working in Bangladesh.
This department conducts different types of inspection which may be summarized into the following four major categories:
- Comprehensive/Regular/Traditional inspection;
- Risk based or System inspection;
- Special inspection/Surprise inspection and
- SME loans inspection.
a. Comprehensive inspections are conducted on Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), Probashi Kallyan Bank, Ansar-VDP Unnayan Bank, Karmasangsthan Bank, Palli Sanchay Bank, Jubilee Bank and Investment Corporation of Bangladesh (ICB) by this department, as per inspection program, prepared annually and approved by the Deputy Governor. Some key areas of comprehensive inspection are:
- Evaluation of assets giving emphasis on classification and provisioning;
- Assessing capital requirement;
- Verification of window-dressing relating to profit;
- Review of liquidity position regarding maintenance of SLR & CRR;
- Evaluation of loan operation, project financing ;
- In-depth Analysis of large loans and concentration of credit;
- Detection of fraud, forgery and action taken thereof;
- Evaluation of management quality and customer services and
- Compliance with various guidelines/instructions/circulars issued by Bangladesh Bank, National Board of Revenue, Registrar of Joint Stock Companies and Bangladesh Securities and Exchange Commission as well as respective banks/NBFIs..
b. Risk-based inspections on core risk areas are conducted on half-yearly basis in the banks. These inspections are conducted covering following key risk areas:
- Asset-Liability Management (ALM);
- Credit Risk Management (CRM);
- Internal Control and Compliance (ICC) and
- Information & Communication Technology (ICT).
c. Special inspections and surprise inspections are those which are conducted beyond routine programs, viz., scrutiny of interest subsidy and the cases relating to the sick industries.
d. This department conducts inspection on SME service center, SME/Agri Branches of all Banks. Moreover, inspection on SME loan activities of all Banks and Non-Bank Financial Institutions (NBFIs) is also conducted by the department.
An inspection team is required to, inter alia, evaluate the financial position, operational soundness and management quality of the banks/NBFIs. Besides, during the branch inspection implementation of policy and guidelines imposed by the regulators, Govt. and bank itself are examined. During Head Office inspection of a bank, among others its CAMELS rating is also taken into account, which is one of the determining factors of the frequency of inspection.
In addition, jobs assigned by higher authorities are carried out by this department. The Department also examines and monitors the compliance made by the banks/NBFIs, whether their actions are adequate/appropriate in respect of the implementation of the recommendations made in inspection reports.