DFIM Circular No. 05: Increase in minimum paid up capital of the financial institutions

Department of Financial Institutions and Markets Department of Financial Institutions and Markets Bangladesh Bank Head Office Dhaka. DFIM Circular No. 5 Date: 24 July, 2011 9 Srabon, 1418

To, Chief Executive/Managing Directors, All Financial Institutions operating in Bangladesh.

Dear Sir,

Regarding the enhancement of minimum paid-up capital of financial institutions.

In exercise of the powers conferred under Section 49 of the Financial Institutions Act, 1993 (Act No. 27 of 1993), through Notification No. DFIM(P)1052-Notification/37, dated 9 Srabon 1418/24 July 2011, and with the prior approval of the Government, Bangladesh Bank has amended the Financial Institutions Regulations, 1994, as follows:

In the aforementioned Regulations:-

(a) Clauses (g) and (gg) of Regulation 4 shall be replaced by the following:-

"(g) In the case of a company registered in Bangladesh, the amount of its minimum paid-up capital (hereinafter referred to as 'MPC') shall be 100 (one hundred) crore Taka; provided that the amount of paid-up capital and reserve fund shall not be less than the risk-based minimum capital prescribed by Bangladesh Bank from time to time;

(gg) In the case of a company registered abroad, the said company shall maintain an institution in Bangladesh with the amount of funds specified in clause (g)."

(b) Sub-regulation (2) of Regulation 6 shall be replaced by the following:-

"(2) Each foreign-registered company shall, within 100 (one hundred) crore Taka or the risk-based minimum capital prescribed by Bangladesh Bank from time to time, whichever is higher, maintain the equivalent amount of funds as a reserve fund in Bangladesh in the manner prescribed by the said Bank, after obtaining the license."

In light of the aforementioned Notification, the following guidelines shall be followed to fill any shortfall in the minimum paid-up capital of financial institutions, if any:

(1) The shortfall in paid-up capital shall be filled by June 30, 2012;

(2) Financial institutions may take necessary measures, where applicable, such as issuing IPOs, rights shares, or bonus shares, to raise paid-up capital;

(3) No financial institution with a paid-up capital shortfall shall pay cash dividends; and

(4) Financial institutions shall immediately take necessary measures to amend their Memorandum and Articles of Association as required under the aforementioned Notification.

In this regard, DFIM Circular No. 09, dated 4 November 2009, shall be deemed to have been amended by the above memorandum.

This instruction is issued in the public interest under the powers conferred by Section 18(6) of the Financial Institutions Act, 1993.

Please acknowledge receipt.

Yours faithfully,

(Md. Sohrawardy) General Manager Phone: 7120362