Written by The Banking Post
Bangladesh Bank has increased the ceiling on housing loans to Tk 40 million, linking the maximum amount banks can lend to the health of their existing mortgage portfolios in a bid to support the property market without compromising financial discipline.
In a circular issued on Wednesday, the central bank said it has amended Rule 23 of the Prudential Regulations for Consumer Financing with immediate effect, citing rising construction costs and changing market conditions.
Under the revised framework, banks with non-performing loans of 5.0 per cent or less in their housing loan portfolios will be allowed to offer home loans of up to Tk 40 million to individual borrowers. Lenders with NPL ratios between 5 per cent and 10 per cent can extend loans of up to Tk 30 million, while those with NPLs above 10 per cent will be capped at Tk 20 million per borrower.
Despite the higher loan limits, the regulator has kept the debt-equity ratio unchanged at 70:30. This means borrowers must still provide at least 30 per cent of a property’s value from their own funds, with banks financing the remaining portion.
Bangladesh Bank also instructed commercial banks to strictly assess borrowers’ net cash income to ensure they can comfortably service monthly instalments, underscoring its focus on repayment capacity amid elevated credit risks.
Issued under Section 45 of the Bank Company Act, 1991, the new policy replaces earlier directives from 2004 and 2019. All other existing consumer financing rules will remain in force.
Market participants say the move could offer a timely lift to the real estate sector, which has been under strain from higher material costs, while providing some relief to middle-income homebuyers facing rising ownership expenses.
