FE Report
The central bank has relaxed loan provisioning rules on mutual fund (MF) units aiming to bring dynamism in the country's capital market, officials said.
Under the relaxation, the banks are allowed to keep provisioning considering both market value (MV) and net asset value (NAV) at the current market price.
Earlier, banks used to maintain provisioning against their investment in mutual fund units considering only the MV.
"It's a very supportive policy directed towards development of capital market," Deputy Governor of the Bangladesh Bank (BB) SK Sur Chowdhury told the FE without elaborating.
Talking to the FE, a BB senior official said the real institutional investors will be benefited after increasing transactions of the MFs in the market following the latest directive.
"The banks will have to keep provisioning against their investment in the MFs in line with rearranged provisioning rules," the central banker noted.
The BB issued a circular in this connection Thursday and asked the chief executives of all scheduled banks to follow the rearranged rules for maintaining provision against their investment in MFs.
He also said the central bank also imposed 15 per cent (100-85) 'hair cut' on the net asset value of the MFs to mitigate the risk of loss in the banks' books.
Currently, most of the mutual fund's market value came down to around 60 per cent of their face value. As a result, the volume and market capitalisation of the MF units have decreased significantly due to market perception, which does not reflect the true fair value of the instruments, the BB official explained.
At present, a total of Tk 44.40 billion have been invested in 40 MFs while banks and their subsidiaries have invested Tk 11.25 billion, according to the central bank statistics.
siddique.islam@gmail.com
BB relaxes loan provisioning rules on mutual fund units
FE Team | Published: March 14, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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