TK 5,000Cr Stimulus

Banks’ single borrower exposure limit waived

Staff Correspondent | Published: 21:00, Apr 11,2020

 
 

The Bangladesh Bank on Saturday exempted all the scheduled banks from complying with the single borrower exposure limit in issuing credit to the export‑oriented industries, including the readymade garment sector, for payment of workers’ salaries.

The central bank on the day issued a circular exempting the banks from having to comply with Sub-Section 1 of Section 26(Kha) of the Bank Company Act, 1991.

The central bank has been issuing a range of policy relaxations in the last 20 days to support implementation of the government announced stimulus packages amounting to Tk 72,750 crore.

The BB in two phases reduced the cash reserve ratio (CRR) to 4 per cent and the repurchase agreement, largely known as the REPO rate, to 5.25 per cent with a view to increasing liquidity supply on the market.

The outbreak of the coronavirus in the country has prompted the BB to take such measures.

Of the packages, a Tk 5,000-crore stimulus package was specifically launched for the export-oriented industries to pay salaries to the workers.

As per the BB rules, the aggregate outstanding principal amount of funded exposures of a bank to any individual or counter-party or group must not exceed 15 per cent of its capital at any point of time.

The outstanding amount of exposure — both funded and non-funded — of a bank to a single person or counter-party or a group must not exceed 35 per cent of the capital at any point of time, it said.

In case of export financing, the outstanding amount of exposure — both funded and non-funded — of a bank at any point of time to a single person or counter‑party or a group must not exceed 50 per cent of its capital.

However, the aggregate outstanding principal amount of funded exposures of a bank must not exceed 15 per cent of the capital at any point of time.

For large loans, the calculation process would be different.

For instance, if a bank’s net classified loans amount to 5 per cent, then the bank would be allowed to have large loan exposures of up to 56 per cent of its total loans and advances whereas total loans and advances are calculated as a sum of 100 per cent funded exposures and 50 per cent non-funded exposures.

In another circular, the banks were asked to submit classified loans and provisioning-related statement to the BB within 10 days after the end of the government announced general holiday.

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