BB unlikely to extend June 30 deadline

FE Team | Published: May 29, 2012 00:00:00 | Updated: February 01, 2018 00:00:00

Siddique Islam
The central bank is unlikely to extend the deadline for doubling the paid-up capital of the non-banking financial institutions (NBFIs) to a minimum Tk 1.0 billion to help the latter consolidate their capital base for minimising risks, officials said.
The issue will be discussed at a review meeting between the managing directors and chief executive officers of the NBFIs and Bangladesh Bank (BB) governor Atiur Rahman, scheduled for today (Tuesday).
Currently, 31 NBFIs are operating in the country. The NBFIs will have to raise their paid-up capital to a minimum of Tk 1.0 billion from the existing Tk 500 million by June 30.
"There is no valid ground for extending the deadline," a BB senior official told the FE Monday.
He also said the central bank earlier asked the NBFIs to increase their capital and meet the required benchmark by issuing rights or bonus shares or floating initial public offerings (IPOs).
"We've raised the amount of paid-up capital to consolidate the capital base of the country's NBFIs in line with the Basel-II framework, being implemented form January 1 this year," another BB official said.
The Basel-II accord has been prepared on the basis of three factors: minimum capital requirement, supervisory review process, and market discipline.
Three types of risks - credit risk, market risk, and operational risk - have to be considered for the minimum capital requirement.
Meanwhile, the Bangladesh Leasing and Finance Companies Association (BLFCA) has requested the BB governor for extension of the deadline on minimum paid-up capital requirement of Tk 1.0 billion up to June 30, 2013.
"We've urged the BB governor to extend the deadline for complying with minimum paid-up capital requirement, considering the country's latest capital market situation," the BLFCA Chairman Asad Khan told the FE.
Profitability of the NBFIs in the last two years has been showing a falling trend. As a result, fulfilment of minimum capital requirement is not possible through issuing bonus shares. Besides, the present capital market situation is not favourable also to issue right shares, he said.
The country's stock market that has been facing a substantial decline throughout the calendar year, in terms of market capitalisation of the listed issues, leading to a sharp drop in the indices in the recent months.
The DGEN, the benchmark index of the Dhaka Stock Exchange (DSE), came down to 4645.62 points Monday from its highest of 8918.51 points on December 05, 2010.
"We expect that the BB will extend the timeframe by one year to help the NBFIs comply with the minimum paid-up capital requirement, considering the ongoing bearish trend of the stock market," Mr. Khan noted.
The BLFCA has also proposed resuming housing loan window under the BB's refinancing scheme to meet one of the basic needs of people.
The central bank suspended disbursement of loan under the refinancing scheme since May 1, 2010 to curb inflationary pressure on the economy.
"We've requested the central bank to resume it to help boost business activities of the NBFIs," the BLFCA chief said.