B Mirror Report : The central bank is planning to scale back large corporate lending by banks as part of its strategy to curb defaulted loans and promote the bond market, Bangladesh Bank Governor Ahsan H Mansur said on Monday.
Speaking at a seminar titled “Bond Market Development in Bangladesh: Challenges and Recommendations” held at a hotel in Dhaka’s Gulshan area, the governor said the authorities are moving toward separating large corporates from bank financing. “Big borrowers will not be permitted to go beyond the single borrower exposure limit,” he said.
Under existing rules, a single borrower can receive loans amounting to up to 25 percent of a bank’s capital, with 15 percent allowed as funded loans and 10 percent as non-funded loans. However, this ceiling has been relaxed in certain sectors, including power, energy, and green financing.
Governor Mansur described the strict enforcement of the borrower limit as a “push factor” to guide large companies toward the bond market. He said discussions would be held with corporate entities and incentives and facilities would be considered to make bond issuance more attractive.
Steps are being planned to reduce the time and cost involved in issuing bonds, he added, noting that authorities are reviewing whether special incentives can be offered to encourage corporate bond issuance.
At the seminar, Bangladesh Bank official Ezazul Islam presented findings from a joint research initiative conducted by Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) on developing government and corporate bond markets. One of the key recommendations includes setting up a one-stop service desk at Bangladesh Bank to allow individuals to purchase government bonds directly and online.
Referring to global financial trends, the governor said bonds dominate international markets, followed by capital markets, while money markets come last. “In Bangladesh, the situation is reversed. This needs a fundamental shift, which requires joint efforts from both the government and the business community,” he said.
He emphasized that government borrowing could play a major role in energizing the bond market and urged the government to take the lead. He also noted that the money market is gradually stabilizing as liquidity injections have been halted for some time, creating room for bond market expansion.
Mansur pointed out that the savings certificate market, worth around Tk 5–6 trillion, could be brought into the secondary market. Making these instruments tradable would not be difficult and could double the size of the bond market overnight, he said.
Stressing the importance of investor confidence, the governor said companies must build trust by ensuring timely repayment of principal and interest. Without that, firms would be viewed as defaulters, discouraging bond investments.
He also suggested issuing government bonds to meet future pension liabilities for new public-sector employees under a fund-based pension system.
According to Mansur, high inflation and bank lending rates of around 16 percent remain the biggest obstacles to bond market growth. “A stable macroeconomic environment is essential. With such high interest rates, it is difficult to establish a strong bond market,” he said, expressing hope that a functional bond market could be developed within five to seven years once economic stability is achieved.
Speaking at the event, BSEC Chairman Khondaker Rashed Maqsood said corporates would have little motivation to enter the capital market if bank loans remained easily accessible. He noted that the rising volume of defaulted loans is largely due to banks extending long-term loans, creating maturity mismatches.
He added that while Bangladesh Bank is currently leading bond market development, regulatory responsibility would eventually shift fully to the capital market regulator, as the goal is to reduce dependence on banks and strengthen the stock market.
Finance Division Secretary Khairuzzaman Mozumder said treasury bonds have already been introduced in the secondary market, though challenges persist due to limitations in tax collection systems. He said the issue is being addressed jointly by Bangladesh Bank, the BSEC, and the finance ministry, adding that lifting the cap on savings certificates is also under consideration.
Meanwhile, ICC Bangladesh President Mahbubur Rahman said the country has strong potential for a large and vibrant bond market.
The seminar also featured a panel discussion moderated by Bangladesh Bank Deputy Governor Habibur Rahman, with participation from Dhaka Stock Exchange Chairman Mominul Islam, BSEC Commissioner Md Saifuddin, City Bank Managing Director Mashrur Arefin, and Pran-RFL Group Director Uzma Chowdhury.
