No bank can lend over 25 per cent of its capital: BB
Bangladesh Bank (BB) has fixed banks' single borrower and large exposure lending limit to within 25 per cent of its capital. The central bank issued the policy to strengthen credit risk management of banks by limiting concentrated exposures and further improving the stability of the banking sector, reports UNB.
It means no bank can lend more than 25 per cent of its capital to any company or group which will be applicable for both funded and non-funded loans. In this case a funded or direct loan will be 15 per cent.
In the case of non-funded loans, in the case of export sector, the loan of Tk100 would be counted as Tk50 and in the case of power sector; the loan of Tk100 would be counted as Tk25.
The BB has formulated this new policy in line with the Banking Companies Act approved in 2013. Earlier, a client or group gets a loan facility for both funded and non-funded up to 35 per cent of the capital of a bank.
Now such clients will get 25 per cent. 35 per cent would be calculated with interest. But from now on, only the total debt of the group will be taken into account.
Along with this change, BB issued a notification for single customer and large loan limits, which will be effective from 1 April 2022. Before that, banks have to bring loans and credit facilities within the mentioned limits.
The central bank has made the change following objections from a number of development partners, including the International Monetary Fund (IMF), officials said.
According to the new notification, the bank will not be able to lend more than 15 per cent of its capital (funded) to any group, which will be identified as a large loan.
Earlier, the loan amount with interest was 15 per cent. As a result, the bank will be able to lend more to a group than before.
The BB has also specified the amount of loans that can be given by any other type of bank. Under the new policy, banks with less than 3 per cent default will be able to lend up to 50 per cent of their total debt.