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The Bangladesh Bank on Sunday specified its regulation on single borrower and large loans exposure limit to comply with the international standard as there were several controversies in its previous regulation.
As per the central bank latest provision, the aggregate principal amount of funded and non-funded exposure to a single person or a group shall not exceed 25 per cent of the capital at any point of time.
In January of 2014, the BB said in its provision that the outstanding amount of exposure both funded and non-funded to a single person or a group shall not exceed 35 per cent of the capital at any point of time.
The central bank said in its latest provision that the aggregate principal amount of funded exposures shall not exceed 15 per cent of the capital at any point of time.
However, the BB’s pervious regulation had said the aggregate outstanding principal amount of funded exposures shall not exceed 15 per cent of the capital at any point of time.
In order to calculate an aggregate principal amount, a conversion factor of 0.50 shall be used against non-funded exposure, said the central bank. For example, 100 per cent of funded exposure and 50 per cent of non-funded exposure shall be considered.
While calculating the aggregate principal amount for credit facilities sanctioned in order to produce, transmit and distribute electricity against any award provided by the Power Division under the Ministry of Power, Energy and Mineral Resources or the institutions controlled by the said division, a conversion factor of 0.25 shall be used against non-funded exposure. For example, 100 per cent funded exposure and 25 per cent of non-funded exposure shall be taken into account, as per the BB notice.
A high official of the central bank said the BB specified the provision as per the international standard as there were several controversies in its previous regulation.
All exposures at the effective date of this policy which are in breach of the limits shall be brought in compliance by 31 December 2022. As a special case, if exposure limit is in breach due to facility provided to the Power Sector, it can be brought in compliance by 31 December 2023.