Bangladesh Bank (BB) has authorized commercial banks to issue loans against Treasury Bonds (T-bonds) held under lien, a move expected to unlock liquidity and streamline credit flow by utilizing government securities as formal collateral, reports BSS.
The central bank issued this directive following formal interest expressed by commercial banks to offer credit facilities backed by government-issued bonds, said a BB circular issued on Wednesday.
By establishing these guidelines, the regulator has now formally recognized T-bonds placed under lien as eligible collateral for bank financing, providing a structured framework for lenders to extend credit.
In accordance with the central bank's definition, a lien constitutes a legal right or claim that a lender maintains over a borrower's Treasury Bonds.
To ensure legal and operational compliance, banks must follow specific marking procedures before any credit is disbursed.
Banks must ensure that Treasury Bonds are duly marked as lien before any overdraft or term loan facility is extended to a borrower.
The central bank has set strict financial parameters to manage the risks associated with these credit facilities. Under the new policy, lenders are permitted to finance up to 75 percent of the bond’s face value.
Furthermore, the regulator has instituted a safety ceiling regarding the total debt. The instructions specify that the total outstanding loan amount must not, under any circumstances, exceed the face value of the bond due to the accumulation of interest or profit, charges, or fees.
The regulator further stipulated that the tenure of the loan facility must not exceed the maturity period of the bond.
Bd-pratidin English/TR
