SBL seeks exemption from single borrower exposure limit

State-run Sonali Bank Ltd (SBL) has sought exemption from single borrower exposure limit so that it could open letter of credit (LC) worth US$11.38 billion for importing equipment and services for the Rooppur Nuclear Power Plant (RNPP) project, officials said.
It sought the waiver following a recent request by Bangladesh Atomic Energy Commission (BAEC), the implementing agency of the plant, to open the LC for facilitating the imports. It also apprised the Ministry of Finance (MoF) of the issue.
The bank was waiting for the Bangladesh Bank's decision in this regard, said an official.
The amount will be much higher than that of the paid-up capital of the state-owned bank.
According to section 26 B (2) of the Bank Company Act, a bank is not permitted to lend an amount to a single borrower exceeding 25 per cent of its paid-up capital.
Under a memorandum of understating with the central bank, Sonali Bank can provide funded and non-funded loan to a single borrower not more than 15 per cent and infrastructure development loan not more than 25 per cent of its paid-up capital.
The project is being implemented under Russian export credit for which a $12.65 billion general contract was signed in December 2012, followed by an inter-government credit agreement worth $11.38 billion that was singed in July 2016.
Latter, an inter bank agreement was signed between Moscow's Vnesheconombank and Sonali Bank Ltd in Dhaka in July 2017 for carrying out banking activities of the credit deal.
According to officials, Sonali Bank also sought waiver from contingent liability to be created due to the credit. Otherwise, the bank will have to keep Tk 9.30 billion with the central bank as general provisions against contingent liability of the credit.
Managing Director and Chief Executive Officer of Sonali Bank Obayed Ullah Al Masud could not be reached over telephone for a comment on this issue despite several attempts.
A senior official at the MoF told the FE that based on Power Division request for funding large power plants, Bangladesh Bank has taken a preliminary decision to bend the rules of the Bank Company Act to facilitate the government's priority.
He said that a committee, led by the then Finance Division Additional Secretary Jalal Ahmed, in a report in September this year said the central bank would not enforce the 26 B (2) of the law, debarring the banks from crossing the 25 per cent limit.
"As large loans are needed to set up power plants and considering electricity as one of the prime needs for industrialisation, Sonali Bank in this case may get waiver," he said.
The unit one of the country's first NPP having a capacity of 2,400 megawatt is expected to be commissioned by 2023, followed by the second one by 2024.

syful-islam@outlook.com