The central bank has put a ceiling on investment by banks in fixed assets at 30 percent of their paid-up capital.
Bangladesh Bank in a circular on Monday clamped the restrictions on fixed asset purchases by banks in public interest.
The circular issued by the central bank’s Banking Regulation and Policy Department said it was issued for ‘strengthening asset-liability management of the banks and in public interest ’.
It provides that the banks with fixed assets (book value) worth 30 percent of their paid-up capital or more cannot purchase such property any more.
They can, however, increase their investment in fixed assets proportionately following rise in their paid-up capital.
Bangladesh Bank officials said the banks that already had fixed assets more than the limit would be asked to raise their capital.
Those failing to increase the capital proportionately in stipulated time might be asked to liquidate the ‘additional’ assets, they said.
Earlier, the central bank slapped restrictions on purchase of fixed assets by the commercial banks in two circulars issued on Jan 25, 2010 and July 30, 2012.
The 2010 circular required the banks to take central bank permissions before purchase of land and the other one obligated them to seek approval for buying buildings, floor spaces and shops.
A senior official of the Banking Regulation and Policy Department, wishing not to be named, told bdnews24.com: “There are some banks which already invested more than their paid-up capital in building constructions and floor space and land purchase.
“Banks are allowed to facilitate investment in trade and industries through collection of deposits. But the aim is frustrated because of the banks’ investment in fixed assets.”
He said the purchase of excessive assets was inducing two-pronged problems. It is raising the prices of land and floor spaces on the one hand and assets are being concentrated in the hands of a certain quarter on the other, he said.
Islami Bank Bangladesh has its own building at Dilkusha in the capital and floor spaces and land at different places. The bank has sought approval from the central bank to purchase another 10-storey building at Dilkusha.
Mutual Trust Bank owns a 20-storey building at Motijheel and is constructing another one, MTB Tower, at Bangla Motor in Dhaka.
NCC Bank is constructing a 22-floor building at capital’s Inner Circular Road. According to Bangladesh Bank officials, the value of the land and construction cost will exceed the paid-up capital of the bank.
National Bank and BASIC Bank are erecting their buildings at Inner Circular Road and IFIC Bank and Al-Arafa Islami Bank at Purana Paltan. Al-Arafa already owns a three-storey building in the same area.
BRAC Bank boasts a 20-storey block at Tejgaon in the city and is trying to purchase another one.
Bank Asia has a large piece of land at Karwan Bazar while Southeast Bank is constructing its head office in the same area.
Apart from the buildings and floor spaces in the capital, the banks have land across the country.
Sometimes the banks acquire lands and other property from its defaulting borrowers through auctions.
Source: bdnews24
