Bank-Insurance
BB ordered to reserve provisions against losses in shares and bonds
On Wednesday (May 24), Bangladesh Bank issued a directive to banks regarding the reservation of provisions against investment losses in shares, bonds, debentures, and mutual funds of listed companies.
The directive was sent to the managing directors and chief executive officers of all banks operating in the country. According to the central bank’s instructions, if the purchase price of securities, other than government securities, in terms of investment is lower than the latest market value, banks must reserve provisions equivalent to the difference between the purchase price and the latest market value.
This difference in price will be recognized as a loss in investment value. This provision requirement applies to listed shares, bonds, debentures, and mutual funds or any portfolio of funds. Additionally, provisions will be reserved separately for equity shares, bonds, debentures, and mutual funds or any portfolio of listed companies.
In addition, it has been stated that in the case of investment in non-listed equity shares, if the total value of the company decreases, banks must reserve provisions equivalent to the reduced value as a percentage of the investment ratio within the institution, through the medium of the bank. If the invested company ceases to exist or its operations are suspended or deemed non-performing, provisions must be reserved for the same amount as the investment, unless any visible operations are carried out.
Furthermore, the directive specifies that for non-convertible cumulative preference shares, if the bank does not receive the specified interest, dividends, or cash gains as per the agreement, a provision of 25% of the principal amount must be reserved at the end of the first year. For the second year, an additional 25% and a provision of 100% must be reserved if the accrued gains remain unpaid for three years.
According to the recent directive from the central bank, if the average purchase price of be-maturity mutual fund units is lower than the surrender price (the value at which units are returned to the asset management company), banks must reserve provisions equal to the amount of the difference between the average purchase price and the surrender price. In line with these guidelines, banks are required to maintain provisions on a quarterly basis and submit the provision reserve information to the Bangladesh Bank.
This directive, issued under Section 45 of the Bank Companies Act, 1991, will come into effect from June 30th.
In light of the current situation, Bangladesh Bank has mandated that all banks and financial institutions refrain from charging additional fees for late payments of credit card bills and loan installments.
The central bank issued this directive through two separate notifications on Wednesday, providing a significant relief measure to the financially burdened.
Borrowers and credit card holders who were required to make payments during the curfew and public holidays now have until July 31 to settle their dues. Bangladesh Bank has explicitly stated that banks and financial institutions are prohibited from imposing any extra interest, penalties, or late fees for installments or credit card bills due between July 18 and 25. Furthermore, no savings schemes shall be canceled for non-payment of installments during this period.
The central bank’s notification acknowledges that many borrowers and credit card users have struggled to meet their payment deadlines due to the prevailing circumstances.
Additionally, numerous depositors have been unable to make timely deposits into various savings schemes, including the Deposit Pension Scheme (DPS). To address these challenges, the new guidelines will be in effect from July 18 to 25, covering dues on loans, credit card bills, and savings scheme installments.
According to the directive, if the outstanding loan and credit card payments are settled by July 31, any accrued interest, penalty interest, additional interest, excess profit, or late fees will be waived. Similarly, if savings scheme installments are paid by July 31, no late fees or penalties will be imposed.
Moreover, any interest, penalty, or late fee already collected on loans, credit cards, or savings schemes must be refunded or adjusted, as per the Bangladesh Bank directive.
The Bangladesh Bank (BB) has announced an extension for the payment period against imports of industrial raw materials from 180 to 360 days, a measure now set to remain in place until December 2024. This policy, initially scheduled to end in June of this year, has been prolonged to facilitate trade transactions, according to a BB circular issued today.
“To support trade transactions, it has been decided to extend the policy support until December 31, 2024. The extended usance period will not apply to imports under EDF loans, as previously stipulated. All other relevant instructions remain unchanged,” the circular stated.
To ensure timely payment of salaries and bonuses to garment industry workers before Eid-ul-Azha, the branches of banks in key industrial areas will remain open on a limited basis on June 14, 15, and 16.
The Bangladesh Bank (BB) issued a notification stating that bank branches in Dhaka metropolitan, Ashulia, Tongi, Gazipur, Savar, Bhaluka, and Narayanganj will operate on these days to facilitate financial transactions for garment sector employees.
Typically, Friday and Saturday (June 14 and 15) are weekly holidays, and Sunday (June 16) will be closed for Eid. Despite these closures, the BB has mandated that banks in industrial regions stay open to manage the disbursement of wages and bonuses and facilitate the sale of export bills.
Additionally, bank branches in Chattogram metropolitan and industrial areas will also be open to support garment workers’ payments and the processing of export bills.
The BB has instructed banks to coordinate with local authorities to ensure adequate security at the branches during this period.
Eid-ul-Azha, one of the most significant religious festivals for Muslims, will be celebrated in Bangladesh on June 17.
