Non-Bank Financial Institutions (NBFIs) in Bangladesh are now allowed to provide loans of up to 75 per cent of the face value of government treasury bonds held by clients.
The directive was announced in a circular issued by the Bangladesh Bank on Sunday.
The central bank said that lenders must utilise the Financial Market Infrastructure (FMI) system to place a lien on the bonds before extending any short-term or long-term credit.
To limit risk exposure, the regulator has capped total liabilities of the clients by stipulating that accrued interest on such loans must not push the outstanding amount beyond the bond’s face value.
The tenure of the loan cannot exceed the maturity period of the underlying treasury bond, the circular added.
Finance companies have also been barred from issuing loans specifically for the purpose of purchasing government bonds, in a move aimed at preventing speculative borrowing.
The directive has been issued to managing directors and CEOs of all finance companies operating in the country.
