Bangladesh Bank relaxes single borrower limit to help LPG imports

Bangladesh Bank has eased the single borrower exposure limit for banks to facilitate increased LPG imports to ensure steady energy supply amid ongoing Middle East conflict.

Under the new guideline, a bank can now lend to a single borrower exceeding the standard 25% of its capital with Bangladesh Bank's approval. 

However, the central bank will decide the specific loan ceiling on a case-by-case basis. This relaxation is intended only for LPG importers, so that there are no complications in importing LPG. 

An official of Bangladesh Bank said the 25% limit will not be relaxed for other types of imports.

The Finance Ministry sent a letter to the central bank on Tuesday, seeking an exemption on the single borrower exposure limit for banks. The letter stated that the extension of the exposure limit would be applicable until 31 December this year, and the central bank will determine the percentage of capital that may be used as the loan ceiling. 

Under the Bank Companies Act, a single borrower – whether a company or a group – can typically receive loans up to 25% of the bank's capital. For example, if a bank's capital is Tk1,000 crore, a company can normally borrow up to Tk250 crore from that bank.

Bankers say this facility will benefit both banks and business groups because banks will prefer lending more to strong companies, which may increase profitability, and customers will benefit from easier access to loans.

Mohammad Ali, managing director of Pubali Bank, said big corporate companies often cannot get enough non-funded credit from a single bank due to existing limits. Now, with relaxed limits, they can access larger credit from one bank, which simplifies management. 

He added that good companies that repay on time should be supported with more credit, while banks must carefully assess risks before lending.

Atiar Rahman, CFO of Omera LPG, said the policy will make it easier to open LCs for LPG imports, especially for large groups with high credit needs. 

A senior Bangladesh Bank official said importers can bring in LPG through a single bank if the bank has sufficient dollar liquidity. 

Syed Mahbubur Rahman, MD & CEO of Mutual Trust Bank, said the facility is being provided to ensure proper LPG supply. He warned that lending always carries risk, so caution should be exercised when sanctioning loans.

A deputy managing director of a bank warned that if many loans are restructured under policy concessions as was done a few months earlier, it could create problems for banks. 

Earlier this month, the Commerce Ministry wrote to Bangladesh Bank saying that 98% of LPG imports are handled by private companies and the existing limits were making it difficult to open LCs for import. They urged faster processing and relaxation of the single borrower limit to ease LPG imports amid the global and domestic supply crunch.