Dhaka, Bangladesh (BBN)– Bangladesh Bank (BB) has waived the single borrower exposure limit in the case of financing the power sector, officials told BBN on Monday.
The single borrower exposure limit will not be applicable in case of financing in power generation, distribution and transmission, according to a circular issued by the central bank on the day.
The BB has taken the move against the backdrop of a greater need to make substantial investment to increase power generation.
Overall electricity generation Monday was around 3,800 megawatt (MW) against the demand of over 5,500 MW, according to official data.
“We’ve taken the move to facilitate the overall power sector to allow more investments with a view to generating more power,” a BB senior official said, adding that the banks would be able to invest more funds in the sector following the relaxation.
Senior bankers have welcomed the BB’s latest move, saying the investment in power sector would increase in the near future, which would also help overcome the ongoing power crisis.
Such relaxation will be applicable only for power generation, distribution and transmission projects, awarded by power division or state-owned enterprises like Bangladesh Power Development Board and Rural Electrification Board under the power division, according to the circular.
“Definitely, we’ll be able to invest more in the power sector following such relaxation,” Chief Executive Officer (CEO) and Managing Director of the Janata Bank Limited S.M. Aminur Rahman said.
He also said the BB’s latest initiative would – at least to some extent – help the country solve the nagging power crisis.
The BB earlier re-fixed the limit on single borrower exposure by 15 per cent of respective banks equity to improve risk management in the banking sector.
The single borrower exposure limit on large loans has already been reduced from 50 per cent to 35 per cent that includes 15 per cent funding facilities.
“Non-funded credit facilities like letter of credit (LC) can be provided to a single large borrower. But under no circumstances, the total amount of the funded and non-funded credit facilities shall exceed 35 per cent of a bank’s total capital,” the BB said earlier in a circular.
Under the existing provision, loan sanctioned to any individual or enterprise or any organization of a group amounting to 10 per cent or more of a bank’s total capital will be considered as large loan.
BBN/SS/SI/AD-15June10-7:5 am (BST)