Bangladesh Bank has significantly relaxed the large loan exposure limits for major industrial conglomerates, a move intended to facilitate high-value financing. The central bank issued a circular on Thursday detailing these amendments, which also grant commercial banks greater flexibility in disbursing substantial credit lines.
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Expansion of Funded Loan Facilities
Under the revised regulations, a commercial bank is now permitted to extend funded (direct) loans of up to 25% of its total capital to a single client or group. Previously, this limit was capped at 15%. However, the aggregate exposure—combining both funded and non-funded credit—must not exceed 25% of the bank’s total capital.
Prior to this change, the distribution was strictly divided into 15% for funded and 10% for non-funded loans. This new directive regarding funded limits will remain in effect until 30 June 2028. To illustrate the impact: a bank with a total capital of BDT 10,000 crore can now provide BDT 2,500 crore as a direct loan to a single group, whereas the previous cap was BDT 1,500 crore.
Relaxation of Non-Funded Credit and LCs
The central bank has also adjusted the “conversion factor” for non-funded exposure, such as Letters of Credit (LCs). The factor has been halved from 50% to 25%. Effectively, when a bank opens an LC worth BDT 100, only BDT 25 will now be calculated against the customer’s large loan limit. This provision is designed to assist large groups and LPG importers who have faced difficulties in opening LCs due to previous restrictive ceilings.
The conversion factor will be gradually restored to its original level according to the following schedule:
Until 30 June 2027: 25%
By 31 December 2027: 30%
By 31 December 2028: 40%
By 31 December 2029: 50%
From 1 January 2030: Original 50% factor fully restored.
Revised Large Loan Limits Based on NPLs
The central bank has further restructured how much of a bank’s total portfolio can be dedicated to large loans, depending on the bank’s Non-Performing Loan (NPL) ratio.
| Non-Performing Loan (NPL) Ratio | Max Large Loan Limit (% of Total Loans) | Previous NPL Ratio Threshold |
| Up to 10% | 50% | Less than 3% |
| >10% to <15% | 46% | 3% to 5% |
| 15% to <20% | 42% | 5% to 10% |
| 20% to <25% | 38% | 10% to 15% |
| 25% to <30% | 34% | 15% to 20% |
| 30% or more | 30% | N/A |
Aggregate Large Loan Exposure
In addition to individual client limits, the total aggregate of all large loans held by a bank has been increased. A bank’s total large loan portfolio can now reach up to 600% of its total capital, a significant rise from the previous limit of 400%.
According to senior central bank officials and private bank executives, these changes were necessitated by top industrial groups reaching their credit limits, particularly in the energy sector. While this provides breathing room for conglomerates and helps regularise those who had previously exceeded legal limits, there are concerns that it may result in a reduction of available credit for Small and Medium Enterprises (SMEs).