Bangladesh Bank (BB) has widened banks’ room for trade finance and large business lending by relaxing single borrower exposure rules, allowing lenders to provide greater funding support for import, export and corporate financing activities.
Under a circular issued on Thursday, the central bank raised the exposure ceiling for a single borrower, counterparty or business group from 15 per cent to 25 per cent of a bank’s capital until June 2028.
The latest relaxation is expected to create additional room for banks to support trade-related financing activities, including letters of credit and guarantees.
The central bank also reduced the conversion factor used for non-funded exposure from 50 per cent to 25 per cent on a temporary basis. This means banks will count a smaller portion of instruments such as LCs and guarantees while calculating exposure limits.
Bankers said the latest relaxation would create additional lending space on banks’ balance sheets and help them finance larger trade transactions without breaching regulatory exposure limits.
They said many banks had been approaching exposure ceilings while financing large corporate groups, import activities and trade-related obligations.
According to the circular, the relaxation on non-funded exposure calculation will remain effective until June 2027.
The conversion factor will then gradually increase to 30 per cent by the end of 2027, 40 per cent by the end of 2028 and 50 per cent by the end of 2029 before returning to the original rule from January 2030.
The central bank also revised the large loan portfolio framework by linking lending capacity with banks’ classified loan levels. Banks with lower non-performing loans will be allowed larger loan portfolios, while lenders with weaker asset quality will face tighter limits.
For example, banks with classified loans of up to 10 per cent will be allowed to maintain large loan portfolios equivalent to 50 per cent of total loans and advances. For banks where classified loans exceed 30 per cent, the limit will fall to 30 per cent.
Industry insiders said the move may support trade activities and improve financing flexibility, although the higher exposure limits could also increase concentration risks if lending remains heavily skewed toward large business groups.
