OutOfMemory exception when loading bitmap from external storage

In my application I load a couple of images from JPEG and PNG files. When I place all those files into assets directory and load it in this way, everything is ok:

InputStream stream = getAssets().open(path);
Bitmap bitmap = BitmapFactory.decodeStream(stream, null, null);
stream.close();
return new BitmapDrawable(bitmap);

But when I try to load the exact same images from sd card, I get an OutOfMemory exception!

InputStream stream = new FileInputStream("/mnt/sdcard/mydata/" + path);
Bitmap bitmap = BitmapFactory.decodeStream(stream, null, null);
stream.close();
return new BitmapDrawable(bitmap);

This is what I get in the log:

11-05 00:53:31.003: ERROR/dalvikvm-heap(13183): 827200-byte external allocation too large for this process.
11-05 00:53:31.003: ERROR/GraphicsJNI(13183): VM won't let us allocate 827200 bytes
...
11-05 00:53:31.053: ERROR/AndroidRuntime(13183): Caused by: java.lang.OutOfMemoryError: bitmap size exceeds VM budget
11-05 00:53:31.053: ERROR/AndroidRuntime(13183):     at android.graphics.BitmapFactory.nativeDecodeStream(Native Method)
...

Why can this happen?

UPDATE: Tried both of these on real device - it seems that I can't load more than 12MB of bitmaps into whatever is called "external memory" (this is not an sd card).