The Bangladesh Bank has relaxed the large loan exposure limits for major industrial conglomerates, a move that will allow them to access higher volumes of bank financing. The revised framework also enables borrowers who have already exceeded legal lending limits to be brought back within compliance.
Alongside this, banks have been granted broader flexibility in disbursing large-scale loans. The central bank issued a circular on Thursday easing the conditions governing single borrower exposure limits.
According to a senior central bank official and executives from two private commercial banks cited by Prothom Alo, a leading industrial group in the country has already reached its lending ceiling across multiple banks, with a significant portion converted into direct loans. Another large conglomerate is unable to open letters of credit as required due to existing exposure limits. LPG importers have also been pressing for relaxation of the ceiling. These developments prompted the policy adjustment. However, officials noted that the changes could potentially reduce credit flow to small and medium-sized enterprises.
Increased scope for direct lending
Under the revised rules, a single bank may now provide up to 25% of its total capital as funded or direct loans to a single client, up from the previous limit of 15%. However, total exposure, including both funded and non-funded facilities, must not exceed 25% under any circumstances. Previously, the structure allowed 15% in funded loans and 10% in non-funded exposure.
The new arrangement will remain effective until 30 June 2028.
For example, if a bank has a capital base of BDT 10,000 crore, it may now extend up to BDT 2,500 crore in direct lending to a single group. Earlier, the same borrower could receive BDT 1,500 crore in loans and BDT 1,000 crore in letter of credit facilities.
Expanded capacity for letters of credit
The central bank has also revised the conversion factor for non-funded exposures. The rate has been reduced from 50% to 25%, meaning only a quarter of outstanding non-funded exposure will now be counted when calculating large loan limits. This provision will remain valid until 30 June 2027.
After this period, the conversion factor will be increased in stages:
| Period | Conversion Factor |
|---|---|
| Until 30 June 2027 | 25% |
| 31 December 2027 | 30% |
| 31 December 2028 | 40% |
| 31 December 2029 | 50% |
| From 1 January 2030 | Previous rule fully restored |
Officials of Bangladesh Bank stated that earlier, opening a letter of credit worth 100 units required 50 units to be counted in exposure calculations. Under the revised rule, only 25 units will be considered, allowing banks to issue more letters of credit to large industrial groups.
Revised framework for banks based on loan quality
The central bank has also restructured the permissible level of large loans relative to a bank’s total loans and advances, based on the proportion of classified loans.
Banks with non-performing loans below 10% may now allocate up to 50% of their total loans as large loans. The same ceiling of 50% will also apply where classified loans are between 10% and below 15%, according to the revised structure.
Where classified loans fall into higher ranges, the limits are adjusted accordingly:
| Classified Loan Ratio | Maximum Large Loan Exposure |
|---|---|
| Below 10% | 50% |
| 10%–below 15% | 46% |
| 15%–below 20% | 42% |
| 20%–below 25% | 38% |
| 25%–below 30% | 34% |
| Above 30% | 30% |
Furthermore, the total volume of large loans will now be allowed to reach up to 600% of a bank’s capital base, compared with the previous limit of 400%.
The Bangladesh Bank has stated that these adjustments aim to address demand pressures from large industrial groups while allowing greater flexibility in managing credit exposure across the banking sector.