Loan cap for coal-based power plants lifted

Staff Reporter :
The Bangladesh Bank (BB) has waived the credit limit of the power generating companies, giving banks authority to grant loans to the power plants as much as necessary for the next five years to meet the ongoing energy crunch.
This decision has been taken to ensure smooth power generation. A circular in this regard was issued the Banking Regulations and Policy Department of Bangladesh Bank on Tuesday.
According to the Bank Companies Act, 1991 under Section 26 Kha (1), a company cannot lend more than 25 percent of the bank’s reserved capital.
However, in the new BB guidelines, the central bank has lifted the loan limit and now the power generation stations can now apply for loan of any amount of loan to weather the crisis.
According to the instructions signed by the BB Deputy Governor Abu Farah Md Naser, the banks can provide necessary loans in order to keep the money supply uninterrupted for setting up coal-based power plants such as purchase of land, import and purchase of machinery, expenses related to installation of machinery, and maintenance of coal-based power plants.
According to the BB circular, therefore, the calculation of lending 25 percent of the reserved capital to get bank loans for the next five years will not be effective.
Earlier, the Bangladesh Bank had given such instructions for six months in July last.
However, Bangladesh Bank will determine the upper limit for the next five years instead of the 25 percent upper limit mentioned in the provisions of Section 26 kha (1) of the Bank Companies Act, 1991.
Fuel prices began rising around the world due to the Ukraine-Russia war and impacted the expenses for electricity production.
The Bank Company Act stipulates that a bank can lend a single customer (company, individual or group) up to 25 percent of the said bank’s capital unless said otherwise by the central bank.
 “This opportunity has been given for the import of fuel oil and other raw materials in order to maintain an uninterrupted supply of money required for power generation,” it read.
The Bangladesh Bank will consider applications on a case-to-case basis to fix loan limits for the next five years.