In response to escalating urbanisation, persistent rises in construction material costs, and growing housing demand among the middle and upper-middle classes, Bangladesh Bank has introduced a revised home loan policy. The updated framework significantly increases borrowing limits for eligible customers while maintaining prudent risk management. Policy makers and banking sector experts anticipate that this initiative will stimulate activity in the housing and construction sectors and generate broader positive effects across the economy.
The revised directives were issued on Tuesday, 6 January, by the Banking Regulation and Policy Department-1 of Bangladesh Bank. For the first time, the new policy links maximum home loan limits to the non-performing loan (NPL) performance of individual banks’ housing portfolios. Banks demonstrating strong risk management and low default rates will be permitted to extend larger loans, creating an incentive for institutions to maintain disciplined lending practices.
Under the new regulations:
Banks with a home loan NPL ratio of 5% or below may provide loans of up to BDT 40 million per customer.
Banks with NPL ratios exceeding 5% but not exceeding 10% may offer a maximum loan of BDT 30 million.
Banks whose NPL exceeds 10% will be limited to offering BDT 20 million per customer.
This tiered structure ensures a balance between expanding credit access and controlling systemic risk. Additionally, the loan-to-value (LTV) ratio has been capped at 70%, requiring borrowers to contribute at least 30% of the property’s total cost from personal resources. Banks are also instructed to conduct rigorous assessments of applicants’ income, professional or business stability, and repayment capacity, thereby preventing over-indebtedness and supporting overall financial stability.
Economists suggest that broadening home loan availability will not only invigorate the housing sector but also boost demand for construction-related industries, including cement, steel, bricks, tiles, and electrical and sanitary materials. This is expected to generate employment and positively influence overall economic growth. Linking loan ceilings to NPL performance is also likely to encourage healthy competition among banks while promoting prudent lending.
Bangladesh Bank has confirmed that all previous home loan directives are now superseded, with the new policy effective immediately. The central bank expects this structured approach to enhance transparency, discipline, and stability in the home loan sector.
Summary of New Home Loan Limits
| Bank’s Home Loan NPL Ratio | Maximum Loan per Customer (BDT) |
|---|---|
| 5% or below | 40,000,000 |
| >5% – 10% | 30,000,000 |
| Above 10% | 20,000,000 |
This balanced policy framework is designed to expand borrowing opportunities while strengthening risk management, reinforcing confidence for both banks and customers alike.