BB goes soft on housing finance regulations

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FE Report
Bangladesh Bank (BB) has relaxed its regulations for housing finance allowing more investments in the sector to meet one of the basic needs of the people, officials said Wednesday.
Under the new regulations, the maximum per party limit for housing loan will be Tk 10 million instead of Tk 7.5 million with the debt equity ratio at 80:20.
Besides, the banks are free to extend mortgage loans on housing for a period not exceeding 25 years, instead of 20 years. But the banks should be mindful in respect to asset liability matching.
The central bank issued a circular in this connection Wednesday and asked the chief executives of all scheduled banks to follow the provisions for sanctioning housing loans.
"We've relaxed the regulations aiming to meet one of the basic needs of the people," a BB senior official told the FE, adding that the sector will be benefited through implementation of the new regulations.
The central bank earlier introduced seven-point regulations for housing finance to bring discipline to the sector and protect the interest of the clients.
According to the central bank statistics, total housing loans from banks and financial institutions as of end June 2009 amounted to Tk 171.1 billion, which was 7.9 per cent of total credit to the private sector.
Of the total loan, private commercial banks, with ample deposit resources, have been expanding their housing loan portfolios, and now have a dominating market position with the largest share of Tk 75 billion in outstanding housing loans as of end June 2009, the central bank said in its annual report for fiscal 2008-2009.