MoF seeks clarification on BB move to raise NBFI capital
Wednesday, 9 September 2009
FE Report
The Ministry of Finance has sought to know from the Bangladesh Bank the rationale behind its move to double the paid-up capital of the non-banking financial institutions (NBFIs), sources in the ministry said.
The MoF has also wanted to know the timeframe for implementing the proposed Tk 500 million capital criteria, up from current level of Tk 250 million, for NBFIs.
The queries of the MoF have been sent to the BB Sunday last as the approval from the ministry is mandatory before issuing any regulation by the BB in relation to the increase of the paid up capital of NBFIs, sources said.
The BB sought clearance from the MOF in the last quarter of August prior to implement 100 per cent increase of the total capital of the NBFIs.
Under the BB's proposal, the NBFIs will have to raise their individual total capital - paid-up and reserve - to Tk 500 million from existing Tk 250 million.
The BB took the move to consolidate the capital base of the country's NBFIs in line with the Basel-II framework that would come into effect from 2010.
The central bank officials said Tk 250 million as paid up capital of the financial institutions is inadequate and so the NBFIs will have to increase their capital to avoid any financial risks.
'Please explain the rationale, mentioning the possible advantages and disadvantages of increasing the paid-up capital of NBFIs from Tk 250 million to Tk 500 million,' reads the letter of the MOF, signed by an assistant secretary.
The letter has sought to know whether the proposed hike could be implemented within a timeframe of three years or more or less than three years.
On June 2003, the BB raised the minimum ceiling of the capital of the NBFIs to Tk 250 million from the previous amount of Tk 100 million with a view to making the financial institutions operationally sound.
Currently, 29 NBFIs are running their business across the country.
The central bank is expected to implement the Basel-II framework for NBFIs by the end of 2010 in keeping with the global standard, the BB officials added.
Under the Basel-II, the minimum capital requirement and the risk weighted assets for the NBFIs will be fixed considering the overall performance of the sector, they added.
The leaders of the NBFIs have meanwhile hailed the BB's move to increase the capital base.
The Ministry of Finance has sought to know from the Bangladesh Bank the rationale behind its move to double the paid-up capital of the non-banking financial institutions (NBFIs), sources in the ministry said.
The MoF has also wanted to know the timeframe for implementing the proposed Tk 500 million capital criteria, up from current level of Tk 250 million, for NBFIs.
The queries of the MoF have been sent to the BB Sunday last as the approval from the ministry is mandatory before issuing any regulation by the BB in relation to the increase of the paid up capital of NBFIs, sources said.
The BB sought clearance from the MOF in the last quarter of August prior to implement 100 per cent increase of the total capital of the NBFIs.
Under the BB's proposal, the NBFIs will have to raise their individual total capital - paid-up and reserve - to Tk 500 million from existing Tk 250 million.
The BB took the move to consolidate the capital base of the country's NBFIs in line with the Basel-II framework that would come into effect from 2010.
The central bank officials said Tk 250 million as paid up capital of the financial institutions is inadequate and so the NBFIs will have to increase their capital to avoid any financial risks.
'Please explain the rationale, mentioning the possible advantages and disadvantages of increasing the paid-up capital of NBFIs from Tk 250 million to Tk 500 million,' reads the letter of the MOF, signed by an assistant secretary.
The letter has sought to know whether the proposed hike could be implemented within a timeframe of three years or more or less than three years.
On June 2003, the BB raised the minimum ceiling of the capital of the NBFIs to Tk 250 million from the previous amount of Tk 100 million with a view to making the financial institutions operationally sound.
Currently, 29 NBFIs are running their business across the country.
The central bank is expected to implement the Basel-II framework for NBFIs by the end of 2010 in keeping with the global standard, the BB officials added.
Under the Basel-II, the minimum capital requirement and the risk weighted assets for the NBFIs will be fixed considering the overall performance of the sector, they added.
The leaders of the NBFIs have meanwhile hailed the BB's move to increase the capital base.