Banks asked to keep 1pc provision against L/C, bank guarantee
Star Business Report
In addition to the existing provisioning arrangement for classified loans, the central bank yesterday asked the commercial banks to keep 1 percent provision against non-funded facilities such as letter of credit (L/C) and bank guarantee from December 1.Bangladesh Bank yesterday sent a circular to this effect to all commercial banks. In the circular the central bank said it is observed that considerable amount of off-balance sheet exposure is being converted into funded facilities and part of it becomes overdue and classified which needs to be taken care of. Banks are advised to maintain 1 percent overall provision against off-balance sheet exposure in addition to the existing provisioning arrangement, the circular said, adding that this general provision will be treated as supplementary capital. The amount of off-balance sheet exposure, required provision and actual provision has to be shown in separate sheets and submitted along with classified statement on quarterly basis, according to the circular.
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