No conversion factor for large loans: BB
As per Bangladesh Bank guidelines, if a loan for a single customer or group is 10% or more of the bank’s capital, then it will be considered as a large loan
No conversion factor will be used against non-funded facilities when calculating large loans given to a single borrower or a group, said the central bank.
According to a circular issued by the Banking Policy and Regulations Department (BPRD) of the Bangladesh Bank on Thursday, 100% of both funded and non-funded exposure will be included when calculating a large loan given to a single customer or group.
However, the conversion factor has to be used as per the previous guidelines of the central bank in determining the maximum limit of large loans at the portfolio level of the bank, the central bank said in the circular issued in response to queries by various banks on the issue.
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According to the guidelines of the Bangladesh Bank, if a loan for a single customer or group is 10% or more of the bank's capital, then it will be considered as a large loan.
In addition, instructions were given to use a conversion factor of 25% in the power sector and 50% in all other sectors against non-funded facilities for determining the maximum limit for large loans in the portfolio level of the banks.
