Bangladesh Bank on Thursday exempted banks from maintaining general provision against two off-balance sheet exposures to increase supply of liquidity in the banking channel.
Banking Regulation and Policy Department of the central bank issued a circular in this connection saying that banks would not require maintaining 1 per cent general provision respectively against bills for collection and guarantees against which government, multilateral development banks and international banks issue counter-guarantee.
BB officials said that these two off-balance sheet exposures did not create any liability to banks in case of default or non-payment.
Earlier, in September 2012, the central bank asked the banks to maintain 1 per cent general provision against the two items.
According to the officials, banks collect bills against export on behalf of their customers and no liability is created in case of default or non-payment of bills for collection.
So, the central bank decided that banks would not have to maintain any provision against such bills, they added.
On the other hand, the BB withdrew the provision for guarantees considering the risk mitigating effect of guarantees against which government, MDBs and international bank issue counter-guarantee.
The counter-guarantee issuing MDBs and international banks, however, have to have BB rating grade ‘1’ equivalent outlined in the Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III), the circular said.
The circular came into force with immediate effect.
Earlier, in February this year, the central bank lowered the required general provision against unclassified housing finance from 2 per cent to 1 per cent to facilitate banks to extend more loans to the real estate sector.
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