BB cuts NBFIs’ investment limit in commercial paper
The central bank yesterday reduced the investment capacity of non-bank financial institutions in commercial paper (CP) in order to avoid their fund concentration in the short-term securities.
From now on, a non-bank financial institution's (NBFI) total investment in the CP cannot exceed 20 per cent of its total capital, down from the previous limit of 30 per cent, according to a revised guideline of Bangladesh Bank.
The new measure will compel NBFIs to invest their fund in the productive zone like small and medium enterprises sector, a BB official told The Daily Star yesterday. The CP is usually an unsecured promissory note, which matures in a period between a minimum of 30 days and a maximum of one year.
NBFIs are also allowed to issue the instrument for mobilisation of their required fund.
NBFIs operating in Bangladesh have some distinctive features than commercial banks. They are not allowed to receive demand deposits as well as term deposits of less than 3 months, which force them to take short-term fund.
NBFIs depend on high-cost bank borrowings and call money market to meet this challenge. The CP helps them both for fund mobilisation and investment.
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