Banks to issue bonds raise capitals
To raise and strengthen capital base, commercial banks are finding bond market as a lucrative destination. A number of private banks are planning to raise capitals from bond market to meet their capital adequacy.
A bond is normally a fixed interest-bearing loan instrument, meaning that the borrower will pay the fixed interest on predetermined time schedules but the principal will be repaid at the end of maturity.
Meanwhile, one private commercial bank has already raised capital worth TK 6 billion and another bank has submitted proposal for Tk 5 billion to the government's concerned departments.
Brac and Islami Bank Bangladesh Limited have enlisted themselves in the Dhaka Stock Exchange (DSE) and the authority has already issued convertible supplement debt bonds worth Tk6 billion, a DSE official said.
Some more proposals are now pending with the Securities and Exchange Commission (BSEC) for necessary vetting and assessment, he added.
He said the Dutch-Bangla Bank Limited (DBBL) has also planned to raise Tk5 billion capitals from bond market to strengthen their capital base and a proposal is already under analysis in the BSEC. The bank's managing director Abul Kashem Md Shirin has confirmed this. After getting approval from the security exchange the proposal would be sent to the Bangladesh Bank (BB) for their final approval to raise Tk5 billion though issuing bonds, the CEO said.
" Our deposits growth is good enough, but we have decided to issue bonds for fresh capitals to strengthen our capital base to meet the Basel III requirements", he said.
Shirin said the bank's board of directors approved the proposal for issuing bonds.
A senior BB official in the department of offsite supervision said seven banks have already issued subordinate debt bond to raise their capitals. Such bonds are usually of 10 to 12 years duration and they are non convertible and also redeemable that the banks must pay against each bonds interests.