B Mirror Report: Bangladesh Bank has allowed commercial banks to provide loans against Treasury Bonds (T-bonds) held under lien, a move aimed at improving liquidity and facilitating smoother credit flow by using government securities as formal collateral.

The central bank issued the directive after commercial banks showed interest in offering credit facilities backed by government-issued bonds, according to a circular released today.

Through the new guidelines, the regulator has formally recognised T-bonds placed under lien as eligible collateral for bank financing, creating a structured framework for lenders to extend loans.

Under the central bank’s definition, a lien refers to the legal right or claim that a lender holds over a borrower’s Treasury Bonds. To ensure legal and operational compliance, banks must follow specific marking procedures before disbursing any credit facility.

According to the circular, banks must ensure that Treasury Bonds are properly marked as lien before granting any overdraft or term loan to a borrower.

The central bank has also set strict financial conditions to manage risks related to these loans. Under the policy, lenders can provide financing of up to 75 percent of the bond’s face value.

In addition, the regulator has introduced a safety limit regarding total debt exposure. The circular states that the total outstanding loan amount must not exceed the face value of the bond due to the accumulation of interest, profit, charges, or fees.

The directive also specifies that the tenure of the loan facility must not be longer than the maturity period of the Treasury Bond.

Officials believe the new measure will help unlock liquidity in the banking system while enabling borrowers to utilise government securities more effectively for obtaining credit.