Bangladesh Bank has imposed a restriction on spending by the commercial banks on purchasing motor vehicles, apparently to prevent them from the recent buying spree of expensive luxurious cars.

All the scheduled banks have been asked not to purchase any more motor car (Sedan) for their own at a cost more than Tk50 lakh and a SUV (sport utility vehicle) not above Tk1 crore, even if it is with the banks’ own funds.

“Bank companies should show their cost affordable tendency to maintain confidence of the depositors and equity providers on management,’’ said a circular issued yesterday. The directives take immediate effect.

Recently, Chairmen, CEOs and high officials of some banks seemed to have the tendency to purchase luxurious motor cars and high expenses for branch decoration. The central bank issued the directive to discourage the high expenses. The commercial banks often come under criticism recently due to their desperate spending particularly to provide the directors with luxury cars, which put pressure on the banks’ profitability.

The circular said the bank companies are allowed to purchase vehicles similar to those of security vehicles for carrying remittance. However, they are not allowed to collect motor car by taking lease financing facility from other banks or financial institutions, according to the circular.

The growth of increasing vehicles has to be consistent with the increase of manpower as well as the branch of the company. Annual expenditure growth in this sector should be limited to 10%. The vehicles for the board chairman and chief executive officers should be replaced after using vehicles for at least five years.

The information on using the motor vehicles and their operating cost should be placed before the board meeting in every six months and the annual general meeting. Banks are not allowed to use space above 5,000 square feet for city branches and 2,000 square feet for rural branches.

The expenditure on IT equipment will not exceed Tk1,500 for occupying one square feet of space for new branches and for existing branch transfer, it will not exceed Tk1,000 per square feet, according to the circular.

The banks should consider quality and durability of the furnitures and fixtures to be procured based on the necessity instead of their luxuriousness.

News:Dhaka Tribune/17-Jan-2014