Dhaka, Bangladesh (BBN) – The central bank of Bangladesh on Thursday asked the commercial banks for doubling their paid-up capital and reserve to US$58.38 million (BDT 4.0 billion) from the existing $29.19 million (BDT2.0 billion) by August 11, 2011.
Of the amount, the paid-up capital must worth a minimum of $29.19 (BDT 2.0 billion), officials said in the capital, Dhaka on Thursday.
“We’ve instructed the banks to raise their total capital to BDT 4.0 billion over the next three years as part of the preparations to implement the Basel-II framework,” a senior official of the Bangladesh Bank (BB), the country’s central bank, told BBN in the capital, Dhaka.
The new capital requirement will help consolidate the country’s financial sector through protecting the interest of depositors, the official noted.
The central bank of Bangladesh issued a circular in this connection on the day and asked the chief executives of all commercial banks to meet the capital requirement in line with the new instructions.
Under the new instructions, the banks are required to have the capital by increasing its reserve or issuing rights shares or floating initial public offerings (IPOs). But no bank will be allowed to offer cash dividends so long there is a deficit in capital.
In case of foreign banks, they have to meet the capital requirement by injecting fresh funds from overseas sources or stopping expatriation of post-tax profits, the BB said in its circular.
Besides, the banks, as an option, may consider merging with other banks or non-banking financial institutions (NBFIs) to meet the capital requirement within the timeframe, according to the circular.
On November 5, 2007, the BB directed the banks to raise their total capital – paid-up and reserve – to $29.19 (BDT 2.0 billion) from $14.59 million (BDT 1.0 billion) in two phases by June 2009.
Under that directive, the banks were required to enhance 50 per cent of their new capital requirement by June 2008 and the balance amount by the end of June 2009.
Currently, a total of 48 banks are operating in Bangladesh. Of which, four are government-owned commercial banks, five specialized, 30 private banks and nine foreign banks.