Bangladesh Bank has barred bank directors, their family members, and affiliated business entities from obtaining loans exceeding 50 per cent of the face value of their shareholding in the respective bank.
- Director-linked loans limited to 50pc of their share value
- Related-party loans capped at 10pc of Tier-1 capital
- BB鈥檚 prior approval must for insider loans over Tk 1 crore
- No preferential terms for insiders
- All insider transactions must be disclosed in AGM and audit reports
- Quarterly digital reporting from Dec 2025
BB on May 8 issued a circular in this regard imposing strict restrictions on how banks can extend loans to their own directors, top executives, significant shareholders, and their affiliated individuals or institutions with an aim to curb insider abuse in the banking sector.
According to Bangladesh Bank data up to 2023, bank directors collectively borrowed around Tk聽2,000 crore from their own banks and nearly Tk聽2.45 lakh crore from other banks 鈥� often through collusion among directors and bank officials. The figure is likely to have risen significantly in the current period.
Bangladesh Bank鈥檚 new guidelines are a direct response to the years of unchecked lending to such insiders. It was framed to minimise the long-standing practice of directors and influential shareholders treating banks as personal finance vehicles, BB officials said.
Under the new directive, no bank director, their family members, businesses they control, or entities where they act as guarantors will be allowed to receive loans exceeding 50 per cent of the face value of their shareholding in the bank.
Even this limit is subject to strict scrutiny, and in cases where loans already exceed the cap, banks must report to the central bank immediately and work to recover the excess within a deadline.
No further renewal, extension, or modification of such loans will be permitted if they violate this ceiling, it said.
Additionally, prior approval from Bangladesh Bank is now mandatory for any direct loan over Tk聽50 lakh or direct and indirect loan exposure over Tk聽1 crore involving directors and other related parties.
Banks must also obtain the personal guarantee of the concerned director and ensure adequate collateral before sanctioning any such credit facility.
However, no bank-company can accept its own shares as collateral security for any financial transaction.
Managing directors and CEOs are now completely barred from receiving any credit facilities during their tenure, while their family members can only borrow with robust collateral and prior central bank notification.
Independent directors are also disqualified from receiving any loan, directly or indirectly, during their tenure.
Government-nominated directors face similar restrictions, with the added condition that existing loans can only be renewed, not expanded or rescheduled.
Loans to directors or affiliated entities cannot be offered on terms more favourable than those given to ordinary borrowers 鈥� covering interest rates, collateral, repayment period, and other conditions.
Every such loan must be approved by the bank鈥簊 board and later disclosed in the annual general meeting and audited financial statements.
Banks must maintain a complete register of all transactions involving related parties, and report them quarterly through the central bank鈥檚 data platform.
Any bank found violating these rules will face disciplinary action under the Bank Company Act, including penalties for directors and officials involved.
