Siddique Islam
The central bank will soon ask the non-banking financial institutions (NBFIs) to double their paid-up capital by June 2012 to consolidate their capital base for minimising risks.
"We expect that a circular will be issued by the end of this month in this connection, after approval of the Ministry of Finance," a senior official of the Bangladesh Bank (BB) told the FE Saturday.
He also said the central bank has already submitted a proposal to the ministry, recommending a hike in the paid-up capital of the NBFIs to Tk 1.0 billion from the existing Tk 500 million.
The NBFIs will be allowed to raise their capital by increasing reserve or by issuing right and bonus shares within the stipulated timeframe.
"But no NBFI will be allowed to offer cash dividend, as long as there is capital deficit," the BB official added.
On November 4, 2009, the central bank asked the NBFIs to double their paid-up capital to Tk 500 million from Tk 250 million by the end of December 31 last.
"Most of the NBFIs have been able to achieve the paid up capital target," another BB official said.
He said the central bank has recommended the new amount for paid-up capital, considering the country's overall economic situation.
Currently, 29 NBFIs are running their business in the country. The BB has taken the latest move to strengthen the capital base of the NBFIs in line with the Basel-II framework that has already been implemented on trial basis, the central bank officials said.
"The NBFIs will have to implement the Basel-II framework form January 1, 2012," a BB official said.
The minimum capital requirement and the risk weighted assets for the NBFIs will be fixed through considering the overall performance of the sector, he added.
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.
Move underway to double paid-up capital of NBFIs
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