ngladesh Bank has allowed banks to provide loans against treasury bonds held by customers as collateral under a new set of guidelines aimed at regulating such lending.
The central bank issued a circular to all scheduled banks on Wednesday detailing the conditions for offering overdraft or term loans against government treasury bonds.
Under the directive, banks must place a lien on the customer’s treasury bond in the Financial Market Infrastructure (FMI) system before extending the loan.
The maximum loan amount allowed will be 75 per cent of the bond’s face value, according to the circular.
Bangladesh Bank also said the total loan balance, including accrued interest, must not exceed the original face value of the bond pledged as collateral.
The tenure of the loan cannot be longer than the remaining maturity period of the underlying treasury bond.
However, the central bank has prohibited banks from providing loans to customers for the purpose of purchasing treasury bonds.
The guidelines took effect immediately, the circular said.
