The Ministry of Finance (MoF) has approved a Bangladesh Bank (BB) proposal seeking to double the minimum paid-up capital of non-banking financial institutions (NBFIs) to Tk 1.0 billion by June next.
The move to increase the paid-up capital was initiated by the central bank to insulate the NBFIs, also known as leasing companies, from risks. Presently, the minimum paid-up capital of NBFIs is Tk 500 million. The paid-up capital was last increased on November 4, 2009.
"We have approved the proposal of the BB to increase the paid-up capital of the leasing companies," a top official in the MoF told the FE.
"The latest directive would help consolidate the financial strength of all NBFIs operating in the country," he added.
BB sought the approval from the ministry in May last.
The Bangladesh Leasing and Finance Companies' Association (BLFCA) has welcomed the decision of the government to increase the NBFIs' paid-up capital.
Currently, 29 NBFIs are operating in the country. Out of the total, only 18 NBFIs are listed.
A senior official in the BB said they would soon issue a circular in connection with the doubling of the paid up capital of the leasing companies.
The NBFIs will be allowed to raise their capital by issuing right and bonus shares within the stipulated timeframe, the BB official added.
According to the data available with the BB as of September 30 last, 10 out of 29 NBFIs have paid-up capital below Tk 1.0 billion.
The total assets of all NBFIs as of December 31, 2010 was worth Tk 247.56 billion and paid-up capital Tk 17.26 billion, according to the latest data of BB.
The paid-up capital and deposits of the NBFIs are 17.40 and 2.18 per cent respectively of their total assets as of December 31 last.
"The paid-up capital of leasing companies is inadequate compared to their total assets. This might give rise to a risky situation," a BB top official said.
Asad Khan, President, BLFCA, said the latest directive of MoF would help consolidate the financial strength of leasing companies, which have long been playing a vital role in the economy.
"It is a good move to strengthen the leasing companies, financially, as the banking companies have so far increased their capital base to Tk 4.0 billion," Asad Khan told the FE on Monday.
"The enhanced capital requirement could be met through issuing bonus or right shares," he added.
The Financial Express, July 19, 2011
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