The Ministry of Finance has granted Shinepukur Ceramics Limited a special exemption under the Bank Company Act, allowing the Beximco Group company to open letters of credit (LCs) with Sonali Bank against 100 percent cash margin despite the group’s default loan status.

The approval came following a request from Bangladesh Bank, which sought clarification on whether Sonali Bank could legally provide the facility to a company belonging to a defaulted business group. The exemption was granted under Section 27Ka(3) of the Bank Company Act.

The Finance Ministry, however, made it clear that Sonali Bank will not be entitled to seek any financial assistance from the government in the future as a result of extending this facility. It also stated that the Finance Division would bear no liability arising from the approval.

According to the ministry’s directive, all income generated by Shinepukur Ceramics must be deposited into a designated bank account, from which Sonali Bank’s dues will be repaid on a proportional basis.

The issue arose after August 5, 2024, when Shinepukur faced difficulties opening LCs because the Beximco Group had been classified as a loan defaulter. Under the Bank Company Act, banks and financial institutions are generally prohibited from extending credit facilities to default borrowers.

However, the law provides an exception if Bangladesh Bank determines that the default was not willful and resulted from reasonable circumstances. In such cases, other companies within the same business group may receive banking facilities with prior approval from the central bank and, where necessary, the government.

Although Shinepukur Ceramics is not individually a loan defaulter, it has been technically classified under the group’s default status because it shares the same directors with Beximco Group.

A senior Bangladesh Bank official said the central bank sought the Finance Ministry’s approval because of the group’s classification. Following the exemption, Bangladesh Bank is expected to issue a circular formalizing the decision.

Mohammad Asad Ullah, Executive Director and Company Secretary of Shinepukur Ceramics, said Beximco was not a willful defaulter and the company itself had not been in default in 2025. He attributed the group’s financial difficulties to the closure of factories and large-scale layoffs during the tenure of the interim government.

A senior Sonali Bank official said the application was intended to help restore industrial operations and allow the company to resume normal business activities. He added that Bangladesh Bank Governor is working to create a more business-friendly environment.

Bangladesh Bank had issued a circular in 2024 allowing companies within a business group to access bank financing even if another group entity was in default, provided the default was not considered willful and occurred due to justifiable reasons. Before the policy change, a default by one company automatically disqualified all affiliated companies in the group from obtaining bank loans.

Despite the regulatory relaxation, default loans in the banking sector have continued to rise. A managing director of a private commercial bank said Bangladesh Bank should carefully assess the impact of any new regulatory support before introducing it, warning that ineffective policy measures could increase risks for both banks and the central bank in the future.