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Dhaka Tribune

Banks get one more year to adjust single borrower limit

Update : 30 Dec 2013, 08:59 PM

Bangladesh Bank has extended the deadline by one more year for adjustment of the single borrower exposure limit by the commercial banks to facilitate financing operations of their subsidiaries, mainly brokerage houses and merchant banks.

Banks will have to adjust the excess amount of loans to their respective subsidiaries by December 31 next year, instead of today, said a circular issued yesterday.

They have been asked to bring down the limit compulsorily within the specified period without extending the existing loan limit under any circumstance.   

The decision was taken in the backdrop of severe liquidity crisis in the capital market, said a senior executive of the central bank.

In May, the Bangladesh Bank had extended the deadline for the adjustment of banks’ exposure to share market from August 31 to December 31 this year.

Although a bank is allowed to lend maximum 15% of its paid up capital to a single borrower, many of the banks violated the rule in 2010 when the market witnessed a boom.

But, after the central bank’s taking a hard line against the anomalies, the market crashed in January.

Currently, 30 commercial banks out of a total of 56 are running 32 brokerage houses and merchant banks as their subsidiary companies.

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