Dhaka, Bangladesh (BBN) – The central bank of Bangladesh has allowed the non-banking financial institutions (NBFIs) to collect fund from banks, corporate entities and other NBFIs through issuing Commercial Paper (CP).
The Bangladesh Bank (BB), the country’s central bank, issued a guideline in this connection on Sunday saying that now-a-days CP Commercial Paper (CP) is emerging as a new money market instrument to corporate houses in Bangladesh and subsequently Financial Institutions along with banks are getting involved in CP in different ways.
“Considering these diversified roles, it is inevitable to issue some directives regarding the activities of FIs (Financial Institutions) concerning CP,” the BB said in its guideline.
Under the guideline, the CP is a promissory note with a maturity of not less than 30 days and not more than one year that is sold at a fixed rate of interest. To ensure the investors’ interest, commercial paper will be backed by guarantee given by a NBFI or a bank.
A CP is an instrument which is used by an NBFI to take loan from a bank, another NBFI or a corporate group while another bank or NBFIs has to act as a guarantor in favour of the commercial paper-issuing financial institution.
The NBFIs which will purchase the commercial paper will receive the amount of loan from the IPA bank or NBFI, if the institution concerned fails to repay the loan in due time.
The total investment in the CP by any NBFI will not exceed 30 per cent of its total capital, but no NBFI will invest more than 10 per cent of its total capital in a single company’s commercial paper.
The equity of the company, in which FIs intend to invest, will not be less than BDT 300 million.
The NBFIs will have to obtain post-facto approval from the BB within 10 days after investing in commercial paper.
The paid up capital of NBFIs, which will issue commercial paper, will be BDT 1.0 billion or more or as set by the BB from time to time, the guidelines said.
The classified loans of the commercial paper-issuing NBFIs will not cross five per cent and their CAMELS rating will be at least 3 for the last three consecutive half-yearly reports.
The aggregate amount of commercial paper issued by any NBFI will not exceed 30 per cent of its total capital.”

BBN/SSR/AD