Loan provision rules eased for stock intermediaries

Business Report :
The central bank on Thursday relaxed the rules on the provisioning of bank loans to brokerage houses, merchant banks and stock dealers, a move that may make it easier for intermediaries to get credits.
A loan loss provision is an income statement expense set aside as an allowance for uncollected loans and loan payments. The provision is used to cover various kinds of loan losses such as non-performing loans and customer bankruptcy.
In 2012, the Bangladesh Bank advised banks to maintain a 2 per cent general provision on the unclassified amount for loans to brokerage houses, merchant banks and stock dealers.
Now it has been decided that banks will have to maintain a general provision of 1 per cent on the unclassified amounts for such loans, said the BB in a notice yesterday.
The new rate will come into force from March 30, it said. “Thanks to the relaxed rules, banks will be more interested to lend to stock market intermediaries to invest in the market. So, the money supply to the market may rise,” said Md Sayedur Rahman, president of the Bangladesh Merchant Bankers Association.