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Dhaka Tribune

Cooking oil refiners want higher single borrower exposure limit

They expected the limit to be fixed on bank-customer relationships

Update : 20 Nov 2023, 06:48 PM

Struggling with the increased dollar prices, local cooking oil refiners are seeking an enhanced single borrower exposure limit to ensure smooth supply of cooking oil and keep its prices stable in the local market.

They expected the limit to be fixed on bank-customer relationships, sources said.

The Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association (BVOVMA) recently urged the Commerce Ministry to request the Bangladesh Bank (BB) in this regard.

Earlier, the central bank reduced the single borrower exposure limit to 25% of a bank's capital from 35%.

The central bank had issued a circular on January 1, 2022, containing the concentration of loans among small parties.

Although the total limit, including funded and non-funded ones, was reduced to 25%, the funded loan portion kept unchanged at 15% of a bank's capital.

Funded loans are given in cash while non-funded loans come in the form of letter of credit (LC) and guarantee.

The refiners said that the single-party exposure limit has been reduced to around 50% due to the massive devaluation of the Bangladeshi Taka against the US dollar.

They explained that the refiners could import goods worth $0.116 million through using the Tk1 crore funded limit in November, 2021.

However, in November 2023, they can import goods worth only $80,000 by using a Tk1 crore funded ceiling.

As a result, around 32.2% less goods are being imported due to the devaluation of the Taka.

Moreover, due to the Ukraine-Russia war, the price of goods in the international market has increased by 18%-20%.

In the current context, the purchase of goods has been reduced by more than half.

The local refiners also said that they have been facing difficulties importing required raw materials due to a reduced exposure limit.

As a result, the prices of essential items have gradually been increasing in the market as well as the companies concerned are now gradually becoming sick and on the verge of closure.

They believe that if the exposure limit is re-fixed on the basis of bank-customer relationship, the normal condition of importing, producing and marketing products would have prevailed.

In that case, the supply of goods in the market would increase and the prices would naturally come within the purchasing power of the consumers, they added.

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