Bangladesh Bank on Monday relaxed provisioning requirement for non-bank financial institutions against their investment in mutual funds because of the losses that the NBFIs incurred due to their price slide.
The BB, in a circular, said the NBFIs would not require maintaining provision against their investment in a mutual fund if the cost price of a unit equals or goes below 85 per cent of market price or net asset value of the unit.
It said the NBFIs would have to maintain the provision, which will be calculated based on two formulas, if the unit’s cost price goes over 85 per cent of the market price or net asset value of the unit.
The first formula will consider the provision based on cost price and market price. The second formula will consider the difference between the cost price of a unit and 85 per cent of the net asset value.
The directive will be applicable for close-ended mutual funds.
For open-ended mutual funds, the BB said, the NBFIs will have to maintain provision if the unit of the fund equals or goes over 85 per cent of the net asset value of the unit.
The central bank asked the NBFIs to implement the directive immediately.
A BB official told New Age that prices of many mutual funds had slumped in recent times amid bearish trend in the capital market, resulting in losses of the NBFIs.
The central bank issued a similar directive on March 12, 2015 regarding provisioning system for scheduled banks’ investment in mutual funds, he said.
The BB issued the new circular for the NBFIs in accordance with directives set for the banks, he said.