Bangladesh Bank raises loan limits, easing credit access for big borrowers

Loan caps are raised even for high-default banks as central bank broadens credit space for large borrowers

Bangladesh Bank has significantly widened the borrowing space for businesses, raising the single-borrower loan limit for large corporate and group borrowers in a move aimed at easing access to finance and boosting industrial activity.

Under the new policy, businesses will now be able to borrow more from banks as the central bank has increased the combined ceiling for funded and non-funded exposure to 25 percent of a bank’s capital.

The central bank sent instructions to managing directors of banks on Thursday.

Previously, the limit for funded loans alone stood at 15 percent of capital for a single borrower.

The central bank said the decision is intended to reduce financing pressure in international trade and support business and industrial growth.

The new rules will remain in force until June 2028.

Bangladesh Bank also raised lending flexibility for banks with higher levels of non-performing loans (NPLs), allowing them to expand credit despite weaker asset quality.

As a result, banks with relatively high default loan ratios will now also be able to sanction larger loans, increasing overall credit flow in the system.

The revised framework also increases lending capacity in working capital, export and import bill financing, allowing borrowers greater access to short-term trade and operational credit.

Earlier, in 2022, Bangladesh Bank tightened rules on non-funded exposures after a rise in forced loans, particularly in state-owned banks, which had affected profitability.

The regulator had then capped the share of funded and non-funded exposure to limit risk.

In the latest move, the central bank has also relaxed rules linking a bank’s NPL ratio to its ability to extend large loans, effectively broadening the exposure limits across the sector.

In banking terms, “exposure” refers to the maximum amount of credit a bank can extend to a single borrower or large loan category, based on its capital position and financial health.

New Rules in Effect

• Banks with up to 10 percent NPLs can now allocate up to 50 percent of total loans and advances to large borrowers. Previously, since Jan 2022, banks with up to 3 percent NPLs were allowed the same limit.
• Banks with NPLs between 10 and 15 percent may allocate 46 percent of total loans to large borrowers.
• Banks with 15–20 percent NPLs can extend 42 percent to large loans.
• Banks with 20–25 percent NPLs are allowed 38 percent exposure to large borrowers.
• Banks with 25–30 percent NPLs may allocate 34 percent.
• Banks with over 30 percent NPLs can still extend up to 30 percent to large borrowers.

Bangladesh Bank also said that total large loan exposure will now not exceed 600 percent of a bank’s capital, up from the previous cap of 400 percent, further expanding lending capacity across the sector.