Borrowers can now lien treasury bond investments to take loans
The central bank said the directive was issued in response to growing interest among banks in accepting treasury bonds as collateral for overdraft facilities or term loans
Commercial banks have been allowed to lend to customers against treasury bonds held as collateral. In a circular issued today (11 March), Bangladesh Bank instructed banks to provide loans of up to 75% of the face value of treasury bonds owned by customers.
However, the outstanding loan amount, including interest, must not exceed the bond's face value, the circular said, with immediate effect.
The central bank said the directive was issued in response to growing interest among banks in accepting treasury bonds as collateral for overdraft facilities or term loans.
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It also specified that the loan tenure cannot exceed the remaining tenure of the bond investment. Banks are not permitted to provide loans for the purpose of purchasing bonds from customers.
Before disbursing loans, banks must mark the treasury bond investments as a lien in the Financial Market Infrastructure (FMI) system, the circular added.
