The central bank yesterday asked banks to cut down their spending on luxury vehicles and at the same time almost doubled the allowance for these purchases.
Bangladesh Bank's latest notice, which came with the intent to rein in banks' expenses, said a maximum of Tk 50 lakh can now be spent to acquire a car for high officials, including the chairman, and Tk 1 crore for a sport utility vehicle (SUV).
The purchase ceilings, as per the notice issued in July 2012, were Tk 35 lakh and Tk 50 lakh respectively.
“The limit has been increased to make it reasonable. The previous limit was not enough,” SK Sur Chowdhury, deputy governor of Bangladesh Bank, told The Daily Star.
The latest notice also forbade banks from buying motor vehicles with lease financing from other banks or non-bank financial institutions, as some took advantage of the facility and bought expensive cars with the lease money, Chowdhury said.
It also stipulated that cars used by the chairman and chief executive officer of a bank cannot be replaced before five years, and that the expansion of the banks' transport fleet must be proportional to the expansion of branches and recruitment of new employees.
The notice said the BB has observed that some banks have been spending huge sums on decoration of branches in recent months.
Subsequently, the central bank has restricted the banks' spending on new branches to Tk 1,500 per square foot and Tk 1,000 per sq ft for relocation of the existing branches excluding IT infrastructure costs.
It also said a bank shall not use more than 5,000 sq ft of space for establishing an urban branch and 2,000 sq ft for a rural branch.