Bangladesh Bank's recent policy move under BRPD-1 Circular Letter No. 15 dated May 5, 2026 regarding consumer financing is undoubtedly a significant and timely initiative. The revised framework reflects the changing economic realities of Bangladesh, where rising income levels, increasing consumer spending, higher market prices, and gradual economic growth have altered the financing needs of individuals.
The new regulations particularly focus on auto loans and personal loans. In the case of auto financing, Bangladesh Bank has increased the maximum loan limit from BDT 60 lakhs to BDT 80 lakhs for electric and hybrid vehicles. Moreover, the debt-equity ratio, which was previously capped at 60:40, can now go up to 80:20 for environmental friendly vehicles. This step clearly demonstrates the central bank's intention to encourage green financing and promote the adoption of electric and hybrid vehicles in Bangladesh.
At the same time, the central bank has also revised the limits for personal loans. Previously, banks could provide unsecured personal loans up to BDT 5 lakhs. Under the revised guideline, this limit has been increased to BDT 10 lakhs. For secured personal loans, the maximum limit has been doubled from BDT 20 lakhs to BDT 40 lakhs. In cases where loans are backed by liquid securities such as FDR lien, the financing amount may even exceed this ceiling depending on the value of the security.
From a policy perspective, these changes are logical and well justified. Bangladesh's economy has expanded over the years, GDP has grown, disposable income has increased for many segments of society, and the prices of consumer goods and services have risen substantially. Naturally, financing requirements have also increased. Therefore, revising outdated loan limits was necessary.
However, despite these positive changes, an important practical challenge remains unresolved. The increased loan limits may not be fully accessible to middle-income salaried individuals because of existing debt burden ratio (DBR) practices and the maximum loan tenure restriction of five years.
In Bangladesh's banking industry, personal loans are generally assessed based on the borrower's DBR. Under this practice, a customer's total monthly obligations-including existing loan installments, certain percantage of credit card liabilities, and the proposed loan installment-cannot exceed a certain percentage of the customer's net monthly income. Depending on the bank and customer's salary range, this ratio usually ranges between 40 and 70 per cent.
Let us consider a practical example. Suppose a salaried individual has a gross monthly salary of BDT 1.30 lakh. After deductions such as tax, provident fund contributions, and other adjustments, the individual's net take-home salary becomes approximately BDT 1 lakh.
If a bank allows a maximum DBR of 50 per cent, then the customer's total monthly loan obligation cannot exceed BDT 50,000. Under the current market interest rate environment, assuming a standard interest rate of around 12 per cent, this borrower may qualify for a personal loan of approximately BDT 22 lakhs to BDT 23 lakhs for a five-year tenure.
This is where the practical mismatch becomes visible. Although the regulatory ceiling for secured personal loans has been increased to BDT 40 lakhs, the borrower cannot actually avail that amount because the DBR restriction prevents the EMI from going beyond an acceptable level.
The issue becomes even more evident for middle-income earners whose salaries are lower than this. In reality, many borrowers who genuinely need larger personal financing for education, medical treatment, home renovation, or family obligations may still remain outside the effective benefit zone of the revised policy.
Interestingly, the problem is not necessarily the DBR policy itself. Banks maintain DBR limits for a valid reason. A borrower must retain sufficient disposable income after EMI payments to manage household expenses and maintain financial stability. Excessive debt exposure can increase default risk, which ultimately affects both the borrower and the banking sector. More practical solution may therefore be needed in extending the maximum loan tenure.
If the same borrower was allowed to repay the loan over seven or eight years instead of five years, the monthly EMI would decline significantly. As a result, the borrower could qualify for a larger loan amount while still remaining within the same DBR threshold. For instance, under an eight-year tenure, the same borrower could potentially become eligible for financing of around BDT 31 lakhs at the same interest rate while maintaining the acceptable debt burden ratio. Even after considering another common banking practice-where personal loan exposure is often capped at around 20 times the borrower's gross monthly salary-the customer could still qualify for approximately BDT 26 lakhs with a slightly extended tenure of six years.
This demonstrates that tenure flexibility can create a better balance between borrower affordability and regulatory prudence.
The revised limits under the Bangladesh Bank guideline will undoubtedly benefit high-income individuals. Someone earning BDT 3 lakhs per month with a strong disposable income can comfortably qualify for the full BDT 40 lakh personal loan under the current five-year structure. However, the real financing pressure in today's economy is often faced by middle-income households rather than top-tier earners.
Inflation, rising living costs, healthcare expenses, education expenditures, and housing-related costs have placed increasing pressure on the middle class. Therefore, if the policy objective is broader financial inclusion and effective consumer financing support, then extending the repayment tenure could make the revised limits more meaningful for a larger segment of the population.
At the same time, extending loan tenure does not necessarily mean banks will be able to aggressively expand personal lending without control. Bangladesh Bank has already incorporated a regulatory safeguard within the guideline by instructing that the growth rate of consumer financing must not exceed the overall growth rate of a bank's total loan portfolio. As a result, unless a bank achieves healthy growth in its broader loan portfolio, it cannot aggressively expand personal loans alone. This condition creates an important balance between financial inclusion and regulatory discipline.
Overall, Bangladesh Bank deserves appreciation for modernising the consumer financing framework in line with changing economic realities. The increase in personal loan and auto loan limits is a progressive step that reflects confidence in the country's evolving financial landscape.
Nevertheless, to ensure that the benefits of these revised limits truly reach middle-income borrowers, policymakers may now consider another important reform: extending the maximum personal loan tenure from five years to seven or eight years. Such a move could improve affordability, maintain prudent debt burden ratios, and create a more balanced and inclusive consumer financing environment in Bangladesh.
Md. Zakaria, First Assistant Vice President,
CRM-CMSME Division
NCC Bank PLC. zak.dufbs15@gmail.com
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