Bangladesh Bank has doubled the ceiling on home loans, allowing eligible banks to offer up to Tk4 crore to a single borrower for house purchases. Until now, the maximum limit for housing finance stood at Tk2 crore.
The new limit was announced in a circular issued today (6 January) by the central bank’s Banking Regulation and Policy Department (BRPD) and sent to managing directors and chief executives of all banks.
According to the circular, banks with non-performing loans (NPLs) of up to 5% in their housing finance portfolios will be allowed to lend a maximum of Tk4 crore to an individual customer.
The loan-to-equity ratio will remain unchanged at 70:30. This means that if a flat costs Tk1 crore, a bank can provide a maximum home loan of Tk70 lakh, with the borrower covering the remaining 30% from their own funds.
Banks with housing finance NPLs above 5% but not exceeding 10% will be allowed to offer home loans of up to Tk3 crore. However, banks where NPLs in house finance exceed 10% will continue to be restricted to the previous ceiling of Tk2 crore.
Arup Haider, deputy managing director and head of retail banking at City Bank, welcomed the decision to raise the home loan limit from Tk2 crore to Tk4 crore.
He said it would have been more helpful if the loan-to-equity ratio had been revised to 80:20 instead of remaining at 70:30.
“If the ratio stays at 70:30 for a Tk4 crore loan, a borrower would need to inject Tk1.20 crore as equity, which could be challenging for many customers,” he explained.
“This circular is positive for the banking sector. At the very least, it is certainly an improvement compared to what existed before,” he added.
A deputy managing director of a private bank noted that the housing finance limit was last raised back in 2019 – from Tk1.2 crore to Tk2 crore.
“This [ the new limit] can be seen as a positive step, as flat prices have risen due to inflation, and customers now want higher loan amounts to match current market prices,” the banker told The Business Standard.
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