DOS Circular No. 01: Provision against investment in listed and non-listed share, bond/debenture and mutual fund

DOS Circular No. 01 Date: 10 Jyestha, 1430 24 May, 2023

To, Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh.

Dear Sir,

Subject: Provision against investment in listed and non-listed shares, bonds/debentures and mutual funds.

Through BRPD Circular No. 04 issued on April 12, 2022, instructions were given regarding the classification of other assets and provision maintenance. Additionally, instructions regarding investment in listed and non-listed companies in the capital market and provision against such investments have been issued from time to time through DOS Circular No. 04 issued on November 24, 2011, DOS Circular No. 04 issued on May 26, 2019, DOS Circular Letter No. 03 issued on March 12, 2015, and DOS Circular Letter No. 10 issued on June 28, 2015. Now, some additions, deletions, and modifications have been made to the instructions of the aforementioned circulars and circular letters regarding provision maintenance against investment in listed and non-listed shares, bonds/debentures, and mutual funds. From now on, the following policies regarding provision maintenance against investment in listed and non-listed shares, bonds/debentures, and mutual funds shall be followed:

1. In case of investment in listed companies:

a) Among the various heads shown in the balance sheet as investments, excluding government securities, for other securities such as: listed shares, bonds, debentures, certificates, and mutual funds/listed funds, etc., if the market price is less than the purchase price, the difference between the purchase price and the market price shall be identified as investment value reduction loss, and an equivalent amount of provision shall be maintained.

b) Provision may be maintained separately for equity shares, bonds, debentures, certificates, and mutual funds/listed funds on a half-yearly basis.

2. In case of investment in non-listed companies:

a) In the case of investment in equity shares, if the capital of the invested company decreases (Capital = Assets - Liabilities), the bank shall maintain provision for an amount equal to the reduced value at the proportional rate of investment in that institution. If the invested company has no net worth or if the company's business has ceased or is not visible, provision for the entire amount of investment shall be maintained.

b) In the case of non-listed bonds/debentures, if the bank does not receive the stipulated interest/profit/cash dividend payable to it according to the contract, provision shall be maintained at the rate of 25 (twenty-five) percent on the principal amount at the end of the first year. In a similar case, an additional 25 (twenty-five) percent shall be maintained for the second year, and if interest/profit/cash dividend remains unpaid for three consecutive years, 100 (one hundred) percent provision shall be maintained. However, in the case of unpaid interest/profit/cash dividend, the instructions contained in serial no. 3(c)(ii) of BRPD Circular No. 04 issued on April 12, 2022 shall be followed.

c) In the case of non-listed shares/bonds, if the bank does not receive the stipulated interest/profit/dividend payable to it according to the contract, provision shall be maintained at the rate of 25 (twenty-five) percent on the principal amount at the end of the first year. In a similar case, an additional 25 (twenty-five) percent shall be maintained for the second year, and if interest/profit/dividend remains unpaid for three consecutive years, 100 (one hundred) percent provision shall be maintained. However, in the case of unpaid interest/profit/dividend, the instructions contained in serial no. 3(c)(ii) of BRPD Circular No. 04 issued on April 12, 2022 shall be followed.

d) In the case of non-maturing (non-maturing) mutual funds, if the Net Asset Value of the considered mutual fund units is less than the average purchase price, an equivalent amount of provision shall be maintained for the difference between the average purchase price and the Net Asset Value.

3. Banks shall maintain provision on a quarterly basis in accordance with the above instructions and submit information regarding provision maintenance to the Department of Off-Site Supervision of Bangladesh Bank along with the attached forms (Annex-A and Annex-B) by the 15th of the month immediately following the said quarter.

4. This instruction is issued under the powers granted by Section 45 of the Bank Company Act, 1991.

This instruction shall come into effect from June 30, 2023. At the same time, DOS Circular Letter No. 03 issued on March 12, 2015 and DOS Circular Letter No. 10 issued on June 28, 2015 shall be deemed cancelled.

Yours faithfully,

(Md. Jobarul Islam) Director (DOS) Phone: 9530314

Department of Off-Site Supervision Bangladesh Bank Head Office Dhaka.

Ref: 11.11.0000.005.01.001.23.100

Annex-A

Provision Maintenance against Investment in Listed and Non-listed Shares, Bonds/Debentures and Mutual Funds

Bank Name: Branch Name:

A. Listed Shares:

Sl. No.	Name of the Company	Purchase Price	Market Price	Difference (Purchase - Market)	Provision @ 50% of Difference	Provision @ 100% of Difference	Difference (Provision - Difference)	Total Provision	Remarks
1				2*3	5	6=2*5	7=6-4	8	9=8-7
1.
2.
3.
..
..
Total:

B. Listed Bonds/Debentures:

Sl. No.	Name of the Company	Purchase Price	Market Price	Difference (Purchase - Market)	Provision @ 50% of Difference	Provision @ 100% of Difference	Difference (Provision - Difference)	Total Provision	Remarks
1				2*3	5	6=2*5	7=6-4	8	9=8-7
1.
2.
3.
..
..
Total:

C. Listed/Unlisted Mutual Funds:

Sl. No.	Name of the Company	Purchase Price	Market Price	Difference (Purchase - Market)	Provision @ 50% of Difference	Provision @ 100% of Difference	Difference (Provision - Difference)	Total Provision	Remarks
1				2*3	5	6=2*5	7=6-4	8	9=8-7
1.
2.
3.
..
..
Total:

Annex-B

Provision Maintenance against Investment in Listed and Non-listed Shares, Bonds/Debentures and Mutual Funds

Bank Name: Branch Name:

A. Non-listed Shares:

Sl. No.	Name of the Company	Capital (Paid-up: Capital)	Decrease in Capital	Difference (Capital - Decrease)	Total Provision	Remarks
1			2-3	4	8	9=8-7
1.
2.
3.
..
..
Total:

B. Non-listed Bonds/Debentures:

Sl. No.	Name of the Company	Interest/Profit/Dividend Unpaid (%)	Interest/Profit/Dividend Unpaid (Amount)	Market Price/Value (Tk)	Provision @ 25% of Unpaid Interest/Profit/Dividend	Provision @ 50% of Unpaid Interest/Profit/Dividend
1.
2.
3.
..
..
Total:

C. Non-listed Shares/Bonds:

Sl. No.	Name of the Company	Interest/Profit/Dividend Unpaid	Unpaid Interest/Dividend (Years/Months)	Unpaid Interest/Dividend Amount	Provision @ 25% of Unpaid Interest/Dividend	Provision @ 50% of Unpaid Interest/Dividend
1.
2.
3.
..
..
Total:

D. Non-maturing Mutual Funds:

Sl. No.	Name of the Company	Units	Average Purchase Price	Net Asset Value/Value	Difference (Average Purchase - Net Asset Value)	Provision @ 25% of Difference	Provision @ 50% of Difference
1		2	3	4	5=3*4	6	7=3*6
1.
2.
3.
..
Total:

Annex-B