Single borrower exposure limit lifted for power producers

The power producers in Bangladesh will now be able to take loans exceeding 25 per cent of a bank’s paid up capital for the next six months, but the Bangladesh Bank will decide the upper limit of this facility at a later time.

A circular issued by the Banking Regulation and Policy Department (BRPD) on Tuesday lifted the single borrower exposure limit for power companies, to help ensure uninterrupted import of power related machinery and fuel.

Signed by the central bank’s Deputy Governor Abu Farah Md Nasser, the circular read, “According to the Bank Company Act, 1991 Section 26 Kha (1), the single borrower exposure limit is 25 per cent of banks paid up capital.

From now this section is halted for next six months for the individual borrower or institute or group companies who are involved with power generation.

When asked about this, a senior official of the central bank told The Business Post, “Due to the USD price hike, companies who are involved in electricity production have to take out more loans for imports.

“This section of the Bank Company Act has been halted, as not to create any difficulty in obtaining loans for power generation and continuity of electricity supply.”

He added that if the country needs to halt or change any section of the Bank Company Act, the central bank does it with the consultation of the government. “This is also the case for the latest move.”

Criticising the central bank’s decision, Consumer Association of Bangladesh’s Energy Advisor Dr Shamsul Alam said, “The halting of single borrower exposure limit for power companies will create a credit risk.

“The government has already been reducing fuel imports to tackle the declining forex reserves. Under such circumstances, facilitating the power companies so that they can hike imports is in contradiction to latest measures.”