BB raises home loan ceiling to Tk2 crore

FT ONLINE

The Bangladesh Bank has raised the highest ceiling of home loans to a single customer to Tk2 crore, from the existing Tk1.20 crore.

The highest ceiling for housing finance facility will be provided at a maximum debt-equity ratio of 70:30, according to a circular Bangladesh Bank issued on Tuesday with immediate effect. 

In response to the request of banks, the central bank decided to increase the ceiling, said a senior executive of Bangladesh Bank. 

Earlier in November 7, Association of Bankers, Bangladesh requested the central bank to raise the loan limit amid rising demand.  

They made the request at a meeting with Bangladesh Bank's governor Fazle Kabir. 

Currently, the Bangladesh House Building Finance Corporation finances between Tk25 lakh to Tk80 lakh for purchasing an apartment. Non-bank financial institutions can finance beyond Tk1.20 crore as they are not limited by an authorised ceiling. 

Earlier, in 2015, the central bank had increased the ceiling for home loans to Tk 1.20 crore, from Tk75 lakh, with a debt-to-equity ratio of 70:30. 

As of June 2019, total home loans stood at Tk25,556 crore, which was 4.67 percent of consumer loans. A bank can grant home loans up to 10 percent of its consumer financing. 

In this perspective, the banking industry has more space to provide home loans, according to central bank data. 

The interest rate for home loans came down to single digits in 2017, but it did not last long as the banking sector fell into a liquidity crisis from the beginning of 2018. 

As a result, the interest rate for home loans jumped to above 14 percent during the middle of the last year. 

However, the lending rate came down to 10 percent-plus in recent months after the liquidity crisis eased.