Bangladesh Bank (BB) has opened the door for private professional institutions to mediate disputes over defaulted loans, seeking to speed up loan recovery and reduce the growing number of cases pending before the courts.
The central bank on Thursday issued guidelines establishing a formal framework for selecting and regulating institutions that will mediate default-loan disputes involving banks and finance companies.
The guidelines took effect immediately.
The BB had earlier issued instructions allowing disputes over defaulted loans and related cases to be settled through ADR (Alternative Dispute Resolution).
The latest guidelines go a step further by establishing specific eligibility, capacity and suitability criteria for institutions seeking to operate as professional mediators.
Under the new framework, an institution registered under the Societies Registration Act, 1860, the Partnership Act, 1932, or the Companies Act, 1994, must have at least three years of business or professional experience to qualify.
Neither the institution nor any member of its board or its chief executive can be a loan defaulter or bankrupt, or have been convicted of fraud, corruption, embezzlement, money laundering or any other serious criminal offence.
Each institution must maintain a panel of at least five mediators, including at least one accountant and one legal expert. Politically Exposed Persons (PEPs) will not be allowed to serve on mediation panels, according to the guidelines
The guidelines said individual mediators must have at least 10 years of experience in banking, finance companies, law, accounting, auditing or judicial work. They must also be free from direct or indirect conflicts of interest involving the parties to a dispute and cannot be loan defaulters.
The banking regulator will assess applicants under a 100-point scoring system, with institutions required to secure at least 70 points to qualify for enlistment. Applications scoring below the threshold will be rejected.
Enlistment will remain valid for up to three years unless suspended, cancelled or withdrawn earlier. Institutions seeking to continue after that period will have to apply for renewal at least 90 days before their enlistment expires.
The central bank will also be able to inspect enlisted institutions and investigate complaints against them. Proven violations may result in warnings, financial penalties, suspension or cancellation of enlistment.
